Thursday, June 12, 2008

eBay: Personal Dissatisfaction, Investor Doubt, and I'm Gone.

Just a few months ago, I defended eBay’s business as it was being attacked on all fronts; fee hikes had disenfranchised big sellers, who were being lured by Amazon’s fulfillment program.

I proclaimed confidence in eBay’s marketplace, even as they began to squeeze too many pennies out of small sellers like myself (peddling my ski wax, Whacks Wax), right as Amazon.com was allowing sellers to list their items for free.

I also noted that PayPal was much of the reason to invest in eBay’s stock. PayPal still is a great brand, but Google is pushing hard to popularize its payment processing service, Google Checkout, by offering new buyers a free $10 discount on their first purchase.

My problem with eBay, the corporation, has grown from a personal problem, but I feel as though it also sheds light on many of the issues currently facing eBay, and it shows that they may be failing to properly address those issues.

I have been selling various goods on eBay for over five years through three different accounts. I began selling trinkets, mirroring eBay’s promoted image as a worldwide 24/7 garage sale. However, a few years ago, I invented and began selling my own ski wax, and eBay was a great market place to promote a brand in its infancy.

Over the years, I have sold approximately $10,000 of goods through eBay. My average selling price was no more than $10, so I logged about 1,000 transactions through the different accounts. Considering that eBay charges a listing fee, a final value fee, promotional fees (I often did choose featured listings to attract attention), and most of my payments were processed through PayPal (which charges a base fee AND a percentage of the transaction), I would estimate that I generated $1000-2000 of revenues for eBay and its entities over the years.

Now, in an effort to promote “marketplace security,” the account that I sold ski wax through (which generated the majority of personal revenue and eBay fees) has been permanently suspended. The account’s feedback rating (the metric that eBay uses to establish confidence in transactions) is excellent, with a 97+% positive rating, including about 400 total positive transactions. The other two household accounts also may be suspended – each of them was sporting a 99% positive rating.

However, the very last transaction I conducted resulted in a negative feedback, and because of some silly computer search eBay must conduct, my account was blacklisted and suspended. (An aside: The circumstance was unusual, and I refunded the customer’s money right after negative feedback was left, so the transaction was resolved. My integrity as a seller remains intact.) eBay suspended the account because of a “result of your violation of site policy on Seller Non-Performance” because I “generated unacceptable levels of buyer dissatisfaction in your transactions.” This is solely based on the one most recent feedback.

A reasonable person could see that I have established and re-established credibility as a merchant. A reasonable company would allow real customer service people to review and overturn suspensions such as mine when their computers clearly take transactions out of context. However, eBay seemingly will not let customer service employees breach official policy, even if the situation merits it.

eBay clearly has issues policing its increasingly-dangerous marketplace, and this is an example of an overreaction that may have broader implications. As many larger sellers are already flocking to Amazon or other auction websites, fleeing the stranglehold of the new fees eBay has imposed, eBay should not be barring willing merchants from using the website. Yes, this may be an isolated, individual incident, but it is an example of policy and bureaucracy of an inefficiently-large corporation destroying the very nuances that led to its success.

Whacks Wax will survive. I already began using Amazon.com’s fulfillment system last year, which streamlines my operations and makes selling my product immensely easier. An eBay presence was certainly beneficial to the company, but this past winter it accounted for the smallest percentage of sales yet. The nostalgia of eBay, where I had built my company from the ground up, may have been one factor that continued to attract me to the increasingly expensive marketplace.

Bigger niche sellers have no need for eBay anymore. Amazon is a worldwide marketplace that attracts deal-seekers just like eBay, except they charge no upfront fees. Merchants leaving eBay can spend the money that would have paid on fees (in my case, between 10-40% of final selling price) to invest in their business or advertise, and probably more than make up for lost sales.

eBay will always exist as a marketplace to promote knickknacks, but its heyday as a serious marketplace seems to have already passed . Now, through websites like pricegrabber.com and shopping.com (eBay owns the latter), consumers can quickly and easily find the cheapest price for a good, instead of having to devote hours to manual browsing as they would have to have done in the past (which led to bidding on eBay, a relatively-cheap marketplace). Powersellers with significant draw can simply promote their own websites, which requires a greater sunk cost but little (if any) incremental costs compared to eBay selling. As Amazon.com continues to expand into groceries, people may become accustomed to look there as a first place for anything they desire, not eBay, as may have been the case in the past.

Luckily for shareholders, eBay’s non-core businesses are continuing to grow the company as the auction marketplace has stagnated. PayPal is still the only widely accepted online payment processer, and no matter how many $10 credits Google throws at consumers to encourage them to use their checkout, PayPal’s dominance should continue. PayPal is also now being used unconventionally, as family may send remittances cross-border through PayPal, and traditional merchants (airlines, etc.) are now accepting it.

Skype also seems to finally be gaining some traction, and eBay has already written off most of the (ultra-inflated) value of the purchase it made a few years ago. Integration into the auction website has made Skype more relevant as corporations and consumers have simultaneously started to use it. Skype is now a positive contributor to the eBay brand, and if eBay chooses to get rid of it, they could probably sell it for more than the value they now have booked.

Still, the street continues to look at the auction website as the most important component of eBay’s businesses (which it is). That business is no longer growing. The exodus of Powersellers and banning of lowly, innocent, above-average sellers will not help stop the bleeding. eBay needs to focus on re-attracting the big sellers, possibly creating a different way for them to list items (think eBay stores, but better) that can rival the appeal of Amazon.com. If the core business continues to decline, it will be hard to make up that gap with the growth of other the brands.

I am angry and disappointed enough by my ordeal to sell my stake in eBay. Investments shouldn’t be an emotional decision, but I cannot have confidence in a brand that has treated me, a shareholder and merchant, so horribly. With few exceptions, brands with poor customer service are eventually passed over in favor of competitors that treat them better - I had personal phone calls with an Amazon Fulfillment representative a handful of times before I even set up an account, but I can’t even get a non-automated response when I’ve made eBay thousands of dollars. My decision was made for me, but it was time to move on anyway. eBay, I don’t need you, and many other sellers don’t either. Even if you don’t kick them out, they'll eventually leave.

2 comments:

Lane said...

blah blah blah...would you like some whine with your cheese?

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