More information on the TnS crackdown @ eBay

August 30, 2007

Marketplaces ChannelAdvisor By ChannelAdvisor

Since we originally broke the story on the change in policy at TnS, there has been much more communication coming out of eBay on the matter (a positive).  Here’s some helpful links for those still trying to get their heads around this:

1. Lynda Talgo w/ TnS posted a lengthy description of the policy change and actions that TnS are taking here.
2. Matt Halprin did a podcast with AuctionBytes that lives here and the transcript is here.
3. Ina@AB has had excellent coverage of all things “neutral=negative” and this is a good starting point.

Some thoughts now that this has had a couple of weeks to shake out:

  • I guess I still don’t fundamentally agree with the sweeping statement/policy change that neutrals are now negatives.  When I go read neutrals, sure some are negative, but some are positive too.  It seems a fairer way to do this is to apply a ratio – maybe 50/50.  Because we are seeing many cases where the “neutrals are not a positive” policy is swinging sellers as much as 3-5%.  So they would have a 98% positive, but in a world where neutrals are negative they swing to 94%.  When you look, that’s not the case.
  • The one datapoint that permeates everything is this 1% of sellers generate 35% of the bad buyer experiences.  eBay does a great job with data to get their point across.  One trick with data you always have to ask yourself is why are they using percentages and not absolutes?  In this case, by eBay’s definition of a seller, I estimate there are 1-2m sellers.  Let’s pick the middle – 1,500,000 sellers.  1% of those are 15,000 sellers that are impacted.  1% is a small number (“you have to remember this only impacts 1%!!”) and to me 15k sellers is a big number.  Digging deeper, I’d assume that 80%-90% of the sellers won’t be touched because they don’t do enough volume (very casual sellers) to fall into the policy.  So you’re really looking at 5-10% (or more) of the truly active sellers.  As you ramp up the volume curve, we’re seeing this impact large chunks of the top sellers (it certainly isn’t 1% of the 20k top sellers (200), it’s more like 10-20% (2-4k).  That’s why I think you see auctionbytes hearing from many more sellers than you would think on this minor 1% issue.
  • Final thought here, these restrictions are clearly not thought up by people that run retail businesses.  Here’s an example of how it works from the chatter post:
    • For example, consider Seller_Steve, who typically sells $1000/week
      in merchandise, and then receives a restriction to 75% of his
      historical weekly volume. In this example, Seller_Steve would be
      allowed to list items until his completed sales over a 7-day period
      reach $750 (75% of $1000), at which point he would be no longer able to
      list. He could list again when his sold volume over the past 7 days
      dropped below $750.
  • Ok, eBay has changed a policy on you without notice (neutrals are negs) and you want to fix that in your business, so you’re going to have to ramp up your customer service, maybe invest in software, maybe work on some inventory revamping/sourcing.  Concurrently eBay hits you with this 75% limit so you have to figure out some tough choices – do you lay off 25% of your staff (because you are guaranteed a 25% reduction in revenue).  Which products do you sell in your now limited biz?  Should you liquidate stuff in fear of going out of biz? What should you soure – obviously less, but zero or just 75% of what you sourced before?    That leads to: How do you possibly simultaneously improve customer service in a business that has a guaranteed 25% revenue haircut?
  • We’ll have to see, but I imagine in 30-60 days this will cause at least 50% of the sellers impacted (50% of 15k = 7.5k) to flame out.  Can eBay really survive without 7-8k sellers?  Only time will tell…

Readers what do you think?  Are there 7-8k bad apples that need to go or are we shooting too many dolphins in the head here?