How eBay Is Alienating Selling AlliesBy Frank Ohlhorst | Posted 2009-03-04 Email Print
The mighty online auction house only needs to look in the mirror to figure out why sales are slipping, customers are leaving and listings are shrinking. Solution providers that once called eBay "friend" are rejecting its hostile policies. Here’s why.
eBay was once king when it came to selling and buying used and overstocked products. Many solution providers and end users would turn first to eBay to locate bargain items, hard-to-find products and low-cost supplies. Just as important was the horde of sellers that saw the giant auction house as a way to unload goods and perhaps even create new business relationships.
For the purveyors of technology, eBay was once thought of as a godsend. But, eBay seems to have lost its appeal and solution providers are turning to Craigslist and other free services to sell and buy technology items.
One would think in a tight economy, those looking to unload items quickly and those looking for bargains would flock to eBay, but the reality is very different. eBay is shedding customers, sales are slipping and shares are hovering around $12, down some 56 percent in the past 12 months.
eBay blames the weak economy for its woes, but the company’s problems go much deeper than that. eBay is compounding its problems with antagonistic policy changes that only harm sellers. It seems that eBay has forgotten who its customers really are—the sellers! It’s those sellers that pay the insertion fees, final value fees and the fees associated with eBay’s PayPal service.
Over the last year, eBay has made changes to policies, which has resulted in sellers finding it increasingly difficult to sell items, as well as making the whole auction process a much bigger hassle than it has to be.
For many sellers, the problems began when eBay changed its feedback policies. In its prior iteration, feedback allowed sellers and buyers to rate their experience with a transaction. A buyer gave the seller a rating of positive, neutral or negative, along with an explanation, while a seller could do the exact same thing. The process was thought to be very fair.
eBay changed the whole dynamic of the feedback system by eliminating the ability of the seller to leave anything but positive feedback for the buyer. Sellers were no longer able to inform the community about buyers that bounced checks, paid late, attempted fraudulent practices and failed to pay. Even worse, those problematic buyers could still leave negative feedback for a seller.
That feedback policy change created additional problems—there were situations where buyers would threaten a seller with negative feedback unless they got additional discounts, partial refunds or unearned compensation. Sellers became powerless to do anything about that, and worse yet, sellers no longer had a gauge to judge their buyers.
Adding insult to injury, eBay enacted another policy modification that impacted sellers only: The company added detailed seller ratings, or DSRs, which gave buyers the ability to rate sellers on very subjective elements, such as item descriptions, shipping speeds and handling fees. Normally, giving a buyer the ability to rate those things would be a welcome addition for most sellers, allowing them to show off their customer service prowess. But, the way eBay implemented DSRs introduced additional problems and yet another way for buyers to have unfair leverage.
Even more troubling is the fact that eBay uses DSR averages to determine whether a seller can list new items. That is all well and good, but the process gets a little fishy—sellers can only view their average ratings and are offered no way to figure out what transaction netted them a bad rating or any mechanism to improve the rating. That wouldn’t be so bad, but eBay’s DSR policy prevents sellers from listing a product if their average DSR is below 4.1. If the average DSR falls below 4.3, listed items become subject to lowered standings in search results. Blocked sellers are required to increase their DSR average above 4.1 to be allowed to list items again.
One big question is how do sellers improve their DSR if they can’t list a new item?
Of course, if those were the only anti-seller policies, many solution providers would still use eBay. But those policies are just the beginning of the end for prospective sellers. Other challenges for sellers comes from eBay’s PayPal service, where PayPal can hold payments for up to 28 days or until positive feedback is received. That may be pretty hard for a seller to imagine—that a buyer could be using the product for up to a month before the seller gets paid. PayPal has other policies in effect that are seller-negative. For example, a seller could list an item "as is," no returns or refunds, and a buyer can still file a claim with PayPal, preventing the seller from receiving payment.
A little bit of research will show that PayPal usually sides with the buyer and not the seller (the actual PayPal customer who pays a commission), regardless of who is to blame. Many technology sellers have encountered situations where the buyer has purchased a piece of technology, attempted to install the product and, due to incorrect installation, damaged the product. That buyer then files a claim with PayPal, who forces the seller to take the product back and give a refund (even if the item was marked no returns or refunds). That situation seems to be a common occurrence with CPUs, memory and hard drives, as well as motherboards and networking equipment.
Making thing more difficult for solution providers is eBay’s relationships with giant e-tailors, such as Buy.com. Sellers now have to compete with the big names to sell their products. The irony here is that Buy.com and other tech-focused retailers do not list their items as auctions, but as fixed price sales, yet those fixed-priced items (non-auction items) get mixed in with the auction listing results.
eBay’s aversion to its smaller sellers seems almost engineered in nature. One has to wonder if the company is aiming to re-engineer itself as a sales clearinghouse for large e-tailors or is looking to nickel and dime its remaining sellers to death. How is that? Simple: Sellers with negative feedbacks or lower DSRs can turn to listing upgrades to get their items noticed, or increase the items' visibility. What’s more, eBay employs some tricks when it comes to listings in general—for example, if a seller pays extra for a "But It Now" upgrade, that option disappears as soon as a perspective buyer bids on an item. Wouldn’t it be more advantageous for a "Buy It Now" option to remain until the item bids up to that price?
The same can be said about reserve pricing. Sellers have to pay an additional fee to place a reserve price on an item, and a "Buy It Now" option will only stay active until the reserve is passed. Of course, the seller can list the item at a higher starting price, but the insertion fees increase and with a higher starting price, bargain shoppers are less likely to bid.
For the purveyors of technology, it becomes clear that eBay stacks the odds against them and the path to a successful and profitable sale is littered with pitfalls and traps. That leaves sellers with limited options. Perhaps the need for low-hassle auctions that don’t penalize sellers will give birth to a competing service and create an electronic garage sale where sellers and buyers can come together and both leave happy.
Frank Ohlhorst is senior technology editor at Channel Insider.