eBay drops the ball, prices themselves out of the media categories

Since I joined the ebay site in 2005, I've noticed alot of talk in the industry about eBay's deteriorating marketshare, slowing of growth on the core site, and increased frustration on the side of both buyers and sellers.

For a typical business, when business is not going well, you cut your expenses and lower prices (ie: sales) and accept lower profits in the hopes of spurning more business. In fact one of the most basic theories in economics is the notion that as the cheaper the interest rate, the more businesses and consumers will invest in the market. The same can be said about supply and demand. In general, prices of goods and services adjust themselves to reflect the current supply/demand ratio. eBay being somewhat of a hybrid business as it services both buyers and sellers could use a lesson in simple macroeconomics.

With the notion of interest rate (here selling fees) in mind, I find the current management's direction in pricing on the site to be full of "irrational exhuberance" (to quote our dear friend Alan Greenspan).

Poor vision in planning out price changes in media

eBay has spent alot of time watching its competition, presumably Amazon.com. In reviewing the pricing changes for the fixed price (Buy it Now) format, it seems that eBay copied verbatim, almost to the point of plagerism, Amazon's pricing structure.

I think this is a fatal mistake.

Sellers are leaving in droves, everyone is super frustrated with the site and the constant changes. Instead of 'rebalancing' and in some cases raising fees, eBay should have taken hard measures to increase the amount of sellers on the site and they can only do this by making it cheaper.

The double whammy of shipping caps and higher FVF's with BIN listings just doesn't make sense to me, especially in the media category. For example the average wholesale cost for a new release video game for XBOX 360 or PS3 is about 52-53 dollars. If ebay wants the seller to sell this with free shipping for under retail price, I just don't see how the numbers work themselves out. 15% of 60$ (that is if you sold it at full retail price) is 9 dollars. 52+9 = 61 and you still haven't factored in the listing costs and costs for shipping and labor.

Ebay might argue that Amazon charges this and is growing quite quickly, but they fail to realize 2 things.

1. Amazon sells these types items at and below retail with free shipping, how can they do this? Easy, they don't pay anyone a 15% FVF.
2. Amazon allows 3P sellers to compete, if they are out of an item, 3P sellers are there to pick up the slack in that inventory area.
3. Either way you look at it, Amazon has the merchandise buyers want at the best possible price. (If amazon is out, then that means the prices are going up all over the web - supply/demand).
4. Ebay on the other hand has only its sellers, they have no inventory so they only compete with Amazon with the 3P marketplace.

So how will this play out?

1. Ebay buyers will come to ebay looking for good deals on the newest stuff. After all, why buy from someone you don't know on eBay if you aren't saving any money?
2. Ebay sellers who run the auction format will find that buyers like to complain about S&H but don't adjust their bids upward commensurately with the reduction in S&H charges by ebay. Thus even though they pay a lower fvf, their ASP's will not be high enough to sell new and in demand games and movies, so the auctions will dry up.
3. Ebay buyers won't find a good deal, they will find a bunch of FP30 overpriced listings or titles which are old and no one really cares to purchase.
4. Buyers will realize that they can get free shipping, no tax, and the reliability of Amazon's service and run to amazon OR
5. Go to Walmart and BestBuy to get the new items because they are in a hurry to get it and the incentive to buy from ebay (lower price/good deal) is no longer there.
6. The new price increases will price most if not all legitimate sellers out of business or away from ebay, this is already happening.
7. Those determined to still make money on ebay will do so only with stolen and fake merchandise, which will further deteriorate the trust in the marketplace.

Media including DVD's and video games are a huge traffic attractor and eBay should realize this. Think of it like 'doorbusters' for big sales for traditional brick and mortar retailers to get people in the door.

The eBay site is lagging in traffic and the latest pricing changes don't really stimulate growth in my opinion, rather they've done just the opposite. A good analogy would be in the current economic conditions, if the Federal Reserve decided to raise interest rates instead of lowering them. It makes no sense to me and the fact all of the eBay managers are MBA's really says little for the value of their education.

Perhaps John and company need to sit through MacroEconomics 101 again.

My feeling is that once eBay realizes what needs to be done (or finally decides to do it), it will be way too late and everyone will be gone.

Perhaps the stockholders have made their point about managements misdirection. The stock is trading at levels not seen since 2002.

Murphy's Law controls at eBay - or is eBay run by a bunch of monkeys?

With the latest round of changes at eBay, its frightening that a company which we depend on so much for our lively hood seems to be run with no real senese of coordination or roadmap and plan of action for mission critical site rollouts.

Murhpy's law states that everything that can go wrong will and at the worst possible time. Is eBay really to blame or are they just a victim of bad luck?? Lets examine the situation further.

Site Glitches

I couldn't help but notice all of the glitches and bugs over the past month with Best Match and related components over the past month.

Lets recap just a few:

1. DSR miscalculation about 6-8 weeks ago
   
2. Best Match sorting results upside down resulting in what was penned "worst match"
3. My latest discovery, on the eve of what I consider one of the biggest changes to date, FP30 or 30 day fixed price listings, Best Match is not de-duping the sort results, therefore sellers are monopolozing the pages and pushing alot of other sellers way down with no hope of ever making a sale.

Recently I read the interview with Jeff King regarding the flip flopping of best match results, here is an exceprt:

“We had a very unusual software bug that we unfortunately didn’t catch during our testing process. Essentially, it caused Best Match to sometimes sort items incorrectly over roughly the past 3 days, which is why the member mentioned in this post saw what they did. The members who did see these strange results were able to fix it by refreshing, but of course that’s not an acceptable solution to either us or them. We had teams working 24 by 7 to get this fixed as soon as we discovered it.”

He went on to say…

“We of course don’t want things like this to happen, and we apologize to all the members who saw this strange Best Match sort order. We’ve already changed our testing process to make sure that this won’t occur again.”

What I find really disheartening is that search is a mission critical component of the eBay site, yet they tinker with it daily and on a live basis, with no regard for the sellers who are affected by these bugs. Has ebay extended any courtesy credits or perhaps free FVF for a month by those who were affected? Thanks for the apology eBay, but we still have to put food on the table and pay the power bill.

I used to be a programmer myself by profession and certain applications were considered 'mission critical'. Things like credit card processing, etc. These systems rarely went down and when they did, it was code red, defcon 4, whatever you want to call it. It got everyones attention and it was taken care of as soon as possible with the most extreme sense of urgency.

What I don't understand is with the amount of money and resources that eBay has at its disposal, why is the site full of bugs on the live site? Several are very easy to spot. Many go on for weeks after being reported.

Perhaps the QC team got laid off and no one has filled those positions?


Lack of planning for changes rolled out


Scot Wingo talked about the lack of API interface for the new FP30 listing type in his blog today.

Well today eBay officially launched the Multi-quantity 30-day duration fixed price listing (FP30 for short).

I'm proud to announce that we are already not only supporting FP30 TODAY at ChannelAdvisor in both our MarketplaceAdvisor Standard and Premium offerings, but we've done some enhancements to take advantage of how the relist works so that our customers will be advantaged with their recent sales.

This was tricky because eBay hasn't had this in the API until it went live on the site at midnight PT, so we had to have a team working on this in real time to support it, test, it, etc. In fact, this new format won't be in the eBay sandbox for weeks. Clearly the business changes are coming faster than the rest of the company can keep up right now.

Congratulations to Scot and his team for getting the CA software to work with FP30. My question is, since this change has been planned out for well over a month or two, wouldn't it make sense for eBay to notify their 'Certified Partners' and let them know that the API is ready so that the launch of such an important change could be used by everyone?

Personally I use the Vendio software and at this time they do not support the FP30 option, nor have I read anything about such a listing type in any of their updates. (authors note: GET WITH IT VENDIO!!)

This puts sellers who use 3rd party tools at a real disadvantage. In fact, eBay's own Turbo Lister application wasn't ready to go until around 4:15 pm EST. Wouldn't it be in eBay and their partners best interests to work together and have everything ready to go for rollout?

The lack of planning and disorderly rollout really shakes my confidence in this once vibrant company. To quote Randy Smythe's interview from awhile back, eBay seems like its a huge ship without a rudder.

I kind of have to disagree with you Randy.

eBay is run by a bunch of monkeys. Haven't you ever wondered why ebay's site is primarily banana yellow?

Currently playing on my iPod (Gwen Stefani - "this beat is bananas.. b a n a n a s....")

The reasonable person, does this include eBay buyers?

The current consensus around eBay circles is that eBay is trying to shed its "flea market" image. Current management has indicated that they don't really enjoy the tag as the world's largest garage sale and current changes to the fixed price format are moving eBay towards an Amazon.com type marketplace.

Can eBay pull this off this drastic image transformation?

Recently I was able to secure a wholesale order of New factory sealed Apple iPods. This is not an item that can be easily sourced, but the price was right and the product was good so I decided to purchase and sell them on eBay.

Here's an example of an email I recieved from a buyer regarding their 'expectations':

"if I pay for overnight fees can you ship quicker? I am leaving on vacation and would like to take it with me. I have about 50.00 max to spend on product and shipping."

The item this buyer was bidding on was a brand new factory sealed Apple iPod Touch 8GB. Normal retail for this item is about 299.99 from Apple. You can find it a little cheaper online, but clearly this buyer's expectations are unrealistic, IMHO.

I emailed the buyer and politely pointed out to her the retail value of the item and asked her to make a reasonable offer. She replied with the following:

" win I guess I win, if not then I didn't neet it. Thought the point of eBay and bidding was to be able to find things you want but not pay full price. If I had 350.00 I would not be on eBay. :O)"

You might say, sure this is just one buyer, but I get many buyers such as this who expect brand new hard to get, indemand items for 50%-75% off. Can anyone sell at these prices? Probably not unless they plan on filing chapter 11.

How can eBay management change this type of perception and still allow sellers to profit? In this scenario, I doubt even Steve Jobs himself could manufacture and sell a device and sell it (not even factoring overnight shipping!) at this price.

Many of eBay's changes are based on "what buyers told us they think is reasonable." Is this a good example of what is reasonable? Is eBay going down the wrong street by listening to buyers such as this? Many of the new policies such as maximum shipping were determined by buyers such as this. Would reasonable sellers sell at these types of prices? Most likely not.

In law school we learn that most issues are decided upon the 'reasonable person' standard. A reasonable person is defined as a person with ordianry degree of reason, prudence, care, foresight or intelligence and judment that society requires of its members for the protection of their own interests and interests of others."

Is eBay management making the flawed assumption that eBay buyers fall into the category of a "reasonable person"?

Food for thought.

Feedback scores not updating on ebay.com

Reports are coming in that eBay is also having a problem with the feedback scores.

I noticed the feedback score on my account has been stuck on the same number since last night even though new feedbacks have been left by other eBay members.

Some other eBayers at PowerSellers Unite have reported similar issues with their feedback scores.

It appears that this issue could be related to the DSR calculation issue which has been affecting the site this weekend. As of Sunday afternoon, Seller dashboard is still offline as it appears eBay is aware of the problem and working on a fix.

Stay tuned!

DSR calculation error frustrates eBay sellers

Over the weekend, ebay announced  that sellers 30-day rolling DSR averages were not displaying correctly in the seller dashboard widget. Ebay initially told sellers that the problem was corrected, but later posted an announcement regarding the ongoing glitch.

DSRs Displaying Incorrectly

Ebay has now pulled the Seller Dashboard widget and announced that the best match logic will not use DSR's until the problem is corrected and went further to announce that seller discounts will not be calculated until the issue is resolved as well.

Nonetheless, several sellers have jumped to conclusions accusing ebay of DSR manipulation.

Personally I saw a sharp drop in my DSR averages which led me to believe something was not kosher. For example, my DSR average for the past 12 months for 'Item as Described' was consistently 4.9 or higher. This number dropped down all the way to under 4.7 in the matter of a few days.  Could this be because of the way DSR's are calculated on a rolling 30 day average?  Perhaps, but the number seemed very low from what I'm used to seeing, so probably not.

Seller's distrust of eBay is undersandable especially in this situation because of the way DSR's are calculated. Sellers don't see the raw scores from buyers and when problems like this rear their head's, sellers are quick to jump the gun.

I will commend eBay for stepping up and removing these items from the best match logic, however it does show how venurable sellers are to all of the constant site problems that eBay experiences. Sellers are always charged listing fees and have live auctions which are ending every minute and eBay's response in my opinion should be more swift and should result in some type of credit to sellers for the confusion and inconvenience.  After all, there is no sure fire way to tell how these bugs are affecting your bottom line as an ebay seller.   

Has anyone been negatively affected by the DSR calculation bug? How would you have handled this issue if you were eBay management?

Does anyone think its somewhat odd that this is even a bug?   

What is ebay doing updating DSR scores?

Pilot

Welcome to Dollars and e-sense, my first attempt at blogging.

The goal of this blog is to comment on the world of online ecommerce particularly aimed at the small businesses who sell primarily through eBay, Amazon and other such up and coming ecommerce sites.  I primarily deal in the selling of video games and such related items, so I will probably write about new games and hardware to mix things up a bit.

There are several blogs such as Randy Smythe's blog which do an excellent job of covering the world of online ecommerce and I hope to write about similar subjects, but hope to put a different spin to some of the stories.

So who am I?  I preferr to leave my ebay id and other sites anonymous, but I will say I've been selling on ebay for 3 years now and have significant experience in that arena.  I am a graduate student as well so I spend my time between online selling and doing school work.

If you have an idea for a story feel free to leave a comment and I'll see what I can do!