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2009 October | Red Ink Diary - Part 2

Posts from October 2009.

Fee Scenarios on eBay

Ina Steiner at Auctionbytes had a blog post last week in which she showed screen-shots of an eBay seller survey. There are links to each of nine different potential fee structure scenarios in the blog, they will open in a new window or tab. Ina wrote

“The survey asked respondents a series of questions about insertion and final value fees, asking them to choose which format they would choose - auction or fixed price - under various scenarios.”

The smart seller does not choose a selling format based only on the fees, if we did we would all use Craigslist. You pick the format to maximize the profit potential of your item; what the item is, fee calculations, exposure and risk are all factors. A question which says:

“Imagine that you have an item worth approximately $500 that you would like to sell. Please carefully review the eBay selling fees shown below. Now, based on the information above indicate if you would [choose] fixed price, auction , not list on eBay”

is really a question about seller perception of the benefits of compared packages.

I would not be surprised to learn that John Donahoe’s controversial “net promoter scores” are being used to weight the survey results. This means that any middle of the road respondents who log 7 or 8 are deemed “passively satisfied” and aren’t calculated in the final score or statistical analysis.

I assure you teams of accountants and statisticians have run every possible combination of charges and potential usage change factors to ensure that eBay benefits from fee changes. The choice has already been made.

Why does eBay have such a complicated fee structure?

  • Because it is more profitable! eBay knows the more complex the fee structure the more money they will make because sellers make mistakes. Listing an auction at $25 instead of $24.99 is the classic example, this basic error nets eBay an additional 1.2% costing the seller an additional 30c in eBay fees alone.
  • Working out exactly what percentage of your sales price goes to eBay is complicated. Most smaller sellers have no clue. Adding in PayPal, which for most smaller sellers is the least costly payment option now, doubles the complexity of the calculations.
  • Complex fee structures make it more difficult to assess and compare overhead on other venues.

It took me close to an hour with my trusty spreadsheet to arrive at a format which would allow me to compare the nine separate fee scenarios. Any seller who was filling out the survey without checking each option on a spreadsheet would just be be guessing. I use spreadsheets because they yield facts which often surprise me.

The spreadsheets

I have made spreadsheets for each of the four price points with the nine scenarios eBay offered in the survey. Each separate image has two spreadsheets, one for Fixed Price (FP) and one for auctions (A).

The first line, highlighted in green, shows the current fee structure. You will note that scenario #2 is the current fee structure. Next, in the left column are the scenario numbers in blue. In auctions, scenarios #5 & #8 are identical.

Note also that scenarios #4, #6 & #7 in FP are all seven day listings, not 30 day. I am not sure what the benefit of a seven day FP listing as opposed to 30 days is to a seller, especially one with multiple quantities. The benefit to eBay is increased revenue by about 433%, add the 12.5% Insertion Fee (IF) increase from 35c to 40c and it is getting very scary.

“12/6/2 - 50/1000/+” translates to the Final Value format; 12% on the first $50, 6% from $50.01 to $1000, and 2% above $1000.

The last column shows what percentage of the sale price eBay gets from each scenario. I have not included PayPal calculations in this set. Click on each image to enlarge.

The sole I think eBay hopI think eBay a hopes aI think eBay hopes a perceived decrease in fees for auction listings might encourage sellers to list more. Given the current lack of traffic and visibility to the many auctions I am not sure how receptive sellers would be to a token decrease, or the more likely overall increase.

The sole purpose of the survey is to enable eBay to say “Our sellers asked us to do this”. Sound familiar?

In line with the current Amazonization of eBay I am inclined to bet on scenarios #5 & #8 for auctions and possibly #3 for FP which will be touted as a reduction because of the drop from 6% to 4% in the middle tranche from $50 to $1000. What do you think?

Y’all come back!
Henrietta!

Saturday Silliness - Shopping in Germany

One day a week we forget our troubles and worries to enjoy a little Saturday Silliness - this week shopping in Germany for a bed. The sign warns shoppers to remove cellphones and any sharp objects like keys from their pockets before testing the waterbed. Enjoy!

If there is no video please refresh the page!

Y’all come back!
Henrietta!

Open Season on Sellers is Extended

Today I learned something new about PayPal. After some research I learned that this is not that ‘new’ a problem, just new to me.

I received an email from a friend who has been selling on eBay for many years. I have removed all identifying information to protect his privacy.

“Buyer bought an item from me. Said he wanted to return it, I said OK, he didn’t return it. 30 days later he said he was returning it and was delayed due to a “family emergency”. When I checked his eBay history, he was very active during the “family emergency”.

Buyer emails that he mailed back item, item doesn’t arrive. I asked for information, when sent, tracking number, etc. He doesn’t respond. Buyer evidently tried to file a SNAD or INR with PayPal but filed after PayPal’s 45 day deadline for filing.

BUT WAIT!

I get the stunning email below from PayPal alerting me that I have some sort of black mark for a “Deferred Dispute”. The “Help” link referred to in the email takes you to PayPal’s full monte “Help” page which has nothing about something called “Deferred Dispute”.

—– Original Message —–
From:
To:
Sent: Tuesday, October 20, 2009 4:09 PM
Subject: Notification of Deferred Dispute: Case #PP-xxx-xxx-xxx

Hello M***r,

We are contacting you to let you know that one of your buyers recently visited the Resolution Center and attempted to open a dispute against a payment. The buyer wished to dispute the payment sent on Sep 3, 2009 (Transaction XXXXXXXXXXXXX). This dispute has been deferred because it was not opened within 45 days of payment.

Although this dispute is not eligible for negotiation in the Resolution Center, we have noted that the buyer was dissatisfied with this transaction.

We encourage you to work directly with the buyer to resolve this matter and take this opportunity to provide customer service as you see fit.

Thank you,

PayPal

Please do not reply to this email. This mailbox is not monitored and you will not receive a response. For assistance, log in to your PayPal account and click the Help link in the top right corner of any PayPal page.
—————————————————————-

PayPal Email ID PPxxx

The ‘Deferred’ Dispute

Evidently buyers can file “deferred” PayPal Disputes against eBay sellers after the 45 day time limit has passed. The first reference I have been able to find on deferred disputes was an unanswered question from a Canadian seller a year ago on a PayPal Merchant board. A Malaysian seller posted on his blog in July of 2009.

Most sellers understand the PayPal dispute process as it applies to Buyer Protection, which may be found in Section 13.3 (a) of the User Agreement. There is absolutely no reference to ‘deferred dispute’ anywhere on the PayPal website.

What is it?
When a buyer files a deferred dispute PayPal annotates their account. If another buyer files a dispute the ‘evidence’ from the deferred dispute is reviewed and may be considered in making a judgment. It is possible, if both disputes are similar and look like a scam the deferred dispute may be reopened.

The danger here is that the only ‘evidence’ is from the buyer, it is almost certainly verbal and PayPal will not always ask for tracking information etc. The seller has had no opportunity to present their side. To be fair, if a buyer has a history of filing disputes PayPal now requires delivery confirmation on the returned item before issuing a refund.

Y’all come back!
Henrietta!

The Good The Bad and the Ugly eBay Q3-09

John Donahoe’s Dog and Pony Show this year has paid off big time in honing (def.#5) his speaking skills. He is remarkably fluent in BaySpeak these days too. Listening to the Q3-09 earnings call I was gobsmacked! He walked the line of exact adherence to his legal obligations with verve, neatly skirting (def.#13) the sticky bits and shining his light on the good bits. Fortunately there were some good bits.

The Good

John Donahoe said:

“PayPal’s merchant services business gained market share in all regions around the world, with total payment volume increasing 35% year over year on an FX (foreign exchange) neutral basis.”

Drilling down through the BaySpeak: PayPal (the whole not just Merchant Services) shows total revenue up 15%, and total payment volume up 19%. TPV growth was 14% in the U.S. and 30% internationally. Merchant Services (off eBay) is the superstar accounting for 56% of total Total Payment Value and representing 31% growth over last year. The number of payments in merchant services grew even faster at 47% .

Skype had 29% year over year growth.
CFO Robert Swan said “The number of tickets sold on Stub Hub increased 40% in the third quarter.” This is a good thing, and good BaySpeak, but was there any net profit? The books do not say, which makes me wonder.

The Bad

Marketplace - overall net revenues of $1.4 billion, 9% up from Q2-09 but a 1% decrease from Q3-08. Purchased items increased 10% in Germany and 19% in the U.K.,  international business accounted for 56% of  revenue this quarter, up from 53% in the third quarter of last year.
Fixed price GMV excluding vehicles grew 37%, Auctions Gross Merchandise Volume (excluding vehicles) declined 12%, vehicles GMV declined 15%.

Classifieds had 20% revenue growth, this was attributed to 2008 acquisitions in Denmark, but total global advertising revenue declined by 2%. Shopping.com and Rent.com declined by 16%

The Ugly

Marketplace GMV is defined as “the total value of all successfully closed items between users on eBay Marketplaces trading platforms during the quarter, regardless of whether the buyer and seller actually consummated the transaction, exclusive of vehicles.”

Remember the first auction of the crypt next to Marilyn Monroe? The one that closed at $4.6M with an NPB? According to the definition above, would that have been a successful but unconsummated transaction?

Bill Me Later, I am not an accountant and I don’t understand the deal there. It almost looks like eBay don’t expect to see any benefit from it until a year or so down the road.

Donahoe’s pet phrase this quarter is “net promoter scores” I think I heard it five times.

Y’all come back!
Henrietta!