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Tuesday, February 15, 2005

PowerSellers not jumping from eBay

American Technology Research analyst Mark Mahaney hosted a call with eBay PowerSellers to discuss their reactions to eBay's recent price changes. Here's the main body of his note (permission received):

We sponsored a conference call with several eBay PowerSellers. They were 1) Randy Smythe, President of Glacier Bay Entertainment, a top DVD seller on eBay. Glacier Bay generates approximately $5MM in annual sales, with 95% of that on eBay. Glacier Bay is also the #2 PowerSeller on eBay, based on feedback ratings. 2) Mark Fitzgerald and John Kuhlmann, COO and CFO of Grapevinehill, Inc, a top apparel seller on eBay. Grapevinehill is the leading seller of footwear on eBay, with approximately $5MM in annual sales on eBay. Grapevinehill is also the #30 PowerSeller on eBay, based on feedback ratings. 3) John Weiber, President of Laptopbroker, a top computer seller on eBay. Laptopbroker generates approximately $1.5MM in annual sales via eBay. And 4) Scot Wingo, CEO of ChannelAdvisor. ChannelAdvisor provides auction and market place management software and services to approximately 3,000 sellers on eBay. This seller base accounts for approximately $500MM in annualized gross merchandise volume (GMV) on eBay, or 3% of eBay's total U.S. GMV.

Here are our take-aways:

1. There appears to be no PowerSeller interest in leaving eBay, but there is interest in allocating incremental investment dollars to other channels, specifically sellers' own Websites. A key theme was that sellers are diversifying away from eBay in terms of using search engines, comparison shopping engines, other merchant sites like Amazon (AMZN, $36.03, Hold) and Overstock (OSTK, $54.92, NR), and especially, sellers' own Websites. But none of the PowerSellers were actually considering reducing their existing commitment to eBay. One PowerSeller said he did not see any of the top 1% of eBay sellers leaving the platform. Another PowerSeller said he expected that eBay would always account for a majority of his sales. The diversification had more to do with using incremental investment dollars. One PowerSeller described 2005 as a transition year. Part of the concern was that the competitive environment of eBay created low final selling prices. One seller estimated that ASPs on his own Website were 20% higher than on eBay. Another seller put it this way -- eBay has struggled to deliver high-end customers.

2. There appears to be little interest in the reported eBay sellers' strike. There have been reports of a potential eBay sellers strike, coinciding with the implementation of the new fees on February 18th. eBay management was asked about this at last week's Analyst Day and stated they were unsure of what would happen. Of the different questions posed to the PowerSellers during the conference call, this one brought the surest consensus. None of these PowerSellers planned to participate in the strike. None of them appeared to take the idea seriously.

3. PowerSellers are concerned about recent fee increases and are reacting to them by reducing their usage of Buy-It-Now and Gallery features. Not surprisingly, the PowerSellers had a uniformly negative reaction to the soon-to-be-implemented fee increases. One PowerSeller stated that the specific Buy It Now and Gallery Feature price changes would increase his expenses by $50,000 annually. Accordingly, he was cutting back on his usage of these features.

4. PowerSellers have seen a recent modest increase in eBay's responsiveness, but are still concerned over what they view as limited company support for sellers. Asked whether some of eBay's recent initiatives -- such as a limited fees rollback or live customer support for eBay Stores owners -- marked an increased responsiveness from the company, the answers were mixed. One PowerSeller -- the one with the highest feedback rating -appeared comfortable with the level of company responsiveness. But other sellers indicated that eBay's responsiveness has consistently been limited, with little signs of change. These sellers also complained that the eBay customer service representatives who contacted them had little to offer in terms of new suggestions.

5. There appear to be increasing concerns over the incidence of seller fraud on eBay. PowerSellers were careful to distinguish between buyer fraud (e.g. disappearing high-bidders, fraudulent checks) and seller fraud (e.g. fraudulent or incorrectly described products). The PowerSellers appeared unanimous in saying that seller fraud was a bigger problem than buyer fraud in that it undermined the integrity of the trading platform.

6. Reliance on PayPal as a payments mechanism is very high among these sellers -- and own Websites could be an incremental new revenue source for PayPal -- but the reliance levels are coming down. All of the PowerSellers were extensive users of PayPal. And all considered it a given that PayPal would be integrated into their own Websites -- a sign of the significant potential for eBay Merchant Services, or PayPal off eBay. At the same time, the PowerSellers indicated that their reliance on PayPal has been declining. One stated that since the PayPal system outages in the Fall, the seller had been promoting more direct credit card usage. Another stated that 80% of his sales were conducted via PayPal, a very high level, but down from 100% in the past.

 

Quick comment: Genuinely useful research. Anecdotal, but names names and has impactful content.

EBAY chart below.
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Posted by David Jackson on February 15, 2005 at 10:11 PM in Sub-sector: E-tailing, ticker: EBAY | Permalink

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Comments

I just read this article and think it is very Biased- yes there are Mega power sellers on Ebay but there are a whole more smaller Power sellers that as a whole outweigh these jumbo's....and we are the ones who are going to be hurt bad by the increases....Ebay has NO justification for these latest increases- we are certainly not getting any better service! I look for Ebay to stay on top for the next 6 months to a year before other auctions with REASONABLE FEES- BETTER Customer service take over....I will not be leaving Ebay- YET- but I am switching many auctions to other sites to help them GROW asap....AND ONLY those Mega Sellers will keep their Paypal Merchant rating- Ebay will also cut out the smaller sellers on Aug.6, 2005- AGAIN we will have to pay Ebay MORE- as Paypal puts in a new rating structure....90% or More of Ebay sellers have seen a DROP in sales this past year of 50-70%- at the same time Ebay's Profits were UP 70%!! doesn't that tell you anything???

Posted by: Deb Jenson | February 16, 2005 11:26 PM

By eBay's own count, there are nearly 450,000 Power Sellers, is it possible these largest ones have a hidden agenda in touting the eBay line?

FYI, Mr Mahaney used to work for one of EBAY's biggest fans on Wall Street, Mary Meeker, and he is part of the alumni network centered around Morgan Stanley.

Posted by: ttiot | February 17, 2005 01:40 PM

I can tell you why Exel-I is not interested in leaving Ebay. They tacitly approve his fraudulent activity on the site, misrepresenting items he is selling, charging outrageous shipping fees (and then not reimbursing when the wrong item is shipped, which is often), and abusing his powerseller status to get out of any complaint to Ebay or Paypal. In numerous transactions on Ebay, his is the only company that has ever burned me, and his negatives and neutrals tell the tale of a seller who is less than honest.

Posted by: Rob Mattheu | June 13, 2005 06:49 PM

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