Down-under or upside down?

An Ed-itorial Commentary

Since roughly the time that eBay Oz conceded they weren’t going to win the battle for a PayPal-only Australia, the management team down under have been trying to garner information from their customer base to discover why the Antipodean marketplace is shrinking.

It should of course be obvious – alienate your customers, or try imprisoning them into a sealed compound, and the transaction levels are bound to fall, but under the theorist dictatorship of John Donahoe’s Disruptive Innovation business plan, market-savvy staff have been gagged and bound into the dogma of divide and conquer at all costs.  Yet it must be questioned whether JD is the dictator or the propagandist.  As Randy Smythe blogged recently, the real power at eBay still lies in the hands of Pierre Omidyar, founder of the Fourth Reich, as majority shareholder and Chairman of the Board.

Yesterday the plain evidence of that was revealed in a significant announcement on the Australian site’s Announcement Board, and a new site sub-section called Planning for a Stronger Marketplace, which in all honesty shows a distinct lack of pro-active planning, and a high degree of reliance on knee-jerk policy amendments.

The announcement introduces the sub-site by summarising the outreach and feedback as follows -

Over the past three months, via an online survey, sponsorship of the PeSA conference, and community group forums held across Australia, better known as Voices, we met with almost 500 sellers and received direct feedback from over 10,000 members on various topics … the top five themes raised -

1. Profitability and fees on eBay – You told us you want free gallery, discounts for high volume sales and/or good behaviour, and success based fees.
2. Feedback – You told us to get rid of the buyer notification that appeared before a buyer leaves feedback, allow a means to remove or revise feedback, and help minimise non paying buyers.
3. Communication & support from eBay – You want greater consultation, more notice of changes, clearer communication, and better understanding of how change may impact you.
4. PayPal – Opinions on PayPal being a mandatory payment option are mixed.  Communication related to PayPal eCheques and disputes was a recurring theme.
5. eBay policies & changes – While largely linked to communication and support, you want to better understand the rationale of why policy changes are being made.

As you can see from that list, eBay appear to be continuing the disingenuous habit of failing to tell the whole truth, even when it keeps belting them on the nose.  Here’s my take on what was said in that list -

1. Profitability and fees on eBay – You told us you want unity of costs and incentives that match the rest of eBay and you want the global platform to operate from a single unified fee table worldwide, you want the administrative cost of calculating eBay fees reduced to the simplest structure, and don’t want to have to spend a full day every few weeks checking where in the world the fees have changed, and by how much.  You want your monthly total fee cost back under 20% of total GMV otherwise we’re going to lose your custom.

2. Feedback -You told us you want us to stop telling buyers to leave you negatives (because you can’t give them back) on the interstitial page immediately before they leave feedback, and you want your ability to issue negatives and neutrals returned for bidders and buyers who deserve them.  You told us you have no faith in eBay’s ability to reduce or eradicate the degree of non-paying buyers, and you want the ability to warn other sellers about those through feedback, in addition to having greater ability to remove the libel and other falsehoods that eBay-inexperienced and/or vindictive buyers routinely leave in feedback comments.

3. Communication & support from eBay -You told us eBay Customer Support is the worst of all your suppliers, and completely incapable of replying in a timely manner to the topics you contact us about, and has a complete inability to progress basic customer concerns.  You stated you have lost all faith in eBay management and believe none of us newbies understand the operational reality of the eBay marketplace.  As such, you want eBay to pre-discuss proposed changes with you, to allow both sides to understand the impact of such changes before they reach the implementation stage, and to enable abandonment or modification of such changes.  You want us to tell you about changes sufficiently before they happen to enable you to factor them into your business planning, and you want us to stop changing things in the fourth quarter of each year (like we used to do).

4. PayPal – Opinions on PayPal being a mandatory payment option are mixed but we’re not going to admit that the majority despise the idea.  We’re also not going to remind you that it’s common knowledge in western Asia-Pacific, that in general, your customers (the buyers) have little worry about PayPal being a compulsory option, but that they want us to stop ramming it down their throats.  The ACCC have proven PayPal is less secure, for sellers (our consumers), than other forms of payment, and eBay’s own numbers show that only around half of Australian buyers actually use it anyway.  We also won’t mention that our own figures, supplied to the ACCC, prove that sellers accepting PayPal have a ten-fold higher rate of chargebacks and payment loss than bank-based merchant services (in Australia), because we still believe that PayPal is the safest and most popular payment method in our world.

5. eBay policies & changes – Look, in all reality, these are commercial strategies and you simply have no right to know what we’re up to because you’d just run off and tell our competitor marketplaces, or blab about it in your blogs.  Remember you’re all heroin peddlars and noisy oiks who know nothing about business and therefore have no valid opinion on how the marketplace should operate – we don’t care if it was successful under Meg Whitman, it’s our ball now, and we set the game rules.  Oh yes, and on an operational level, you want to cling to that old level playing field with the same rules and policies worldwide, plus worldwide visibility, that we used to have.  Not a chance.  As we said, it’s our ball and we also choose the playing field.  If you don’t like it, there’s another three potential sellers for each of you that want to leave.

Have I got that just about right?  Or did I miss something?  Now I’ve got the cynicism out of the way (for those who like that type of thing) lets’s look at it in a more balance attitude.

Maybe you think I was being a bit harsh on eBay and the Australian management team?  I was one of “the chosen few” invited to complete a lengthy online survey by Nielsen on behalf of eBay Asia-Pacific, and I went into it looking for hidden agendas (read that as pre-skewing of data via biased questions and attached answer options).  I spotted many, and knew exactly how to tell them what they were trying to avoid being told – being a pro-interviewer (journalist) has advantages when completing surveys – therefore what they got from me may have been different from what they got from others.  It’s also why I know how they acquired the data used to justify their details in this announcement, and what they were trying to justify.

If you are thinking that I’m being hyper-critical, then put your “completely neutral head” on, or your “slightly cynical” one, and go read everything on that new Planning for a Stronger Marketplace sub-site.  If your eyes aren’t open when you’re reading it, you won’t see what’s written between the lines, or that it’s all smoke and mirrors and a complex PR stunt to say “See, we listened, we made a few unimportant tweaks for you, and now we’ll press on with the disruptive innovation”.

Translating some of the eBay PR-speak, there are a few predictions that come from the sub-site -

Overview – Australian buyers no longer believe in the eBay marketplace.  Sellers have stopped buying on there, and now that they have, it can no longer be hidden that they were a community trading within themselves.  In other words, there are insufficient purely-buyers to sustain the marketplace if the sellers are no longer buying, and the sellers are the best source of repeat-buying in any online trading community, but eBay are unable to publicly admit that or Wall Street will crucify them for relying on internal purchasing.

In the last segment of the Overview, there is an interesting undertone.  It’s almost as if the Australian team are admitting they disagree with the global policies, and are using local policies where possible to offset the dictates from San Jose.  This is further disrupting the marketplace down under, but they see it as having no choice if they want to retain any marketplace at all.

1. Profitability and fees on eBay -The most important statement on this page is the warning in the top grey box, “at this stage we are investigating the following changes that have already been implemented in eBay markets in the USA, UK, Germany and Italy“.  Remember the common fee factors on those sites – the move from auctions to long-duration, fixed price, listings with supposedly low insertion costs and very high success fees.  Much has been discussed online about this, and I’m sure that ultimately it will cause the opposite of popular opinion – i.e. successful business sellers will be forced off eBay due to the incrementing of FVF increases, whilst the amateur and hobby sellers will remain due to the low entry cost.  Mega business sellers will eventually get bored with the high overheads of supporting eBay buyers, and whilst they may maintain PayPal usage, they will drop eBay as a long term channel.  I’m not sure eBay have examined this and factored it into their plans.

The messaging on that page certainly seems to indicate eBay.com.au »”>eBay.com.au have already decided on following the UK’s shift, from SIF shop inventory into new-BIN / FP30 fixed price formats, particularly when reading the note about volume discounts for shop users and matching core visibility for shop listings.  The question has to be whether they, like the UK, will then shut out non-residents from receiving those reduced fees if their shop subscription is on a different site?  If all sites move to this model, is there then any reason to continue such usury, or should it become the subject of an anti-trust lawsuit?

2. Feedback – There are two major disingenuous concepts promoted on this page.  The first is that now eBay have revised Feedback 2.0 to re-introduce the ability for buyers to amend feedback, which still requires sellers to initiate the procedure and restricts how many times per year they can do so, eBay think it is problem solved.  However, having the ability to do something does not guarantee that it will be done.  When a buyer simply refuses, or ignores the sellers’ approaches, to do so, then there MUST be an independent review channel for doing so.  After all, eBay is the site publisher and they are condoning frequently libelous information to be published on their site – that is illegal.  Unfortunately eBay believe that US law applies worldwide (that they are not responsible for the content their users post) and rely on several court cases in the USA which have found in their favour.  Until users outside the USA begin knocking down that belief via local court victories, nothing in that department will change.

The other is the statement, “September 2008 data shows that the share of non-paying bidders on the Australian site has reduced by 5.53% since the Feedback changes came into effect on 12 May 2008 so there is no evidence that this is currently a widespread problem.“  There is one very simple, daily, operational reason for that perceived drop in NPBs, and one blatantly obvious, data-manipulation reason too.

August is the traditional mid-year holiday month in the westernised world operating on the Christian calendar.  Therefore it follows that transaction volumes are generally down in August, and thus feedback rates fall in the following month, due to those lower transactions.  One month of data proves nothing – it is statistically insignificant and has a high probability of being a “blip”.  They should be quoting for three to six month periods, and comparing that period, year-on-year, over several years – and publishing the full data for all to see.  Their justification in that statement is frankly an insult to all professional sellers using the site, and as such proves they are basing decisions and strategies on invalid foundations.

The other factor, as frequently stated in eBay forums and elsewhere, is that sellers are now scared to file NPB reports as they know it will lead to negative feedback about which they can do nothing.  This is the underpinning flawed rationale for eBay believing that NPB rates are dropping.

Myself, I couldn’t give a flying fig about feedback – it doesn’t pay the bills and it doesn’t feed the family, therefore on day eight, every unpaid item gets a non-payment dispute opened, and a non-paying bidder report filed on day sixteen – no excuses, no exceptions – 90%+ of my inventory is in Buy Now format.  Buyers can’t have it all ways, if they want combined shipping discount, then they still have to pay quickly, if they refuse to do that, then everything gets switched to Buy Now with immediate payment.  It’s up to them as a whole, to persuade all sellers which route is best.

I used to have a lower than 0.5% NPB rate on around 150 sales a month … in September it was 9.1% on around 50 sales.  If every seller followed my lead, then eBay (and buyers) would soon get the message.  If every seller was issuing NPB strikes against 9.1% of buyers every month, then by eBay’s own policies, within 12 months, every buyer would be NARU.  Of course, by month four they’d change the policies and maybe remove the availability of NPB strikes.

10,000 Aussie buyers and sellers are to be made into a consultation committee, but will they be hand-picked elitists, volunteers, or random conscripts?

3. Communication & support from eBay – I’m not buying into the PR hand-washing on this page – I did the survey remember.  Instead of addressing very real, continuously reported problems from customers regarding eBay’s support for paying customers, eBay are trying to obfuscate that there is a problem, and are further automating services – the very cause of those problems in the first place.

This attitude is what has many believing eBay want rid of the small sellers, though I’m less sure (see comments above).  It’s possible there is a growing realisation that eBay buyers are not eBay customers, and the automated support will gradually be more emphasised towards them, with a split towards real-person support channels for the much smaller number of sellers (paying customers) that eBay have legal obligations towards.

One of the biggest challenges that eBay faces in this arena, is re-educating buyers (and sellers) to understand buyers should be seeking (and obtaining) purchaser-support from the sellers, not from eBay.  eBay has legal obligation to support customers who pay them, but they have far fewer legal obligations to support the buyer in any transaction.

eBay is an advertising publisher (an advertising venue if you like) and their duty of care towards buyers pretty much stops with making best efforts to prevent fraudulent sellers advertising in their media, and making sure paying customers get what they are paying for.  Of course, the more eBay interferes with the transaction (such as promoting PayPal above all others) then the more they increase their duty of care towards the buyers, and lose the protection of being just a venue.  In this, the rise of Amazon has an influence.

Amazon are not just a venue, they are also a merchant, therefore they have legal duties to buyers that eBay do not have.  However, it appears that eBay are attempting to assume those responsibilities unnecessarily, and thus arise the cries of interference with the business operations of their paying customers.  This can be summarised as eBay having currently both a crisis of identity, and a crisis of management.  It is proof absolute that eBay have no clear vision of who they are, what they do, nor of their future path.

4. PayPal -I’ve reread this page several times now, and I still have problems identifying the underlying message other than a “you will use PayPal whether you like it or not”.  Certainly the fact that almost half (38%) of buyers do not feel safer when using PayPal deserves comment, as does the fact that no similar statistic is presented for seller sentiments about the service.  Perhaps all that needed said, was said to the ACCC this year?

It is certain that PayPal are now the supporting pillar of eBay Inc.  The latest financial reports make this undeniable.  It is also certain that PayPal are courting the corporates such as newly acquired merchant American Airlines, but what is less obvious is how PayPal are courting the smaller non-eBay sellers.

Taking osCommerce as just one example, the PayPal payment gateway (in various formats) is now embedded in the out-of-the-box distribution of this popular webstore/shopping cart software.  Browsing the osCommerce.com user forums reveals an increasing number of merchants taking up both PayPal, and eBay selling, based on that embedding, even if their original offline business had no prior plan for using eBay’s services.  However, such entrants to eBay also make it clear that they have no intent on becoming reliant on selling through that channel – it is incidental to their core activities, of offline sales and their new webstore.

There is a further trend emerging.  As more and more sellers become disillusioned with eBay for the myriad of reasons discussed everywhere, they are moving to opening their own ecommerce sites, and almost universally seem to be retaining PayPal as a payment method.

Hypothesising about numbers, let’s say that since 1996, when eBay started as AuctionWeb, they have enabled around 10 million people to create businesses “out of nothing”.  Lets further project that around 2.5 million of those have become full-time businesses.  Remember this is all unsubstantiated “best guess” hypothesising.  If eBay were to completely disenfranchise all its current and previous full-time sellers tomorrow, it’s likely that around one million of them would create (or have already created) their own web sites and stores, whilst the rest would drift off to other online channels, or move their sales off-line.

Further assuming that 90% of those retain PayPal as a processor, eBay is in a win-win situation.  They lose the support overhead of massive numbers of eBay-savvy sellers who know how to complain, seek redress, and push the limits of the sites’ rules, and they retain a huge merchant user base for PayPal.  However there would be a major shift in how those users would use PayPal.

On-eBay, those merchants cannot refuse to accept a payment via PayPal.  On their own websites they can do so.  They can also surcharge for paying through that channel, and they can direct each sale to either a regular PayPal account, or to a micro-payments one, thus making fee-overheads more cost efficient.  Ultimately PayPal will still make more revenue, so will the merchants, but PayPal’s take on base fees per transaction may drop.  That equates to an increase in cost-of-sale per transaction for PayPal, which ultimately would get noticed by Wall Street (reduced gross margins).  This may explain why they are courting the big-ticket retailers such as airlines – not to boost eBay marketplace performance, but to offset the increasing costs of PayPal servicing small merchants.  Those costs can only increase as ever-increasing numbers of eBay transactions turn sour due to current feedback policies.

eBay policies & changes – eBay makes three broad statements on this page (on the planning for a stronger marketplace sub-site).  The first two are both basic common sense and corporate flanneling – they simply justify things in a way that we are all familiar with already.  Not much to discuss there, but also nothing to praise them for either.  There will be a body of sellers who disbelieve that eBay policies are intended to create a safer marketplace, but such arguments are well discussed pretty much anywhere online.

The third “Q&A” is more interesting.  Here they seem to be laying the foundation for a step-backwards from the constant seller-whipping of the last 10 months, but are reinforcing that DSRs (however flawed) are here to stay, yet fail to recognise that their draining pool of experienced sellers are leaving mostly due to DSRs and everything eBay has built upon them.

This proves a fundamental disconnect between eBay management and the marketplace they operate.  The greatest threat to the future success of eBay as a platform for sellers comes from the DSRs and all the rewards and punishments that stem from treating emotive assessments as intrinsic data.  I’m not going to harp on about the details of each flaw, but if eBay were truly listening to their community of users, then they would understand the simple logic that “DSRs must go”.

Summary - Overall, there is little new in what is a medium sized, yet significant, announcement supported by a bland new sub-site.

The intention of Australia to move to a revised UK-style marketplace is a fairly safe bet.  The introduction of a consultation community of 10,000 buyers and sellers should not be relied upon to change anything – you can be sure eBay will cherry-pick policy-friendly members to be on that panel … yes-men and yes-women, who will not create conflict with the “Disruptive Dictates of Donahoe”.

I also see an ongoing determination for creating a PayPal-only marketplace, and an increasing of the fleecing of existing paying customers as the site tries ever harder to turn existing users into repeat buyers, keeping a dwindling pool of finance within the PayPal system, with PayPal taking it’s 3.4% each time the money is moved around between members.

Ed