Wednesday, April 30, 2008

eBay Says they Are Cheaper Than Amazon

At the PeSA Summit in New Orleans, eBay held a Q&A session about the many changes on the platform. I did not attend because I was goofing around, but RBH (Richard Brewer-Hay) from eBayInk did and he's added a couple of posts about it on the eBayInk Blog.

One of the Answers that interested me most was from Monroe Labouisse, Director of North American Marketplaces, PayPal.

The Question: by eBayInk reader CrunchyPostingGoodness

"Why isn’t PayPal confirming all buyer shipping addresses for all sellers? Amazon guarantees every shipping address for all of their sellers. I doubt that Amazon can actually verify every address, just like I’m sure PayPal can’t either, however Amazon does assume all responsibility and protects sellers who ship to any address specified by the buyer at checkout. Even if PayPal can not physically confirm every address, it should still provide the seller with the same protection, as if the address was able to be confirmed."

The Answer is long and I only want to comment on one part, but in order to provide context I have included the entire answer and highlighted the section I want to comment on.

The Answer:

  • At PayPal, we agree that we should help protect sellers from fraudulent buyers and we do it today in a variety of ways. One way is that, using new fraud detection technology, we have greatly expanded the number of confirmed addresses for all sellers in our system in the past two years. A second is that we have just introduced expanded seller protection for eBay PowerSellers in the US, UK, Canada and Hong Kong (and in Australia we’ve rolled out seller protection for all sellers), in which, as you suggest, a seller just has to ship to the address provided by a buyer at checkout. It’s free for PowerSellers, no longer has a coverage limit, and addresses aren’t “confirmed” or “unconfirmed” anymore - you just ship to the address provided by the buyer through PayPal. Provide great experiences for buyers, qualify for PowerSeller status, and then along with the many other benefits eBay provides, you can get this protection from PayPal.

    Two other things that are worth pointing out, in reply to your comment: 1) contrary to your statement, Amazon does not protect sellers who ship to “any” address provided by a buyer in checkout (I’ll explain more below), and 2) Amazon charges more for transactions at high price points (where fraud is most likely to take place) than eBay and PayPal together charge.

    On the first point, it’s more accurate to say that Amazon protects sellers who ship to the address that Amazon “allows” to go through checkout, not that they protect sellers who ship to “any” address a buyer provides. Before allowing a transaction to go through, most payment systems (including PayPal’s and Amazon’s) will check the safety of an address. If an address is considered unsafe, then the transaction may be denied, or the buyer may be required to provide more information to authenticate the transaction. In both cases, a sale may be turned away. And to my second point above, in part to cover the cost of fraud at high price points on transactions it is letting through, Amazon charges you more than eBay and PayPal combined.

    At PayPal, we are taking an approach to protections that we think is better for sellers’ businesses. First of all, we do protect sellers on a large majority of transactions. Second, sometimes we let transactions go through that we choose not to protect, but we let merchants know when that is the case and provide them with information they need to decide on their own what’s right for their business. And finally, we charge less at high price points than Amazon - and less than the electronic payments industry in general across all transactions.

    So, since Monroe brought up the difference in cost between Amazon and eBay and in essence said Amazon charges more to protect sellers at higher price points (my words not Monroe's). I thought I would provide a comparison from a comment left on the blog post by TheBrewsNews

    QUOTE: “On the first point, it’s more accurate to say that Amazon protects sellers who ship to the address that Amazon “allows” to go through checkout, not that they protect sellers who ship to “any” address a buyer provides.”

    My response:YES YES YES and YES again!!!!! That is EXACTLY what I want as a seller. Don’t give me an eBay order where the buyer won’t pay (but of course I get the privilege of paying fees to eBay for that nonpaying bidder) and then if the bidder does pay there is a good possibility that I won’t be protected. I would gladly take an Amazon order ANY DAY where the address I am given is one that Amazon “allows.” If a customer on Amazon continually claims not to receive packages from a variety of sellers then guess what Amazon does? Yep, no more orders allowed for that buyer / address. Sounds like HEAVEN to me!

    PLEASE that is EXACTLY what we eBay sellers are BEGGING eBay to do…. get rid of the deadbeat and fraudulent buyers. Or, at the very least, allow us sellers to do it ourselves by linking any new buyer’s IDs to their current or previous IDs so that we can block them ourselves. Instead, eBay is opening their welcome arms to all the Amazon-rejects. I guess that is one way to get new eBay buyers.


    QUOTE: “And to my second point above, in part to cover the cost of fraud at high price points on transactions it is letting through, Amazon charges you more than eBay and PayPal combined.”

    My response: Yep… you are right again! And I absolutely positively want that. Let’s compare my eBay versus Amazon sales for ONE particular “high price point” item. I offered the SAME exact item for sale on eBay and Amazon. I sold the item in both venues.

eBay Sale

  • Took me three times to list before it was sold. Paid insertion fees 3 times. Of course, I cannot get nearly as high a price on eBay as I can on Amazon for the same exact item so I have to offer the item for sale at a significantly less price AND I offer free shipping on eBay. So….
  • Item sold (after 3 attempts) for $199.99 and free shipping.
  • eBay fees (insertion and final value fees) of $13.76
  • Paypal fees $6.10
  • Total paid to eBay / Paypal - $19.86
  • NET proceeds received - $180.13

Amazon Sale:

  • Of course I receive a much higher price for the same item AND I charged shipping fees to the buyer.
  • Item sold for $259.99 plus $28.77 shipping.
  • Insertion fee - $0
  • Amazon commission $43.32
  • NET proceeds received - $245.44

It’s kind of a no-brainer for me… I get $180.13 net proceeds from eBay or $245.44 net proceeds from Amazon for the exact same item. Amazon can charge me more than eBay any day! For me, it is a Win/Win on Amazon for high price point items.

**************************** Used by permission.

This comparison blows me away:
TheBrewsNews received 36% more net proceeds from the Amazon sale then from the eBay sale on the exact same item. They paid 118% more in fees to Amazon than they did to eBay, yet they would take an Amazon sale over the same eBay sale any day of the week.

Let me be clear to any eBay employees reading this; it is not about the fees!

Sellers want profitable sales and they will pay more for that. The only reason you constantly hear complaining about fees is because the value that sellers receive for those fees is less than it is worth.

Amazon does not have the ""discount factor" that eBay has because Amazon customers Trust Amazon to protect them.

Just my 12%


Beady Eye Guy said...

I would agree that Ebay is cheaper than Amazon but two things neutralize that thinking:

Amazon gets more customers that Ebay would never get. For sellers like me, I may take a bigger hit in the margin but I can make it up in volume.

Amazon customers aren't as high maintenance as those on Ebay.

Ebay on the other hand allows me to set my shipping rates which means I can get better margins in the end.

Ebay pays me faster since the money is in my account and can be used if you have a Paypal Debit Card.

Beady Eye Guy said...

BTW Randy, why won't Amazon let media sellers subscribe to Webstores?

I would LOVE to have that as my building blocks for an online store.

Randy Smythe said...

Beady Eye Guy,

My guess is they will eventually open up the Webstore to Media Sellers but for now we all have to wait.

Anonymous said...

Excellent work Randy. I just want to comment again what has been mentioned before:

Amazon customers aren't as high maintenance as those on Ebay.

This point cannot be stressed enough. Ebay costs an average business tens of thousands of dollars in unnecessary customer service each year. At first this was because I thought that eBay buyers were of a "lesser breed" so to speak (whinier, less trustworthy, more complaining, don't read, etc...) Now I feel that this is only part of the story. I hate the fact that the entire setup for customer service on eBay is so poorly thought out and executed. Hiding people's email addresses from the seller? Are you kidding me?! Do you know how hard that makes contacting buyers? How about for our customer service agents looking up email conversations with buyers?

Ebay's YELLOW BUTTON is the most unbelievably stupid thing I have ever seen. It needs to be abolished, or at the very least modified immediately.

Beady Eye Guy said...

Not only that but Ebay customers feel the need to barter over EVERYTHING using that YELLOW BUTTON feature.

I get emails asking me if I discount 8 CDs to Europe can I get cheaper shipping (no) as well as a cheaper per unit price (all depends but when I am making an average of 1.00/unit after fees and such for in print CDs it's tough!).

I get emails telling me that other sellers are cheaper. I get emails asking me if the item is a promo (if it was, I would say so!). I get TONS of special requests and spend too much time answering these emails.

The Amazon customer sees it as is if you will. My listings are NEVER the cheapest (unless an item went out of stock at both AMZN and AEC) and then I sometimes wind up the cheapest by default. Overall, the Amazon customer expects Amazon standards. They buy it, you ship it quick and if the exchange went well, they give you good feedback.


Randy Smythe said...

I remember those days when the girls would come into the office after cleaning out thir email in-box the day before and there would be 300 new emails.

Burn-out is very high for CS employees especially since for every 10 you answer you will get at least 7 back saying tahnks, follow-up questions, etc.

My favorite is getting a reply to one of our shipment emails that said "Did you ship my DVD yet?"

oldschool said...

The email/customer service issue on ebay is a neverending, uphill battle for even medium-ish volume sellers.

I sell on average 50 books a day, don't do virtual listings, don't do drop-shipping, only sell what I actually have, and those facts do help cut down the email load. But after 9 years on ebay, I'm still struck by how incredibly hard the ebay buyer can make just a simple transaction! We get so much useless post-sale email, it would make your head spin. I don't see this ever getting any better.

But like most media sellers, my profit margins are incredibly thin! I really can't afford more employee labor than I already have.

Guys, I'm finally ready to take the Amazon plunge! If I sell less, that's fine with me, as long as the customer service time I waste on ebay gets reduced...thanks for the inspiration....

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