September 29, 2009, 12:00 AM

All smiles

Unhappy customers could cost merchants dearly under eBay’s new rules. Many sellers will have to change their ways.

eBay is changing the rules. Again.In its latest attempt to revive slumping sales, the world’s largest online marketplace is changing how eBay sellers qualify for discounts. The new rules, which take effect this month, put pressure on merchants to avoid disappointing customers. A few poor grades from buyers could cost a seller the 20% discount off the fees paid to eBay that are crucial to sellers who earn their livelihood there.

Many eBay merchants will have to improve their service to qualify for the benefits of the new Top-rated seller program, including a large portion who have enjoyed discounts in the past. Only about 25% of the 3,000 merchants that ChannelAdvisor Corp. helps sell on eBay would qualify for the top discounts under the new rules, says Scot Wingo, CEO of the online marketing company. Sellers who want to compete in the marketplace are going to have to take a hard look at why they are getting low marks from customers and change their business processes to avoid them at all costs.

EBay’s aim is to improve buyer satisfaction, and thereby lure online shoppers away from competitors, notably Amazon.com. “Buyers were telling us they had a hard time distinguishing a quality seller,” says Todd Lutwak, senior director, seller development, for eBay. “Now, when a seller is marked as Top-rated, this will be eBay’s way of telling buyers we are extremely confident they will have a positive experience.”

The new Top-rated seller program is the latest in a series of significant changes eBay has made in the past year and a half as it tries to reverse its decline. The value of goods sold through its online marketplaces, excluding autos, declined 10% in the second quarter to $11.1 billion from $12.3 billion a year earlier. And that represented improvement over the 16% and 12% declines of the previous two quarters. EBay is hoping the new seller discount program will help it continue its upward trend.

New rules

But it will be tough for merchants to make the cut. In the new Top-rated seller program, buyers still give sellers a one to five score in four categories which eBay calls Detailed Seller Ratings or DSRs. Those categories are: how the item was described, seller communication, shipping time, and shipping and handling charges.

What’s new in the new program is that no more than 0.5%, or one in 200 feedback grades, can be 1’s or 2’s. “EBay has set the bar very high,” Wingo says. “Now one bad score is going to cancel out ten great ones.”

In addition to very few low scores in April, a merchant must have an overall rating of at least 4.6 in each category to make the grade. Those that do enjoy a 20% discount off final value fees paid on completed sales, receive a Top-rated seller badge for their product pages and prominence in search results.

The new rules are quite a change from the final PowerSeller system that provided a 5% value fee discount for sellers with a minimum average score of 4.6 in each category, 15% off for a score of 4.8, and a 20% discount for a score of 4.9 or better. The new Top-rated seller program replaces eBay’s PowerSeller system this month; however, eBay will continue PowerSeller discounts through April so that larger eBay retailers have time to make changes.

While stringent, the new program brings some good news for smaller eBay sellers. Sellers only need complete 100 sales totaling at least $3,000 each year to qualify, well below the PowerSeller annual requirement of 1,200 sales or $12,000 in volume. EBay says about 150,000 merchants will qualify for the discount, including 86,000 whose annual volume has been too small to qualify them for the benefits of PowerSeller status.

Making the grade

But for many PowerSellers that built their customer service policies around the old rules, the new system means taking a hard look at how to avoid disappointing customers.

Merchants might want to start with tracking inventory as it sells, instead of just updating inventory figures overnight, Wingo says. One of the most frustrating experiences for a shopper is placing an order and later finding out it is not in stock, and that can happen often during the holiday season when sales pick up.

“A lot of sellers have five widgets, and they’ll sell two out of their store or their e-commerce site, but they won’t know that until the next day. For nine months out of the year, that may be okay, but during peak times like Christmas, merchants need real-time inventory updates.”

If several shoppers try to order the same item in a short period of time and all leave low scores after finding the item is out of stock, a seller could lose his Top-rated status almost overnight, Wingo says.

Beyond knowing what they have in stock, merchants also need to describe it clearly and consistently, so that a shopper isn’t disappointed when the product arrives.

“Shoppers give 1’s and 2’s when the description of the product is poor,” says Eric Best, chairman and CEO of Mercent Corp., which connects online retailers with web-selling channels and has about 30 retail clients that sell on eBay. “It is so rudimentary, but it’s a real problem.”

Unlike Amazon.com, which requires merchants to enter product data and then assigns the item a description based on similar items in its catalog, eBay allows merchants to describe an item pretty much however they choose, Best says. If merchants aren’t accurate in their descriptions, they can get dinged, Best says.

Consistency also is key, Lutwak of eBay adds. He says it’s important for merchants to describe items the same in their listings as they do in e-mail communications because buyers will give low marks for communication if they are confused or receive inconsistent descriptions.

Keeping in touch

Those e-mail communications play a crucial role for eBay merchant Stephanie Inge in avoiding low marks. Inge, who teaches classes on selling on eBay at two Texas community colleges and operates her own eBay accessories store, The Fossil Floozy, says she keeps in constant contact with buyers, including sending e-mails when she receives payment and when she ships the merchandise.

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