With ebay’s recent spinoff from Paypal, I thought this was a good time to review what went wrong with the auction giant. Yes, things did go wrong. Otherwise, ebay would be in a much better place. Afterall, ebay admits Paypal was its money maker. Yet Amazon and Google stock are worth hundreds of dollars more than an ebay stock even before the ebay-Paypal split. Why is that? Ebay started only a couple of years before Google and a year after Amazon. Of the three, Google stock is worth more but Google has given us more, literally. Google has provides us with Google Earth, Youtube, Google Books, and Google Analytics…I could go on…all for free. Neither Amazon nor ebay compare in the contribution of free things Google has given the public. So why can’t ebay’s stock soar like Amazon and Google!
The reason that ebay stock is so cheap after twenty years is because ebay is cheap and forgot why they were such a mega hit when they forgot the seller that put them on the cyber-map. Sellers have been leaving ebay every year for over a decade now, due to their new allegience to China and unscrupulous buyers. My first purchase on eBay was some item, I don’t remember what, that I bought from Australia in 2001. I was so green and didn’t know what I was doing. I remember that the shipping was three times what I paid for the item. I didn’t want to pay it. I didn’t pay for it and of course back then, I did not get it. I got a negative feedback instead, on my first purchase.
I was so naive. It took years for me to see even 98% positive feedback. As I purchased more and later sold on eBay I realized how dishonorable I was. I deserved the negative feedback. I have since forgiven myself. I just didn’t know.
That was when you could give a buyer negative feedback. That was when PayPal was new and separate from eBay, though Paypal is separate again.
So much has changed since then. Although the format is still familiar, the rules are very different, rules that have benefited ebay buyers rather than sellers, at least Western sellers. Those changes include high listing fees, high final value fees, new shipping fees, the inability to leave unsavory buyers negative feedback, thousands of Asian competitors, and arbitrary holds on sellers’ PayPal accounts.
Fees started quite small on eBay. That is what made it so attractive to both buyers and sellers. EBay has changed their fee schedule so many times since, that it has left sellers dizzy with frustrations. The most insulting: EBay has attached fees to the sellers shipping cost. So, unless you list your item with Free Shipping, sellers now must give eBay a percentage of their shipping cost.
2. Negative Feedback
Sellers are no longer allowed to leave negative feedback for buyers. This practice in started in 2008. According to Bill Cobb, then President of eBay, North America, “buyers are more afraid than ever to leave honest, accurate feedback because of the threat of retaliation” from sellers. As an eBay buyer, I know this to have been true. Sellers, angry usually because of a complaint from a buyer, or a return, would leave negative feedback for the buyer. Recovering from negative feedback, as I mentioned earlier, was and still is very difficult. I did not find this to be the norm in my transactions. I am sure something had to be done since Cobb stated “that sellers leave retaliatory feedback eight times more frequently than buyers do,” a problem eBay surely had to resolve. EBay’s solution, however, caused nightmares for sellers, especially once buyers realized their new powers. The results are that sellers do almost anything to keep their buyers happy and prevent negative feedback. It is not uncommon, according to the eBay community message boards, for a disgruntled buyer to keep a seller’s merchandise after they were refunded their money.
3. 21-day Hold
First let me tell you how it used to be. Previously, a buyer paid a seller through PayPal and once that payment cleared, (instantaneous unless done by an echeck), the money the seller earned through his sale was then available to actually ship the item. Sellers were told that this hold policy would be enforced on sellers with few sales, no sales, risky items, etc. Now, in present day eBay Purgatory, it appears that the hold is a random policy, for new ebay sellers, according to ebay. Payments to new sellers from buyers can be held until the buyer receives the item and/or leaves feedback.
Similarly, even veteran ebay sellers can have their Paypal account frozen if a buyer disputes a sale, for any reason. Otherwise, as long as there was no dispute, fund were released to sellers immediately.
Unfortunately, the implementation of this policy has frozen accounts of sellers in good standing and newcomers alike. Sellers are complaining that their PayPal funds are being held after recent sales. Some of these sellers have no negative feedback. Some are new sellers with tragic stories of not being able to ship items because their funds (payments from buyers) are frozen.
4. 14-Day Minimum Return Policy
Ebay’s most recent anti-seller policy is their 14 day minimum return policy and partial refunds to buyers. Ebay gives buyers way too much credit. Yes, most buyers are honest and I am witness to that. Only once did I have a buyer try to swindle me after they received a product. I offered to return their money and pay for their shipping both ways (and this was before this also became a quasi-ebay policy). The buyer decided to keep the item. Even in retail, people know that buyers can sometimes be dishonest but this has not deterred ebay from favoring them. So not only does an ebay seller have to provide refunds up to 14 days after a sale, they also may have to refund part of the money they made if a buyer complains.
5. Ebay and China
In addition, and perhaps most important, ebay partnered with China Post (China’s postal system) and U.S. Post Office to make shipping easier and cheaper for the Chinese to sell on ebay. How else can a Chinese seller sell an item for $1 and free shipping? You can visit Ebay’s China site at ebay.cn. You should go “incognito” though, because ebay has a mechanism in place to block you. The site is in Chinese but you can do a Google translate of the page. What you will find are tools that no European or American ebay site has to help sellers with their products. Also, as of the original writing of this article, I did not see any buying, just selling.
Sellers in china are selling items for $.99 and sometimes less, including shipping. I can remember my first purchase from China. I was hesitant because Ebay purchases from Asia was new at the time. I bought a baroque, coffee pearl memory wire bracelet for less than 50 cents. I figured, no harm if I never received the item. But I did receive it and it was cute, nothing special but I did not realize how this new purchase power was going to change ebay.
The problem for American sellers was and still is, you cannot compete with items that are $.99 and free shipping. This phenomenon is not missed by the eBay message boards. The boards are abuzz with not only how can one compete with that but also how are they able to make any money? Enter more research and what I found was an article in Bloomberg Business Week, How EBay Found a Secret Way Into China by Bruce Einhorn. According to the article, eBay lost money purchasing China’s Eachnet, “at the time China’s top e-commerce site.” Einhorn goes on to explain eBay lost over $200 million on this purchase. So what does eBay do? According Einhorn’s article, eBay subsequently brought small Chinese entrepreneurs together with non-Chinese consumers. In addition, Einhorn confirms that eBay “launched a service, together with China Post and the U.S. Postal Service, to provide a way for foreign buyers to track their China purchases and allow sellers on the mainland to offer free shipping.”
In addition, an article posted on eBay’s discussion board in May 2008 was prophetic. Though the original post was removed by eBay, a search found the entire post is still there, although not by the original author. The author wrote, “The powers that be want to transform eBay into an overstock warehouse…Sellers, my advice is simple. You are not wanted. Leave. If you stay, you will be crushed. Leave. Go away. You cannot win.” You can read the original here in its entirety.
Many people still lament what ebay has become because they know what ebay once was. Many people have made a nice living, even fortunes on eBay. When it was started, it shined with all the glitter of an ingenious idea that allowed people to make extra money or a lot of money. It connected people from around the world. Today, the only thing keeping sellers on eBay is that it is the only eBay there is. Regretfully, there is no other auction site as well known or with as many users. Unhappy sellers are looking and looking hard. One day, someone will find eBay’s replacement or program it themselves. When that happens, and it will, eBay will be a memory of a good model gone bad.