Wednesday, June 25, 2008

Conflicting Studies on Free Shipping.

They actually aren't conflicting because they are not comparing the same things.

On one hand a PayPal and Comscore study of cart abandonment shows that "43 percent of consumers didn't pay for items in their shopping carts because shipping charges were too high" while on the other hand Doug Feiring at Auction Insights sites two separate studies "that eBay bidders were more prone to bid on auctions that had a separate shipping & handling charge, than auctions that had both charges rolled into the price of the product under the pretenses of “free shipping.” This held true even if the total cost of the “free shipping” auction was less than the combined cost of the auction with the charges broken out."

I think both studies are correct. The PayPal/Comscore study was accurate in discussing the traditional online retail environment, while the studies Doug sites are specifically looking at eBay.
So here is the problem: eBay management wants to bring the retail experience to a platform not designed for it. eBay customers are not typical online retail customers and they never will be.

There is a reason we have both an eBay and an Amazon, because they are made up of unique users (though there is some crossover); trying to import a traditional online retail experience to eBay makes little to no sense.

Free shipping is becoming the standard in the online retail world because of companies like Amazon and Zappos, but as Doug mentions "Free Shipping" is not the preferred option on eBay.

I don't want to beat a dead horse here, but trying to turn eBay into an online retailer will just marginalize the entire business. If eBay managers want to grow their retail business they will either need to create a new marketplace (not likely because of the expense) or buy an existing marketplace and turn it into their "New eBay" Trying to make "Free Shipping" and other traditional online retail features work on eBay is like "putting a square peg in a round hole", or my favorite saying, "making a silk purse out of a sows ear" It just won't work.

Read Doug's entire post on Free Shipping on eBay here.

Just my 12%


ms.pat said...

Randy - I would like your honest opinion - from deep down in the gut. After Ebay fails on this present path - and I believe it will and after the present management is ousted do you feel there is any chance at all of bringing ebay back to where it belongs?

David said...

Randy when I hear about studies done by Paypal (which is owned by eBay), I give them very little credibility.

I recently took a few eBay surveys and they always ask questions in a way that is designed to get the answers they are looking for.

For instance I took a survey on going Paypal only. It only wanted to know why I use paypal and why I "prefer" paypal.

It asked me what the advantages of going Paypal only are, but it never asked me the disadvantage (the biggest being you are limiting yourself to people who only have a paypal account)

Furthermore I've never understood why any website whether it's Ebay, amazon, etc. offers "Free Shipping". I think a better way to sell is to do something like flatrate shipping, or "All orders over $100 are shipped free", etc.

I think when you just offer free shipping it discourages people from buying more than 1 item. IMO the way to go is offer incentives to get people to spend $50 or $100 at your site.

eBay has also never been about free shipping. It's been about buying a $20 cell phone charger for 99 cents and $4 shipping. Yeah they "get you" on shipping but you still paid 75% less than you would have at Best Buy.

Randy Smythe said...

Pat, my gut says if they wait until they fail, eBay will end up being acquired because they would have marginalized the marketplace business.

Randy Smythe said...

David, I agree with you, its the same way they look at the metrics. They say "What is the result we want" then they come up with the calculation.

ms.pat said...

I can see msn mulling this one over and waiting. Scooping up Ebay would be pocket change for them - and they tried the online auction business many years ago but Ebay was in its heyday then and msn couldn't compete. Worse things could happen to Ebay from what I see. Somehow, I don't think Google has the guts to tackle the problem or come out with a competing online auction like everyone is hoping. Just my humble opinion.

David said...

Ms.Pat here's the problem.

The only way eBay would get rid of Best Match, and go back to the old eBay is if a competitor popped up and started luring away all of eBay's top sellers.

If this happened eBay would go back to "eBay classic" in a second.

I don't think eBay is worried about this problem though.

Nobody remembers the 2nd person to walk on the moon. They remember the 1st and that was Pierre Omidyar

Henrietta said...

Shipping on Amazon is not 'free' you have to either subscribe or make a minimum purchase. Neither model applies to eBay.

Randy Smythe said...


The Amazon model is the only one that works and you notice that 3P merchants product doesn't qualify for theose "free" services unless they are fulfilled by Amazon.

eBay can't make a "free shipping" model work on eBay.

ms.pat said...

Ebay wants to do it the cheap way - which is why I always say they want to be a cheap, cheesy clone of amazon. They'll try to beat free shipping out of their sellers rather than spend one cent on it themselves. That way sellers have to put shipping into the price and ebay/paypal get bigger fees. They always win...buyers ultimately lose ;-)

ms.pat said...

david - if Ebay loses enough revenue you watch all these corny policies go flying out the window. They're way too greedy to see their business fail. Right now I'm almost convinced as the sellers are leaving then customers like are filling the holes with their listings - but their sell-thru (I hear) is very low. If this is the case then sooner or later ebay won't be able to hide the loss of revenue. They already seem to be edging back a bit. Time will tell - at least I can have my hopes ;-)

David said...

ms. pat that promotion for 10% off is interesting. The way they are throwing out coupons tells me they are getting desperate.

Tony P. said...

The best survey ebay ever conducted was with the GCO issue. Ebay asked its users how they felt about GCO safety, reliability and how many times they'd used it.

Since the survey group was on a platform that didn't allow for the subject being surveyed, the responses were just what ebay expected them to be.

Imagine that! Nothing like a captive audience!!


David said...

I don't buy the argument that "eBay wants free shipping because they make more money on FVF's". I think if that was the agenda, they'd just start charging a FVF on S&H

I think eBay is trying to get rid of their bad reputation for having high shipping

Here's what I wonder. The MBA's and Consultant that call the shots, if they were running an eBay business, would they offer free shipping? I tend to think they wouldn't.

Since the extra $$$ though isn't coming out of their pockets of course they want you to offer free shipping.

Anonymous said...

"The only way eBay would get rid of Best Match, and go back to the old eBay is if a competitor popped up and started luring away all of eBay's top sellers."

The nightly backup tapes from about 2005, are probably worth thier weight in gold.