March 11, 2014, 2:29 PM

eBay changes the way it rates sellers

A single “transaction defect rate” replaces four separate measures, the online marketplace says. Sellers with better ratings will appear higher in eBay search results. The changes take full effect in late August, though merchants will start to see some of them over the coming weeks, eBay says.

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EBay Inc. will change the way it measures seller performance on its online marketplace, a move that promises to influence which online merchants achieve “Top Seller” status, and how high those retailers appear in eBay search results.

The online marketplace and e-commerce services provider said today that it has begun telling sellers about the new ratings criteria and related revisions, which cover such areas as shipping costs and holiday returns. Sellers will start to see evidence of the changes within the next few weeks, though the changes won’t be reflected in monthly seller evaluations until late August, eBay says.

“Our world is changing at an incredible pace driven by technology and fast-rising consumer expectations,” says Michael Jones, vice president, eBay North America. “Customers expect to shop and buy wherever they are, and at eBay, we’re fully committed to helping sellers meet these rising expectations and reap those rewards.”

Among the main changes is that eBay will measure seller performance via a new measure called “the transaction defect rate.” The single measure replaces four separate ones that covered the following areas: shipping charges, speed of delivery, seller communication and the accuracy of the product description.

The new transaction defect rate is the percentage of a seller’s successful transactions that have exhibited one or more “defects,” such as poor shipping times, negative or neutral customer feedback, or a product returned because it was not as described by the seller. EBay says sellers can have up to 5% of transactions “with one or more transaction defects over the most recent evaluation period.” An eBay spokeswoman explains: "When a seller goes above 5%, they’ll be notified and have time to adjust their selling practices. If they are unable to fall back below 5%, then longer term impact would include restrictions or suspensions."

But to qualify as a top-rated seller, the merchant can amass no more than 2% defective transactions over such a period. (Only transactions with U.S. buyers count toward the rating, eBay says.)

By contrast, under the previous regime with four seller rating requirements, top-rated sellers could have only 0.5% of transactions with low ratings. "If a seller breached any one of the four thresholds they would be impacted," an eBay spokeswoman says. The new seller rating criteria will first apply to Aug. 20 seller evaluations, eBay says, though on April 16 sellers will “have a preview of how they’re trending toward the new defect rate requirement in the seller dashboard.”

The online marketplace says that sellers with low transaction defect rates will end up with better positions in eBay search results. “The new measurement allows eBay to recognize and reward sellers who consistently deliver the great service buyers expect, and to identify and respond to the experiences that erode confidence and drive buyers away,” the online marketplace says in a sheet explaining the changes.

At least one eBay seller today welcomes the change. Rick Green, CEO of auto parts seller 1A Auto—which, he says, started selling on eBay in 1999—says the new, single-rating system is more likely to reward long-term, incremental improvements by retailers, and enable less “gaming” of the system—for instance, by offering shoppers discounts to make their complaints go away.

That’s possible because eBay says it will be less likely for a single transaction defect to mar a seller’s rating. The online marketplace says a seller will not suffer under the new measure unless defects are reported from at least eight different buyers—or five different buyers for top-rated sellers—over the most recent evaluation period. Each transaction is counted only once toward the seller’s defect rate, meaning a disgruntled shopper who leaves negative feedback on several parts of a transaction will lead to just one defect count for that seller.

“This is the closest eBay has gotten to receiving actual marketing signals from consumers as a whole,” Green says.

Other changes eBay announced today include:

• Shipping costs no longer count toward performance ratings. “This will protect [sellers] from low ratings for ship cost even through the shipping charges are shown to buyers up front when they purchase an item,” eBay says.

• Sellers must accept holiday returns through Jan. 31 to qualify for the “Top Rated Plus” seal and a 20% final value fee discount for sales made between Nov. 1 and Dec. 31. If the item sells, a seller is charged a final value fee. Final value fees are calculated based on the total amount of the sale and are charged per item. This does not apply to gold bullion, gift cards, tickets and business and industrial product categories.

• EBay will provide standard rules for returns as part of its item condition policy. That means there is “no more need to spend time detailing [return] policies” to shoppers, eBay says.

The recent moves from eBay follow other changes within the past year, including a new pricing structure announced last month, designed to make selling on eBay more attractive than selling on Amazon.com Inc.’s marketplace.

Today’s changes from eBay show its ongoing effort to keep up with the expectations set by the Amazon marketplace, says Scot Wingo, CEO of ChannelAdvisor Corp., a marketing company that helps retailers sell on Amazon and eBay.  “It’s a very competitive world out there, and eBay is trying to keep up,” he says. Some sellers likely will face a period of confusion, he says, because “the new defect rate is quite a change.” 

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