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eBay’s new Best Match Search – Is it Bye Bye to eBay’s Large Sellers?

Hi gang,

On March 3rd,  eBay rolled out their spanking new search algorithm, called Best Match.  eBay wants everybody to use Best Match, so eBay made BM the default search tool.  BM is intended to help buyers to better find what they are looking for. BM tries to make search results more relevant to what a buyer is looking for.  As an example, if you were to type in “black ipod nano”  3 weeks ago, you would get approximately 3 billion listings for black nano ipods,  black nano skin covers, black nano earbuds,  etc.   Todays BM results will give you only about 4 million results, most of which will be for a black ipod nano. Progress, indeed.

Sounds great, right?

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Weeelllllll, it depends on who you ask.

As one of eBay’s largest sellers, I was very excited to hear about BM.  After all, anything that would help buyers find my listings in the giant sea of eBay driftwood sounded great to me!  It should have been a big boost to my sales.

Weeellllll, that’s not exactly what went down.

What went down on March 3rd were my pageviews for all my eBay auctions.  I don’t mean a slight hiccup – I’m talking about 40% down.  And oh yeah,  if people aren’t looking at my auctions, then they certainly aren’t buying anything.  So sales are down 40% as well.  Stick that in your pipe and smoke it!, as Grandpa used to say.

So what happened to us?

Well,  eBay also rolled out a big sweeping suite of Seller Rewards and Punishments along with the BM rollout.   Let’s start with changes to the Feedback system.

For 10 years, the Feedback system on eBay remained about the same -  if you were happy with a transaction, you could leave the other party a positive feedback.  Unhappy = negative.  Just ok = Neutral.   It was a fairly simple concept that in practice made eBay the gigantic company that it is today.   The Feedback system enables a buyer to see the reputation of a seller before he buys an item.  Genius.

So, in pure eBay tradition, they found something that was working, and changed it completely.  

The first change that they made was about a year ago.  It was a “secret” change that they didn’t tell anybody.    eBay began to count Neutral feedbacks as Negative feedback when evaluating a seller.  So all of the “I was fairly satisfied” or “great item, UPS took too long to deliver” neutrals now became Negatives when eBay looked at a Sellers performance.  They then launched what I still call the “Great Bad Seller Torch and Pitchfork Hunt of 2007″.  They aggressively went after any seller who was below their fairly high bar of feedback ratings. 

We fell in their sites for various reasons, and we spent much time, money, and effort improving our company to provide the best level of customer service that we could in an eBay environment.   We are a good company, and we pulled out of the eBay crosshairs and have never needed to look back.

eBay’s second big change came with the creation of Detailed Seller Ratings, or DSR’s.  This allowed a buyer to rate a seller overall with a Pos, Neut, or Neg, and they could now leave separate 1-5 ratings for 4 areas of the experience:  Communication,  Product as Described,  Shipping Time,  and Shipping Cost.   The intention of DSR’s in my mind is to show where a sellers weakness is (you learn on eBay after a while that its never about what’s good about a seller,  it’s always about what’s bad about a seller).    So if a seller had high marks everywhere except communication,  the seller could figure out that they needed to do something to improve that.

The next big change to feedback was a few months ago and was a real shocker -  eBay would now only allow a Seller to leave a buyer positive feedback.  Yes, you read that right.   A seller cannot leave a buyer anything other than a Positive feedback.  Luckily for eBay,  every single buyer is a wonderful person who would never do anything to hurt a seller  (sigh).  eBay’s angle on this is that buyers are too fearful to leave sellers negative ratings for fear of retaliation.   In case you haven’t noticed, eBay’s buying community has been dropping like flies, so I suppose eBay figured this was a good place to start.

Ok, so we’re now arriving at “The Rub”.

The Best Match system eBay rolled out also incorporates a Punishment/Reward system for Sellers.   The basic idea is that sellers with higher feedback/DSR’s will rise to the top of Search results, and Sellers with a lower score will fall to the bottom.  A la Google,  eBay will not reveal the exact formula for the Best Match algorithm,  which is probably a good thing because odds are I wouldn’t understand it anyway.

But for us, the bottom line is simple -  we’re being punished because of our feedback score.  

Our feedback score is 98.0%.  We make 98 out of 100 people happy.  We make 980 of 1000 people happy.  And you know who those 20 people are.  They are your crazy Uncle Bob, who thinks the Earth is 3,000 years old, or your neighbor Freddy who hasn’t left his house in 4 years, or your old schoolmate Patty, who calls us 8 times a day to check on her order (no, I’m not kidding), or your cousin Bob who buys an item and then sends us 45 emails insisting that we ship him the product and then he’ll pay.

My local Arbys has a sanitation rating of 91%.   4 out of 5 dentists think chewing Trident will reduce cavities – 80%.  55.5% of Americans voted Bush back in office in 2004.

On eBay, Arbys, Trident, and Bush wouldn’t exist (and 74% of you would applaud the Bush comment).   Not good enough.  Bye bye.

98% positive is not good enough either.  eBay wants a seller to have > 99% positive rankings.  

Now, let’s set the stage for the selling environment that eBay is today:

eBay is the most competitive marketplace for a seller on Earth.  You are competing against a worldwide seller base. There are sometimes hundreds of other sellers selling your product.

eBay does not allow you to brand yourself.  No matter what they say,  your customer is actually their customer.  They do not allow you to email your buyer about anything other than their eBay purchase.  The best eBay sellers may only have a 20% repeat customer base.

Because there is really no way to stand out in the crowd on eBay,  price becomes the main buying decision for a buyer.  So as you can imagine,  your price has to be waaayyyy lower than you’d sell product anywhere else.   In fact,  if you cannot buy the product that you sell well below wholesale price, and sell it below wholesale price, you won’t make it.  (exception:  rare items and collectables – good high profit items usually, but no competition)

The auction process is complex, and will require medium to complex software to handle it.   That costs money.  The more auctions you list, the more software you will need to handle the auctions,  relist them,  handle buyer payments, email buyers, answer buyers questions, and ship items.   More money.  More people. More overhead.  It’s called scalability.

eBay will take 10-20% of your gross sales for selling on their site.  About half of their take will be earned, meaning they took a fee because you sold something.  The other half you will pay to eBay even though it did not result in a sale.

eBay expects you to deal with all of the above, and maintain a 99% or so Positive buying experience as a seller.

To recap:

1. Most competitive market on Earth.

2.  Can’t brand yourself

3.  Must buy product below wholesale and sell at wholesale or below

4.  Lots of software to manage everything

5.  You pay eBay half the time for doing nothing for you.

6.  They expect you to satisfy 990 out of 1000 people.

If you were to look at the largest 500 eBay sellers by number of feedbacks given,  you would discover that the vast majority of them will be punished by Best Match.

Why?

Because 1-6 is pretty much impossible to accomplish.   Can you imagine Tiffanys offering their top notch customer service, but only making 3% profit?  Does that math jive in your busy little business mind?  Of course not -  excellent customer service companies charge more for product so they can afford to provide the excellent customer service!

So most of the large sellers will not have feedback high enough to be advantaged by Best Match.   In effect,  eBay is implementing a “large seller tax” on the very sellers who enable eBay to be so profitable.    A 40% reduction in visibility = a 40% fee increase, does it not?

I think the winners in Best Match will be the smaller sellers -  the guys who don’t have huge overhead and who can stay 100% focused on customer service.   They have not hit the scalability wall on eBay yet, and I feel that they should see a good bump in sales as a result.

Is the large seller on eBay doomed?  It sure is possible.  To quote Scotty (go ask your best geek friend if you don’t know that name) – “She canna take much moor capn!  She’ll blow apaaatt!”

All I can say is this -  the next time you see a large eBay seller, they may have more grey hair than usual.  They may look tired and haggard.  They will be wildly looking around for other places to sell than eBay. 

Give them a hug.

-Kevin

About the Author: Kevin Harmon

Kevin Harmon is a freelance e-commerce business consultant and blogger. He is the former CEO of Inflatable Madness, LLC, one of the largest DVD and CD sellers on eBay and Amazon, and Red Shorts Media, LLC, which operated multiple e-commerce media buyback websites.

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