Merchant Group Blasts EBay

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A powerful and vocal group of large eBay merchants has blasted the e-commerce giant for changes it has implemented this year, saying they have done more harm than good.

The Professional eBay Sellers Alliance (PESA) on Tuesday published a scathing indictment of eBay, charging that most merchants have been hurt by recent modifications to the online marketplace.

Changes to the way buyers rate sellers, to eBay's fee structure for listings and to the search ranking functionality have been flawed and have led to a substantial deterioration of the marketplace for merchants, according to PESA.

In an interview Thursday, PESA Executive Director Jonathan Garriss reiterated the complaints. "The sentiment of most eBay sellers is that 2008 has been a very difficult year, and they're really nervous because they're not seeing any of the changes eBay is implementing improve their business," he said.

eBay didn't immediately respond to a request for comment.

Although PESA represents merchants with very high sales volumes -- its roughly 700 members collectively sell more than US$400 million in gross merchandise volume per year on eBay -- Garriss maintains that the eBay changes in question are affecting all types of sellers.

In the case of PESA members and many other so-called Power Seller merchants who make their livings selling on eBay, the situation has serious consequences, said Garriss, who is CEO of eBay merchant Gotham City Online, a seller of shoes.

To earn a Power Seller badge from eBay, merchants have to maintain certain customer satisfaction levels and sell a monthly average of between $1,000 or 100 items (Bronze level) and $150,000 or 15,000 items (Titanium level). Power Seller status grants merchants certain benefits at eBay. PESA members are mostly Platinum and Titanium Power Sellers, the top two categories.

"Their livelihood is being threatened because the marketplace isn't doing as well as a lot of Power Sellers think it could," Garriss said.

For example, eBay had the right idea when it decided to use buyer ratings to increase or decrease merchants' visibility in eBay's search results and to award listing fee reductions, he said. However, the plan's implementation leaves a lot to be desired, he said.

In addition to the general positive, negative and neutral ratings for the overall transaction experience, buyers can also leave what eBay calls Detailed Seller Ratings (DSRs) in four specific areas, with a scale of one to five stars: accuracy of item description, communication, shipping time, and shipping and handling charges. The search visibility and fee rebates are based on these DSRs.

"We think DSRs aren't accurately capturing what the true buyer experience is," Garriss said.

While PESA agrees with letting buyers rate item description accuracy and communication, it maintains that buyers' opinions on shipping time and shipping and handling charges are out of line, because those are things eBay can measure with specific hard data.

According to PESA, merchants who offer free shipping and handling have an average DSR of 4.8 in the shipping charge category. "They're offering free shipping. Why isn't the score a 5.0?" he said. "That's one sign that letting buyers share their opinion on something [factual] results in an inaccurate measurement. Two-tenths of a point in deviation on the DSR score is substantial."

In this case, eBay should automatically award a 5.0 score in shipping costs to merchants who offer free shipping and handling, he said.

One negative consequence PESA has identified is that now many U.S. merchants are opting to reduce or eliminate altogether their international sales. That's because those are more likely to result in lower shipping time scores since they involve longer, more complicated delivery, through no fault of the merchant. At a minimum, eBay should weigh differently shipping time scores of international orders, he said.

"The last thing eBay should want is for sellers to start selling less because of the structure of the DSRs," he said.

Another change PESA says is conceptually good but badly implemented is eBay's rebalancing of fees by generally lowering the upfront charges for listing items and then increasing the sales commissions for items that are sold.

The idea is good because it aligns eBay's success with merchants' success, since eBay's benefit is higher when products are purchased. However, the increase in commissions is generally too high compared with the reduction in listing charges, Garriss contends. It would have been wiser of eBay to wait until concrete benefits from the lower listing fees kicked in before raising commissions, he said.

"It feels like eBay is trying to take too much money out of the marketplace, as compared to investing in it to truly make it as vibrant as it once was," he said.

In its statement, PESA argues that, because the changes have been a fiasco, merchants are giving more priority to other sales channels than to the eBay marketplace, such as their own Web sites, competing marketplaces from rivals such as Amazon and Overstock, and even sales in physical stores.

"Merchants are focusing on other channels at higher rates than we have ever measured in the past. Prime products that used to find their way to eBay are now being diverted to these new 'premier' channels that are reportedly delivering higher margins with greater certainty and decreased overhead," the PESA statement reads.

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