Are There More Big Changes Coming To eBay?

The eBay Seller's News, November 2008, Volume 8, No. 17

Learn How To Sell More on eBay with The Newsletter for Professional
eBay Sellers by: Skip McGrath

In This Issue:

Musings

Are There More Big Changes Coming To eBay?
Online Sales Growth is Slowing. What does this mean for small online sellers?
eBay Holiday Promotions Could Help Some Sellers, But is eBay Forgetting The Little Guy Again?
Recession Strategies for eBay and Small Online Sellers
New eBay Wholesale Sources for November 2008

"A pessimist sees the difficulty in every opportunity;
an optimist sees the opportunity in every difficulty."
~ Winston Churchill

Musings

Times are tough and will probably get a bit tougher before they get better. On one hand I am getting emails from people who are getting depressed and even giving up, and then I get email from people who say they want to know how to start an eBay business as a way to replace their income. I spoke to a source inside eBay who told me that they are seeing more and more new sellers. It is interesting that after all the turmoil over the past year or so, that people still see eBay as a path to online income.

I was on eBay Radio a few days ago in the PowerSeller Hour with Uncle Griff (Jim Griffith. We talked about what you can learn from your competitors. The segment is only about 7 minutes long but there was a surprise topic and a rather cryptic comment from Griff at the end that has generated a lot of blog posts and eBay board comments.

Here is a link to the show: http://www.wsradio.com/player/wsradio-player2.cfm/type/windows/show/eBay-Radio-PowerSeller-Show/segment/21299.html

In a recent blog post I covered the eBay Board of Directors -their backgrounds and the fact that eBay members don't really have any influence on -or with the board that runs eBay. Randy Smyth an ex-eBay seller who writes an influential blog for eBay and online sellers has started the Dolphin Project. This is an attempt to gather actual and factual stories from eBay sellers showing the problems caused by the new policies. Once Randy gathers the stories they will be forwarded as a package to every member of the eBay board. You can read and contribute to Randy's project at his blog Utopia.

My good friend Steve Lindhorst, who wrote, Selling on The River has come out with an excellent little book about Niche Marketing. It’s called The Niche Book, How To Pick a Market for Profit. I have written several articles about niche marketing and this always gets me questions from readers about how to pick a niche. Steve shows several methods and lists tons of tools –including many free tools for doing this. So if you are struggling to find your niche for eBay or even for a web site, check out The Niche Book.

eBay isn’t the only place to sell products online. Did you know that Amazon gets almost 10,000,000 customers a month? Now I am not suggesting you leave eBay –even in this economy my sales are doing well, but it pays to look for additional channels to sell. Getting started on Selling on Amazon is safe and easy, and gives you a low-cost, low-investment sales channel that's great for new and experienced sellers alike. The problem is that Amazon can be a bit confusing for new sellers. I know I struggled with it for a while.

Worldwide Brands has teamed up with Amazon Services to create 2 free educational videos about Selling on Amazon:

Multi-Channel Selling: An Intro to Selling on Amazon.com
Selling on Amazon Best Practices

If you understand Amazon's sales platform, you will sell there more effectively and profitably. Watch these videos and learn how to increase your online income with Amazon Services. Here is a link to the videos:
http://www.worldwidebrands.com/video/amazonservices/?kbid=7948

[top]

1. Are There More Big Changes Coming To eBay?

The short answer is "I hope so." I doubt if eBay will make any major changes before the end of the holiday season. If they did, sellers would go ballistic. I think eBay learned that lesson a couple of years ago. But I suspect there will be more big changes coming in late January or February.

When I look back over the past two years I think eBay over reacted to some of the endemic problems they had. A big part of eBay's problem was slowing growth that was in fact natural. eBay had grown so fast and so large in a fairly short period of time that a slowdown was inevitable. No corporation can sustain 20% to 30% growth for years on end. Think about this a minute: If eBay could continue to grow at 30% per year, that means it would double in size every 2.4 years. Within 10 years it would be bigger than Wal-Mart and Microsoft combined and 80% of the US population would be doing their shopping on eBay. That is hardly a likely scenario.

But when growth slows, investors become unhappy and put pressure on management to do something. So management tries to identify things that are not working well and fixing them. In the process some things get fixed that weren't broken.

I think eBay may be coming around to this now and hopefully they will go back and take a more holistic approach. There were a few things wrong with the "old eBay" that did need fixing but nothing that required the dramatic rethinking and repositioning of the platform. I think management may be starting to realize they went too far in some areas.

One plan I have favored for a while, and I know is being considered by eBay, is what I call the 2-Door Plan. Essentially bring back the old eBay for unique, used and vintage items and create a separate eBay portal for new consumer merchandise in a fixed price format. Here is how the two sites could differ. Let's call them eBay and eBayShopping just for comparison:

eBay would be a pure auction site for art, antiques, collectibles, books, used and vintage merchandise, handmade products and certain niche new products. The format would allow auctions with Buy-it-Now, second chance offers and make an offer. There would still be reserve price auctions and Dutch auctions but no fixed price listings.

Feedback would go back to something close to the old system where both buyers and sellers could leave negative feedback and mutual feedback withdrawal would be allowed. DSRs would stay with some modifications that allow sellers to fix unfair ratings, but I would eliminate DSRs for international sales as they just don't work.

Personal checks and money orders would be allowed as long as the seller also offered electronic payment and would be limited to items under some number such as $500, to prevent fraud that often occurs with large non-electronic payments.

On the traditional eBay platform, eBay management would work closely with buyers and sellers to bring back the community aspect of eBay. This could be done by bringing back a version of eBay University or smaller regional versions of eBay Live and setting up some better methods for buyers and sellers to give feedback to eBay management. Lastly management would work with the community to make eBay fun again.

eBayShopping would become a pure shopping site for new merchandise. The only format would be fixed price and perhaps Dutch auctions. Sellers would still no longer leave negative feedback, but eBay could launch a more liberal feedback removal or mutual feedback removal for situations where the seller has a problem but makes good on it.

DSRs would still be used and listing fees would continue. If listings were free the site would be swamped with sellers and junk merchandise and eBay would have to start limiting who sells on the site and qualifying sellers. This would be great for large sellers but would make it very difficult for small sellers to get started and build a business.

As for payment, it is probably a good idea to ban personal checks and money orders and only allow electronic payments. eBay could also look at an Amazon-type system whereby eBay handles the payment as part of their fee and offers something similar to Amazon's A-Z guarantee. I know a lot of eBay sellers don't like this, but I also sell on Amazon and it's not really a problem. In fact I find that it is far less work to sell on Amazon. Even though it costs me slightly more in fees it is still profitable and frankly less hassle than selling on eBay.

eBay sellers would be allowed to sell on both platforms with the same account or start a separate account for each platform, but feedback and DSRs would be unique to the platform.

As you read this you are probably wondering why I suggest leaving DSRs? I know most eBay sellers don't like them, and I was an early and vocal critic, but I have changed my mind. I think the DSR system still needs some tweaking, but in fact it has worked out well for sellers who take their business -and their customer service seriously. The big exception is international sales. I have stopped selling internationally completely because I can't control international shipping time, customs brokerage charges, customs delays and with the dollar strengthening against the Euro I am no longer getting the higher bids that made all the extra work worthwhile.

A few people I have mentioned this idea to reminded me about eBay Express which was an attempt to accomplish what I describe in The New eBay. eBay Express was poorly executed and promoted. eBay is now at a crossroads. If they are going to restart their growth and quit losing market share to Amazon and other shopping engines they have to make some bold moves -but destroying the core of what made eBay great is not the way to go. There is plenty of precedent for companies dividing their business into segments to serve different markets. Now is the time for eBay to look forward and examine new models to expand their market without cannibalizing their existing market.

[top]

2. Online Sales Growth is Slowing. What does this mean for small online sellers?

Online sales numbers for September came out last week and revealed that online sales grew at a slow 5% rate during September. September was the fifth consecutive month where growth has slowed and October will probably be the first negative number in several years. Here is what the numbers look like for the last 6 months:

April:            +15%
May:              +12%
June:             +11%
July:              +8%
August:         +6%
September: +5%

As you can see the trend is definitely down and will probably go negative soon.

A year ago, growth for many months sat above 20%. Nothing can keep growing at double digit rates forever, some slowdown in growth was inevitable --but the recession seems to be taking its toll on all online sellers. Amazon is probably the strongest player with Overstock the weakest and eBay somewhere in the middle.

If you are an online seller this sounds like bad news --and it is --but it's not horrible news. We are in for what will probably be a long and deep recession. Unemployment hit 6.5% this week and could go as high as 7% or 8% but will probably not reach the 10% rate that it hit in the late 1970s. That is pretty bad for the up to 8% that will be affected --but remember, 92% of people will still be employed and those people will still spend money. Yes business will keep slowing down but it will not go away.

[top]

3. eBay Holiday Promotions Could Help Some Sellers, But is eBay Forgetting The Little Guy Again?

Everyone is hoping the Holiday season can lift online and retail sales out of the doldrums. eBay announced several holiday promotion programs they hope will drive buyers to the site for the benefit of all sellers, but the promotions seemed to be aimed at large sellers of popular consumer goods -an area where small sellers are finding it tough to compete.

Greg Fant, VP, Marketing and Buyer Experience said the following in an eBay announcement:

"In this tough economy, shoppers will be exceptionally cost-conscious, and our marketing initiatives reinforce the message that the greatest deals can be found on eBay - we'll be saying this earlier, louder and in a more integrated way than ever.

Plus, we've invested in new programs that will work hard to deliver on this promise."

Here are the new promotions that eBay announced. After you read these I will comment on how they will affect sellers and how you can take advantage of them.

Microsoft Live Search Cashback - Shoppers who arrive at eBay through Microsoft Live Search can receive up to 30% cash back on the purchase of any eligible fixed-price item when using a PayPal account through the Microsoft Live Search cashback program. When used to purchase items that are already offered at a deep discount, this represents significant savings for our customers.

Coupons - eBay coupons will be distributed to millions of eligible eBay customers throughout the season. You can't miss it - coupons will be displayed throughout the site and in customers' My eBay accounts. Actual percentage offers will vary, and all coupons are valid on any auction-style of fixed price listings when PayPal is used. They'll be offered for a very limited time to get customers shopping!

Special Deals Offers - We're introducing a number of special deals to increase excitement, drive buzz, and keep buyers coming back to eBay for more. Here is the line-up:

Daily Deal: From November 3 to December 17, a different product will be available each day at a fixed-price and deep discount off MSRP with free shipping. These limited-quantity items will be available daily by 3 p.m. EST.
Bid From $1: From November 3 to December 17, shoppers can bid on thousands of the hottest electronics all starting at $1, no minimum final-price reserves and with free shipping.
$1 Holiday Doorbuster: From November 24 to December 8, we will offer $1 Doorbuster deals - limited quantities of two different items at a fixed-price of $1 and one surprise luxury item, also at a fixed-price of $1.

Internet Marketing - A huge percentage of the online shopping population will be seeing eBay ads running across some of the most visited sites including Yahoo, MSN, Facebook, YouTube and many more. We want customers everywhere to know about all the great deals on eBay!

Radio - We'll be on the airwaves in major cities throughout the US beginning November 17th to spread the word!

Get 15% Off Holiday Purchases with the eBay MasterCard - And last but not least - From November 18th through December 31st this year, eBay shoppers can get 15% off their eBay purchases, up to $30 back, when they sign up for the eBay MasterCard. The credit will appear automatically on your statement, so it couldn't be easier.

So what does this mean for sellers and how can you take advantage of it? My first thought is that this promotion is aimed at sellers of hot consumer goods. If you look at the eBay Deals Page, you will see that all of the products featured are hot consumer goods such as Garmin Nuvi's, Elmo dolls, Nikon cameras, Nintendo game sets, Blu-ray DVDs and iPods. These items are out of reach for most small sellers. However, eBay hopes (as do I) that the fact that these deals are so good will bring people to the site, and I suspect that is true. If it does, we know that eBay buyers tend to spend some time looking around and they use the eBay search engine to find what they are looking for.

The coupons and Microsoft Live Search cashback should bring some incremental buyers that may not otherwise come -however I am not sure those are traditional eBay users who even know how to look around eBay for other goods or if they will bother once they get their deal.

This is really the crux of the problem. In general anything that increases traffic is good for all sellers, but it will only overflow to smaller and niche market sellers if the new buyers become hooked on eBay and come back. The coupon deals will help all as savvy eBay buyers will look for these and use them to buy products they are looking for.

Lastly I am glad to see eBay doing Radio advertising. I had hoped they would do another TV campaign, but with their recent layoffs and budget cutbacks that is probably off the table for a while.

Bottom line, the promotions will help big sellers the most, but this is a situation where a rising tide lifts all the boats -even the rowboats. We have to wait and see how high a tide it will be.

[top]

4. Recession Strategies for eBay and Small Online Sellers

This is not the time to give up or become frightened -and if you have not started an eBay or online business this is actually a good time to start.

One of the things that happen in challenging environments is a shake out. Weak sellers disappear. This is good because these weak sellers usually compete solely on price and they tend to lower margins for other sellers. For example, in one of my niches I had three serious competitors and about half a dozen occasional competitors. One of the serious competitors and most of the casual competitors are gone and my sales and final values have increased.

There are some things you can do to shore up your business in a recession.

Steps to take now:

Tighten your belt and watch your fees and expenses. Look for sensible opportunities to cut costs but be careful cutting items that contribute to your income. Let me give you an example. When I looked at my eBay fee statement I saw that one item that was costing a lot of money each month was using the Bold Listing option on eBay. This fee was recently raised from $1.00 to $2.00. So I tried removing it from several listings to see what would happen. As it turned out, my final values suffered by more than the $2.00 cost. So that was not a good cost to cut.
Reduce your debts. Interest rates are already starting to rise and if you have credit card debt you will soon see some pretty big increases. This debt service can really cut into your income. If you reduce your debts, you will have a lower debt-to-income ratio. This will allow you to qualify for lower interest rates thereby further reducing your debt costs and allowing you to pay off your debt sooner.
Get rid of unproductive inventory even if you have to take a loss on it and use the cash to buy inventory that sells. Inventory sitting on the shelf that is not selling is costing you money both in real terms and in opportunity costs.
Review all of your listings. Basically use this time to give your business a tune-up. Go through your listings looking at titles, keywords, photos and descriptions. Make sure you are selling the benefits of your product.
Compare all of your listings. Increase the ones that are working and remove or change the rest.
Ramp up your communications and customer service. This is the time to build your feedback and high DSR scores. The higher DSR scores will get you better placement in the eBay search engine and if you are (or become) a PowerSeller you will earn additional fee discounts.
Experiment with listing starting amounts, optional features, new products, new keywords in titles, auction duration and ending times and free shipping. Keep good records so you know what works and what doesn't. Keep what works and discard the rest.

All recessions end and this one will too. The old saying "When the going gets tough -the tough get going" has never been truer. Given the choice of being a victim or an opportunist, I will pick opportunity every time.

[top]

5. New eBay Wholesale Sources for November 2008

I get a lot of questions about our FREE Wholesale Search Engine. This is a great tool for finding wholesale sources but you have to be a little careful. This is a search engine. I do not control the results. So just because a specific company comes up that does not mean I endorse the company.

Most of the results will be pretty good -better at finding wholesale companies than you would do with Google or Yahoo -but some companies are good at tricking search engines, so look at the results very carefully and check out references if a company looks too good to be true.

One of my readers has started a new wholesale site and has some great items for the Christmas selling season. Check out Value Wholesale Plus.

Lang Holdings is a distributor of very high quality kitchen organization items, stationary products and other gifts.

Levine Gifts is a leading importer of candle accessories. They carry a large selection of wholesale candle warmers, wholesale tart burners, including wholesale electric tart burners, ceramic jar candle shades, and votive and other candle accessories.

The Hearthside Collection sells a wide range of country-themed gifts and accessories.

Ohio Wholesale another dealer of country and primitive art and accessories and gifts.

Yes Anime is a wholesale supplier of anime toys, cards, clothing and accessories.

Toy Wonders is a wholesale distributor for die-cast model cars

Elms Gifts Wholesale is a wholesale supplier of licensed merchandise such as Coke, Jack Daniels, John Deere, I Love Lucy, Harley Davidson, Elvis, Betty Boop and so much more. And they have a free dropshipping program.

If you are making and selling crafts or want to sell craft supplies on eBay, check out DBC Wholesale.

That's it for now.

Skip McGrath
The eBay Seller's News

P.S. If you missed the last issue, click here to read it.