July 30, 2008, 12:00 AM

As eBay tries to attract more buyers, it upsets sellers with new ratings system

As eBay tries to return to the high growth rates of its earlier years, it’s taking several steps to lure more shoppers by upgrading the shopping features and services offered by eBay sellers. But many sellers contend some of eBay’s new policies are unfair to smaller merchants.

With its growth slipping, eBay Inc. has been making changes to lure more buyers to eBay.com. In the process, however, it’s managed to upset many of its sellers. And those sellers are speaking out on blogs, forums and other social communities telling tales of how the changes have hurt their businesses.

The debate focuses on eBay’s new seller ratings including modifications to its customer feedback system, which no longer allows sellers to leave negative or neutral feedback about buyers-only positive. Merchants say the policy leaves them vulnerable to crooked consumers who can make unfair demands-such as a shipping refund or partial refund after the sale-and threaten to leave a negative rating if merchants don’t comply.

Merchants also think the policy change to count a neutral rating by a buyer as a negative when calculating the seller’s positive feedback rating is unfair.

Those and other changes worry Erik R. Faraldo, co-owner of cell phone accessory store Wireless Unlimited with sales of about $60,000 a month. His eBay feedback rating fell from 99.9% to a 99.2% with the “neutral as a negative” change, he says.

Many of eBay’s relatively small sellers are also concerned about the company’s apparent shift toward more fixed-price sales by large retailers such as Buy.com, which is doing about $3 million in sales a month on eBay after starting to list about 500,000 items on eBay.com earlier this year, according to Scot Wingo, CEO of ChannelAdvisor Corp, a company that offers services to help retailers sell through eBay and other e-marketplaces. The ability of large merchants to afford services like free shipping can make them show up higher in eBay’s new site search feature.

While it’s clear merchants aren’t happy, both eBay and others who work closely with the world’s largest marketplace say increased focus on buyers is necessary to fuel growth. Gross merchandise sales, the total value of goods sold on eBay, grew 13% in 2007 over 2006, down from year-earlier growth of 19%. Moreover, its fastest growth was in overseas markets.

“If you look back five years, eBay grew so rapidly that it took its eye off its core U.S. market,” says Wingo. “They bought PayPal and Skype but didn’t keep their core marketplace up to date with what happened in the rest of e-commerce. It’s all about the customer experience in 2008. There have been more changes in the last three months on eBay than in the last four years. And there are more changes to come.”

katie@verticalwebmedia.com

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