"If their new fee increases leads to increased revenues and stock price for EBAY, then the leadership is to be commended. If they notice that the new fees have a detrimental effect on certain segments of their business, then I truly hope they reconsider their recent move. No matter what they say to the press or how they try to frame it, it’s all about bringing increased revenues to their bottom line. And a less-than-expected increase will likely be the only thing that would get them to change their recent fee increases."
This quote comes from a large eBay seller I spoke with last week, and it echoes the sentiments of many large volume sellers I’ve talked to recently. Most professional sellers understand that eBay has a business to run, but sellers have businesses to run too. If squashed margins driven by new policies hurt sellers’ businesses, what choice to they have but to shift their businesses elsewhere?
Articles, blog posts, and analyst coverage have taken note of seller grumblings about eBay’s new fee increases for stores and eBay's rationale that it was needed to “rebalance” the inventory levels between stores and auctions. eBay built its business off of core auctions, and developed a strong business model with the addition of stores. The addition of eBay stores was the very reason hundreds of thousands of businesses could run off of the eBay platform each year. By hitting these businesses where it hurts, eBay is forcing them to re-think their long-term business strategy, and the company is underestimating the ability of these businesses to sell off of the eBay marketplace. As someone who speaks to hundreds of eBay sellers each year, what’s surprised me in the coverage of this recent issue is what is not mentioned:
1) They don’t discuss the inevitability of where this big eBay debate is heading: that some sellers will strongly focus on building their businesses outside of eBay. This is healthy and shows a maturing of the e-commerce market.
Multi-channel selling is the future- and it’s often misunderstood by the mainstream media. The media is harping on Google becoming the next marketplace, but I actually think the future has less and less to do with massive portal-like marketplaces. Free- standing stores, powered by software service providers like Channel Advisor - probably the best known of these in the eBay space, but also companies like MIVA or Yahoo Stores - are big players beyond eBay. This trend brings along with it a whole new suite of problems, but we see the growth in this sector, we’re excited about it, and we’re addressing ways to allow merchants to extend powerful trust signals backed by financial guarantees to make them mean something to their free-standing stores. Our other more eBay-centric colleagues like Channel Advisor also rapidly following their customers off eBay.
eBay still is and always will be an incredibly powerful and rich marketplace, but change is afoot and diversification, as I mentioned last week, is inevitable. We’ve certainly turned our business in that direction.
2) They don’t understand seller motivations- or at least they don’t seem to accurately report on them. As the quote above echoes, eBay sellers are businesspeople (many are quite sophisticated and are former investment bankers, lawyers, accountants, etc. with MBAs and other advanced degrees). Some articles have been quite patronizing in their discussion of eBay sellers and their reactions to fee increases and other new rulings such as the removal of many sellers’ stores listings. Hi-volume eBay sellers are smart entrepreneurs. They know eBay is motivated by the bottom line, and so are they. I think some analysts and journalists still think of eBay sellers as empty nesters wanting to clean out their attics and garages or stay at-home mom’s who have built a business out of the garage. I assure you, there is nothing is further from the truth. These sellers want and need to run healthy businesses. High fees, lower visibility, and a lack of buyer trust conspire to create an atmosphere for some sellers that just do
esn’t allow them to run profitable businesses. Profitable businesses lift the e-commerce sector as a whole- and lift eBay’s value in the long run.
Professional sellers view eBay as a landlord, and when your landlord starts charging too much rent and letting the riff raff in, you move, or open another location. As Mylene Mangalindan mentioned this week in the Wall Street Journal, “there is a growing gap between registered users—people who have registered information about themselves on the site—and its “active” users, who have bought, bid on, or sold something in the past year.” The numbers I’ve seen point to active user attrition rate on eBay is now approaching 50% (annually). This points to a massively high churn rate for eBay buyers, something more in keeping with the behavior of a search or comparison shopping engines and not a trusted marketplace. However, Wall Street (and journalists) often see eBay as an e-commerce play unto itself—or as an auctioneer, maintaining prices, courting buyers, and controlling inventory.
The truth is somewhere in between, but for the majority of serious merchants we work with, eBay is now just part of a multi channel retailing strategy. This is healthy, and to be expected.
