eBay Q4: “Letting Go of a Very Successful Past”
by John Paczkowski
Posted on January 19, 2009 at 7:41 AM PT
We had to create a mind shift at our company–we had to think bold and not just incremental. We had to create a vision of the future so people could let go of a very successful past.”
– eBay CEO John Donahoe, Sept. 2007, Legg Mason Capital Management
Good thing Wall Street’s expectations for eBay’s fourth-quarter earnings are low, because the online auctioneer is gearing up to post what many believe will be its first quarterly revenue decline in nearly 10 years. With its auction business slowing and the deepening recession playing havoc with its now year-old turnaround plan, 2008 has been a challenging year for eBay (EBAY). So much so that analysts expect the company’s earnings per share to drop 11 percent for the quarter. They’re calling for eBay to report earnings of 40 cents a share on revenue of $2.1 billion, according to consensus estimates from FactSet Research. Worse, they’re predicting eBay’s gross merchandise volume–the total value of all goods sold over the site–will have fallen 5 to 10 percent year over year.
Which is odd, since one would think that the GMV would rise during these financially uncertain times as consumers visit the online auction site in hopes of stretching their shrinking budgets or simply to sell something off to make ends meet. Seems eBay’s pricing and payment changes, bemoaned by longtime sellers and buyers alike, has had a deleterious effect on the online auctioneer. Both have been abandoning eBay for rivals like Amazon. Just how many have departed will become clear on Wednesday when eBay posts earnings.
“[The fourth quarter] has been a difficult quarter for eBay, which has been implementing a turnaround strategy in one of the worst consumer environments since World War II,” Sanford Bernstein analyst Jeff Lindsay wrote in a recent research note. “Although online consumer spending held up better than expected–with the consumer pulling out the last of the stops for the holiday season–we think the lion’s share of that benefit went to Amazon.”
What was it that Donahoe said again? We had to create a vision of the future so people could let go of a very successful past. Mission accomplished, I guess.
[Image Credit: Legg Mason Capital Management]
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Comments
Gee….I wonder why their business is faltering….could it possibly, just possibly be because of their outrageous new policies and their horrendous fees? They have choked the life out of small sellers – who happen to also be BUYERS! More and more of these sellers have left the building – on to sites like Etsy, Bonanzle, iOffer, eCrater, etc. Ebay…the big cheese…is now almost standing alone, alone with a bunch of “diamond sellers” who don’t pay fees, have miserable single digit sell thru rates and who lure buyers off of Ebay to their OWN sites! They are using Ebay to drain off customers! Donahoe’s plan to kick the “noise” (small sellers) off Ebay is working….but in its wake there is a big hole of nothingness that he won’t be able to fill.
For years sellers wished for an alternative. They needed someone to come along to break the monopoly Ebay had over them. Well, like it or not the time has come….only its left up to us small sellers to build the up and coming sites the same way we built Ebay. Ebay will never again be a monopoly…and they did it with their own hands! We are watching the slow and painful death of a once healthy and loved company.
Posted by Patricia none at January 19th, 2009 at 8:53 amI know it is believed that John Donahoe is responsible for all the changes on ebay but unfortunately he is just the lucky guy chosen to carry out the plans and wishes of Meg Whitman. Meg decided to pursue a career in politics and had she been the one to actually carry out the changes that plan would have gone up in smoke. In a few more months, ebay will be nothing short of an Amazon clone. Meg Whitman has the audacity to spew her support of small businesses for her own political agenda but that is a pack of lies as she has done nothing but try and drive small sellers off ebay for years now. What she didn’t bargain for is how many large and megasellers are following suit and leaving as well. Wake up California! You will soon have Detailed Citizen Ratings stamped on your foreheads.
Posted by Marla Orlowski at January 19th, 2009 at 10:55 am“What was it that Donahoe said again? We had to create a vision of the future so people could let go of a very successful past. Mission accomplished, I guess.”
Exactly. Thank you for a great read, John.
Is that the most ridiculous statement you’ve ever heard? Especially as he walks away with his obscene, multi-million dollar salary “earned” for annihilating eBay?
Perhaps Donahoe will need to “let go of a very successful past” in the very near future.
Posted by Rainbow Jones at January 19th, 2009 at 11:46 amI think it’s important to note some key figures and the reasons why eBay is failing at the core of it’s site and the veteran sellers who made eBay the once great site it was – those who have been blown off, cheated and pushed aside.
Quite simply, buyers have realized that it’s cheaper to shop at WalMart.
Why? Here’s a break-down of the cost to sell on eBay and why buyers have left for calmer and certainly cheaper waters.
When sellers have to increase the price of their products in excess of 15%, plus 2.9% PayPal fees (an eBay company – how convenient since sellers can no longer accept Money orders, only PayPal), plus listing fees, plus store fees, plus conversion fees, and no protection, this is a recipe for complete and total destruction. In fact the only zero in this equation is eBay’s customer service. That part seems to comes easy to them.
Follow the trail and the cost of doing business on eBay:
An original item cost of $49.99 with $13.99 shipping (modest shipping costs considering UPS and USPS have raised their costs yet again), will actually translate to a minimum selling price of: $73.91 and up! AND this is without adding your own profit!!! This figure is only to pay off the greed monsters.
Here’s the breakdown:
*Original item cost to seller refers to what it will cost the seller to purchase this item from a distributor or manufacturer and then to resell it:
Original Cost: $49.99 x 15% (eBay FVF Fees)
eBay FVF fees: $7.50 (sub-total + $57.48)
Listing fees: $.35 (sub-total + $57.84)
Shipping: $13.99 (sub-total + $71.82) x 2.9% PayPal Fees
PayPal Fees: $2.08 (sub-total + $73.91)
—–GRAND TOTAL: $73.91 Without any profit!!!
Now let’s add some profit to this figure – I mean…. this is why we are in business right? Remember, your profit should never be less than what you pay to the monsters to sell an item. So let’s add a profit of $10.00.
Now we have a whole new ball game! Different tiers and percentages that even an veteran accountant would have trouble understanding. I’ll try to break it down for you:
Original Cost: $49.99 + 10.00 profit (sub-total $59.99)
x 15% eBay FVF Fees (Tricky, so watch carefully)
15% x the first $50.00 = $7.50 plus 5% over $50.00 which would be on $9.99 x 5% = $0.50
eBay FVF Fees are now $8.00 (sub-total $67.99)
Listing fees: $.35 (sub-total + $68.34)
Shipping: $13.99 (sub-total + $82.83) x 2.9% PayPal Fees
PayPal Fees: $2.40 (sub-total + $85.23)
—–GRAND TOTAL: $85.23
OH MY GOSH!! Buyers pay $85.23 for a $49.99 item!!!
I can guarantee the consumer won’t be blind for long when they realize they can go down the street to WalMart, examine, touch and test the same product for a whole lot cheaper and take it home the same day – and not pay return shipping charges if the item is defective.
To be successful online, you have to offer something better than the department store down the street.
This is why eBay IS failing! WalMart has better prices. Buying on eBay is not a deal anymore. Not now, not tomorrow, not ever.
There you have it. The recipe for complete and utter destruction of a once great place to sell.
Posted by Rolin Bach at January 19th, 2009 at 11:53 amThere is no question that hundreds of thousands of users are now listing and selling merchandise elsewhere. Only the type of sellers who built ebay up to where it once was, are their old loyal sellers who have been around for years. These folks don’t go to sell on Amazon. There is no community or respect on that site either.
Posted by Lynne Siegel at January 19th, 2009 at 1:11 pmTake a more serious look at Etsy and Bonanzle,as well as Worthpoint. You will then see where all of the quirky old ebay sellers REALLY are. There is a reason why the Ebay developers are following those sites so closely in twitter. You won’t see THOSE site owners/developers watching or following ebay’s employees! LOL!
Take a look again at ex ebay employee Alan Lewis’ blog, after he left ebay. It speaks volumes.
http://alanlewis.typepad.com/
I don’t understand all the complaining, I can only speak for myself but my eBay sales have increased more than 400% since they changed formats. I had an unbelievable holiday selling spree.
I find the main advantages are the new 30 day and ‘good till cancelled’ listing formats. Also you can list multiple items without paying a penalty. Whether you sell 1 or 1000 items you can do so at the same price. Before it was a graduated scale.
I now sell 300-400 items per month with the new format (instead of 75 to 100 previously). This has made me a silver power seller and I get discounts and improved search rankings.
Finally it saves a LOT of time since you can add items to an existing listing and you don’t need to waste time constantly relisting things.
All this was a direct result of their changes (I did nothing different).
It is not all good however I wish they’d provide better integration between eBay and PayPal as iI find myself having to log in to each site 5-10 times a day.
Posted by Bob Leander at January 19th, 2009 at 1:28 pmHere’s another prime example of the wool being pulled over the eyes of the seller:
eBay has extended the highly touted “double discounts” for offering “free shipping through March 31 2008. Why not? eBay is still raking in your money! And here’s how:
First, you have to be a powerseller to qualify. If you qualify for the double discounts also included is a sub-title and a “boost” in “best match”.
The catch here is that the double discounts are added to your DSR’s percentages. In other words, if you qualify for 5% DSR discounts, you’ll get 10%, qualify for 15% – get 30%, qualify for 20% – get 40%. Qualify for 0% – get 0%. Got the idea?
Just because you offer free shipping, doesn’t make it free. You’ll have to recover those delivery charges. How? You’re going to add the shipping costs into the actual selling price of the item, of course.
Under eBay’s current policies standard shipping such as calculated or a flat rate (not offering free shipping) does not incur a fee, they leave that one to PayPal who charges a percentage on the over-all sale including shipping charges.
Now let’s modify our listings and get our “double discounts”!
Go ahead and offer free shipping and add that item’s shipping costs to the items actual selling price. Now that the new shipping figure has been added to the actual selling price, it can and will be charged the selling percentage fee for that particular category. If the selling price is under $50.00 those percentages will be 15%, 12%, 8% and 6%. Following the trail here?
Let’s take an average shipping price of $13.99 which is now added to the item’s actual selling price:
Ready? Take a deep breath. These discounts really add up, unfortunately not for the seller’s offering “free shipping”.
S & H Costs:———————-Double Discounts——-
—-S & H @ $13.99———10% off—30% off—40% off
$13.99 x 06% = $0.84——–$0.76—–$0.59—-$0.50
$13.99 x 08% = $1.12——–$1.01—–$0.78—-$0.67
$13.99 x 12% = $1.68——–$1.51—–$1.18—-$1.01
$13.99 x 15% = $2.10——–$1.89—–$1.47—-$1.26
As you can clearly see by offering free shipping, seller’s will gain nothing. In fact, you will lose, even with the highly touted “double discount” deal. I think more appropriate wording would be the “double dipping” deal, as eBay gets a new cut along with PayPal.
Posted by Rolin Bach at January 19th, 2009 at 1:30 pmOne of Ebay’s main problems is that the novelty of online auctions has worn off for consumers.
The consumer is completely empowered and can comparison shop in seconds. With that kind of instant gratification why wait on an auction for up to a week?
It’s the same for buyers and sellers. The thrill of the hunt is gone. Case in point, they ditched that ’shop victoriously’ tagline pretty darn quick. Shop empowered.
Posted by dan williams at January 19th, 2009 at 3:10 pmDan Williams
Special Ops Media
I think Rolin best summed things up with:
“To be successful online, you have to offer something better than the department store down the street.”
I totally agree, what makes anyone think they can sell a commodity item cheaper than Walmart?
The key to success is to create an exclusive product and build in enough padding into the price to offset any fees.
That is what I do
Posted by Bob Leander at January 19th, 2009 at 4:38 pmI was a very happy and sucessfull ebay seller for 9+ years with a 100% positive feedback record after 4100+ sales. I Never had a bad paper payment in all of that time. Once the “New” policies: (ebay owned Paypal only-no checks or money orders, Flawed anti-seller feedback & DSR policy & Best Match) were enforced, I quit selling on ebay. I too have moved over to Bonanzle.com to sell my items. They are happy to have me. The name kind of held me off for awhile but I threw my lot in with them and it is a great site which is actually rising just as fast as ebay is falling according to charts. 150 -200 people are signing up daily and a very large portion of them are ebay refugees. Come on over and check out what they have to offer for buyers and sellers. Once again, sellers have rights and support and the freedoms that that they once enjoyed in earlier days while selling on the ebay of the past. You can transfer your ebay feedback record over to your Bonanzle account too.
Posted by Mark Maye at January 20th, 2009 at 9:26 amI’m delighted with eBay’s new policies! If it weren’r for the unfair feedback rules, high fees, forced paypal and more, I never would have had the guts to find a better site – onlineauction.com! OLA.com is fantastic! GREAT deals for buyers, as the sellers aren’t nickeled and dimed to death. And, buyers also have many forms of payment to choose from. Sellers only pay 8.00 a month to list all they want, and no final value fees! I love the great selection of both fixed price and classic auction items. Please take a peek! onlineauction.com..it’s NOT eBay…cuz it’s BETTER!
Posted by Missy Snell at January 22nd, 2009 at 11:47 pm