E-Bay: The high cost of a good reputation

February 19, 2008

For heavy sellers and those who make a substantial proportion of their income from eBay, the reports they get from other buyers and sellers are very important. Their concerns about negative feedback are well-grounded. Buyers and sellers seem to be engaged in a war of attrition where negative feedback is one of the main weapons, and now eBay has announced that sellers will no longer be able to leave negative feedback on buyers, hoping that this will help to rebalance things.

Read at www.unitedBIT.com

eBay’s in the ‘Hood

October 26, 2007

by Jack Schofield

Like Google, eBay has become a verb, and users say things like: “I ebayed a dozen books last week.”

This reflects the fact that it has been around for a long time – since 1995 – and is hugely popular. It now has 233 million users in 37 markets, including the US and the UK.

Along the way, eBay has acquired a lot of rival sites and a few complementary ones, such as PayPal, Skype and the social bookmarking site, StumbleUpon. eBay also owns Gumtree, a popular small ads network, and 25% of Craigslist.

And although the basic service has not changed much over the past decade, eBay does try to innovate. Last week, for example, it introduced Neighborhoods, a new social networking service. It’s also beta testing a desktop program codenamed San Dimas, which allows users to do things while offline. This is pioneering software developed for AIR, the Adobe Integrated Runtime, which enables users to run Flash-based programs outside the confines of a web browser.

eBay recently introduced a Facebook widget that enables users to put listings on their Facebook page, and another dozen enhancements are in the works. In particular, it’s experimenting with a new search system called Finding 2.0. This is being used in “the Playground”, which is “a separate eBay site that lets you experiment with new features we’ve come up with, before we consider introducing them on the regular eBay site”. Note that all the auction items and bids are real: it’s not somewhere to play around. Finding 2.0 is a much-needed attempt to make search smarter. It would be nice if it was more reliable at finding things, too.

Social networking is obviously trendy, following the huge success of MySpace and Facebook. It also makes a lot of sense on eBay: it should help users with particular interests (eg Quad hi-fi not Quad Bikes) find one another and share information, and increase the level of confidence you feel when bidding. From eBay’s point of view, it could also encourage people to hang around on the site, and thus to sell or spend more.

However, eBay has a tendency to add whatever’s trendy without the new features ever making a significant difference. For example, how many people know that eBay already offers users their own blog, and how many people actually use them? eBay also has MyWorld, Groups, Reviews, Answers, chat rooms, a Wiki and the ludicrous MatchUps.

Maybe it’s just me, but all this stuff looks utterly pointless, and I won’t be surprised if Neighborhoods turns out to be a waste of time. The only things that make a real difference are the built-in mail and the discussion forums.

There are plenty of things eBay could do to improve its core service. These include better search, more detailed categorisation and tagging, more space for feedback (160 instead of 80 characters), quicker action against scammers, lower PayPal fees and a real help service. In comparison, adding Neighborhoods is trivial.

eBay’s Chaos Theory

October 22, 2007

By: Chuck Salter

It was early in 2006, and Matt Carey, the new CTO of eBay, was attending his first focus group about the online shopping site. It was a memorable experience, to say the least. “It’s hard to use,” complained a longtime customer. She had been collecting antique glass on eBay for years. But lately, the treasure hunt was more frustrating than fun. “I get lost,” she said. “I can’t get back to my search results. I have to go all the way out and start over.”

“This is not good,” Carey thought to himself. This particular buyer was, as he puts it, a “dyed-in-the-wool, right-down-the-center customer.” What she was describing is known by the pejorative “pogo sticking.” To Carey, who had just moved to eBay after 20 years at Wal-Mart, it was the equivalent of “having customers not able to shop in your store because they can’t find the aisles.”

It is not news that eBay has lost the magic that made it an Internet darling a few years back. After peaking at $59 a share in late 2004, the company’s stock plunged to $23 two years later. CEO Meg Whitman may boast about the company’s latest stats–record number of users, revenue, and items listed for sale–but the fact is that the rate of growth at the company is slowing. EBay has tried to jolt itself by investing as much as $4 billion in Skype (which has yet to pay off) and $1.5 billion in PayPal (which has been far more successful). Yet 70% of revenue still comes from the core marketplace business. And as Carey recognized, the weakness there has become impossible to ignore.

How troubling is the slowdown? Despite the double-digit increase in listings and gross merchandise sales that the company reported last year, both of these key indicators have steadily decelerated over the past three years. In 2006, gross merchandise sales grew by less than 20%, the smallest rate ever. More troubling still, the number of active users–those who bid, bought, or listed at least once in the previous year–rose by only 14%, the slowest rate since 2001.

EBay is responding with a whole new strategic gamble–one some company insiders say is its most ambitious ever. The mastermind is John Donahoe, 47, whom Whitman brought aboard three years ago and installed as president of eBay Marketplaces (and as her heir apparent). His bold stroke–what he calls “our number-one strategic priority”–is recasting the site to focus primarily on buyers, not sellers.

As obvious as this realignment might seem, it is a sea change for an outfit that long regarded sellers as its main customers; some 1.4 million vendors rely on the operation for their primary or secondary income.

Donahoe’s key partner is Carey, 42, who is charged with making the buying experience efficient and fun again. Improving one of the Web’s most heavily trafficked sites without disturbing its global–and vocal–sellers’ network and its millions of loyal buyers is a challenge that Carey compares to a “four-wall expansion” at Wal-Mart: turning a standard store into a supercenter without disrupting day-to-day operations.

The good news is there are signs of progress. Wall Street has noticed–the stock has gone up by about $10 a share since its low a year ago. Still, shares remain about 40% below their high, and the ultimate outcome of this effort to revive eBay’s growth is in doubt.

“This is definitely an inflection point,” says Robert Peck, an analyst with Bear Stearns. As Jeff King, eBay’s senior director of product search (what eBay calls “finding”), puts it: “This is our biggest bet.”

Twelve years after a pony-tailed programmer named Pierre Omidyar built an unfussy auction Web site one Labor Day weekend, it’s easy to forget how swiftly and thoroughly eBay changed the online-shopping game. Within four years, customers had listed 130 million items and sold nearly $3 billion worth, giving rise to a new type of entrepreneur, the at-home eBay retailer. The site’s charm lay in the fact that the merchandise was utterly unpredictable, and in the way that auctions introduced an element of competition. The initial hodgepodge of obscure collectibles and discontinued items at bargain prices was joined by hard-to-find new products and pricey cars and jewelry. Part flea market, part Mall of America–eBay chalked up $52.5 billion in total sales last year, more than the sales of Amazon, Apple, and Nike combined. There’s still nothing else like it in size and breadth.

From the beginning, the strategy was to amass an unrivaled array of goods that would attract buyers. It worked well. In fact, as Donahoe now admits, it worked too well. The site became bloated and unwieldy. At any given point, it features about 100 million items for sale, with nearly 7 million new listings every day. “EBay’s abundance was one of its attractions,” Donahoe says. “But if you type in ‘BlackBerry’ and get 23,000 search results, it’s not that helpful.” (His offhand math is not far off the mark: A search in September produced 3,911 phones and PDAs, and 17,771 accessories.)

Donahoe is sitting in the employee cafeteria at eBay North, one of two corporate campuses in the San Jose area, in early September. It’s just after 8 a.m. The campus is coming to life, the parking lot starting to fill. Donahoe is already in midday form after his 6 a.m. Pilates class in the company gym. In a sense, he’s trying to do for eBay Marketplaces what Pilates does for his lanky 6-foot-5 frame: improve its flexibility. “This is not a one-time project,” he says of the drive to revamp the buyer experience. “We’ll make big changes over the next couple of years and keep iterating and innovating.”

Whitman and Donahoe worked together in the 1980s in the San Francisco office of Bain & Co.; Donahoe stayed and eventually became Bain’s worldwide managing director. In many ways, he says, eBay has been going through a natural evolution, from a wildly successful startup to a public company with global reach to, well, a maturing business. “Early on it created a market,” he says. “Now we have competition on all sides.”

Today, the company’s homegrown vendors can sell through their own Web sites, as well as channels such as Amazon.com and Overstock.com. Shoppers have even more online options. A bargain is only a Google search away, and brick-and-mortar retailers have worked hard to upgrade the shopping experience on their sites with virtual assistants, gift registries, product videos, customer reviews, and liberal return policies.

Once an e-commerce innovator, eBay fell behind. “We were shackled by our own success,” says Eric Billingsley, who runs the engineering side of the finding operation. “When the company was growing 80% or 120% year over year, the mind-set was, ‘If it’s not broken, don’t fix it.’?”

“The buying experience hasn’t changed dramatically since 1999, compared with the rest of the Internet,” says Scot Wingo, president and CEO of ChannelAdvisor, which makes software to automate everything from auctions to shipping for sellers on eBay and other sites. “The highway is now crowded, and others are going faster.”

Historically, eBay made sellers the priority for a very good reason: They generate revenue. Sellers are the ones who pay eBay fees for listing an item, posting a photo, even processing a payment through PayPal, which eBay bought in 2002. But Donahoe realized that eBay had to stimulate shopping, and to do that, the company needed technology designed around the buyers’ needs. In late 2005, Donahoe began looking to hire a new CTO. Given the site’s size and complexity, there weren’t many candidates with the appropriate experience.

Then he met Matt Carey. Carey didn’t know much about eBay–in fact, he had never used the site–but he had helped build and oversee the technical infrastructure behind the world’s largest retailer, one of the most data-centric businesses on the planet. In two decades at Wal-Mart, he had experienced firsthand both unprecedented growth and the challenges of maturation. A half-hour into the interview, Donahoe excused himself and called a colleague: “We have to have this guy.”

Carey inherited a catastrophe. Shortly after he arrived in San Jose in December 2005, the site’s core listings, largely auctions, and those for its 600,000 individual stores were combined for the first time–a blunder no one now takes credit for. Previously when you typed in, say, “Sony PlayStation,” the search engine combed through only the core listings. To see the other merchandise, you had to surf over to the eBay Stores site and do a separate search or browse the stores. The goal of combining the entries was to show a broader mix of inventory on a single search; the effect was to give more exposure to the store products. The new setup was rolled out with no customer testing.

Within weeks, nearly every measure of eBay’s business was down. Bids. Return visits. The conversion rate, or percentage of listings sold. Average sales price.

In hindsight, it’s hard to understand why no one at eBay foresaw what would happen. Because eBay charges less for store listings than core auction listings, once they all appeared in a single search, many sellers shifted their inventory to save on fees. Suddenly, store merchandise, which tends to be pricier, was crowding out the auctions–and the bargains. Auctions bottomed out at just 17% of total listings, yet they still accounted for 91% of sales.

The misstep triggered headlines, a falling stock price, and pointed questions from analysts. Whitman explained repeatedly that the marketplace was out of balance. In March 2006, eBay rolled back the program. Finally, in August the company used its only real lever: It raised fees for store listings.

That fiasco became the catalyst for overhauling the buyer experience. Carey asked for a detailed report: When were shoppers abandoning the site? How much were they scrolling through the new search results? He discovered that there was no mechanism to create such a report. It took “many, many, many hours and days and weeks,” he says, to unravel exactly what customers were doing. It turned out that eBay collected all sorts of data about transactions–“It knew that business like the back of its hand,” Carey says–but little related to shopping. “I said, ‘We got gaps in the data. We got holes,'” he recalls. And his mission was to plug them.

Carey grew up in Okmulgee, Oklahoma, where his father operated the family’s furniture-and-appliance store. It was located in a four-story building, the tallest in town. As a boy, he dusted furniture in the showroom and rode the elevator for fun. As a teenager, he delivered air-conditioners, sold bedroom suites, repaired TVs. Meanwhile, his mother was working for IBM in information systems. “When we were young, she used to take me and my brother to the data center, and we’d sleep on the floor in her office while she wrote programs on punch cards,” Carey says.

After graduating from Oklahoma State University, he went to work for Wal-Mart as a programmer trainee, combining his retail and tech know-how. On his first day, he wrote a program automating a sales report for Sam Walton about the Sam’s Club stores–all 12 of them. The IT department was small enough, with only 300 or so employees, that he met Wal-Mart’s CIO early on. “I think I’m going to want to do your job one day,” Carey told him.

The CIO invited the 24-year-old to work alongside him for six months and learn the ropes. Carey eventually had a hand in developing virtually all of Wal-Mart’s major systems, from software that analyzed every inch of shelf space to programs that identified inefficiencies in the company’s global supply chain. “The lesson there was, it’s all in the data,” he says. “If you start with the lowest level of detail, you can answer any question about the business.”

He’d watched from Bentonville, Arkansas, over the years as colleagues left for tech companies like Amazon and Dell, and when eBay came calling, he was intrigued. Still, leaving the only employer he’d ever had was terrifying. “You’ve got no idea how hard that was,” he drawls. “No idea.”

Before moving to San Jose, Carey put the family’s dining room set up for auction on eBay. It sold within days. “A retired couple in Hot Springs drove in with a truck and picked it up,” he says. “I thought, Wow, that’s $1,000, man! This is totally powerful.”

He got his first taste of the eBay culture on day one. Everyone works in cubicles, but executives get individual conference rooms, decorated in a theme their colleagues pick out: Blondie for Whitman. Dennis the Menace for Donahoe. And Elmer Fudd for Carey, an avid hunter. Seeing his conference room for the first time–with two double-barrel toy shotguns mounted on the wall, plus a couple of comic-book covers–he remembers thinking, “Okaaay. Am I in the wrong room?”

Carey set about creating what he calls a “culture of analytics,” particularly around buyers and product development. More experimenting, more testing, more data. “I want to eliminate feelings and get down to true math,” he says. In just 10 months, his team built a faster and more flexible technology platform. His developers also began testing applications on small randomly selected samples of the eBay population (typically 1% or 2%).

In the old eBay, one former engineer had so many failed launches that he had earned the unfortunate nickname the Rollback King. Now, if a new feature doesn’t improve buyer engagement–a new metric, in which return visits, bidding, buying, and other activities are weighted–it doesn’t graduate from trials to reach a broader audience. “In a Darwinian sense,” says Billingsley, one of eBay’s top developers, “to be a survivor, something has to keep producing.”

The evolution of the eBay search engine is continuing, driven by the need to boost browsing and sales. One step is to give shoppers more relevant information, more rapidly. Until recently, the search engine relied on sellers’ product descriptions. When you typed in the name of a product or brand, the software looked for those words in the sellers’ 55-word listings. The results were then ranked according to the closing date of the auctions. If you entered “John Deere,” you could get a listing for a John Deere tractor or a set of John Deere sheets. By eBay’s definition, both were equally relevant.

Playing catch-up with other consumer-oriented sites, the company is now applying the “wisdom of crowds” to create a new feature called “best match.” Every click on the site is measured; the outcome of every one of the 2,600 searches per second is tracked to determine what leads shoppers to bid or to buy. If you submit “John Deere” today, you’ll see the John Deere products that most previous shoppers purchased. “We get flack that we’re trying to control search, but we’re letting the buyers vote with their clicks and say what’s relevant,” says search-meister King. “It’s a big, big, big change for us.”

Narrowing even the most relevant search by price or brand or size has been a particular problem for eBay. Unlike other retail sites that sell a set inventory, eBay has to index and classify a constantly changing universe of whatever people are selling. So where Apple.com or Bananarepublic.com has you pick from predetermined price options, for example, one new eBay feature lets you set your own price range. The site also steers buyers to those sellers with the most positive feedback.

EBay is launching a “snapshot view” in certain categories in time for the holidays; instead of the usual prominent text and thumbnail images, a larger image pops up as you scroll over the picture of a sweater or a vase. It’s the sort of functionality online shoppers have come to expect. “If they’re shopping for clothes,” says King, “they’re comparing us to Nordstrom now.”

What about serendipity–that item you weren’t looking for but are delighted to discover? EBay staffers talk about serendipity all the time. So at the bottom of the list of matches are a few outliers. “If we got rid of cheetah iPod covers, we’d lose a little of eBay,” King says.

What does all this mean for the sellers? Chris Hinze, who turned to eBay when asthma made him abandon his auto-mechanic business, is enthusiastic. Working out of his home in Portland, Connecticut, the 46-year-old refurbishes fixtures bought wholesale into what he calls “power showerheads” with dramatically more water flow. He’s an eBay PowerSeller, meaning his sales amount to at least $1,000 a month and buyers give him high feedback scores.

Hinze attended eBay Live, the annual gathering of thousands of sellers, for the first time this past summer. After one session, he approached King and mentioned that searches for “shower heads” and “showerheads” produced significantly different results. Back in San Jose, King had his team add the terms to their “stemming” project, which combines related words in the finding system. The result: a flood of customers for Hinze’s Superpowershower. He sold three months’ worth of merchandise in three weeks. “Crazy, huh?” he says.

It’s a good example of the power of eBay’s algorithms, both to steer shoppers toward what they’re looking for and to boost a small business 3,000 miles away. In essence, that was Omidyar’s original vision: linking strangers through a virtual transaction that served both parties well. An honest, efficient marketplace, he called it.

But tinkering with the search engine creates new winners and losers; some sellers bubble up, others disappear. No matter what, somebody’s unhappy, suspicious of favoritism, accusing eBay of tilting its playing field. Even minor tweaks can disrupt business for sellers who rely on automated software to manage hundreds or thousands of auctions. It’s all there in the often vitriolic discussion boards on the site.

The biggest question facing eBay today is whether the totality of the changes that Donahoe and Carey are implementing can do for eBay and its millions of sellers what the “showerhead”/”shower head” fix has done for Hinze.

Therein lies eBay’s central conundrum. “We don’t pretend to have all the answers,” says Donahoe. “We’re doing things that will upset some people. But we’re not just listening to the average noise. We’re sharply focused on what our buyers want and need.” Ultimately, the new strategy is a risk, but it’s one that eBay can’t afford not to take. Faced with the classic growth-company problem, it’s betting that it can regain momentum by becoming more like mainstream retailers while still offering stuff you can’t find anywhere else (Michael Vick’s purported handwritten notes for his televised apology in August: $10,200).

The buyers will decide if eBay made the right move. If they shop the site more regularly and purchase more Nintendo Wii consoles and Coach bags and iPhones and Elmer Fudd comics and antique glass, the sellers will applaud the changes. At eBay, there’s little doubt what’s at stake. “If we don’t change, we get marginalized,” says Carey. “We can’t let that happen.”

Employees, who seem to take pride in running a global democratic marketplace, profess a greater sense of mission. “We haven’t even released an eighth of what we’ve done,” says Billingsley. “That’s what excites me. It hasn’t even begun.” Customized pages are in the works. More social-commerce features. An eBay to Go widget with your favorite auction listings to post on your Web site or your MySpace page, complete with a clock to remind you to bid before it’s too late. It all sounds good.

But is it enough? Even eBay’s revamped search engine can’t find the answer.

Source: Fast Company

eBay To Sellers: We Want You Back

October 18, 2007

Many of the folks who list items for sale on eBay have never been happy about rising fees imposed by the e-commerce giant. Nor have they hesitated to make those feelings known—in blogs, chat sites, and elsewhere across the Web. Finally, executives at eBay have heeded those complaints.

Faced with increasing competition for sellers and the buyers who bid for goods online, eBay said on Oct. 17 that it’s going to start slashing fees for listing items. In what eBay considers a test of major changes to its pricing model, it will reduce fees at least 33% through the beginning of November and make other price tweaks in hopes of spurring sellers to put more items on eBay’s site at desired prices, leading to large sales growth and higher overall profits. If successful, the fee changes could become permanent.

Google and Amazon Competition

The announcement, made during a call to announce third-quarter results, represents a major shift for eBay. Traditionally, eBay has increased profits by raising fees for sellers. It could do this despite the complaints of sellers because for a long time, small-business owners really didn’t have anywhere else to go. To get noticed by shoppers, sellers had to get their items in front of eBay’s massive, global audience.

Not anymore. Sites such as Amazon.com and Google offer sellers alternative ways to get noticed by the masses. Sellers can either list items on Amazon or drive traffic to their Web sites by buying ads that show up alongside search results when would-be buyers hunt for a particular product on Google. Partially as a result, eBay has seen declining sales growth in its U.S. marketplace over the years. “Having unlimited pricing power over your sellers—those days are over,” says Tim Boyd, an analyst for American Technology Research. “eBay pushed its seller base a little too far and pushed it into the arms of the competition a little bit and now it has to bring them back.”

Investors Still Wary

eBay has been working to reinvigorate shopping growth in its core U.S. and German online auction and shopping sites for some time. This year, it largely focused efforts on getting more buyers to spend time and money on the site, launching new tools and site features aimed at making it easier for buyers to find items they want and, in some cases, buy those items immediately for a set price rather than try to bid on them in an auction. The company has also made it easier for buyers to ensure they get the items they want with tools that help purchasers bid on identical items until they win an auction. Some of eBay’s efforts are beginning to pay off. In the third quarter, eBay posted 14% growth in the total price of goods sold on its site and had better-than-anticipated revenue growth of 26%.

But eBay has a long way toward assuring investors that their core shopping business can stand up to the competition and keep growing. The total number of goods listed on the site decreased 5% in the third quarter, compared with last year, indicating that sellers are placing some of their merchandise elsewhere.

Skype Effect

The fee decreases acknowledge that some of that work has to involve getting sellers to keep more of the merchandise on the site at a price that buyers want. The mix of items on eBay’s site will likely include more fixed-price items. Analysts have argued for some time that online shoppers want the convenience of simply clicking and buying what they want, even if it means they don’t get the thrill of winning an auction or pay slightly more.

The danger for eBay is that decreasing prices could be too little, too late to encourage more shopping. Another risk: eBay’s margins may come under pressure. That fear was fueled by Swan, who said during the conference call that eBay planned to invest in areas of its business such as the Skype calling service and concentrate less on making a profit from them in the short run. “We believe we may have monetized Skype a little too early and a little too much, so we will like reinvest some of those profits,” Swan said.

Source: BusinessWeek Online

Skype Goes Mobile

October 18, 2007

by Bruce Meyerson

Bit by bit, big names in the computing world, from Apple (game-changing iPhone) to Google (software platform for a new breed of cell phones) are barging into the cell-phone business. Now Skype is set to launch a customized cell phone developed jointly with 3 Mobile, a wireless carrier in Europe, Asia, and Australia.

Code-named the “white phone,” the Skype handset will be introduced by late October in Britain, Italy, Hong Kong, and Australia, and will reach 3’s other five markets later. There are no immediate plans to bring the device to North America, though the companies may try to license it to other carriers or sell versions straight to consumers for them to use on other networks.

Connecting with Skype Buddies

What may be most striking about the device is that it’s being pushed by a mobile carrier at a time when most of the wireless industry is anxiously fighting to preserve its business model against a siege of new technologies and players.

The Skype cell phone, developed with a software outfit named iSkoot, is equipped with multimedia capabilities and high-speed data for mobile Web browsing. But its most prominent feature is a big button right above the regular keypad to activate Skype’s popular service for long-distance and international calls. A press on that button triggers an iSkoot-developed application that brings up a list of a user’s Skype “buddies” and regular phone contacts. A click on any entry in that list dials the call.

Skype’s Challenge: Turning Appeal into Profits

Skype is betting that easy mobile access to its service could spur more overseas call traffic, a revenue-producing business where growth has slumped sharply. Though Skype boasts 246 million accounts, only about one-quarter to one-third of those customers are thought to be regular users, and the vast majority of their calls are free. Skype has struggled to turn its popularity into profits.

Calls on the Skype cell phone will cost the same as on a computer or Skype cordless phone: free when speaking to other Skype users, pennies per minute when users dial regular phone numbers in most countries. 3 Mobile, owned by Hong Kong’s Hutchison Whampoa, won’t charge extra to use the Skype feature. But customers will need to spend a certain amount per month for other services, such as regular mobile calls, ringtones, or text messaging.

A cheap international connection could prove to be a potent draw for wireless users. Currently, few mobile phone subscribers are willing to pay the quarters and dollars per minute charged by cellular companies for international calls. That means 3 Mobile is putting little international revenue at risk by moving to the Skype model. Another intriguing twist: Since eBay owns the online payment service PayPal, success with the Skype phone could provide a springboard for using a cell phone or other handheld device to pay for items, as if it’s a charge or debit card. That’s been an elusive goal for the wireless industry except in a handful of countries such as Japan and Korea.

A Tough Sell with Carriers

But even if it widens the path being carved by Apple and Google, the Skype phone is really more of a back-to-basics concept. The iPhone adds sleek Web browsing and the simplicity of an iPod music player to a phone. The gPhone seeks to bring Google’s expertise, finding information and showing related ads, to a mobile handset. By contrast, the Skype phone is first and foremost about plain old phone calls.

Whatever the nature of these new services and phones, Apple, Skype, and even handset makers like Nokia have found that it’s difficult to get them into consumers’ hands without the aid of mobile carriers—and their cooperation is rare. In the case of Internet calling, the industry’s uneasiness has been especially palpable.

The arrival of the Skype phone is but the latest sign of evolution in wireless, and counter measures by the cellular carriers a ready reminder that there won’t be a revolution any time soon.

Source: Business Week Online

EBay Sellers Go Back to School: 10 Tips

October 18, 2007

 by Kerry Miller

1. Set the starting price low (except for items you expect little interest in). Low starting prices stimulate auction traffic and get early bidders psychologically invested in the auction, leading to more completed sales and higher final prices. Professor Gillian Ku from London Business School and professors Adam Galinsky and J. Keith Murnighan from Northwestern found that Nikon cameras with starting prices of $0.01 resulted in significantly higher final prices than the average price for completed camera auctions.

An auction for a kitchen sink with a starting price of $225 ended without a single bidder. When re-auctioned with a starting price of $75, the sink sold for $275. The exception to the start-low rule: If you’re selling an idiosyncratic item you don’t think a lot of people will bid on, set a price closer to the item’s actual value.

2. Use reserve prices with caution, especially for low-priced items. When using a low minimum bid, nervous sellers sometimes set secret reserve prices to make sure their item doesn’t sell for less than the item’s true value. Using reserves is a risky strategy for sellers, say professors at Stanford and the University of Arizona, because it reduces the probability that the auction will end in a sale.

In an experiment using Pokémon trading cards, they found that secret-reserve auctions on average resulted in fewer serious bidders per auction and lower final sale prices. However, other research suggests that for auctions of higher-priced goods (over $25), secret reserves might actually push revenues higher when the auctions end in a successful sale.

3. Use photos in your listings. Listings with photos receive much more traffic than listings without photos. Generally speaking, more traffic to your listing—especially on the first day of an auction—results in more active bidders, and the more bidders competing for an item, the higher the sale price. In one study at Stanford, researchers found that an extra bidder results in an 11.4% increase in auction revenue among all auctions, and a 5.5% increase for auctions in which there are least two bidders.

4. Don’t flood the market. If you’re selling multiples of an item, space them out, rather then selling them all at once, says Ku—that’s simple supply and demand at work.

5. Spell-check. Misspellings decrease the amount of traffic an auction receives. Ku, Galinsky, and Murnighan found that Michael Jordan shirts listed “Micheal” went unsold almost twice as often as those that were spelled correctly. When sold, the misspelled brand names resulted in lower final sale prices.

6. Hype it up. Ku and Murnighan suggest that inserting blatant puffery like “This shirt is hot!! A must-have for the summer!!” into low-starting-price auctions could stimulate interest better than more straightforward listings, and possibly even raise final sale prices. Researchers at Stanford found that auctions which mention the high retail price in an item description sell for 7% more on average.

7. Hold longer auctions. Researchers from the University of Arizona and the University of Michigan found that longer auctions tend to fetch higher prices. While three-day and five-day auctions yield approximately the same prices, seven-day auctions are about 24% higher, and 10-day auctions 42% higher on average.

8. Don’t end auctions during “eBay happy hour.” Though it might seem counterintuitive, a University of Pennsylvania researcher found that auctions ending during peak hours on eBay are actually 9.6% less likely to result in a sale. The reason? More competition. About 35% of auctions end between 5 p.m. and 8:59 p.m., when 25% of bids are placed.

9. Charge for shipping—but not too much. Bidders don’t pay much attention to shipping costs when placing bids, say professors at UC Berkeley and Hong Kong University of Science and Technology. CDs listed with a starting price of one cent with $3.99 shipping averaged 21% higher final sale prices than CDs set with an opening price of $4 and no shipping charge. But when the professors listed CDs with a $2 starting price and a $6 shipping cost, five of the 20 CDs went unsold.

10. Avoid negative feedback. A Bentley College researcher found that sellers who have even a few positive reports are more likely than sellers who have no history to receive bids and to have their auctions result in a sale. Positively rated sellers also receive higher bids. One study by researchers at UC Santa Cruz and Ryerson University found that highly rated sellers are more likely to provide secure payment options, such as PayPal, as well as detailed product information.

By being aware of the strategies that eBay sellers use, eBay buyers can benefit from academic research as well. For example, be wary of high-traffic auctions: Prices can get artificially inflated. Instead, try searching for items using common misspellings and check out products listed without pictures. These auctions generally receive fewer bids, and therefore usually end up with cheaper sale prices.

Source: www.businessweek.com