Ebay Secrets Blog

Archive for the ‘eBay Strategies’ Category

Background

We first started releasing same-store-sales (SSS) at the requests of our customers.  Retailers are always interested to know how they are doing against their peers (also known as benchmarking) so we started releasing the information as a resource for them.  Along the way, we grew the GMV that goes through ChannelAdvisor to over $3b and have over 3000 customers.  As we gained scale, analysts on Wall St. have become very interested in the data as a directional view of how e-commerce companies are doing (a view we don't necessarily believe in – see disclaimers).

Because of this additional focus on the SSS data, we wanted to add a little more structure to the data and how/when we disseminate it that we are rolling out today.

SSS Changes

• SSS will be published after 5pm on 5th business day after end of month
• We are making sure that the disclaimers on the data are clear and repeated with every SSS publication.
• We are going to eliminate the data point that we previously called ‘ChannelAdvisor’.  Customers don’t see value from that metric and prefer to see the individual channels.  The ChannelAdvisor number is highly influenced by our channel mix that is primarily driven by our product feature and sales efforts and not necessarily an indication of broader market moves.
• Starting next month we are going to add both search and comparison shopping engines (CSE) to the data and will report on those channels going forward

2010 Schedule

• June 8
• July 7
• August 6
• September 7
• October 7
• November 9
• December 7
• Increased frequency for the holiday period TBA

Disclaimer

ChannelAdvisor Same Store Sales (SSS) are reported as a benchmark data point for ChannelAdvisor's internet retailer customers.  The SSS data is not a position or forecast of any e-commerce activity, but the real transactional data captured by ChannelAdvisor across over 3000 retailers and $3b of Gross Merchandise Value (GMV).  There are many reasons this data is not a proxy for overall e-commerce activity including, but not limited to:

• Customer variance – ChannelAdvisor's customers may not be representative of the overall customer mix of any individual channel.  For example, on eBay, our customers are skewed towards the largest eBay customer set, not the average.
• Category variance – ChannelAdvisor is over-indexed in some categories (electronics, sporting goods and auto parts) and under-indexed in others (collectibles, BMV/media, etc.)  For example, on Amazon, ChannelAdvisor has very few media customers so we have no visibility into that large chunk of the business.
• Cross Border Trade variance – While ChannelAdvisor does have a fair amount of non-domestic GMV (>25%), our mix and currency exposure is vastly different than other e-commerce players.
• Software Impact – At the end of the day, we are a software company. Some of our features cause a short-term bump in sales that may skew results high a the beginning and then lower at the end of a one year SSS cycle.
• Channel impact – Certain changes at e-commerce channels may cause more good or harm to our customer base, category mix, international mix and software.  While the data shows these changes, because we are not a material part of every channel, over 90% of that channel's business may not have the same impact (positive or negative).

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

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ChannelAdvisor has a lot going on at IRCE this year.  IRCE has over 6000 attendees, 400 exhibitors and tons of content.  IRCE has replaced what eBay Live was for years (thousands of small business retailers) and also draws in some great large and mid-tier retailers as well.

This year we are at Booth 501 giving demos of some cool new features we're announcing later this week and I'm giving a talk Wednesday at 11:30am with Peter Cobb from eBags on Comparison Shopping Engines.

We usually have a lot of blog readers in attendance so come on by the booth and say hello, I generally spend the bulk of my time in the booth so look forward to seeing everyone.

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We have details over on sister-site, Comparison Shopping Engine Strategies (CSEStrategies.com)

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Today, eBay's CEO, John Donahoe (JD for short), spoke briefly at the D8 conference.  I found that there wasn't a good central place that covered the talk, so I skimmed twitter and some blogs for you and pieced together this list of bullets from his conversation and attendee's perceptions.  I'm sure some video and other items will come out that I will update to reflect in this post, so check back in a couple of days.

Here's what I've found so far – the talk was in little soundbytes around different topics so I've written it that way.

Overview/intro:

• JD is tall (funny how many folks found this something to tweet about)
• He started off by saying he has no plans to run for a political office, but hopes Meg wins.
• They are 30% auctions now, have a lot more 'new' items and broader selection than people realize.
• At the same time eBay has a lot of returned/refurb items so people have choices

What is eBay/Skype?

• Mossberg set the stage by calling eBay a Web 1.0 company
• 90m users in last year 
• Lots of talk about Skype – JD defended and said that companies have to experiment and take risks – Skype was one that didn't fit, but a great co.

Paypal?

• Mossberg asks "What's the point of paypal, does it have a future?" (ouch, he's coming off very attack-ish in the twitter stream)
• Paypal will be the digital wallet of the future
• Talked about bump money
• Physical wallets will go away, replaced by paypal on mobile devices like the iphone
• Many tweeters thought that JD sounded defensive in the Skype and some of the Paypal convo
• There have been 10m downloads of the eBay iPhone app

Phishing, competition, iPad

• Mossberg asking him about all of eBay's Phishing problems.
• JD replies that they have a handle on it.
• Mossberg: "Who is your main competitor"?
• JD -> Amazon, Etsy, Wal-mart
• amazon is only 5% of e-commerce so lots of room for other options, uses the wal-mart/target/etc. offline analogy – both eBay and Amazon can be successful, like Wal-mart and Costco.
• (Back on mobile)
• They see $2B in GMV (This is up from last $1.5B) from mobile in 2010

JD gives eBay a 4/10

• JD notes that the best eBay experience is the iPad (I should do blog post on this – hmmm)
• JD gave the company's website a 4 out of 10, said it was a 2/10 18 months ago.
• Mossberg challenges this – you've been a website for 10 years, why isn't that the best experience?
• JD -> new devices allow you to start over and make new apps that serve users better (I didn't catch this point)

Fashion – why?

• Mossberg – eBay seems very focused on fashion – why?
• JD – We are the largest seller of fashion in the World. Driving more vertical shopping experiences on eBay for better customer experiences.
• They chatted about stubhub

Back to Paypal

• Moss – What role will Paypal play in content?
• JD – Digital is a big opp for PP, just like social gaming, you will have the ability to pay for digital content with paypal.

Q+A

• Audience gave JD a hard time about the usability of PayPal
• Sellers feel like they are nickel and dimed – JD – yes, for years we did this, one of the first things we've fixed.

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

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In the World of the eBay ecosystem, we have our own lingo that is deeply ingrained and we forget sometimes that people have no idea what we are talking about. 

Over at the eBay Ink Blog, RBH posted a picture of eBay's priorities from a sign in an eBay building:

It's titled "eBay Marketplace Goals 2010" and has these three called out goals and then 7 priorities. They are chock full of eBay lingo, so I thought it would be fun to a) decode them and then b) analyze them.

eBay Goals Translation

• Net Promoter Score (commonly called NPS) + 10 ppt – NPS is something I've been meaning to blog about for a while in detail as it has become core to eBay (as is clear from this goal) – it is a measurement of consumer sentiment and word of mouth.  The goal here is to improve it 10ppt which translates to percentage points (not powerpoint slides, but that is kind of funny because eBay uses a LOT of PPTs).
• Bought Item Velocity + 6 ppt – This is interesting as eBay doesn't really have a metric publicly called 'bought item velocity'. Pure speculation, but they do have the 'sold item metric' as shown here in this graphic from their Q1 conference call.  Perhaps this bought item velocity is a second order measure of sold items and they would like it to increase 6 percentage points y/y (from 31% to 37%).

• Market Share – Maintain – JD has stated numerous times that in 2010 as part of eBay's turn around they will grow 'with' e-commerce (vs. below -08/09 and above – 2011+), so I'm going to guess this is basically saying that eBay will grow with e-commerce.  Sidebar – there's a growing disparity in e-commerce growth metrics.  Comscore is coming in very bearish with single digit growth and the US dept of commerce is at 14.3% – comscore is the easier metric and if you use that, eBay is at their goal, if you look at the USDC, they are not there.

eBay Priorities Translation

The sign lists 7 priorities along with the three goals:

• "Retail-like" trust levels by reducing BBEs and protecting buyers- BBEs are Bad Buyer Experiences, kind of like the Amazon ODR (Order Defect Rate).  Inside of here you have all kinds of things that can go wrong like (SNAD – Significantly Not As Described, INR – Item Not Received, etc.) all of which result in a claim or low NPS score, or the dreaded 1/2 stars of death.
• Enhance selection and value in CSA – CSA is the acronym for the Clothing Shoes and Accessories (now rebranded Fashion) category. More on this in the analysis section.
• Deliver value across the site – Great deals across the site.
• Scale B2C sellers and improve efficiency –  B2C (business to consumer) sellers probably refers to the larger merchants that are coming into the system like buy.com, disney, etc.  Scaling them means helping them grow much larger.  Deal of the day is one lever for this, perhaps there are more to come.
• Defend C2C seller business – C2C are consumer to consumer sellers – a.k.a. 'small sellers' or 'casual sellers'.
• Improve the eBay buyer experience - Self explanatory
• Build our advertising business – ?!  More on this in analysis.

eBay Goal and Priority Analysis

Let's start with the goals (NPS, Bought Item Velocity and market share) – these are all good and very much in line with what eBay has been telling Wall St. as well as sellers.  It is a bit of a bummer to see that the "Market Share" goal is "Maintain".  While realistic, that's a hard one to get the troops rallied and definitely not in the Meg Whitman realm of a BHAG that she seemed obsessed with.  However, in context of losing market share for the last couple of years, it's definitely a step up.

The priorities are not what I would expect. First let's think about the order of these.  (buyer satisfaction, CSA, value, big sellers, small sellers, buyer usability, ads).  Personally, I worry that the buyer experience on eBay is so outdated that it will become increasingly hard for them to keep market share for the next 5 years if they don't make this a priority.  I guess you could argue that CSA is where they are doing some pioneering, but the fact that buyer usability is goal number 6, right above ads, makes me nervous.  Personally, I'd say they need to do this order (FIX SEARCH, buyer usability, buyer satisfaction, big sellers, small sellers, CSA)  Yes I left ads off and added search in all caps .

(rant on)

Ads?  It is disconcerting to me that eBay has ads on here.  I hope I'm misguided, but I'm assuming this is something like AdCommerce and ads on the site and not eBay classifieds (not part of marketplaces).  eBay should focus on GMV and not ads.  Period. 

Personally, I find the AdCommerce ads program to be terrible from all angles:

• Sellers - There is no way to measure closed loop ROI of the system.  It's 2010, I can't imagine why anyone would pay for clicks and not know if they turn into conversions in this day and age.  We do not recommend sellers use the program for this reason alone.
• Buyers - Google is able to show so many ads on the sight because of one reason – relevance.  Google is religious about making sure ads are as relevant as possible.  When they do that, it results in a BETTER experience than just organic results because the ads enhance the experience.  From a buyer's perspective, the only good thing about the AdCommerce ads are that they are at the bottom of the page and hopefully consumers don't see them very often.  I've found they are a HUGE step backwards in the buyer experience because 99% of the time they are not relevant. Here's a great example.  I just did an iPad search and I am presented with these three ads: (click to enlarge)

Scanning the pictures, you may think I'm off-base, they seem decent.  But dig a tad deeper.  The first ad, while it has a picture of an iPad, is actually for a Arwen evenstar pendent (all my LOTR peeps)  will appreciate this, but not your average IPAD SHOPPER?! Really!?!

The second ad seems decent – someone has an iPad on sale with free shipping – ok, very relevant – I click through and find that, well, that's not really the 'case', it is a case and not an iPad – a clear decision by this advertiser to mislead the buyer.  This ad would last about .00000000000000000000000000000001 seconds on Google, yet here it is happily spamming up the search results for one of the top products.  

The third ad is at least clearly an ipad  case (at least the image says IPAD CASE).  The ad says: "Best Deal Here and "reat (sic) Deals starting at $.99…..".  Again, this ad would not last a second on Google, yet here's an ad with a typo.  

So let's recap: Three ads: one is nothing like what we are searching for, second is misleading at best and the third has a typo: Useless Consumer Spam: 3, AdCommerce: 0. Spam wins!

Finally, eBay seems to let anyone advertise in this program.  Featured listings got a LOT less spammy when they restricted the program to eTRS, they should at least do the same here and in fact, I don't get why you wouldn't just put a bullet in the whole program – it really is just that bad.

(rant off)

CSA? In the Q1 conference call, JD said this of CSA:

"So we are starting from a strong position as the number one clothing site based on sales and traffic and we begin to expect traction from these initiatives in Q2 and beyond. In fact, we expect to generate more than $5 billion in GMV from clothing, shoes and accessories."

So it seems like eBay has decided this category is an area they a) are top and b) want to stay top.  This is great and it's good to see them getting aggressive, especially in light of Amazon+Zappos that is a counter force in e-commerce CSA.  My only concern is that they neglect the other 10 billion dollar categories on eBay.  They kind of capture this with the 'deliver value across the site' priority, but would it be prudent for eBay to win the CSA battle and lose autos, CE/CMP, sporting goods, home+garden, jewelry, toys, collectibles?

What do you think of eBay's goals and priorities? Sound off in comments.

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

P.S. Here's the AdCommerce Ad that I was just shown as part of a iPod search:

Aside from being totally irrelevant, can you find at least three things wrong with this ad?

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Details at sister blog Amazon Strategies.
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An observant reader pointed out that eBay is back on Bing Cash back with a 8%.  On May 5th, we noticed that eBay as not on Cashback. Today, 16 days later they appear to be back 'on' as illustrated by this screen shot: (the red square was added):

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Some interesting news in the e-commerce and marketplace world.  Buy.com has been acquired by Rakuten  for $250m in an all-cash deal.  First, I wanted to congratulate all of the folks we know and work with at Buy.com (Neel, Randy, etc.) on a great run and what looks to be a great new parent going forward.

You can check out the coverage at several places, each has a new tidbit of info:

• WSJ is here ($)
• TechCrunch is here
• VentureBeat is here (don't believe that revenue number, kind of crazy)

Rakuten's CEO, Hiroshi Mikitani said: "We feel it has a great strategic fit with our global expansion. Our goal is to become the number one e-commerce company and Internet company in the world."

Pretty bold statement and if you've never heard of Rakuten, one that may seem kind of 'out there'.

We're getting a lot of questions from customers that are active on Buy.com and Wall St. so I wanted to take a bit of time and look at this deal as I do think it has obvious ramifications for the Buy.com marketplace and will have ripples outside of Buy.com.

First, to orient everyone, I give an 'about buy.com' overview followed by an 'about rakuten' perspective.  Not many people in the eBay/Amazon worlds have heard of Rakuten, but they are a huge Japanese company that already has a meaningful US presence that just got bigger and signaled some important moves  by bringing buy.com into the fold.  Finally we'll look at what this means to the US marketplace players – eBay and Amazon.

About Buy.com

The latest and greatest Internet Retailer 500 guide approximates Buy.com's 'first party' (where they are the retailer, not their third party marketplace) GMV at $690m for 2009, up from $657m in 08 and enough to place them as the 32'nd largest retailer.  Buy.com doesn't separately release third party (3P for short) GMV or revenue, but they did have this press release recently that pegged the growth of that segment at a whopping 150% and Neel Grover, their CEO, said: "We firmly believe that our marketplace platform is the future of online retail."

Buy.com has 14m registered users and comscore and  other traffic measuring sites put their traffic at avg 4m/m with a big spike in Q4 of course.

It's widely believed in the industry that Buy.com's 3P marketplace is 10-15% the size of their 1P business, so call it a $100m GMV/yr marketplace.  It's also pretty easy to guess that the 1P business which is largely drop-ship media and CE products is very low margin. 

Based on those facts, my speculation is that the $250m price tag, while it may seem low when compared to the $690m top-line, when you look at the bottom line/EBITDA, Rakuten probably put the bulk of the value in the more lucrative 3P marketplace (say $200m) and the rest in the 1P market that really is a loss leader/break-even leader for 3P (say $50m).

About Rakuten

Who is Rakuten and how the heck do you pronounce Rakuten? Well I can't help you on the latter, but on the former, here are some highlights:

• Rakuten's CEO, Hiroshi Mikitani is the richest dude in Japan and one of the richest in the world #7 actually.
• Rakuten has their fingers in a LOT of businesses (check out the chart that follows) in Japan – including owning a baseball team! The cash cow of Rakuten is their e-commerce site which is an online mall concept called Rakuten Ichiba – you can check it out here (more on this in the speculation section)
• Their $3.2b revenues and $9.5b market cap place them as a top 10 internet company globally.
• They are so focused on global expansion they hold all board and company meetings in English – very unusual for a Japanese co.
• Rakuten enjoys 64m active members.
• Rakuten acquired one of the two largest affiliate networks, Linkshare, back in 2005 for $450m (more on this later)
• Rakuten doesn't have a Paypal competitor that I'm aware of, but they do have this point systems they offer throughout the mall called Super Points that folks in Japan are crazy for. Like Farmville in the US, there is a whole set of entertainment and other outside e-commerce items that have grown up in a Super Points ecosystem.  This guy is clearly very excited:

The following graphic is from their annual report and shows the lines of business they are in: (click to expand)

What does this mean for e-commerce, eBay, Amazon, etc.

E-commerce is a tangled world and the first things to keep an eye on are the various intersections between the three (eBay, Amazon, Buy/Rakuten) companies:

• Buy.com is eBay's largest seller with around 1m items for sale and $2m/month in GMV between their buy seller ID and buydeals.  In fact, eBay has anchored their media strategy around buy.com.  should they become more competitive (read on, it seems like this is a clear yes) and let's say buy.com leaves eBay, then you have a big hole to fill there from a GMV and selection standpoing.
• Buy.com recently started selling again on Amazon and is a top tier CBA (Checkout By Amazon) merchant.
• Buy.com is a big Paypal merchant as well.

Mr. Mikitani wasn't being too secretive about their plans for Buy.com when he told reporters: "If we can convert it (buy.com) into what we do here in Japan, then it is going to be a lot more powerful," he said. "We believe that we have a very different business model from Amazon and eBay. We empower the merchants," he said.

So taking this comment and thinking about the three assets now at Rakuten's US disposal:

• The Rakuten Ichiba online mall business model that is wildly successful in Japan
• The Buy.com rapidly growing 3P supported by a 1P loss-leader
• The LinkShare affiliate network with 1,000's of merchants and $B's of affiliate flow-through

My speculation is they will attempt to mash-up these three things to create a US -flavored version of Ichiba.  If you read Mikitani's last statement: "We empower the merchants." I think this bodes very well for sellers already on buy.com and those that are looking for another marketplace to come on the scene and balance the 800-lb eBay and Amazon.

An Ichiba-like system in the US would be unique and innovative on several dimensions:

• Unique offering – The US doesn't have a 100% 3P marketplace with an integrated cart, integrated points/cash back system. Think Etsy/Bonanzle but with a much larger company and a broader view and a mix of large and small merchants and some clever cross-merchant marketing and merchandising with high entertainment value.
• Advanced merchant services (this is a sampling of what they offer in Japan) including: Rich content management system, advanced inventory system, advanced order management system, CRM capabilities (these are all called Rakuten Merchant Services or RMS), University system for sellers (training), dedicated e-commerce consultants (ECC) and much more.
• Aggressive merchant pricing – Rakuten charges 5% take rate and has some fixed fees and some a-la-carte services like the Universities and ECC systems.
• Linkshare + Buy 3P can get this going quickly – I've been watching the LinkShare acquisition since '05 and honestly Rakuten hasn't really done anything that I can see there, so it will be interesting to see if they plug those merchants right into this 'US Ichiba' that I'm speculating on here.

A new player is here….

Speculation aside, what is clear is that a new $9.5b player is in town from Asia, they are willing to spend $250+$450m = $700m to get the pieces they need, and they clearly have their sights set on a US Ichiba-like marketplace as an alternative to eBay and Amazon.

This is a pretty big deal for merchants so we'll be keeping an eye on developments, stay tuned for more information as we learn what's going on and how you can take advantage of it to SELL MORE.

SeekingAlpha Disclosure – I am long Google and Amazon. eBay is an investor in ChannelAdvisor.  Buy.com is a business partner of ChannelAdvisor's.  

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While this is an eBay blog, we have many customers that sell on both so I wanted to alert you to a complimentary webinar tomorrow for anyone interested.  We have historically done a bunch of what I would call 'Amazon 101' webinars for folks just looking at the platform and wanting to get started.

This webinar is more of a 201  -you're on Amazon, things are cooking, but you want to take it to the next level.  Many sellers feel that once their products are on Amazon, you can 'set and forget'.  That's one approach, but like any channel, Amazon has many second and third order things you can do to continue to boost sales.  For example – are you doing the right things for Amazon SEO (optimizing within the Amazon search engine), are you merchandising your products, are you being competitive with pricing, are you considering leveraging FBA and of course, what are you doing to own the infamous buy-box?

We'll be covering a lot of these more advanced topics and of course will have Q+A with a group of folks that know more about the ins and outs of selling on Amazon than anyone outside of Amazon's four walls.

The webinar is tomorrow, May 20th at 2pm ET and you can register here.

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This is part III – covering the Q+A part of the session.  Part II is here.

Dinesh then took Q+A:

Q: How long will it take for eBay to get to zero listing fees?

A: As we introduce more structured data, zero insertion fees will follow.

Q: What is eBay doing for buyers to help educate them? We feel like we are constantly doing this for you.

A: Our trust initiatives are the biggest things we can do here.  As buyers feel more confident over time, we should see these kinds of questions go way down.

Q: Can there be a tire configurator like the diamond configurator? 

A: Fitment is a solution for that in the auto parts category

Q: In April, auction listings were back up as a mix, which disrupted sellers, what's up?

A: Auctions are a great format and auctions have become even more attractive with the fee changes.

Q: We see a lot of adoption from Amazon, but not as much from eBay – do you think that the cart on Amazon is helping them.  Will eBay have a cart.

A: eBay is working with ChannelAdvisor on a cart that users are asking for – they will partner folks to deliver in a way that's great for buyers sellers.

Q: DSR question – We subsidize free shipping to help with DSRs so our costs have gone way up.  Is eBay looking to revise the shipping cost DSR?

A: We are trying to make this less subjective and more objective. (e.g. were you happy vs. "did you get it by day X").

Q: Thanks for variation listings – when will they roll out beyond the limited categories they are in.  For example, we sell uniforms and would like to list with VSL.

A: We introduced some new categories last month, and we should get with you to give you ETAs for specific categories that maybe of interest to you.

Q: We've had a number of cases open against us and we never lost one.  The new open cases in eTRS is very concerning.

A: We've looked at data on open claims. (after 7 day waiting period).  The mere act of a buyer opening a claim is an indication of very low customer satisfaction scores.  That's data we think is important to collect and get to sellers and make as part of our programs.  The question is how are we protecting sellers?  We have to protect the integrity of the system by monitoring buyers from frivolous claims and we will do that.

Q: In the past, eBay has announced they were getting rid of third party checkout.  What's the status of that?

A: Any changes we make to cart or checkout will be communicated through ChannelAdvisor to you.

Q: We work hard and spend a ton of $ to get to eTRS – is there any thought to increasing the benefits of the program (discounted fees)?

A: We are always looking to be the most competitive option out there for your business and factor that into all of our pricing decisions.

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

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