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Why outside?

The first topic that is being widely discussed and speculated is eBay's statement that they are looking externally for a replacement. That blurb wasn't in the official eBay press release, but:

• NY Times: "EBay said that it will conduct an external search for her successor."
• Bloomberg: "…and that it’s looking outside the company for a successor."

So evidently in conversations with reporters eBay was pretty explicit in stating they are looking outside the company for a replacement.

What problem(s) need to be solved?

Before we begin our eBay fantasy league draft, let's think through this challenge.  The eBay President effectively works for JD and has these pieces that report to it:

• eBay.com, eBayMotors.com, eBay classifieds (the site previously known as kijijijijijijijiji), stubhub and bunch of global pieces too.
• customer service
• Buyer and seller experience (includes tsam, trust and safety, large merchants, partner programs)
• Marketing

What does the eBay president NOT do?

eBay's technology team, headed by Mark Carges, reports directly to JD, so that is in a separate silo along with Paypal and of course Skype is gone now.

So really this person is effectively in charge with turning around the eBay marketplace.  eBay is 50% through a 3 year plan to turn the marketplace around and isn't showing much progress.  This chart really tells the story as simply as possible – it compares the growth rates of eBay, Amazon and e-commerce.

As you can see, eBay has been growing slower than e-commerce for over two years now which is bad enough, but when you look at that blue line, you see that Amazon is just mopping up market share.  So this person is going to be like the relief pitcher going into a very tough situation with bases loaded and a 3-0 count.  In other words, they are going to start behind the eight ball.

I've long been on the record (I'm thinking of updating my ebay 2.0 mini-novel here soon as it's been a couple of years since we really dug into this) that eBay needs to focus on:

• The buyer experience  (ease of use and merchandising) is still, by eBay's own admission, a 4/10 and it's not moving fast enough – in fact it continues to lose ground IMO.
• Trust and safety- eBay has made some strides here, but still a lot of ground to cover to get up to state of the art.
• Selection - hard to say, my sense is they are losing ground.
• Value - Also hard to say, but again, it feels like they are losing ground.

With this backdrop, here are my thoughts on who should run eBay…

My top picks to run eBay…

First, I think eBay's problems are unique to eBay and it would be a huge mistake to think that getting someone from a top 10 retailer can come in and apply some pixie dust to solve things.  For, example, JC Penney is doing really well online, what if they recruited a top manager there?  That person would have a set of core competencies that would be around selection, value and buyer experience, but from a retailer's perspective.  A retailer controls all their inventory, they have buyers that understand consumer needs and how their selection will meet those buyer's needs.

That's 180 degrees from how eBay works, so I think that would be a mistake.  eBay has a lot of product talent so I don't think they need to look there.

In short, I think eBay needs to look internally vs. externally so that the company doesn't miss a beat training someone new and risking that they don't 'get it'.

Thus, I've decided to look internally to see who would be the best fit.  This was an interesting challenge.  eBay has something like 300 VPs and very few SVPs on the operational side of things so it's a flat organization that can be hard to tell who the next in line is (at least based on publicly available information from the site and linkedin, etc.).  I also wanted to keep it to a list of ten options so that it's manageable.

• Nobody - Yep you heard me, nobody.  When Stephanie Tilenius left, eBay decided to not replace her and instead widened the responsibility of 2-3 existing VPs and were left with a flatter organization with broader span of control that seems more nimble.  JD could add 2-3 reports (now that Skype is gone, this is do-able) and keep the organization flat.
• Dinesh Lathi – Dinesh started at eBay in the finance dept and then left for a startup.  When he came back, he took over the seller experience and then added buyer when Stephanie departed.  Dinesh obviously is a rising star that gets the eBay marketplace and has been behind many great improvements.
• Chris Tsakalakis – Chris is a super-smart executive at eBay that currently runs Stubhub.  In addition to having a fun last name to pronounce, Chris has an entrepreneurial background and has had success at every stop at eBay.  Stubhub has a great buyer experience, has nailed the trust and safety angle and is growing like a weed.  Chris could bring some of that mojo over to the rest of the biz.
• Andre Haddad – Following in the steps of Lorrie, Andre is the current CEO of shopping.com and I believe also carries one of the few SVP titles at eBay.   Andre is a triple threat – entrepreneurial, gets product and has already run eBay international.  
• Greg Fant – Greg is the VP of Marketing at eBay and has been with the company since I can remember.  He worked his way up through the ranks of category management and knows every nook and cranny of the eBay business.
• Rob Chesney – Ok, Rob isn't at eBay any more, but he's in the 'recently departed' bucket so I'm cheating a little bit having him on the list.  Rob ran eBay Motors through some tough times and to his credit did a great job with the parts and accessories part of that business. P+A is one of the fastest growing categories at eBay and if eBay is really focused on different vertical shopping experiences, Rob is your man.  He's an EIR at a VC now, so not sure if he'll come back or not.
• Miriam Lahage - Miriam is new to eBay, but enters as a GM of fashion which appears to be eBay's big strategic focus (which I somewhat disagree with, but that's a topic for another time).  If fashion is the most important focus, why not put Miriam in charge of the whole enchilada?

Who do you want to run eBay?

That's my list.  Several customers have been  already politicing for Todd Lutwak who is wildly popular with the seller base and some feel that this is a great time to put a top eBay seller in a senior position at eBay.  Also, I didn't dig deep into the ex-ebayers like Dearing, half of linkedin, a chunk at facebook/goog, etc. Would an Amazon exec take the plunge?

I'm eager to hear everyone's thoughts on my short list and anyone else you think would be a good choice to steer the good ship eBay? 

SeekingAlpha disclosure – I am long Amazon and Google. eBay is a strategic investor in ChannelAdvisor.

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College football rivalries aside (Lorrie is a Terp, while I'm a Wolfpacker), we've worked with Lorrie at ChannelAdvisor on a regular basis for the last 5+ years and she's always been a joy to work with.  Lorrie has a lot of traits that are admirable in an executive:

• She does what she says she will
• She is a straight shooter
• She knows the eBay marketplace backward and forward.
• She understands the value of partnerships and how to nurture them.
• Finally, Lorrie has been a tireless advocate for sellers. I've been in many situations where Lorrie came down squarely on the side of sellers and did things like tweak policies, pause potentially disruptive initiatives and most importantly spend a lot of time understanding sellers and their businesses.

I and everyone at ChannelAdvisor and our customers want to take this opportunity to thank Lorrie for 5+ years of great interactions, partership and advocacy and wish her nothing but the best in her future endeavors and dealing with whatever personal items require her attention.  Lorrie, we'll really miss working with you!

SeekingAlpha Disclosure- I am long Amazon and Google. eBay is an investor in ChannelAdvisor

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You can learn more at sister site CSE Strategies here.

Or download the report here: www.channeladvisor.com/consumersurvey.

Enjoy!

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Last week, 8/24/10, eBay somewhat quietly (no AB post, just a tweet+post from their blogger?) rolled out a significant improvement to the system.

If a seller offers free shipping, and the buyer chooses that option, then the seller automatically gets a 5 star on the shipping and handling cost DSR.

You can see a screen shot below of how this will work:

Kudos to eBay to listening to sellers and patching a hole in the system.

SeekingAlpha disclosure- I am long Amazon and Google. eBay is an investor in ChannelAdvisor.

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This is a little view into a very powerful strategic advantage that Amazon has over other players, eBay included, and illustrates why eBay is making a huge effort to 'Amazon-ify' the eBay experience.  I thought our eBay folks would find the topic of interest.

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Today, eBay's Todd Lutwak (looking quite tan, I might add!), announced today that in about nine months eBay will sunset eBay's third party checkout system.   ChannelAdvisor (and our customers) are the largest user of the Third party checkout (we use 3PXO as shorthand so I'll use that going forward to save time) system so I wanted to share a bit of background on the system as well as our plans in a world without 3PXO  and what it means for buyers and sellers.

Background on 3PXO  (or "Greetings loved ones, let's take a journey" – Snoop Dogg )

Prior to October, 2001, there was no checkout at all on eBay.  You would click buy now or win an auction and it was up to the buyer and seller to work out how to complete the transaction.  To fill that gap, innovative third party applications built checkouts that the seller could just email to the buyer and BAM the transaction was done.

In October, 2001, to much initial fanfare followed by massive outcrying of sellers, eBay rolled out a checkout system.  Sellers that were using third party systems were very upset about the system and eBay shortly thereafter allowed sellers to turn off the eBay system and instead plug in one of the third party checkouts- thus 3PXO was born.

Sidebar – this is funny, in searching around, I found that eBay still has the help files up from the initial launch of checkout live here - it's like a trip in a time machine.  

ChannelAdvisor and 3PXO, today and in the future

The initial reason that 3PXO was born and exists to this day is that eBay's checkout has significant gaps that in some cases can negatively impact the buyer and seller experience.  The biggest items:

• Tax/VAT calculation – many larger retailers need enterprise-level tax calculations as part of their business.
• Promotions – Sellers frequently want to offer specials such as 'buy two get one free', or free shipping on orders over $X, etc.
• Shipping and Handling – eBay has very limited Shipping and Handling options.  Also, eBay has a UPS exclusive that makes it impossible to use FedEx as a shipping carrier.
• Up-sells/recommendations – The eBay checkout does not have up-sells or recommendations or after-purchase bundle building/configuration.
• Payment option flexibility - By doing away with paper payment options, eBay has essentially gone Paypal exclusive – many sellers also have found that buyers like having the option to just pay with a credit card or for large B2B transactions, by invoice/PO.

We've been working with eBay to help them understand these feature gaps and they are committed to filling them before turning off the 3PXO functionality.  You can read more details about their plans here.

Today we announced our plans around this phase-out of 3PXO.  Today, sellers have two choices:

1. Stay with the ChannelAdvisor checkout through the holiday period
2. Move to eBay checkout with immediate payment today (if immediate payment is a huge issue for you, this is the best path if you don't have tax/fedex/promo/payment/other considerations)

In early 2011 as eBay rolls out their solutions to the gaps that exist, we'll be adding support for those and have more information on when we feel like they are solid and able to meet our customer's needs.

ChannelAdvisor will continue to provide advanced functionality around inventory management, channel optimization, etc. for customers.

Seller impact of the end of 3PXO 

If eBay is able to bridge all of the gaps in functionality, there shouldn't be much of an impact to sellers.  However, if, for example, eBay forces all sellers onto their UPS rate card, or does not implement improved shipping and handling features, or does not implement VAT/taxation features, the negatives for sellers could be:

• Maybe forced to leave the marketplace due to some showstopper (e.g. VAT tax capture and calc)
• Maybe forced to raise S+H fees if flexibility around promotions, FedEx/shipper, S+H rates, etc. are not allowed.
• Sellers already are not allowed to offer up-sells so that functionality is already gone

Buyer impact of the end of 3PXO 

These changes will be largely positive for buyers as they will have one unified checkout experience by mid-2011 and then when the eBay Cart/Basket is ready (reviewed yesterday here), everything will be one happy common buyer experience.

There is a small probability that if eBay can't execute on the long list of checkout features they need to add, that there could be some buyer impact (e.g. the higher fees for S+H mentioned above), but we'll have to wait to see how that plays out.

Conclusion – More Search (and cowbell!!!!), less cart/checkout

There's a long time between now and June of 2011 and we'll keep you posted as eBay rolls out the various fixes to their checkout.  Ultimately a common buying experience is the right path and we are very supportive of that path.  My only concern is that all of the effort going into checkout and cart right now is taking away from search, which is where I continue to believe eBay is falling further and further behind.  If you had to nail one of the two (search or checkout/cart), personally I'd pick search. Right now it looks like eBay is betting on and making the most movement on checkout/cart at the detriment of search.

More bluntly stated – Does it really move the needle if eBay has a perfect cart/checkout if buyers can't find the items they are looking for?

SeekingAlpha disclosure – I am long Google and Amazon. eBay is a strategic investor in ChannelAdvisor.

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Thoughts about the Basket

We've spent a lot of time with the early experience Basket in the UK and while it's a good start, we've found several problems that indicate that it's very raw and buggy.  It's great to see eBay moving into the modern era with the checkout, but it lacks many of the benefits that normal carts offer:

• Since most likely items will be from different sellers, promotions around cart size to drive an increase in AOV
• Thus far there aren't any of the AOV expanding options you would expect from a modern cart such as up-sells and product recommendations
• The short-life of most eBay listings makes the occurrence of items in the cart going out of stock much more likely than any other site.
• eBay did an interesting implementation with auctions – it will be interesting to see how buyers react to it.
• The cart/basket is definitely more convenient than the single-path checkout, but my biggest question is eBay's priorities.

eBay seems to be spending a lot of engineering resources on the cart.  My biggest concern with the cart is not the functionality itself, but the priority.  In my opinion, the eBay search experience is so far behind the times and moving so slowly forward, eBay should take every available resource that is working on cart/basket and put it towards the search effort.

Until eBay gets search 'right', any other changes to the back-end of the process won't do much to accelerate GMV and help buyers.  In other words, if you can't find the products you are looking for, then what good is a multi-item cart?

In a future post, I'll give a concrete example of eBay's search challenge, before then let's take a brief tour of the eBay cart so you can see it in action for yourself.

Basket tour

Note in this section, I've scaled the screen shots down to preserve space – click on them to see the larger version.

The first time you notice something different is when you see a little basket in the upper right corner of the eBay homepage.

The other indication this isn't your normal eBay is on an item page instead of the "Buy it Now' button, you have an 'Add to Basket' button.

When you add the item to your basket, it is shown there with the other items and you are able to see all of the items in your basket and check out if you'd like to.

If you add an item to a cart and come back, say a day or two later, and the underlying item has sold,  you get the message you see below.  At that point, you have to remove it from the basket to be able to continue. Most of the items on eBay still have quantity=1, so it will be interesting to see how frequently this happens and if it ends up really turning off users that are more used to a cart metaphor that is more persistent (Amazon).

Another interesting situation that is happening frequently with the UK cart is that the seller either doesn't allow shipping outside the UK, or the seller hasn't setup their S+H properly and either the item won't add to the cart at all, or it won't calculate the shipping and handling properly.  In the following, you can see an example.

Auction items are automatically added to your cart and are ready to checkout as illustrated below (the first item was from an auction and the others are fixed-price 'add to basket' items),  When you've successfully added items to the cart, you initiate the checkout process by checking off the boxes of the items you want to include in the purchase as illustrated below:

 From there your items are totaled and you checkout in one single checkout vs. multiples.  The exception is if the seller is using third party checkout, then you go through two checkouts.

One last thing, as you add items to your basket the little icon shows that it is full.

As mentioned, the basket has several bugs including:

• Frequently when items are added to the cart, they don't actually go into the cart.
• Over a period of 24-48 hours, items drop out of the cart
• The cart's shipping and handling calculations can sometimes get 'off' and create an endless loop.

I'm sure eBay will resolve these, but with the 'basics' of the cart still not there, I don't think we'll have a global site-wide solution for some time to come.

What do you think?  Is eBay on the right path?

What are your thoughts on the eBay cart/basket?  Silver bullet or putting the cart before the horse?

SeekingAlpha disclosure – I am long Google and Amazon. eBay is an investor in ChannelAdvisor where I am CEO.

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