Sunday, October 05, 2008

eBay to Host Pre-Market Conference Call - 10-6-08

The call will be held Monday, October 6th, at 5:30am PT (8:30am ET).

There is no word as to what they are actually going to be announcing, but there is much speculation:
  • The announcement is being held before US markets open, but while Asian markets are closed, so it is likely that eBay will announce they have finalized their deal to acquire a minority interest in Korea's GMarket, but that doesn't seem like big enough news for a special call.
  • We've been hearing rumors of layoffs, so if those layoffs are going to happen, it just makes sense they would be announced tomorrow. 
  • I would assume that with layoffs, eBay would also announce a re-organization; which could be quite extensive.
  • Several weeks ago (Sept. 9th) Bob Swan reaffirmed guidance for the the second half of the year, but that was before they launched Finding 2.0 and FP-30. Perhaps the business has deteriorated so much since then that they need to re-state their guidance for Q4 and deal with Q3 earnings which were scheduled to be announced on the 15th  -- inquiring minds want to know.
I will update you on the news as soon as I hear it. Not really looking forward to getting up at 5:30 AM, but I'll do it for youse guys/gals

Just my 15%


Anonymous said...

Successful eBay sellers are the people who have the skills necessary to be successful elsewhere and they are finding it more difficult to remain successful on eBay. These sellers are moving their inventory where they are making more margin for significantly less effort.

For example, if we have an item with a Manufacturer’s Suggested Retail Price (MSRP) of $100, then we have on average a gross margin on our own website of $34, on Amazon the gross margin is $25, and on eBay the gross margin in $12. The Gross Margin is the Selling Price less the product costs (costs we pay to the manufacturer to obtain the product) and less the selling fees (including payment processing fees) we pay to Amazon or to eBay / Paypal. So to put it in a little different format:

MSRP $100 item
Gross margin - website $34
Gross margin - Amazon $25
Gross margin - eBay $12

The reason that eBay gross margin is so much lower is actually the function of two things - higher selling fees paid to eBay and lower average selling price. For an average item, the eBay buyer will not pay as much as the buyer who purchases from Amazon or directly through our website. In addition, we have to pay eBay an insertion fee per item as well as a final value fee per item which always comes out to a higher percentage than Amazon.

So, in essence, we have to sell twice as much volume on eBay to make the same money as Amazon or three times as much volume on eBay to make the same money as our website. That, in and of itself, is a problem. However, the even bigger problem is that the amount of effort to make one sale on eBay is about 9 times more than the effort through the alternate channels. Communicating with eBay buyers is so labor intensive because they require so much more hand-holding and eBay actually encourages unnecessary communication and punishes sellers who do not do so (for example, in the recent Town Hall meeting, Stephanie suggested that sellers should email every buyer personally who pays with an echeck to explain the echeck process and let the buyer know that their item will be shipped when the echeck clears).

If we adjust the gross margins based on the EFFORT we put forth to actually generate a sale and to follow through on that sale (including begging the buyer to finally pay for the item they purchased) and the after-care of the sale, our table would look like this:

MSRP $100 item (adjusted for order generation and processing time)
Gross margin - website $34
Gross margin - Amazon $25
Gross margin - eBay $1.33

Now, it doesn’t take a rocket scientist to realize that we should be continuing our efforts to move off eBay.

Randy Smythe said...


That comment should be a post all on its own. You covered the problem very effectively.


TheBrewsNews said...

Randy, thanks for the compliment (since I am the original author). It appears that someone has copied a portion of my blog post from Sept 24th word for word. I am flattered :)

Randy Smythe said...

I wondered why I liked it so much :)