E-Commerce Growing Pains

Washington Post columnist Leslie Walker was online Thursday, June 30, at 1:30 p.m. ET to discuss the dream of striking it rich on eBay, the Internet's most heavily trafficked shopping site.

She spent three days last week attending eBay's annual user convention, where 11,600 people descended on the auctioneer's home town of San Jose to celebrate the 10th anniversary of eBay. Most attendees were small merchants trying to earn a living selling everything from Barbie dolls to used Hummers on eBay.

Walker talked to more than 30 high-volume eBay merchants about why they increasingly are testing other Web retail locations besides eBay. Many of these "power sellers" shared details about how their online sales operations are doing.

A transcript of today's discussion is below:

Read her Thursday column about the lifestyle and career ambitions of eBay sellers, and her weekend piece about the heated competition eBay is facing from other Web retailers.

Read Leslie's .com archive .

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Leslie Walker: Hi everyone. We are getting ready to start. Please send us your thoughts, comments, hopes, frustrations and insights into eBay!

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Chicago: I have been selling children's clothes on eBay for three years and the recent fee hike really killed me. When is eBay going to learn not to bite the hand that fees?

Leslie Walker: Boy, that was a refrain I heard A LOT at the eBay convention. I knew the fee hikes galvanized many eBay sellers into looking at alternate sales outlets, but I had no idea how many.

More than half the dealers I interviewed told me they had reacted to the fee hikes by starting their own Web site, or by boosting their marketing for their own Web sites, or by trying rival sites like Overstock, Yahoo and Amazon

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Washington, D.C. : What are the most popular eBay rival auction sites right now?

Leslie Walker: None of eBay's rivals has anywhere near the number of buyers and sellers eBay has, but everyone is watching to see if the fee hikes eBay imposed will help its competitors gain traction.

Amazon.com's marketplace probably had the biggest buzz at the eBay convention, with sellers of newer and commodity merchandise (books, CDs and DVDs) flocking to list stuff there.

Amazon has a different model. Unlike eBay, where buyers and sellers have to complete transactions on their own, Amazon takes payment from buyers, shaves off a commission and forwards the money to the seller. Some high-volume dealers like the fact they don't pay up-front listing fees on Amazon, meaning less risk to them compared to eBay, where they have to pay even when stuff doesn't sell. The trade-off is Amazon's commission tends to run higher than eBay's.

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Washington, D.C.: Leslie: I stopped using eBay a few years ago because I really didn't like their search functionality. Has it improved at all since 2002?

Leslie Walker: Yes, it's greatly improved, with a lot more bells and whistles. You can run filters now by price, category and all kinds of variables. You can use "wild card" asterisks ** like you can on Google. Ebay CEO Meg Whitman told the convention there are actually as many searches being run on eBay as on Google in the United States, or were in recent quarter.

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San Francisco, CA: Ebay seems like a glorified garage sale. Was its conventino as goofy as eBAY?

Leslie Walker: There was some silliness at the convention, for sure, like when eBay flashed up some ridiculous items currently for sale and asked the audience to guess if each had sold and for how much. You had to laugh at the "mind reading machine" that supposedly sold for $710.

But for the most part, eBay appears to be growing up. The last two eBay user conventions I attended were much tackier than this one. Many more businesses displayed products to help eBay sellers on the exhibit floor this year. In years past, you had to navigate past distracting ferris wheels and treasure hunt extravaganzas to find substance at the convention.

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Alexandria, Va.: Why is eBay so unwilling to disclose how many gold and platinum level sellers they have?

Leslie Walker: This is a good question. I think eBay should disclose more about its seller profile than it does. It obviously knows a lot more than it's telling.

That said, it should be noted the "powerseller" program is purely voluntary. A lot more eBay sellers are eligible than actually sign up.

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Bakersfield, CA: Regarding fee hikes by eBay. It seems that many sellers pasted the fee hikes on to the consumer just like in any business. All the fee hikes did was drive sellers and bidders from the eBay site, if recent sales are an indication of what's to come on eBay, we are in trouble unless they do something! I say if you are going to raise the fees then adverstise to bring the bidders back with all the money that is being collected in fee hikes.

Leslie Walker: Good points. A lot of dealers I talked to did just what you described--increased their minimum bid and "buy it now" prices to compensate for the fee hikes. The sellers I talked to, though, didn't see a companion drop in sales--they said people were still buying at the higher prices.

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Reston, Va.: Any backlash at the convention to the fact that Whitman was a candidate for the Disney job?

Leslie Walker: No, I saw no backlash, and since the time that Meg Whitman interviewed for the job as Disney CEO, she has publicly committed to staying at eBay for several more years.

In fact, people a the convention lined up for the chance to meet with her and get photographed with her. Whitman was a highly visible presence at most of the eBay convention functions.

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Washington, D.C.: Do people really make millions of dollars selling on eBay?

Leslie Walker: As near as I can tell, very few. In fact, I suspect there are more dot-com billionaires than eBay millionaires!!

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Germantown, Maryland: Not exactly a question; more of a comment. I used to buy things on ebay fairly regularly. But recently, things have changed.

In my most recent auction, I was one of the losing bidders on a Sharpvision front projection TV. Losing the auction was no big deal. But I was hardly ready for what happened next.

Within 12 hours of the end of the auction, my email was deluged with fake/spoof/spam emails, supposedly from the original seller. I contacted the original seller, who had not sent me anything, and was frightened by the level of information and sophistication that these would be theives have.

Each day since, I have had to get rid of a number of these emails.

I am thinking seriously about not using Ebay anymore.

Leslie Walker: Wow, Germantown, sorry to hear of that awful experience. Unfortunately, it is becoming all too common, and not just at eBay. It sounds like fraudsters hacked into the seller's account to access your email. I wish I could say the problem of hackers/fraudsters/phishers was limited to eBay but it is much bigger than that.

EBay does offer a toolbar you can download and install to help prevent "phishing" attacks in which fraudsters direct you to site that look like eBay but actually are not. You might consider installing it if you have not already.

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Bakersfield, CA: That is exactly the mentality that eBay needs to address. It is not a glorified garage sale in this day and age. Items are sold for 1000's of dollars and if they would advertise such this kind of thinking would not be out there among the masses!

Leslie Walker: I tend to agree that eBay plays up its reputation as the whacky place that sells Virgin-Mary grilled cheese sandwiches way too much. It gets them lots of publicity, but it's debatable how helpful that publicity is to building a serious business!

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Washington, D.C. : What do you think of all these new eBay drop-off stores?

Leslie Walker: For the life of me, I can't figure out how they are going to turn a profit. The drop-off franchises such as QuickDrop typically charge the people who bring them merchandise 30 percent of the final sales price on eBay. The franchise store also has to pay a royalty to the parent company, say 4 percent or more. Then they have brick-and-mortar costs and employee salaries. That's a lot of costs!

Yet eBay drop-off stores were all the rage at the shop, lots of 'em exhibiting on the convention floor.

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Gaithersburg MD: Saw the question asking about making millions of dollars on eBay. Our revenue on eBay this year will be about $2.2M if our current run-rate continues. However, we "make" -(net) far less than that, obviously. Our eBay fees constitute about 12% of gross sales, so I suspect that eBay makes more than we do at this point.

Leslie Walker: Ebay fees averaging 12 percent, wow, that seems high. You must use a lot of eBay's ancillary services. I'd be curious to hear from other eBay sellers what their fees run, on average.

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Silver Spring, Md.: How much talk was there at the gathering about security and fraud issues? Are the sellers generally happy with the company's steps to minimize fraud?

Leslie Walker: LOTS of talk about fraud and security. It's a huge issue that is not going away. eBay and PayPal both take it very seriously, but some questioned whether the site is staying ahead of the bad guys.

In addition to phishing attacks, people hacking into eBay user accounts, selling things they don't have and not delivering the goods, another BIG issue I heard talk about was counterfeit goods.

Many dealers selling legitimate, authorized merchandise said they were incensed at what they perceive to be a large amount of counterfeit merchandise on eBay, especially in DVD movies and designer apparel.

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Leslie Walker: Some of you sent email this morning asking what in the heck an eBay convention is, and what happened there.

For four years in a row, eBay has hosted a convention for users. It attracts mostly sellers, 11,600 of 'em this year. They come to network with one another, to meet the eBay staff who toil behind their computer screens tending auctions, and to learn how to optimize their businesses. It was in San Jose this year and will be held next year in Las Vegas.

As for news, eBay announced various intiatives. The biggest was an off-ebay Web site creation and hosting service called ProStores. Another was integration of U.S. Customs forms into eBay to make it easier for sellers to fill out forms online for shipping overseas. Postmaster John Potter joined eBay CEO Meg Whitman on stage to announce some new shipping services.

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Philadelphia, PA: I have to say, I _like_ the eBay-as-garage-sale model. It's just as useful for people who want to get rid of a few things that their kids have outgrown as it is for "Power Sellers" or Platinum members or whatever they're called. And it gets harder to do that as "real" businesses increasingly predominate the site.

Leslie Walker: Well said, Philadelphia. eBay as a virtual garage sale has worked for a lot of people, obviously. And I agree it has gotten harder both to sell and to find that kind of stuff as bigger businesses increasingly list vast amounts of merchandise for sale. I think that's what makes eBay so interesting to watch right now. What I do think is overhyped are all the "I sold my soul" on eBay stories that pop up every week.

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Arlington, VA: To what extent were feedback issues discussed? Some sellers complain that bidders who don't pay can still leave negative feedback. As a buyer, I don't like to leave anything less than glowing since I don't want a retalitatory negative. Even neutrals are as bad as negatives.

Leslie Walker: Feedback was a big issue this year. eBay made some changes in the feedback rules. For one, buyers who don't pay and then leave a "negative" rating in the seller's feedback area won't be able to impact that seller's rating. The negative point will be removed if the seller requests it.

Also, eBay agreed to remove feedback left by new users who get permanently suspended in their first 90 days after registering on eBay.

But eBay wouldn't bow to pressure on another issue. Buyers cannot sort all the feedback so as to just see the negatives. Folks have lobbied eBay to allow this, but eBay North American President Bill Cobb said it would be unfair to sellers.

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Gaithersburg, MD: Update on the fees: we do NOT use a lot of ancillary features, in fact. We have limited nearly all of that, and use software to manage listings and fee expenses. However, we lose a lot of money on listings that don't sell, as well as listings that "sell" but represent fraudulent buyers that we ultimately lose money on.

Leslie Walker: Ah, thanks for the clarificaiton, Gaithersburg. It makes sense that your fees for unsold listings would push up the average. Thanks!

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Bakersfield, CA: eBay has the answer to fraud. It is called My Messages and they have taken giant steps towards fraud. They started a secure message board right on your my eBay site where all questions from buyers, important notices from eBay are directed. Therefore, you can just check your messages after you sign-in on eBay and ignore any spam emails. eBay is trying to get everyone to just answer emails that are posted on your personal My eBay link within the mainframe of eBay. This will pretty much put the fraud emails hackers out of business. As soon as everyone knows that the only real email is in their personal message folder after they sign-in to eBay that should stop the problem. Too bad it has taken so long for this to happen, but at least they are taking the issue seriously and protecting both buyer and seller with the new My Messages folder.

Leslie Walker: Hello Bakersfield. Yes, you are absolutely right, eBay has rolled out an interesting initiative to help its users know when email they get purporting to be from eBay ACTUALLY IS from eBay. Thanks for pointing it out.

I have not tested this My Messages system personally, though, and can't comment on its effectiveness.

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Bethesda MD: Where do eBay dealers find their merchandise?

Leslie Walker: All over creation. Many start as junk dealers, scouring local garage sales. Others contact wholesalers of specific products and try to buy at bulk rates. Others carve out special direct relationships with manufacturers or their authorized wholesalers to buy at deep discounts.

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Bowie, MD: I tried to submit earlier, but not sure if it made it through. As a professional seller, I am always interested in what the 3rd party service providers are up to. These firms are typically innovating, and they often signal what we can expect to see more of in the future. Also, the tools/services are useful to PowerSellers. Any new businesses/services worth exploring from the seller's perspective? Thanks!

Leslie Walker: I did not spend a lot of time exploring the new tools this year, sorry. There were a lot of new tools, though. And more than 100 companies showing stuff on the floor.

A lot of companies released new software programs for automating ebay sales support. One called Hosted Support introduced an automated help desk system for sellers. It analyzes emails from buyers and delivers automated replies.

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Bethesda, MD: I've sold items on eBay for some time now, I even taught a class at the local community college on how to sell. Recently I've noticed items selling for much less than they should (brand new disney movies going for $1) or not selling at all. Do you think the market for some items has been flooded? It seems like it was a lot easier to sell back in 2001.

Leslie Walker: Yes, dealers tell me many categories have seen prices drop as sellers flood the market. But eBay executives counter that it's a market, with supply and demand constantly in flux.

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Sioux Falls, S.D.: I've been thinking about starting an ebay business. As I look at auctions for items similar to what I'd like to sell I see a lot of listings but many close with no bids or with a single low bid. Along with the new fee rates, the experience related by the poster from Germantown, and ebays reputation for being slugish in assistance for people who have been ripped off. Is ebay still a good place for a beginner to get their feet wet?

Leslie Walker: Yes, I still think it's a great place to find a bargain. I buy there every couple of months and recommend it to newbies. I always use PayPal to pay, and select the credit card option so I have a chargeback option from my credit card if I don't get the goods. That's the advice I give.

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Locust Grove, Arkansas: Greetings Leslie,

Have you ever thought of doing a story on 3rd party company's that seem to be thriving by serving ebay sellers and buyers... example BuySafe and Discount Shipping Insurance.

I'd also like to state that selling on eBay is not my only goal. I am building a site to sell to ebay sellers in light bulk. We have the option of selling our product offline in public venues also. I have some local contracts to manufacture parts and provide safety eyewear to local industry.

With the big picture in mind, I am using eBay for a business incubator. I litterly started with less than nothing. I am thankful for the opportunity to do business on eBay.

Leslie, with all that said, I think, I noticed that your true passion would be to write your own book. I encourage you to look into it and follow your passion... who knows, you may end up hawking it on eBay.

Have a great one and I hope to see you at live 2006!

Gary Richardson

HarleyGlasses

www.motoglasses.com

Ebay store www.harleyglasses.com

Leslie Walker: Hi Gary, thanks for the feedback! What you say about using your eBay business as an incubator for offline sales is interesting. I heard a LOT of dealers doing online/offline combo sales in interesting ways.

As for the book, I did write one once, and may write another, but right now my two newspaper columns a week are consuming me.

I enjoyed meeting you in San Jose. Good luck selling those cool sunglasses!

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Detroit, Michigan: If one has been using Ebay over the past few years, it is understandable why people are looking at other venues for buying and selling. Six years ago, I ran in to problems with a seller from whom I won the auction. I was able to telephone Ebay, talk with someone, and got the problem resolved. Then when this happened again three years ago, I found that there was no customer service person of Ebay to whom one could talk. When I emailed Ebay about the problem, I only received a computer-generated response.

In addition to customer service problems, there are now others: the heavy promotion of Paypal. In addition to giving Paypal one's credit card information, after $2000 of purchases they also want one's bank account number.

Personally, I have been now doing much of my shopping elsewhere.

Leslie Walker: Thanks, Detroit, for sharing your story. I can appreciate the lack of customer service on eBay can be frustrating. Recently, though, eBay has sworn off those annoying automated email replies and vowed to have real live humans handling all those emails. Hope they stick with it! Better luck elsewhere on the Web!

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Washington, DC: As a seller, I still like Ebay, but they definitely need some real competition to keep them on their toes. Why haven't any serious competitors risen up? Sure, you have sites like Amazon and Yahoo make a half-hearted attempt, but no one seems really committed to slaying the dragon, so to speak. I'm really surprised that so many companies, especially the likes of Microsoft or Google, are apparently willing to let Ebay keep the entire market to itself.

Leslie Walker: I agree. I wish eBay had more competition. Overstock.com is making an attempt, as are Yahoo and Amazon, but eBay is still the King-Kong of Web auctions because it has so many more buyers and sellers than its rivals. IT's hard to imagine a rival catching up any time soon. That said, I do expect these rivals to start gaining traction, at least in niches. amazon already has in books and CDs.

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Falls Church, VA: Leslie:

I'm a pretty regular user of eBay. I buy stuff and occasionally sell stuff. By no means am I a business, just a guy looking to find the stuff he wants and sell the stuff he doesn't want. I'm curious to know if there's software out there that allows someone to monitor an item and bid on it within the last minute. I've more than several auctions where I was winning with only 15 seconds left and was suddenly outbid. This happens to often for it to be coincidence. Is there such a software?

Leslie Walker: Yes, there is a ton of "sniping" software, as it's called. Google the term, "sniping software and eBay" and you will see. I can't recommend a particular program ,though.

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Arlington, VA: Though we've been buying sporadically from ebay since 2001, I just started looking on it for more deals since the beginning of this year. I've found I've really had to keep an eye on shipping charges; it appears more sellers have tacked on the fees eBay charges them into their shipping charges. Often, this makes the item (kids' clothes or books) too expensive and not worth bidding on. So I wonder if ebay realizes that sellers have tried to pass on fees, and when things don't sell, the sellers go elsewhere?

Leslie Walker: Yes, good points, Arlington. Thanks. In fact, eBay announced it will add a new column to the search results on its sites, so that shipping fees are displayed right there. That will make comparisons easier for us buyers!

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Gaithersburg MD: Saw the comment on the "My Messages" feature. Unfortunately, I don't think that will stick as an anti-fraud tool, primarily because volume sellers like us cannot use it. We need to use tools (quicktext entry, etc.) as well as multiple people (tech, sales) to handle all the mail, and the Messages feature supports none of that. To minimize fraud, the real change has to be getting rid of the anonymity that eBay fosters, and have every buyer and seller be verified (like Amazon does).

Leslie Walker: Ah, thanks for the feedback.

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Shreveport, LA: I have been selling on Ebay for about a year. Yeah it has problems, but it lets me work and still stay home with my kids. I think the higher ups do need to work on Ebay's image as an honest company both with advertising and they way they treat their sellers.

Leslie Walker: Ok, Shreveport, appreciate your viewpoint!

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Alexandria, Virginia: When a seller starts opening his own store, which is most popular? eBay store or independent web host store?

Leslie Walker: In a nutshell, an eBay store is easier to create, and an independent Web site is cheaper (in the sense that eBay doesn't take commissions on those.) Most big sellers seem to use both.

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North Bethesda, MD: Leslie,

The auction component of the e-Commerce industry has focused on Seller-side automation. What are your views on Buyer-side automation tools such as AgentProxy.com for simplifying the user experience through meta-search across multiple auction sites, bid automation and expanded services like persistent search and cascaded bidding?

Could you also speak to the question of personalized agent software (e.g. bots) and the issues surrounding website content intellectual property and bot restrictions.

Regards,

Rob Montgomery

Leslie Walker: Sorry, I have not used these tools and can't comment.

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Sioux Falls Sd.: What I was asking was is ebay still a good place for a begining seller to start a business.

I have bought some things and found it a good experience as a buyer.

Leslie Walker: Ah, yes, I do think there are plenty of start-up opportunities on eBay. Just don't expect to get rich quick.

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Leslie Walker: Sorry, that is all we have time for today. Thanks to everyone who sent in questions. Sorry I couldn't get to them all. Bye for now!

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