Sunday, July 27, 2008

Distrust All Around on eBay

Once again, a comment posted by eBay Australia seller Kevin to my post on seller confidence is too comprehensive to leave in the comments section. It deserves its own post so I have moved it. Thank you Kevin for taking the time to share your thoughts.

eBay seems to have added a rather odd business tool to their arsenal this year - distrust.

This is totally at odds with the concepts and foundations that Pierre Omidyar built the site on, and is probably the major affront and culture shock to "old school" eBay sellers, who have felt assailed by an apparent campaign against them throughout 2008, but as illogical as it sounds it does seem to be eBay's tool of choice for the financial expansion of eBay this year.

So, how can distrust be used to make a marketplace more profitable, when trust is an essential ingredient for that very marketplace to work in the first place?

If it is true that during times of recession Ebay will stagnate, or if numbers or gross turnover will cease to grow at the rate of unreasonable expectations placed on it by the stock market, then tools on the site need to earn additional income for the perception of growth to remain.

The obvious answer here is PayPal.

In times of recession, sellers will be more alert to how they are spending their money and will stop investing in "bells and whistles" on their listings unless they feel they have a proven track record of increasing sales.

Meanwhile, the buyer is being mercilessly convinced that the only safe way to shop on eBay is to use PayPal. And thus, while I suspect that only a minimal fraction of buyers have actually read the user agreement to see what the extent of their protection really is, most are convinced that they are being protected by the online payments monolith, whatever may happen with their transaction.

Most buyers, even of high value items, will no longer take postal insurance because, it appears, they believe that PayPal is a free insurance policy for their purchase (it isn't).

Several sellers I know here in Australia had not even studied the protection aspects of PayPal until they were facing all of their turnover being forced into the hands of this company through the threatened "PayPal only" policy for the Australian eBay site, and were quite alarmed to see the gaping loopholes in PayPal's protection policies (more fool eBay for drawing user's attention to such things).

What seems to be ignored is that the costs related to PayPal have to be paid by someone, and as is obvious to every seller on eBay, particularly if they are "retailing" new goods on the site, the seller bears all of the fees and creates all of the profits that eBay pulls out of it's payments monopoly subsidiary, and in some countries must also bear the costs of real postal insurance in order to qualify for so-called seller protection, and it eats into their profit margin.

As we have already discussed here, at the same time as having increasingly distrustful buyers channeled through PayPal and adding to the costs of sellers marketing their goods on eBay, the sellers are being "incented" to reduce their selling prices and associated costs, such as shipping, for the benefit of the marketplace. Well, I guess that combination benefits everyone in the marketplace - except those who are selling there.

Using distrust as a business tool has to be a dangerous exercise, but in eBay's eyes it has benefits. As well as forcing the uptake of PayPal, it also discourages buyers from communicating directly with sellers (who they are learning not to trust,) and that in turn reduces "off-site" sales. The danger though, is, of course, if you convince people that eBay really is an unsafe place to shop, they will actually go elsewhere to shop, where they feel safe.

There is also another danger for eBay, the sellers who are no longer trusted in their own marketplace have also lost much trust of eBay itself. While this can be marketed as an effective campaign against dishonest sellers (they protesteth too much), it will also mean that many good sellers are leaving the site because they simply do not trust the business tools that have now turned against them.

The quality, variety and life of the site is being sucked out of the eBay marketplace - and from my perspective at a steadily increasing rate. We were promised that eBay would be unrecognizable by mid next year, but I am not convinced that this is the direction that the site should be taking for it's own long term health, let alone for the health of it's clientele.

Oh well,



Anonymous said...

In the USA the law requires that the item be delivered as described, if it arrives broken it is not as described and seller must refund, so insurance if bought, protects the seller. There are big differences in the PayPal User Agreement between USA & Australia.


Kevin_T said...

Hi Terry,
Can you please post a link to the laws that cover vendor responsibilities relating to damage in transit?

There are huge differences between the PayPal user agreements in most countries. Insurance and registration are deemed to be the only "proof of shipping" for PayPal in Australia, which adds a minimum of $2.70 per parcel (registration includes $100 of insurance).

Kind Regards, Kevin

Henrietta said...

I don't know what law Terry is referring to but the US eBay User Agreement is quite clear, if it arrives broken it is SNAD.

This link:
is to the FTC Mail Order Rule which also governs internet orders & sales, but is mainly concerned with shipment times.

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Henrietta said...

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