Wednesday, October 01, 2008

PeSA Speaks Out! eBay Position Paper.


Members of the Professional eBay Sellers Alliance have been concerned with the vibrancy of the eBay marketplace for the past few years. In the first nine months of 2008, we have observed a substantial deterioration in the value of the marketplace for merchants. Broader e-commerce growth is in the high teens while eBay’s GMV has increased at low single digit rates; a clear sign that eBay is losing wallet share among online shoppers. 

We were encouraged with the culture of change that swept through eBay during the past 12 months; however, we believe the flawed execution of change has accelerated the deterioration of the marketplace. Today eBay merchants have an increased level of business uncertainty due to eBay’s poor execution of changes in many areas including seller performance measurement, fees, site search, buyer activity, and seller communication. The result is that merchants are changing their behavior in ways that we believe is not beneficial to the eBay marketplace. 

Merchants are pursuing alternate channels for their businesses which are more economical, including launching their own website, participating in other third party channels such as Amazon and Overstock, and even opening brick and mortar stores. Based recent feedback from PeSA members, merchants are focusing on other channels at higher rates than we have ever measured in the past. Prime products that used to find their way to eBay, are now being diverted to these new "premier" channels that are reportedly delivering higher margins with greater certainty and decreased overhead.

Merchants that used to prioritize the eBay channel now regard the marketplace as a venue of last resort used mainly for liquidation of product that doesn’t sell elsewhere. eBay has acknowledged that it may have an undersupply of merchandise on the site, however, they fail to recognize that the supply issue on eBay is a direct result of their relationship with their customers, the sellers. The lack of credible communication from eBay to its sellers about its strategy has resulted in a marketplace of skeptic sellers, which is bad for business. We would like to highlight eBay’s recent move to allow "big box" retailers free access to eBay, at a competitive advantage to its existing seller base, as an example of a decision that exacerbates the situation by threatening the diverse supply of merchandise that shoppers expect on eBay. 

As PeSA has stated in its prior position statements, the real issue affecting eBay is buyer activity. We believe that issue still exists. According to eBay’s latest published results, eBay’s annual active user churn rate was close to 40%. eBay has discontinued reporting the data that allowed us to actively monitor the issue, but based upon the flat active user growth, we believe eBay is still seeing poor user activity. 

Unfortunately, most of the changes at eBay have been focused on sellers, not buyers. We are proponents for measuring the performance of sellers and rewarding those sellers that provide positive customer experiences. The concept is used in other marketplaces; however, the eBay execution of that concept resulted in a Detailed Seller Rating (DSR) system that is substantially flawed both in its measurement and transparency. We understand that a new system will not be perfect and should be adjusted as experience builds. The real problem is that eBay seems to be building on top of a flawed DSR system that has not been adjusted to reflect true buyer experience.

At PeSA, our position on eBay fees has been that as long as sellers are receiving value, eBay is certainly entitled to share in that value. During the past few years, that economic balance has shifted dramatically to the disadvantage of merchants. In our opinion, eBay still does not recognize that their excessive extraction of value in the form of fees and other monetization techniques has resulted in dramatic underinvestment on improving the marketplace. Declining buyer activity also has a direct result on average selling prices and conversion rates on the platform. Thus the lower margins in conjunction with rising eBay fees, results in eBay taking more value while leaving less for merchants.

In addition, the diversion of traffic off the eBay platform in the form of advertising (run by Yahoo in the US) helps eBay monetize the marketplace, but leaves less buyer traffic for merchants that list on eBay. And, the greater compliance burden of operating on eBay combined with the risk that a merchant business will be shut down with little visibility creates an unworkable environment. 

We embrace the effort that eBay has made to adjust fees to better align with the success of merchants. But, again, the implementation of the changes comes across as an effort to increase the take rate on merchants without really investing in the marketplace. While eBay lowered the upfront cost to list on the marketplace, they dramatically increased the fees on the back-end. We were disappointed with this approach and would have preferred that eBay show some commitment to increase value to the marketplace before raising final value fees on its customers.
We argue that the declining economics on the marketplace justified lowering front end fees without an associated increase on the backend. After all, less buyer activity means that the marketplace is not as valuable a channel for a merchant and the cost to list on the marketplace should be less. Unfortunately, eBay does not see it that way and the result is that eBay is placing the burden of all the changes on the marketplace on the backs of its customers, which are its merchants. We continue to experience one step forward on concept and two steps back with execution. We cannot find any other case where a company, with the desire to restructure and improve its business, places the burden squarely on its customer base. 

PeSA is focused on promoting professional and successful selling on the eBay marketplace and are actively working with all professional sellers to help them navigate the changes on the marketplace. We believe eBay still needs to better understand its customers and we hope that sharing our views helps highlight the most pressing issues. it is our intention to continue working with sellers and with eBay to effect positive change in the marketplace and will be publishing additional papers with more specific commentary in the near future. 

Just my 15%

20 comments:

Anonymous said...

Two six-month anniversaries last week!

*Off the sauce
*No payments to eBay

Taking it one day at a time...

Randy Smythe said...

Anonymous,

Maybe I need to create a 12-step program for eBay sellers. :)

TheBrewsNews said...

Randy, a good 12-step program for eBay sellers could potentially make you a millionaire.

Randy Smythe said...

Brews,

Yeah, we could have different chapters of eSA (eBay Sellers Anonymous)in each state.

Hi, my name is Randy and I am an eBay Seller.

ms.pat said...

This was an interesting read. They certainly nailed the main problem - which is ebay is squeezing its revenue out of sellers to the point where sellers can't profit enough to make buying on Ebay worthwhile. I wonder if Ebay is doing this purposely knowing that more and more sellers will leave but it is also giving them the time they need to usher in the big sellers and let them get set up. I feel us small fry are supporting ebay while they change their business model - and then, they'll sweep us all out!

Tony P. said...

We cannot find any other case where a company, with the desire to restructure and improve its business, places the burden squarely on its customer base.

That is because they don't give a damn about "restructuring and improving". They suck, as in the manner that a vampire bat sucks.

It isn't just the sellers that are bled; ebay's monetization, via PPC ads, is nothing short of cannabalistic predation of the buyers.

The "corporing" of ebay is complete and it now acts as a mindless zombie. Its head spews forth commands that cannot be accomplished with any degree of success.

The body of the corporation functions as best as it can, implimenting the commands in patchwork fashion that form a haphazard environment.

As a result, the marketplace is filled with financial pitfalls and a neverending, frequent Parade of Change for sellers.

The buyers are also subjected to that same Parade of Change, which leaves them feeling frustrated and alienated.


We believe eBay still needs to better understand its customers and we hope that sharing our views helps highlight the most pressing issues.

NO, you - PESA - needs to understand that ebay knows exactly what it is doing. Every.Step.Of.The.Way.

The 800-pound gorilla has you hooked on the pipe and there's only one way to break its grasp on your short hairs.


I suspect this past quarter's numbers are going to look very bad. Even Swan may have a problem spinning anything positive.

I also suspect that this coming season is going to be absolutely horrible if this mess continues, and IT is actually slated to get even more complicated and glitch-prone with the upcoming 'improvements'.

People scoff at the mention of a Boycott, but if ebay repeats its history, it will create a self-imposed one. Given enough rope....

nadine said...

PESA certainly let eBay have it right between the eyes:

We cannot find any other case where a company, with the desire to restructure and improve its business, places the burden squarely on its customer base.

pat, I don't think eBay can be doing this "purposely" because PESA are the big professional sellers whom eBay claims to want. You know, the ones who just got hit with diamond powerseller competition with the sweetheart deals, against which they cannot compete. I'm sure those who are big enough to try to negotiate their own sweetheart deal are doing so. The rest are moving to Amazon and their own websites.

At this rate, eBay will soon have Buy.com and other 'diamonds', professional sellers using eBay as a liquidation/customer acquisition channel, and a declining number of small fry.

I can't wait for the Q4 revenue numbers.

Tony P. said...

part 2

No one, not even a "book learned, college educated" fool could be as clueless as the ebay elite.

For every one of them to be this intelligencia-challenged, they would have to be chained to their desk, lest they wander off into traffic.

But I know different. I've seen Donahue in public. He can walk and talk. Talk, coherently. That tells me they are just arrogant and clueless.

The mindset that emanates from this company is disgusting. This is no way to treat the buying public and that includes both sellers and buyers.

This goes against everything that I believe in as a business person. If They worked for me, with this attitude, we would have a meeting behind the building.

nadine said...

One postscript that just occurred to me: doesn't it absolutely beggar belief that eBay instituted non-fee-paying "diamond" powersellers without instituting a standard sliding scale of volume discounts that would benefit all their large customers? and they even tried to sneak Buy.com in on the sly, too!

As a customer removal strategy, it is very well designed.

nadine said...

P.P.S. Hi, my name is Nadine and I am an eBay seller.

Randy Smythe said...

Hi Nadine! :)

Tony, you seem uncharacteristically agitated today.

Tony P. said...

part 3 (yeah, I'm FIRED up)

We believe eBay still needs to better understand its customers...

How to put this? I need to be uncharacteristically UN-warm and UN-fuzzy. :)

PESA, you are the Polish delegation headed to Berlin in 1939, to "talk sense to him".

You are a captured Kurd took into a backroom in Baghdad, circa 1999.

You are a Christian in ancient Rome, and here comes a lion... talk to him.


PESA, you REALLY think that Donahue et al are just a 'little hazy' on sellers' issues?

Right. Maybe if you explain to him one-more-time how manipulating the fees is damaging the marketplace he will see the light.

Generally, Denial is a sad thing, but in this case it is absolutely depressing.

(Randy, I'm okay. it just pisses me OFF with pesa's mamby-pamby "stern talking to" attitude. they should have stood up long ago and made it count)

Anonymous said...

(Randy, I'm okay. it just pisses me OFF with pesa's mamby-pamby "stern talking to" attitude. they should have stood up long ago and made it count)

Gee Tony, maybe that was because they were busy taking money from eBay for sponsoring their conferences? Would you really stand up to the entity that is essentially paying you off?

"talking to"...snork!

Anonymous said...

Tony P. - You might need Ebay Anonymous. I know I do.

Anonymous said...

Ebay upper management listens only to the metrics and that is that.

Bill Cobb and everybody else always said, "we hear you" but that was always a big croc. Yeah, he heard us (but in private, he also hated our guts).

The company is so incredibly rich, they can afford to pay other staff to "listen to the sellers" but that is a croc, too.

It all comes down to the metrics up there in the ivory tower. The proletariat can shake their fist outside the palace all they want, but the royal family are just gonna yawn at that.

Upper ebay management are all going to retire rich (as I doubt many of us are going to), no matter what happens to the rest of us, so keep that in mind, fellow sellers, as we continue forward with our ebay selling.

They've destroyed confidence and any sort of trust, beyond repair-and they're aware of that. So, expect more "ebay math" as fees change again in the future and more covert deals with corporations like Buy come to light...

Bob

nadine said...

Tony, I didn't read that PESA missive as being in the least hopeful or naive. The language may have been professional, but that was a broadside.

In plain English it said: eBay, you have behaved in an unprofessional manner. You have planned badly and executed worse, and abused us, your paying customers, into the bargain.

We are giving you notice: your new deal sucks & we are leaving. Not all at once, but slowly but surely. By this time next year, you will be an online dollar store. Have a nice day.

PESA would not have written an open letter like this if they still had hope of changing Donahoe's mind. This was a public notice designed not for the sellers, who know it all already, but for the BOD & The Street. PESA just supplied ammo for the coming battle to replace Donahoe.

ms.pat said...

Well, there's still my gut feeling prediction - I feel Donahoe will be replaced by the beginning of next year. I can even imagine Meg coming back to fill in until they find a suitable replacement. Sometimes I get these gut feelings and mostly they turn out to be right. I can dream...can't I?

Tony P. said...

This is the 2nd "stern talking to" letter that PESA has written. I just can't see where anyone with a lick of sense would think that ebay...

just doesn't get it

at this point in time. Sheesh - their metrics have to be showing a hit, and besides that, even Helen Keller would have felt the bad vibes by now.

The Ebay Plan is rolling along. Period. I doubt if a Bezos plant could have done any better.

The most confusing part about The Plan is the fact that the (current) PTB will NOT get great stock options unless ebay does succeed. That means that they must REALLY believe in The Plan.

The delusionally hopeful are pleading with the delusionally arrogant.

And if this Statement is some sort of wishy-washy "threat", it is pushing forth a moot point. It also indicates that PESA are just now noticing the prevalent mass defection.

Anonymous said...

Nadine, I agree with you, that although it was written professionaly it was a broadside.

However, too little too late.

Pesa needed to take a stand with all sellers earlier this year.

nadine said...

Pesa needed to take a stand with all sellers earlier this year.

Yes, but PESA didn't know they would hate the changes until they saw the dog's breakfast that eBay made of the implementation. If anybody was okay with no feedback for buyers and DSRs, it was large professional sellers - but naturally they wanted a competent Amazon-like system, not this four-stars-equals-failing hash with half the grade dependent on the shippers. And Best Match was designed to help PESA sellers, in theory, but in practice it's been chaos.

So it took PESA a while to figure out that they too were receiving degraded service at higher fees.