The changes, which include lowering some fees and raising merchant standards,
were announced at the company's eCommerce Forum by John Donahoe, who will succeed
Meg Whitman as president and CEO in March.
The changes, which will be implemented at different points in the coming weeks
and months, come at a time when eBay is struggling to boost growth of transaction
volume and revenue amidst increased competition from the likes of Amazon.com,
which in recent years has attracted many merchants away from eBay.
Donahoe said last week during a conference call to discuss eBay's fourth-quarter
financials that the eBay marketplace business hasn't been growing as fast as
he would like and that changes would be coming to make the shopping experience
easier and safer.
EBay's fourth-quarter earnings and revenue exceeded Wall Street's expectations,
but its outlook for this year was considered generally disappointing. For example,
the conservative 2008 forecast, coupled with slowing growth in the marketplace
business, led Citigroup to downgrade the stock to "hold."
While eBay's marketplace "playbook" has served it well for the past
10 years, the e-commerce game has changed significantly so the company must
now try bold, new plays, Donahoe said during Tuesday's presentation, which was
webcast.
Specifically, buyers have much higher expectations about online shopping than
10 years ago, so eBay must adapt and make their experience on the marketplace
a better one, he told more than 200 of the company's largest merchants at the
Washington, D.C. event. Likewise, eBay has to do a better job of helping its
best merchants be more successful, he said.
"The Web has evolved around us, and what sellers and buyers have come
to expect has evolved right along with it. Today, buyers want a very high level
of value, selection and convenience. They want to shop on their own terms in
a safe, easy-to-use environment. Sellers want a platform that meets the reality
of doing business online today and that scales to their needs," Donahoe
said.
In short, eBay finds itself at a crossroads where it can't afford to make just
incremental changes if it wants to remain a leader and meet its customers' expectations,
said Donahoe, president of eBay Marketplaces. "We need to redo our playbook,
we need to redo it fast and we need to take bold actions," he said.
Donahoe announced that eBay will introduce an insertion fee reduction in the
U.S. Feb. 20 by cutting the cost of listing items by 25 percent to 50 percent.
By reducing the impact of items that don't sell, eBay hopes merchants will list
more products. In turn, eBay is increasing the so-called "final value"
fees it charges merchants when items are sold. The insertion fee cuts apply
to auction and fixed-price items.
For example, the insertion fee for a $25 auction or fixed-priced item will
drop from $1.20 to $1.00, while the final value fee will increase from 5.25
percent to 8.75 percent. A full rundown of new fees can
be found here.
EBay will also do away with fees it charges U.S. merchants for its "gallery"
option, in order to encourage merchants to include more photos with their listings.
Fee changes will vary by country.
These two changes will reduce fees for most eBay merchants and, while eBay
will see a cut in its fees revenue, it believes the moves are necessary for
the overall health of the marketplace, he said. "Our goal is to reduce
your risk, improve the overall buyer experience and align our success with yours,"
he said.
In addition, eBay will alter its search engine so that merchants with lower
rates of customer satisfaction get less exposure on search results. Meanwhile,
sellers with higher buyer satisfaction ratings will get better exposure in search
results.
In particular, eBay wants to penalize sellers that charge excessive fees for
shipping and handling, which the company has found is a major turnoff for buyers,
said Bill Cobb, president of eBay North America, who spoke after Donahoe.
EBay will also require a "safe payment option," such as PayPal
or a major credit card, from merchants with lower customer satisfaction and
from those in product categories that generate many buyer complaints. This gives
buyers more protection when transacting with these merchants, Cobb said. Moreover,
eBay will also raise the requirements for qualifying as a PowerSeller and update
its feedback system.
Regarding PowerSeller status, eBay will require, starting in July, that to
qualify for the program a merchant have a minimum 4.5 DSR (Detailed Seller Rating)
score, in addition to the existing requirements of a 98 percent positive feedback
rating and a certain level of sales, Cobb said.
The DSR rating lets buyers not only leave an overall feedback rating of positive,
neutral or negative, but also rate the seller specifically in four areas with
a scale of one to five stars: accuracy of item description, communication, shipping
time, and shipping and handling charges.
DSR ratings will be used also to determine which merchants get heightened or
lowered exposure in eBay's search rankings, Cobb said. "We're linking search
with seller performance," Cobb said.
Moreover, for the first time, PowerSellers will get discounts based on high
DSR ratings obtained in the previous 30 days. Those with at least 4.6 on all
four DSR areas get 5 percent off final value fees, and 15 percent off with ratings
of least 4.8.
If these discounts were in place today, about 60 percent of PowerSellers --
about 100,000 -- would qualify for them, Cobb said.
EBay will also revamp its feedback system, in particular to curb what Cobb
called "a disturbing trend" of sellers using it to retaliate against
buyers by giving them low ratings. This discourages buyers from leaving honest
feedback and drives many of them away from eBay.
So, starting in May, sellers will only be allowed to leave positive feedback
for buyers, Cobb said. However, eBay will also add protections for sellers against
inaccurate feedback from buyers, such as removing negative and neutral feedback
when a buyer fails to respond to an "unpaid item" inquiry. In addition,
eBay will remove all the negative and neutral feedback from buyers who are suspended.
In addition, PowerSellers will get increased protection from PayPal, which
will no longer require them to ship to confirmed addresses for items sold on
eBay. PayPal is also lifting its $5,000 annual seller protection coverage limit
for PowerSellers and making it unlimited, Cobb said.
More details about these and other changes can be found in
a blog posting Cobb made on Tuesday morning.
