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Internet EBay Boycott Fails, Profits Soar
Jason Mick (Blog) - April 18, 2008 1:07 PM
Print E-mail del.icio.us 43 comment(s) - last by Clue69Less.. on Apr 22 at 3:15 PM
eBay has the last laugh at its sellers expense, throws a bit of sand in boycotters faces with earnings report

Apparently, eBay's policy changes are having desirable effects, despite the massive public outcry the company received.  While the company cut its listing fees, it more than made up for it by significantly raising its commissions on successful sales, particularly on low-priced items such as video games and CDs.  The higher rates along with the elimination of negative seller feedback to the buyer created outcry among many loyal eBay sellers.

Some sellers tried to boycott eBay.  Initial metrics seemed to show the boycott to be working -- listings were decreasing and sales were down, by most official counts, although eBay insisted they weren't.

However eBay soon rebounded and resumed largely business as usual, despite having lost a few loyal sellers.  As DailyTech's Shane McGlaun wrote in a blog, sellers really had few choices -- Amazon.com only allows resale of select items such as CDs or books, and Craigslist.com is avoided by many, due to its unseemly reputation as a hotbed for illegal activity.  Most sellers were stuck with eBay, whether they loved it or hated it.

On Wednesday, eBay CEO John Donahoe announced a stronger than expected earnings report, with the company reporting $2.19B USD in revenue, a 24 percent increase over Q1 2007.  The performance significantly beat analyst expectations.  Net income also rose 22 percent to $562M USD.

Despite the boycott, listings jumped 10 percent to 647.4 million, which eBay attributes to the listing fee cuts.  However, eBay did admit that its "conversion rate", the percentage of sales ending in success, "declined only slightly", though eBay would not reveal exact figures.  The total "gross merchandise volume", a metric measuring the value of goods sold on eBay and associated properties, experienced 10 percent growth to $16M USD

However, while eBay may have a bit of grounds to gloat over the boycotting sellers, the long-term outlook for the company is not quite as peachy.  In 2008's first quarter, eBay had 83.9 million active users, up just over one percent from last year, at 82.9 million users.  The stagnant growth indicates that eBay may be reaching the market saturation point.

For a company at a market saturation point, customer satisfaction becomes increasingly important.  EBay CFO Bob Swan noted, "We've concluded that the best way to grow our active user base is by not losing any of them."

However, while Donahoe may not want to lose his users, his company's policy certainly threatens to send some users packing, or at least slow growth further.  Next month, the company will eliminate negative feedback from sellers to buyers, taking away a major tool which sellers could use to safeguard themselves against malicious customers.  While Power Sellers will have some new protections, normal sellers will find themselves in a much more dangerous situation, at the mercy of their buyer's reviews.

Donahoe feels that it’s a buyers’ market, and that the changes are necessary, whether sellers like it or not.  He states, "We are extremely focused on improving the buyer experience on eBay.  This is not to say that sellers are not important to us, but our belief is and has always been that what is good for buyers is ultimately good for sellers."

Swan said that the slowing U.S. economy is catching up to eBay as well.  He mentions, "We saw a slowing in buyers' propensity to buy toward the end of the quarter."

This coming month eBay plans to step up its coupon initiatives, to try to lure buyers to buy more and buy more often.  The move continues eBay's focus on giving the buyer the best benefits.

Perhaps emboldened by its modest success eBay's management says they will be sticking with their new policies no matter how much sellers complain.  Said Donahoe, "As we expected, some of the announcements generated a lot of passion from our community.  We stayed the course on the changes that we believe are critical for the overall health of the marketplace and the long-term success of our community of users.  We may have some sellers that make some noise, but we're absolutely confident of the direction we're going."

The only minor concession eBay made was to further reduce the listing fees for low price items, helping to lessen the sting of the particularly large commission increase.

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Regardless of what eBay thinks, or is saying...
By Motoman on 4/18/2008 1:22:39 PM , Rating: 5
...their time is limited. Attempting to boost your buyers' power over your sellers may get you short-term profit, but as time goes on and the sellers get tired of the abuse, they'll stop selling. And no matter how many buyers you have, if there's no sellers, you're dead.

I have a 99%+ satisfaction rating at 440 on eBay as a buyer and seller. Since they made the policy changes, I have continued to bid on items as a buyer, but will never sell anything there again. Frankly, you're an absolute idiot to try to sell on eBay anymore...it's a hostile environment to sellers, in more ways than one.

eBay will continue to lose sellers, and they're not going to admit they're wrong until other auction houses gain traction and put the hurt on them (if even then).

I'm biding my time to see what happens with other online auction places before I start doing auctions again. eBay has permanently lost me, and I am certain that millions more are following.




By MatthiasF on 4/18/2008 1:34:21 PM , Rating: 4
The culture on Ebay was such that people avoided criticism because one side or the other would rate in retribution. It's not the way to keep things civil or allow truthful ratings.

The change had to happen and to expect ratings from only sellers is far more ridiculous, since buyers well outnumber them.

As far as I'm concerned, this changes nothing. The numbers might fluctuate in ratings for awhile, but in the long run Ebay will be better off.

I personally avoid rating others on Ebay entirely, and I've been doing fine for 9 years, buying and selling.


By mcmilljb on 4/18/2008 2:41:35 PM , Rating: 3
I find the rating system important. Maybe they should have a buyer rating and a seller rating separately. Mixing the 2 together doesn't really help anyone. Not being able to leave negative feedback for buyer is wrong, although the buyer has less ways to screw over the seller than the other way. They should keep negative feedback for not paying, not paying promptly, and not following rules that the seller has clearly listed. The best way to do fair feedback is to not have it show up until both parties have posted their feedback, then you can't have people leaving negative feedback as a response. Plus force people to leave feedback, it helps everyone by doing it.

I think if they wanted growth to continue, they would quit worrying about more nickels and dimes on the listed items by increasing the effectiveness of being able to buy stuff. If they would make it easier for people to find stuff they wanted, they would get more customers interested. Then after you generate more interest, make it safer or even feel safer to buy on ebay. I also think they should audit sellers to get people who are committing fraud. Also charging for shipping costs on paypal, increases the cost for the end user(it's like a tax on shipping).


By othercents on 4/18/2008 5:58:22 PM , Rating: 2
You do really need buyer ratings to allow sellers to limit who buys from them especially on big ticket items. You don't want to have an account that is 1 day old bidding your items just to find out that some competitor is trying to crash your auction.

quote:
The best way to do fair feedback is to not have it show up until both parties have posted their feedback, then you can't have people leaving negative feedback as a response.

This is exactly what I told my friend. Give 30 days for feedback and after that point feedback is locked and no more feedback is allowed. Only show feedback after both parties have posted, or the 30 days is up. I know on the buyer side the original feedback system was hostile. When a seller sells thousands of items per month and a buyer tries to buy one item, but gets screwed in the item and they also get their account screwed because the seller is going to put bad feedback onto the buyer when the buyer leaves bad feedback.

Blind feedback system is the best way to go.

Other


By JoshuaBuss on 4/20/2008 12:36:37 PM , Rating: 2
does no one use ubid anymore?


RE: Regardless of what eBay thinks, or is saying...
By kinnoch on 4/18/2008 5:59:38 PM , Rating: 2
quote:
The best way to do fair feedback is to not have it show up until both parties have posted their feedback, then you can't have people leaving negative feedback as a response.


That solution looks good at first, but there is a huge problem with it. The problem is that scammers and bad sellers know they are going to give the customer a bad experience, so they will give the buyer negative feedback no matter what the buyers response is. They can then use this preemptive negative response to negotiate a mutual feedback withdrawal if needed.

The people who abuse the system today, will be the same people who abuse the double blind system.


By AlexWade on 4/19/2008 9:06:16 AM , Rating: 2
How about this? Use the double-blind feedback system. Also have a way to report scammers. If eBay determines that an user is indeed a scammer, then delete all feedback made by the scammer. Ideally, follow up on every request but give priority to scammers with multiple incidents.

That solution would require eBay vigilance, something I doubt they know anything about.


By phxfreddy on 4/19/2008 2:31:52 AM , Rating: 2
The way to effectively boycott ebay is as follows:

Since buyer feedback has been quite effectively neutered....Sellers should simply quite placing feedback.

This will have integral term effect ( think PID ) on their buyer base. The seller will be able to sell but the new buyers ability to buy will be curtailed. ( I quite often screen on the basis of BUYER feedback. Overseas buying is VERY VERY VERY sensitive to this )


RE: Regardless of what eBay thinks, or is saying...
By jgp on 4/20/2008 4:11:32 PM , Rating: 2
eBay can easily counter that by making it a violation of the TOS to screen based on feedback. They can even add language to the TOS stating that the seller is legally bound to sell the item to the highest bidder regardless of the higest bidder's feedback rating. That would make any seller who discriminates based on feedback open to lawsuits from both eBay and the buyer.


By phxfreddy on 4/20/2008 5:35:50 PM , Rating: 2
They let you add caveats. They would absolutely kill international dead if they did as you said. It would be too risky to list that it would cease.


By Omega215D on 4/19/2008 7:30:46 AM , Rating: 2
Bobcats instead of chairs, how novel.

http://www.xkcd.com/325/


By phxfreddy on 4/19/2008 10:52:01 AM , Rating: 2
Yes really? If you've ever sat in a bobcat before you know how painful that can be!


By Alexstarfire on 4/19/2008 7:16:08 AM , Rating: 2
Well, it might be bad from an eBay perspective, but once you get into Paypal realm, likely what you will pay through, then it's all on the buyer. Buyer has total control in Paypal. You can provide proof that you shipped the item to them and still get your money taken away from you. Though, on the other hand, if the seller removes the money from the account then the buyer gets screwed cause Paypal won't do anything about it. I think to be able to receive payments from eBay that you should be required to have a verified bank account, that way Paypal can just charge your bank if you try to screw them over. Course, then the buyer is in total control.


By Zoomer on 4/22/2008 12:51:49 AM , Rating: 2
It wouldn't work. A scammer can easily close the bank account right after the funds hit.

After the x months before paypal does anything, the account will be well and truly closed and settled.


By hobbes7869 on 4/19/2008 8:31:44 AM , Rating: 2
I would disagree that buyers well out number sellers on Ebay. Afterall there is only one buyer per item sold, and there are always a number of items that go unsold. There are plenty of potential buyers, yes. I think that ratings are indeed we worth it for both sides. I have utilized ebay for about the past 5 years, and do really look at whether sellers are reputable. It is important to keep that. On the flip side, I like to make sure that when people are bidding, they are known for prompt payment etc. I don't care too much about other things such as this person was hard to communicate with etc, because that has much less bearing on whether I will receive my money. Perhaps simple comments would be more beneficial, and let the seller beware based on reading the comments


RE: Regardless of what eBay thinks, or is saying...
By dever on 4/18/2008 1:39:53 PM , Rating: 2
Ebay may lose some sellers, but if buyers remain, then demand will prevail and sellers will deliver (even if that means fewer sellers fill in the gap for those missing).

Now, if the loss of sellers impacts the consumer experience (price or otherwise) then, yes, customers will start migrating away. Just my 2 cents.


By Adonlude on 4/18/2008 4:19:33 PM , Rating: 5
It's not just about buyer/seller ratios anymore. Ebay is a huge company and they are probably reaching market saturation. Our dog eat dog stock market requires continual profit growth. Ebay used to provide that growth by attracting more customers but they are running out of new customers. This time Ebay was able to raise fees to provide the required profit growth but don't expect them to be able to do that for many more quarters. I see Ebay becoming stagnant which will mean a stock value decline. The auction sector seems ripe for a new player ready to play the growth game.


By 16nm on 4/18/2008 6:13:54 PM , Rating: 2
quote:
I see Ebay becoming stagnant which will mean a stock value decline. The auction sector seems ripe for a new player ready to play the growth game.


Since Google seems happy sitting on its hands with regard to auctions.google.com and Microsoft is having no luck with Yahoo!, perhaps Microsoft could think about putting a strategy together to tackle this segment of the Internet. It has lots of money burning a hole in its pocket, it might as well do something with it. I'm very frustrated with eBay. Its fees are not realistic for the service it provides. It's just a listing service not unlike craigslist. It's not like eBay has to pay auctioneers!

I have one of my tabs homed to My eBay which is odd because I don't use it much anymore. Maybe it's time to have one less tab and enjoy a tad more free memory when browsing.