Wednesday, November 28, 2007

When Big Companies Don't Deliver!

Yahoo Small Business had a bit of a hickup on Cyber Monday, if you haven't heard yet, their shopping platform was down for most of the day on arguably the biggest shopping day of the year -- so far. In this case, Yahoo Small Business clients took a big financial hit on a pretty important day. Also, their retail customers were not unhappy with Yahoo, they were unhappy with the small seller who's site didn't work. So the small seller is impacted both in the wallet and in customer satisfaction due to no fault of their own. What did these small businesses receive as compensation for their trouble, an apology.

Earlier this year, Skype had a major outage of their service and customers that relied on that service were unable to communicate using Skype for the better part of a day, again there was a simple apology and a promise to do better.

eBay has had a major outage in the past, PayPal has had several, not to mention the constant glitches being reported by sellers with both services. In the case of PayPal some items were being shipped to old addresses because of a glitch in the database and sellers were getting emails blaming them. In fact, in most cases the small business is blamed for the problem because they are the direct contact to the customer. Heck, even shipments sent through the post office that get lost or delayed are blamed on the seller rather than the Post Office. When I answered email in the early days of my business I was always amazed that I was responsible for the delivery by the post office. Of course, in an effort to retain a customer I did my best to help the customer out by shipping a replacement, refunding for a lost shipment or compensating them for the delay.

More often then not the only compensation the small business owner receives is an apology and a promise to do better. In the case of the post office its "why didn't you pay for insurance, delivery confirmation, Express mail because its guaranteed".

Sure, many of these problems are corrected quickly, systems are beefed up or rules are put in place to prevent it from happening again but the small business takes it in the shorts every time with little to no compensation. Many of the day to day glitches are more of an annoyance rather than a major problem but small business owners have little margin for error. They aren't sitting on Billions of dollars in cash so they can write down the value of a mistake (Skype) most small businesses can't take many hits that are out of control in addition to the mistakes they make on their own.

How can small business owners hold their service providers accountable? They need to demand an SLA (Service Level Agreement) that spells out compensation for not meeting minimum service levels. eBay, PayPal, Skype, Amazon, Yahoo, Google and many others that charge for a service need to make service level promises that they either keep or they compensate their customer.

In the TV Business there is a think called "Make-Goods" where a network will compensate an advertiser with additional airings of their commercial, if the show did not meet the ratings goal. It is the same concept as an SLA. Small Business owners should demand an SLA agreement from their service providers.


Chris said...

Hey Randy
The good news from eBay is that they do have a service level agreement and have spelled out the compensation any affected sellers can expect :-)

Randy Smythe said...

Thanks for the link Chris. Now PayPal needs to have one. Once in place an SLA agreement encourages the service provider to make sure nothing happens which is that goal.

Anonymous said...


Hello Randy: I would never condemn any proposal that is aimed at making sure the seller receives what he pays for. However, even in a best case scenario, the most any of these sites would be willing to offer is compensation for the time they were down, i.e. an extra day of service. It’s purely academic to suggest that Yahoo, eBay or Amazon should compensate sellers for lost sales during the down period, because it would never happen. By the way, I like your analogy of radio stations giving additional spot time to their advertisers when the ratings don’t meet expectations. I was a DJ for several years, and I can tell you that many stations actually give free additional spots anyway. Imagine, giving a customer something extra for free. Wouldn’t it be great if some of these sites followed suit?

Sue Bailey said...

The problem with eBay's so-called policy is that it never kicks in. It's incredibly rare that the entire eBay site is down - in fact, I don't remember it happening ever in the nearly-nine years I've been registered. Instead, *parts* of the site are inaccessible: *some* people can't bid, *some* people can't get into My eBay, etc. etc. etc. And for most of the time that that is going on, eBay Support deny that there is a problem (viz. the recent disappearence of Gallery photos on eBay UK, when Support told everyone that it was a new policy to not show Gallery by default).

The current policy is totally inadequate, just as the current site infrastructure appears totally inadequate.

Randy Smythe said...


I think mainly the concept of an SLA is to incentivise the service provider to improve so that they never have to compensate anyone. I don't think the small businesses I mentioned like yours would care as long as the site is actually up and working properly.

Anonymous, thanks for the link. I am hearing more often than normal that there are problems with PayPal that are going on months now. A PayPal SLA is very much a need.

Sue, your point is very valid. Most SLA's will of course favor the service provider but it is a step in the right direction.

When a Small Business depends on a service provider things can go bad in a hurry when there is an outage or a major glitch. The lesson learned of course is to spread your risk. I learned that the hard way.