EBay Watch 2008: The Year in Review

There is no doubt that 2008 will go down as eBay’s most controversial yet. The auction giant rolled out one policy change after another — changes that drive eBay's focus on attracting bigger retailers.

The big problem behind these changes was – and still is – eBay's declining traffic and sales. The solution was announced by the new eBay-elect CEO, John Donahoe, tasked with overseeing eBay's year-long strategy to position the company to compete with popular fixed-price e-commerce destinations like Amazon and Walmart.com.

As we look back on the most controversial changes made by eBay in 2008, it is apparent that these Donahoe-inspired policies set the stage for eBay's new Large Merchant Services. The company quietly launched the beta program earlier this month, with seemingly little regard as to how these changes would affect existing sellers on the site.

The Boycotts of Early 2008: Target Donahoe

At the end of January eBay announced plans to lower listing fees while increasing fees sellers pay to eBay when an item sells. The company also told sellers they would no longer be able to leave negative feedback for buyers, a move that caused a ruckus among those who felt they would have no recourse for handling problem customers. 

Seller rebellion was another hot topic of 2008. Leading up to May we saw a number of grassroots boycott movements that gained a lot of publicity. One group even went so far as to call for the resignation of John Donahoe, which went largely ignored. The boycott actions from earlier this year were a big deal mainly with small to mid-sized sellers, but even in the face of a public boycott, eBay still rolled out its policy changes.

Donahoe's hand will continue to play out into the coming year, regardless of how many sellers he rankles with policy changes. How long he remains at the helm in 2009 is a topic debated in many blogs. E-commerce blogger, Randy Smythe of My Blog Utopia is predicting that Donahoe will probably get at least two more quarters to turn eBay around, and at most a year. Many industry watchers agree he is on the way out, but how much longer he has is up for debate.

Media Fees and Max Shipping Limits

EBay first unveiled a new pricing structure for its Media category which drastically lowered insertion fees, with the bulk of the fees moved to the back-end of a sale. Later, in September, the company adjusted fees again to reduce start-up costs for sellers by lowering the listing fee for all items sold in the fixed-price format.

Sellers were vocal about the fee changes and some even called eBay a snake for “hiding” final value fee increases behind lower listing fees.  What some sellers didn’t realize is that this new fee structure is not a new idea at all. Many platforms, including Amazon, already offer pay-per-performance based systems.

This new fee structure basically lets sellers who have been hesitant to invest in eBay integration before this year. The new structure lets them experiment with the eBay platform with lower upfront costs.

EBay also set limits on shipping charges for its most competitive categories: Media - Books, DVDs and Movies, Music and Video Games. Sellers listing in these categories were required to offer at least one shipping option within eBay's specified limit.

Lorrie Norrington, president of eBay Marketplaces, said that enforcing shipping limits was designed only to protect buyers from excessive shipping charges, but eBay's focus on catering to large retailers was also in play. There is no point in opening your platform to large merchants to list if buyers will still choose other destinations because the overall purchase price (item plus shipping) is cheaper.

EBay's Other Mission: Appease and Protect Buyers

Over the years eBay has become almost synonymous with the word scam. News reports of eBay rip-offs are reported on a daily basis. Despite the company's security efforts there is no denying that there are plenty of active scammers on eBay, which isn't helpful when you’re trying to entice big brands to your platform. EBay moved into action mode in 2008 – from masking buyer IDs to initiating safe computer policies ‑‑ to make its platform safer for buyers.

The new Detailed Seller Ratings (DSR) policy shook sellers to the very bone. DSR is a policy that has sellers worried about how frequently their items will be seen in Best Match searches. In August eBay made DSR matters worse by announcing a new DSR minimum that required sellers to maintain a minimum 4.3 DSR rating across all four DSR categories (item as described, communication, shipping time and shipping and handling charges) over the prior 30-day or 12-month period — depending on volume — to list on the site.

Some sellers have called the minimum a 'scare tactic,' but there are also sellers who say that DSR minimums will keep unsavory sellers off the site, which is a positive thing for honest merchants trying to turn a profit on eBay.

After months of controversy it's unlikely that we'll see DSRs being thrown out any time soon — in fact it's more plausible to see eBay toss its basic positive, neutral and negative style of feedback once the dust settles and sellers get used to living up to tough DSR standards.

Tough Decisions in the New Year

By creating policies and tools to attract large retailers, eBay also expects to become a more attractive shopping destination for consumers looking for cheaper online prices and fixed-price, instant-purchase gratification in a bad economy.

The big decision for large retailers going into 2009 will be deciding if eBay is a good fit for their retail brand. Since eBay is often associated with scams, lawsuits and brand fraud, many retailers will not be ready to use this new selling channel right away. Also, many large retailers will not want their entire product catalog sold at discount prices on eBay.

Sellers that fall into the too-big-to-be-small but too-small-to-be-big category appear to be left without a life ring, but that is not necessarily the case. Auction sellers have the same home on eBay as they have for some time now — and thankfully eBay didn’t mess around much with auction policies this year. On a more positive note for sellers, more big brands and more products in fixed-price format can help increase traffic to eBay which will benefit all sellers, regardless of their inventory size.

Sellers with smaller inventories may not get a crack at the coveted Diamond PowerSeller perks, but they will find opportunities unavailable to large retailers. Larger retailers will be slower in reacting to and meeting changing market demands on eBay, and smaller sellers will have fewer restraints and more flexibility in setting their own pricing and discounts.

Will Sellers Sink in ’09?

Only a few things are certain. For merchants who are not already using Amazon, this platform is looking better by the minute. This year, sellers who never heard the phrase "eBay Alternative" before this year have their items listed on multiple sites.

Many casual and part-time small sellers — those who use eBay to supplement their personal income — simply find the new rules and policies too much of a hassle. It is this group of community-minded sellers who will continue the fuel the growth of many non-corporate alternative marketplaces in the coming year.

EBay’s focus on attracting large retailers and consumers who want instant and cheap purchase gratification is not going to slow in the coming year. There is no doubt that sellers will be swimming — with some drowning — in eBay’s changing e-commerce tide in 2009.

Vangie Beal is a seasoned online seller and frequent contributor to ECommerce-Guide.com. She is also managing editor of Webopedia.com.

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