January 30, 2009, 12:00 AM

Transforming eBay

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Grover says incorporating reliable, big-name merchants will build consumer trust and in the long run help other eBay merchants. But some eBay sellers disagree. The Professional eBay Sellers Alliance, a trade group of eBay merchants, wrote a letter to eBay in September arguing that favoring bigger merchants will drive away the smaller retailers that offer the unique goods that made eBay the place to go for items consumers could not find anywhere else.

“Merchants that used to prioritize the eBay channel now regard the marketplace as a venue of last resort used mainly for liquidation of product that doesn’t sell elsewhere,” the letter said. It added that eBay “fails to recognize that the supply issue on eBay is a direct result of their relationship with their customers, the sellers.”

For all the stir that wooing big-name merchants is causing, it’s unclear how much it’s driving sales. Buy.com, which doubled its customer service staff in anticipation of growth in sales from eBay, has yet to experience big returns on its eBay investment, Grover says. “We went into this expecting pretty big results,” he says, “and I think long term it will be a good, beneficial relationship.” But, he adds, “we are still scratching the surface of selling on eBay.”

Grover would like to see diamond merchants like Buy.com given more prominence on eBay. Today, Buy.com is listed as an eBay store called Buy and easily lost in the shuffle of the thousands of other shops. “The overall benefit of what shoppers get with the diamond tier and the advantages of such merchants could have some branding around it,” Grover says.

As with its move to attract bigger merchants, eBay has angered smaller eBay sellers with its steps to revise site search and prod sellers into providing better service.

When auctions were the core of eBay’s business, the top search results would show the auctions that would expire soonest. Now eBay is incorporating fixed-price listings and giving weight to lower-priced listings as well as preference to merchants that garner favorable feedback from buyers.

Tilenius says the aim is to make the site better for shoppers. “For the first time we’ve seen sellers competing on price to drive up their search results, which is a good experience for buyers,” Tilenius says.

But the changes frustrate Doug Day, owner of eBay store Recordsaliendotcom, which sells about $9,000 worth of collectable records a month. “You’ve got millions of items going up and then all of a sudden you change the way that search works, and that makes it confusing for everyone,” Day says. “They are just making it more complicated for buyer and seller to get together.” Day now also sells on Amazon, where his sales average between $2,000 and $4,000 a month, he says.

Merchants have also objected to changes in two eBay programs that enable consumers to comment on their buying experience.

One of the programs, introduced last year in a move to weed out unscrupulous sellers, provides final value fee discounts for eBay merchants that get high marks from eBay buyers. The ratings system asks buyers to rank a seller’s service from 1 to 5 in four categories: how the item was described, seller communication, shipping time, and shipping and handling charges. A 4.6 average garners a 5% discount off standard fees, a 4.8 average earns 15%, and 4.9 or higher gains the seller a 20% discount.

EBay says a 5 rating means a merchant has exceeded expectations, while a 4 means it met expectations. The problem, merchants say, is that a seller who follows through on a promise to, for example, provide free shipping is merely meeting expectations, and is likely to get a 4 in the shipping charge category.

“The negative impact of buyers leaving 4’s for a seller can be significant, even though the eBay site makes it look like a 4 is a pretty good rating,” wrote Steven Grossberg, president of the Internet Merchants Association, a non-profit e-commerce sellers group, in announcing the launch last year of a web site to explain eBay’s ratings system to consumers.

Tilenius says the ratings system is part of eBay’s efforts to satisfy consumers. “We’ve evaluated the shopping experience with the buyer in mind and we are rewarding the best sellers,” she says.

Sellers also objected to eBay changing its feedback system in May to prohibit sellers from leaving negative feedback about buyers, although buyers can still complain about sellers. Feedback is important for a merchant because merchants must keep a positive feedback score of at least 98% to retain power seller status and qualify for fee discounts.

Dishonest buyers

The merchants say the new rules leave them open to dishonest buyers who make unfair demands, such as for discounts or free shipping, and threaten to leave negative feedback if sellers don’t comply. Without the ability to post negative feedback about buyers, the system essentially leaves merchants open to blackmail, they say. But eBay says sellers posted too much unwarranted negative feedback, noting sellers left negative feedback eight times more often than buyers in 2007, up from twice as often four years earlier.

As it tries to reinvent itself, eBay has backed off some changes it has implemented. For example, the marketplace last year tried out a policy that counted a neutral rating by a buyer as a negative in a merchant’s feedback score, noting that oftentimes a consumer’s neutral rating is a “soft negative.” It’s since reversed that. EBay also for a period took away the ability for a seller to work with a buyer to remove negative feedback, then added that back in October.

Ultimately, if merchants are dissatisfied with eBay they can move to other selling platforms, such as Amazon.com and Overstock.com.

Some have, says Rick Raesz, co-owner of PinkSmoothie Boutique, an eBay store that sells between $125,000 and $150,000 a month in baby items and bridal accessories, and head of a Fort Worth, Texas-area eBay merchants group. Raesz says about 50 of the merchants in the 350-member organization are selling elsewhere, and most of the rest are considering it. The Professional eBay Sellers Alliance, in its September letter, claimed that merchants are using other platforms at the highest rate ever, but did not provide data on the number of defections.

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