**UPDATED: Third-party checkout / checkout redirect clarification from ChannelAdvisor

April 15, 2009

**Update – eBay has officially clarified that the program is not going away here.  Thanks to Dinesh and team for jumping on this erroneous information quickly.  “To reiterate, we are not eliminating third party checkout on June 15…”
—original post follows—
We don’t usually use this blog for official ChannelAdvisor company business, but today is one of those rare occurances where we need to clarify some things and this is the best venue for it.

There’s a fair amount of confusion floating around this morning and has been over the last year as rumblings (without any official announcement) have been going around that eBay is going to cancel what we call Checkout Redirect / Third-party checkouts.  In eBay-land, we call this program 3PXO (Not to be confused with C3PO – your friendly chatty protocol droid).

Ina@AuctionBytes has a piece out this morning that has caused a good bit of confusion that I wanted to attempt to quell at least amongst the ChannelAdvisor customer base. In short, this article is completely incorrect as eBay is not eliminating third-party checkout in the foreseeable future.  I’m not sure what Ina’s source is, but we have a call into her to clarify and she’s not available at this time.  I’ll update this post as I learn more.  You will note that there is no eBay quote or link in the article so perhaps this was hearsay or specific to another vendor’s decision or ProStores.  Perhaps the correct title is Prostores ends checkout redirect.  Also, it is our understanding that eBay is significantly limiting the program from 100’s of participants to a handful (including CA), so maybe that’s the source of confusion.
In any case, in this blog post, I provide a brief background of the program to help understand its importance and then detail the changes as we know them that are and are NOT coming around the 3PXO program.
On October 23, 2001, eBay introduced their checkout system.  Prior to that we had a 3PXO, that wasn’t automated (buyers had to click on an emailed link vs. a redirect from ‘pay button’).  In December of 2003, eBay implemented checkout redirect which made the process easier/seamless for the buyer.
The need for both 3PXO and Checkout Redirect came about because ChannelAdvisor started to bring larger merchants to eBay (Motorola, IBM, etc.) and existing eBay powerseller-type merchants started to hit bigger-business issues that the eBay checkout wasn’t (and still isn’t BTW) equipped/designed to handle.
Thus, merchants could continue to sell on eBay with the buyer experience being that at time of payment, the consumer would be routed to our 3PXO via checkout redirect.  When the consumer clicks the ‘pay now’ button on eBay, they are routed to the checkout in a secure fashion where we then take them through a richer checkout experience.
The list of shortcomings of the eBay checkout system is expansive and the top reasons large sellers can’t use it are:
  • UPS exclusivity – eBay has an exclusive deal with UPS.  If you use FedEx you are hosed.
  • Tax calculations – The eBay checkout fails at basic tax calculations, many businesses also have multiple-nexus and other ‘enterprise tax’ needs that aren’t met by eBay Checkout.
  • Payments – eBay checkout is Paypal-exclusive with some merchant credit-card capability coming, but tightly managed by eBay and far from ‘open’.  Also, while eBay allows paper payments (if the buyer requests), those options are gone from the eBay checkout.
  • Promotions – Sellers want to offer a variety of promotions.  The eBay checkout is very limited in this ability.
  • Store integration/ eBay Up-sells –  Because of the listing fee system at eBay, lack of a cart and the poor up-sell engine it usually doesn’t make sense to list accessory items (e.g. shoe cleaning kit) and try to add them to orders to increase average order value (AOV).  3PXO gives sellers the strategic ability to do that outside of eBay and in addition to the bump in AOV, enjoy no-eBay fees on up-sells.  This is accomplished with an integration with the seller’s e-commerce site that allows both eBay and store items to be put into one cart – a system that we have found buyers really enjoy and of course so do sellers.
  • Branding/Customer retention/customization – With our 3PXO, sellers are able to ask questions that you see in almost every checkout flow on the Internet like – how did you hear about us, do you want to tell a friend, do you want to subscribe to our newsletter, etc.
That’s the short list of strategic functionality, at least at ChannelAdvisor, we had to implement in order to continue to have sellers keep growing on the platform past the eBay checkout limitations.
One other data-point that is interesting and important.  It is our understanding that the ChannelAdvisor 3PXO has a higher completion rate than the eBay Checkout system.
ChannelAdvisor and 3PXO Changes in 2009 
While eBay has made some cosmetic changes to the eBay Checkout system, the enterprise selling limitations to the eBay Checkout I detail above still exist today and will for the foreseeable future.
At eBay Live last year, rumors started to circulate that eBay was thinking of canceling 3PXO.  In our one-on-one meetings with eBay we learned this was not the case and we used that opportunity to help educate a bunch of people new to eBay marketplaces why 3PXO exists and why it needs to keep existing.  We found them to be very open and understanding which was good.  However the lack of a public statement on this has continued the confusion going unfortunately.
Earlier this year, eBay did express their desire to ChannelAdvisor that they would like some tweaks to the checkout branding and the elimination of up-sells.  We were planning on using Catalyst as a venue to discuss this with customers and have them share their thoughts with eBay on the importance of those two elements of 3PXO.  eBay would like us to implement these changes by mid-June, but we have not committed to any changes at all, much less a time-frame.  Also, we strongly feel that our resources would be better spent on revenue-generating features such as support for the new resolution process and multi-sku/variations that were announced yesterday.  
We have asked for and expect to see some public clarification around this topic from eBay later this week since the AuctionBytes story has caused a good bit of confusion in the marketplace.  I will update this post once that comes out.
ChannelAdvisor and the eBay Checkout
We do have a small number of eBay selling customers that for a variety of reasons have told us they would prefer their buyers go through the eBay checkout vs. our 3PXO.  Usually it’s because they don’t need/require the functionality I mentioned in the background section.  That’s fine and it’s our intention to work on the ability to offer sellers the option to use eBay checkout OR ChannelAdvisor’s 3PXO.  We’re in the early stages of figuring out how that would work and we’d like to get that out for the holiday selling season in 09, but we’re going to have to wait and see what other changes has in store for us (the collective us) in the Fall so we can see if we should prioritize something in front of eBay checkout support that has a bigger opportunity for our customers to drive GMV. To be crystal clear, this would be optional.  We would support both our existing (and eBay supported) 3PXO and eBay Checkout.
Conclusion and an action item for sellers.
I wanted to take this opportunity to say that for our customers reading this, we take our role as your advocates with eBay very seriously and that is the reason we have pushed back HARD on both the scope and timing of even these small 3PXO changes, much less our frustration over eBay’s lack of public commitment to 3PXO to match their private commitment.  While we are doing everything possible in our advocacy role, sometimes it helps to have you contact eBay directly about material business issues and this is one of those times.
Therefore, I encourage you to call your TSAM or the folks in seller development and let them know that the 3PXO program is important to you and list some of the reasons why elements like up-sells and branding are important to your business as well as any other features you utilise, like tax calculations.  If you’re coming to Catalyst, that’s another great venue to let your voice be heard on this topic.
It’s also important for the folks at eBay to understand that an unintended consequence of small and large 3PXO changes could be that you effectively sell less on eBay if your economics deteriorate.  For example, if up-sells generate $X/month of profit to your eBay business and that were to go away, it would change the economics of the eBay channel for you. Or for argument’s sake, let’s say eBay were to enforce the UPS exclusivity and you had to change from FedEx to UPS, you likely would be forced to increase your S+H or take a material margin hit for example that would make the eBay channel less viable for you.
If you’re not passionate about 3PXO, that’s of interest to me as well – let me know in comments as that will definitely help us prioritize our optional support for eBay Checkout.
If you have any clarification questions, please leave them in comments and I will definitely address them.  For customers, there’s also a private thread on the SSC if you prefer that venue.
Thank you for your continued support – back to our regularly scheduled programming of eBay strategies and news.
Scot Wingo