Saturday, February 02, 2008

What happens when you annoy eBay sellers

How the mighty are fallen
eBay performance (blue) compared to the NASDAQ (red) over the last year
Chart courtesy of AOL money and finance.

Many independent artists - and readers of this blog - sell their work using eBay for their auctions. Last week Ebay made some radical changes to terms of business including the fee structure and feedback arrangements.

I ruminated a few days ago about What should artists do about marketing their art in a recession? This produced a lot of responses including suggestions that there was no recession as yet. Which is true - but there are lots of indicators that say that a lot of people are already experiencing an economic slowdown.

eBay is also very much feeling the pinch and needs to act. eBay's market performance had been falling until its 4th quarter results. Predictions about performance in 2008 do not meet market expectations which caused the share price to fall still further. Some are saying it's now a 'don't buy' stock mainly because its share price is expected to go even lower. The only bright spot seems to be the non-auction parts of the eBay business - particularly Paypal. Overall it appears that eBay's auction business has been hurt by raising fees, reducing advertising and long-standing problems about fraudulent items and behaviour.(edited/revised post publication)

compete.com: The number of pages an average person views on each visit to a domain.
amazon=blue; ebay=red; overture.com=green; etsy=gold

In addition, Audit Integrity currently rates eBay Inc. has having an Aggressive Accounting and Governance Risk - well below the industry average - and identifies a number of material areas of risk in current operations. The Accounting & Governance Risk (AGR®) rating is an assessment of the quality and transparency of corporate behavior.

eBay felt change was needed. There's major change at the top of the organisation - John Donahoe replaces Meg Whitman as eBay CEO at the end of March and on Tuesday, before stepping down as CEO for North America , Bill Cobb's last act was to announce a package of changes aimed at bolstering ebay's market share and revenues.

It was supposed to bring sellers and buyers back to ebay - but looks as if it might have only succeeded so far in enraging rather too many sellers. In addition, although the share price which has taken a battering of late has rallied, expert comment recommends not buying eBay stock as predictions are that it is set to fall even further....

These are the links to:
Donahoe hopes the changes will force sellers to improve their performance and make buyers feel more comfortable shopping on the site. He's gambling that happy buyers will lead to higher sales (and higher Average Selling Prices) that will keep sellers listing.
Auction Bytes: changes rock eBay world - Ina Steiner
Overall, eBay is aiming to improve the eBay experience from the buyer perspective - which is a totally laudable aim.

What are the changes? In a nutshell,
  • Listing fees have been reduced.
  • Fees charged when an item sells have increased
  • Feedback: buyers can still leave negative feedback for sellers - BUT buyers can only receive positive feedback. eBay rationale is that negative feedback left by sellers was 8 times higher than that left by buyers and had risen dramatically.
A number of other safeguards have been put in place to protect sellers but this particular change has gone down like the proverbial lead balloon with some sellers. From the sellers' perspective, it suggests that eBay is implying that there are no people out there who come into the category of nightmarish buyer or the mischievous competitor. People whose payments are fraudulent or who moan and complain about every single aspect of a purchase or who leave negative comments in order to undermine a seller's standing in the marketplace.

The results, so far, is that eBay appears to have been successful in enraging rather a lot of regular e-bay sellers and powersellers. The noise has been so loud and newsworthy that the level of disenchantment has been covered by prominent newspapers such as the New York Times and the CNN/Fortune/Money site - see links to articles and blog posts below for more detail.
Sellers on eBay's normally rancorous message boards were apoplectic, using phrases like "extortion" to describe the news. On Wednesday several began calling for a general strike, under which sellers would withhold listings for a week.
CNNmoney.com
On the feedback issue, it just struck me that eBay was being naieve as to the level of defaults that are now occurring in the marketplace generally from merchant banks and mortgages on downwards. I'd be very surprised if eBay sellers haven't also been experiencing an increased level of problems with buyers also defaulting.

As one friend put it - what is the point of having feedback if you're only going to get the good news stories? An eBay seller commented
Ebay discounts the fact that there are fraudulent buyers out there, apparently believing that the sellers are the problem. I will have to reconsider how much I sell on Ebay as it may no longer be worth the effort.
On the other hand one of the posters in the eBay forums suggested that buyers will no longer feel blackmailed into giving top ratings.
Unless sellers are willing to turn orders around inside 24 hours every time and offer free shipping too, how can they expect a large percentage of 5/5 shipping ratings from buyers who are no longer blackmailed by the threat of bad feedback in return? And don't tell us you never realised this was the unwritten feedback deal with most experienced sellers.
Make your own mind up. Here are some links to blog posts on this topic - it was difficult to find any which were positive. You can find more news results about the changes here.
A lot of sellers have been asking for the return of Yahoo Auctions - which back in 2005 cut all fees to sellers and moved to an ad supported model before 'being retired' in June 2007. The announcement about the Microsoft bid for Yahoo yesterday might yet set the scene for an interesting battle of the titans.

Other people are talking about walking away. Some have already walked.

Maggie Stiefvater used to be a die-hard eBay enthusiast selling both original paintings and ACEOs on eBay. Not any more. Now, apart from giving more time to her literary endeavours (she's an 'about to be published' author), she also pulled out of listing her original artwork on e-bay last year and isn't planning on listing any more there any time soon. She's selling prints from her website and doing original commissions to order - and artwork for her own pleasure.
"I used to be a diehard eBay enthusiast until late last year when they cut their advertising funds and views dropped 40%. That was when I pulled out, tired of eBay jerking the sellers around. We always seemed to be the brunt of their experiments and they don't mind losing one or two or forty of us -- there's always more to take our place."
Maggie Stiefvater - Greywaren Art
Diversification is one option for independent artists - that and increased self-sufficiency and awareness of alternative options. Etsy, overstock.com and google base might possibly be the beneficiaries of this action. That line running along the bottom of the chart below relates to the relative minnow called Etsy. However Etsy is totally devoted to all things handmade and what you can't see on this chart from compete.com is the fact that it had a 280% rise in the people visiting in the last year, as well as a 330% increase in visits. In fact it rivals eBay for the length of time people stay on the etsy site when they visit. In addition, I don't hear the concerns about fraud that one hears again and again in relation to eBay and I do hear lots of satisfied noises from etsy sellers.

Compete.com: The number of people visiting a site.
amazon=blue; ebay=red; overture.com=green; etsy=gold

eBay won't look in any way attractive for a lot of people until it gets on top of the fraud issues which seem to plague both buyers AND sellers. As a commentator on Forbes.com said this week........

Perhaps more concerning than competition from Google is the ongoing infiltration of scam artists upsetting the fine balance of trust between buyers and sellers. These include well-documented online "gangs" that pilfer retail establishments and re-sell stolen goods and international crime rings that attempt to hijack sales by posing as high-rated buyers. The latter group will attempt to close auctions early and send false PayPal payment information in an attempt to obtain free goods.

In a few years, when we have the advantage of hindsight, eBay's stock price may be as much as $10 lower if the company is unable to curtail the international interception schemes seemingly spreading like a cancer in their auction business.

If all of this sounds far-fetched, take a moment to ponder the company's recent announcement that it is acquiring Fraud Sciences for $169 million. Obviously there are deep concerns surrounding the security of eBay transactions.

Forbes (Do Not) Buy It Now: eBay To Get Even Cheaper
Andrew Horowitz, The Disciplined Investor

My conclusion? My gut says things are likely to get worse for eBay and eBay sellers before it gets better.

If I were currently selling on eBay - which I'm not - I think I'd be wanting to make sure I had an alternative distribution channel set up and ready to go as an absolute minimum.

8 comments:

Marsha Robinett said...

Katherine,
Wow, this is very interesting. I've been trying to maximize my internet presence of late and eBay was my next step...I'll definitely be rethinking this move. I'd read some information eluding to the issues you discussed...but not in this depth. Thanks for giving us the heads up on this, think I will be waiting to see just what happens.

Will be interesting to see what others have to say. Perhaps even some comments from those who are using eBay now.

Edition Handdruck said...

I would think that EBAY will gain in a slow market because people with a tight budget will start selling or buying more things there instead at "regular" prices.

As consumer I like to use EBAY as price information tool,but I don´t buy there.

Strategyhack said...

I think what's "interesting" here from a business perspective, is whether eBay will continue to be a successful business as they're gradually moving away from many of the features and principles that made them a popular destination in the first place.

In particular the feedback changes are radical. This new ‘customer is always right’ model is more in line with how traditional retail works both online and offline where the merchant is the only party being scrutinized. However, this is a radical departure from the peer-to-peer roots of eBay, where the small, independent seller would be protected against buyer fraud or misbehavior.

Maggie Stiefvater said...

Great post, Katherine! As you mentioned, I pulled all my originals off eBay around the same time that I got my book contract. But I had left prints and portrait commissions at full price in my eBay store (they're still there now). But I have to say that now that the feedback is changing, I'm going to close down my eBay store as well. The only negative feedback I ever had to leave was for a disastrous portrait client who made the entire process hellish for me. If that happened to me now, I'd have to just suck it up and leave her positive feedback? I don't think so.

What it comes down to is that I saw the writing on the eBay wall several months ago and have been working to make sure it wasn't a major source of income for me. I used to recommend it for beginning artists. Now -- I think that I have too much self-esteem to list there. I have other venues I can sell at where I'm treated with respect as a seller.

Nicole said...

Just found your site. Wonderful. Thanks so much for the ebay news. Very well said! And very informing about the changes.

Tina Duncan said...

Not sure why everyone is running to Etsy... since the only payment accepted is still Paypal and they are gouging us too.

We went to ecrater because its FREE and we can use Google checkout which isnt like Paypal on the fees and allows credit cards too.

Katherine said...

Tina - good point - but you also need to compare the traffic.

Katherine Tyrrell said...

To the people who are trying to make anonymous comments - please note I don't accept anonymous comments. Use Open ID.

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