Blodget’s 4-step program vs. Wingo’s 3F’s…

December 19, 2007

Marketplaces ChannelAdvisor By ChannelAdvisor

Infamous inet bubble analyst, Henry Blodget, has a provocative piece out today that is basically a four step program for fixing what ails eBay.

As someone in the eBay ecosystem that probably spends too much time thinking about all this stuff, I’m frequently asked what eBay needs to do to turn things around.  I’ll do one better (fewer) than Blodget with my 3-F program:

  1. Finding – eBay needs to do a LOT to fix the buying experience and Finding 2.0 is a step, but they need to get to Finding 4.0 or 5.0 ASAP.  I feel good with Jeff King at the helm, he’s a rock star for sure, but I worry that he may not get the institutional support and LOTS of developer talent to help him solve some really tough problems eBay faces here.
  2. Fees – I’ve talked about this one until I’m blue in the face, the summary is that an eBay seller’s fees fall into 65% up-front listing fees and 35% back ended fees.  We got to this point as eBay leveraged their lack of competition to dramatically increase prices.  Today there are alternatives that are effectively 0% up-front and 100% back end (Amazon 3P being the most popular right now).  In Asian markets, eBay has consistently lost against this formula and need to change this now.    The current fee structure not only puts eBay at a competitive disadvantage, but it also limits selection (good bye long tail) AND forces sellers to increase their eBay prices as they have to balance the risk via increased prices (and games like shipping fees, etc.)
  3. Fraud (aka Fear) – When I talk to online shoppers, the number 1/2/3 reasons they don’t buy on eBay are fraud fraud and fraud. While I don’t doubt that actual fraud on eBay is low (sub 1% as eBay states), the problem is that all the eBay/paypal phishing schemes and stories of fake/fraudulent items and the actions of a few bad sellers have created an environment of buyer fear on eBay that results in:
    1. Buyers leaving the marketplace (eBay is finally admitting this)
    2. Remaining buyers ask sellers too many pre-buying question – this makes ebay 10x as expensive as Amazon from a customer service perspective
    3. Remaining buyers pay less, effectively giving everything on eBay what my buddy Steve Woda over at Buysafe calls, a “lemon discount”.

eBay needs to take a strong stance not only on nuking bad sellers (which they are doing) but also raising the bar for who can sell on eBay and then standing behind the transactions.  When you buy on Amazon, you know that if you have a bad experience, they are going to make that right.  Not eBay/Paypal, if you’ve ever tried to take advantage of any of the assurance programs that will be the last time you buy on eBay.

It’s important to note that these three need to be addressed in a holistic fashion.  For example, you can lower fees and without finding being spot-on you’ll actually make things worse.  If you fix Finding+Fees without Fraud, those two things alone won’t bring back buyers, so what’s the point?