Red Ink Diary

Today’s big news from eBay Lorrie Norrington is out. Quoting the Dear Leader

“For personal family reasons, Lorrie made a decision to do what’s best for eBay and for her family, and I respect that. I wish her the very best and thank her for many contributions to our company and our nearly 92 million active eBay users.”

How weird is that?

First I hope someone can explain to me what kind of family there is other than a personal one. Best for eBay and for her family? This woman who has had a career spanning thirty years in upper level management has to be humiliated by this kind of psycho-babble? Whatever happened to ‘resigned to pursue other interests’ or just plain ‘is retiring and looks forward to spending more time with her family’?

Meanwhile back at the Bay

Another press release from eBay recently announced the addition of yet another layer of middle management to the corporate structure. The new vice president of North American business development is Michael Jones who has spent most of his  working life at ChannelAdvisor (which was AuctionRover in a previous incarnation) most recently as chief revenue officer.

Standards have really fallen in eBay’s PR Department. The ever-so-slightly disjointed announcement includes such gems as “Jones will be newly joined” and randomly slaps in a chunk of spin with no visible attribution for the quote until four paragraphs later. Tsk Tsk.

“EBay’s fantastic platform and global presence combine to help retailers and manufacturers sell more products and reach more buyers online”

Auntie May didn’t think it was a quote at all, more on the lines of “Hey Mr Jones please read this out loud. Oh good quote sir!” She remembers when MJ spoke plainly and made sense, back in the early Whitman days when AuctionRover was an auction aggregator (def.#3) and eBay was suing everyone, but I digress.

The eBay Fashion team

eBay has put together a team who may have strengths and synergies (def.# 1) that are not immediately obvious to those of us who are not Bain graduates. The logical assumption that this is an attempt to animate (def.#1) John Donahoe’s unverifiable claim at this year’s D:8 - D: All Things Digital Conference,  “eBay is the largest seller of fashion in the world” about 25 minutes into the interview with Walt Mossberg. Shouldn’t that be ‘largest fashion venue’? eBay is now a seller, not just a venue?

All three new hires have business development in their resumes. Michael Jones has the only eBay Merchant background from his days at ChannelAdvisor. Michael Mosser came from the Home Shopping Network where he was a business development VP and Sam Shaffer worked for IMG Worldwide where he presumably gained the fashion creds.

This group looks a lot more like a committee than a team, all chiefs and no braves. Remember Auntie May’s definition of a committee?

“A committee is a cul-de-sac down which ideas are lured and then quietly strangled”.

Sharpen up those PowerPoint skills boys, you’ll need em..

Fashion Vault

eBay’s less than stellar attempt to be trendy, and I chose the word deliberately, has been damned with faint praise in the press. Here is a quote from one I particularly enjoyed, veteran Style Inc fashion business reporter Lydia Dishman

“It used to be that eBay (EBAY) was the online marketplace for finding that highly-coveted item from a favorite designer . . . Then things started to change.

eBay may have to lock this Vault idea away until it can offer deeper discounts or can lure more haute designers into the fold rather than push what’s available in most department stores.”

The Wall Street Journal’s Geoffrey Fowler quoted Fiona Dias, executive vice president for strategy at GSI, saying that the advantage of her site Rue La La over Fashion Vault is that it has “the merchandise that matters.” Ouch!

Y’all come back!

Tweet

Once upon a time, long long ago, eBay had a feedback system which worked. It was flawed in that it could be, (and sometimes was) abused by sellers who used automated systems, but overall it was a two-way (def. #2) frame of reference which enabled both buyer and seller to gauge (def. #2) the character of the person they were contemplating doing business with.

Under CEO John Donahoe eBay has ‘improved’ the feedback experience to the point that buyers are expected to perform the equivalent of completing a marketing survey for each purchase. Surprise! Most of them don’t bother any more, but you can bet your reputation an unhappy customer will jump through all the hoops to leave bad feedback, and enjoy the experience, that is human nature.

There is no mechanism for eBay sellers to leave feedback for eBay, other than to leave. Cheerleaders aren’t cheering or even very cheery about eBay these days. Seller disillusionment and glitches are probably the second highest growth factor on eBay, advertising being the highest.

Folk wisdom says a happy customer will tell three friends but an unhappy one will tell ten. In today’s internet society that unhappy customer is more likely to tell hundreds if not thousands.

Connections, Harvard, Bain & Co and the Old School Tie

Meg Whitman, graduate of Harvard Business School, worked for Bain & Co., a consulting firm, as a senior Vice President before moving on to other challenges. Her chosen successor John Donahoe went to Bain straight out of Stanford and became a partner in 1992.  President of eBay Marketplaces in February 2005 was his second job.  He tells the story.

“Meg rang me. She needed a successor. She said ‘everyone is rich and tired’. They knew they needed to make a transition. I just fell in love with the values of the company.”

Other HBS graduates high up in eBay management include Lorrie Norrington and former senior vice president of eBay North America and Global Product Stephanie Tilenius, now at Google. Bill Cobb who was passed over in favor of Donahoe has no connection with Harvard or Bain.

Flawed Measurements

Fred Reichheld is also a Harvard graduate & past Bain director, thus passing the old school tie presumptive credibility check for eBay.   Reichheld wrote “The Ultimate Question: Driving Good Profits and True Growth” published by Harvard Business School (HBS) Press in 2006 which touted his (disputed) Net Promoter Score theory. Quoting from the publisher’s promotional text,

“CEOs regularly announce ambitious growth targets, then fail to achieve them. The reason? Their growing addiction to bad profits. These corporate steroids boost short-term earnings but alienate customers. They undermine growth by creating legions of detractors–customers who complain loudly about the company and switch to competitors at the earliest opportunity.”

Oh exquisite irony! eBay has been dedicated to ‘bad profits’ for years, viz. Meg Whitman’s lever pulling quarter to quarter management system. Did nobody notice?

Other marketing experts say that Net Promoter scores are seriously flawed using phrases like “… poison management practices and affect the bottom line”. For example in Loyalty Myths: Hyped Strategies That Will Put You Out of Business (see the ‘I am reading’ link in the right navigation bar)

“… the concept of net promoters is a bad idea that would not likely have seen the light of day had it not come from such a respected individual.”

A further quote from the same book, (bold-ing is mine):

“The difficult truth regarding customer loyalty is that how it links to growth and profitability is far more complex than we have been led to believe. An improperly directed program can result in keeping the wrong customers and ironically deflating an organization’s profitability. A blind pursuit of customer loyalty is at best a case of misallocated resources. But at worst it is a recipe for financial disaster.“

Rebuilding eBay

eBay CEO John Donahoe is a great believer in Fred Reichheld’s  Net Promoter Score system referring to ‘net promoter’ more than once in his introduction to the analyst call for Q1-10. The entire NPS theory is predicated (def. #2a) on one single question “How likely is it that you would recommend _____ to a friend or colleague?”

For an eBay buyer this is on the level of asking a business rival to share their merchandise sources. I am sure as heck not going to tell you where I buy my good stuff!

Auntie May, (who did not attend Harvard Business School and has no association with Bain) says  “Only a foolish man builds his house on sand.”

Has John Donahoe rebuilt eBay on sand? Or, is he just trying to remodel Meg Whitman’s work using the same defective foundation?

On the Street

Wall Street that is. The second financial quarter ends June 30th. eBay will announce results July 21st. Today eBay shares closed at $19.69, after dipping to $19.54  the share price reflects an 11% decline for the year.

On CNBC’s Options Action Carter Worth of Oppenheimer said eBay’s 150-day moving average has turned down, and the stock has gaps and drops. “eBay’s relative strength is a disaster. It is under performing retailers, tech and the market.” Mike Khouw of Cantor Fitzgerald added that the only area of real growth for EBAY is its advertising business, and this segment is not EBAY’s core business.

Jeetil Patel of Deutsche Bank repeats his Sell rating on the stock, trimming his target to $16, from $18. “We remain sellers of shares of eBay, as a combination of U.S. dollar strength, weak U.S. sales activity and discontinuation of the Microsoft Bing Cash Back program, which drove extra traffic to the site, will likely result in lowered earnings guidance for 2010,” he writes.

In the Marketplace

A quote from Scot Wingo, who, as CEO of ChannelAdvisor is uniquely better placed for access to raw data than any non eBay observer of the marketplace.

“eBay declined in May to -4% y/y vs. April which was flat at 0%.”

It is important to note that Scot is comparing CA seller’s data on eBay for April and May 2009; which was arguably the weakest year in eCommerce to date; to the same months in 2010, not to eBay as a whole.

In conclusion

I anticipate Q2-10 results with interest! Given eBay’s historical confusion as to who their customers are, (as opposed to the buyers who visit the site) I wonder if eBay are blindly pursuing and measuring loyalties of the wrong group of users. What do you think?

Y’all come back!

Further reading:

GigaOm.com :: eBay’s Crossroads: Turn Around or Break Up, Kevin Kelleher June 26th 2010
AuctionBytes.com :: eBay Survey Measures Perceptions about Top Rated Sellers, Ina Steiner June 28th 2010

A dry little press release article in The Australian today notes senior management changes at PayPal Australia. Congratulations Australia, you are getting a real winner. Frerk-Malte Feller has been appointed Managing Director to replace Dinuke Ranasinghe who is moving to Singapore as head of PayPal Asia-Pacific.

“Feller joined the eBay group of companies in 1999. Between 2004 and last year he was managing director of PayPal Germany, Austria and Switzerland, and launched PayPal in those markets.”

“Big woo!”
As my little buddy Sarah used to say when unimpressed.

Let me refresh your memory on Frerke-Malte. The employment synopsis above omits several steps. Until February 2008 he was head of PayPal in Germany, then he became head of Auctions for eBay in Germany.

While in that position, in June 2008 he auctioned some tickets to the European Soccer Chanpionships on eBay and in the process broke multiple eBay and EUFA rules.

This was not a case of “my cat died and alas I cannot go”, he sold 12 tickets. One might reasonably suppose this was a straightforward commercial venture. A quote from the EUFA rules for ticket purchase for that event, Section 6.5

Neither the applicant nor his/her guest may sell, offer for sale, AUCTION BY ANY MEANS (WHETHER ALONE OR WITH OTHER ITEMS), resell or otherwise transfer the ticket without the prior written approval of UEFA.

Given the apparent abandon (def.#4) with which Feller treated eBay rules it would be reasonable to presume he didn’t bother to get UEFA approval for his auction or his use of the UEFA logo either.

Don’t worry about it, those silly rules don’t apply to eBay management, they are just there for everyone else to follow! Ask Lorrie Norrington, she ignores them too, repeatedly.

The actual auction # 140237360310 is of course long gone but from my notes at the time:

“If you pay with PayPal, I need copies of your passport/ID as well as from your credit card that you are using within PayPal (both sides). Please provide these documents as electronic scans immediately after the end of the auction. The tickets will only be shipped after you have provided these documents. These additional terms are important, asPayPal will only protect sellers from unjustified chargebacks in accordance with the above. You as a buyer remain fully protected through PayPal’s Buyer Protection Policy. So both sides are well protected.”

Ina Steiner of Auctionbytes received some outstanding BaySpeak in an official response to her questions from eBay.

“Since highly-coveted tickets such as these can have a higher risk of fraud, he asked for buyers paying with PayPal to send him a copy of their ID and proof of the financial instrument used to fund the purchase. While this is not required by PayPal, some sellers in higher risk categories do ask for additional identifying information.

Finally, while Malte did not include the statement that he is an eBay employee in the actual listing, he did inform buyers after the listing closed that he is.”

It is interesting to note that eBay ID Frerk-Malte shows only purchases these days, no sales transactions after June 2008. Another case of multiple user ID usage?

Y’all come back!

What is your definition of a small eBay seller?

Is it what I think of as a micro-seller, someone who sells actively but has less than 100 transactions or $1000.00 a month Gross Merchandise Value? (GMV) In other words below Bronze PowerSeller eligibility? Maybe you have your own definition and if so I would really like for you to share it in the comments section.

We have heard Lorrie Norrington say eBay loves their small sellers and some of us thought that eBay has a strange way of showing the love.

eBay is talking and talking and we sellers and ex-sellers are talking and talking, but we are not communicating. It is like a three stooges slapstick routine except it is not funny at all.

About a month ago the light bulb came on and I had an eBay illumination moment.

This is a language problem
Chances are very good that when I say small seller and you say small seller we are not talking about the same animal. From my perspective a small seller is someone like me, a mouse maybe. My friend John Lawson also known as ColderICE, who is a Platinum PowerSeller thinks he is a small seller, I think he is a giraffe, not small at all, way up there.

There are Clues

1. When Brian Burke was talking about the kind of sellers eBay wanted to keep (ones with a track record) last year  “(We) define “track record” as active PowerSellers who have been on eBay for at least 12 months.”
2. When ProPay first offered Merchant Processing on eBay in October it excluded all sellers below Silver PS.
3. The Christmas message from eBay thanks PowerSellers, not sellers.
4. Who gets the Final Value Fee discounts?
5. Who gets expanded seller protection from PayPal?

I am sure there are more clues out there, if you can think of any please share.

What does eBay think?

Now, now, be nice!

I would bet money that to eBay a small seller is a Silver ($36,000 a year GSV) or Gold ($60,000 per year GSV) PowerSeller. In other words if you sell less than $36K per year you are not a professional seller, or a small seller, you are a hobby seller. You are below the radar and you don’t count.

Additionally, if you are not a PowerSeller now, you should be aware (if that is your goal,) it is a great deal harder to attain from scratch as of July 2008 than it was in the past. Despite the statement that a seller must have been an active member for only 90 days, as of July 2008 the de facto requirement is one year.

“New requirement effective July 2008: have maintained a rating of 4.5 or higher for the past 12 months in all four detailed seller ratings (DSRs) - item as described, communication, shipping time, and shipping and handling charges.”

I would be extremely surprised to get any formal confirmation of this hypothesis which is in my opinion (I don’t do humble, sorry) a great pity.

eBay has inflicted immense damage both to their own Marketplace and to those whom I postulate (def.3) were the small sellers who grew eBay the venue to the size that it thought it needed MBAs and consultants to run it. If eBay were able to communicate, simply and honestly, then the little people would know where they stand.

eBay’s Public Relations department and every single executive or manager who knew what they failed to make crystal clear need to accept responsibility, not only to the sellers they damaged but to shareholders who have watched, and will continue to watch their investment circle the drain.

Y’all come back!