 This is why ebay wants to get rid of small sellers!!!!
Found this article. Intresting read and explain exactly why we are muppets for eBay.
What Ebay Is doing and Why?*
This is a very in depth look and I apologize for how long this post is but if you decide to read the entire post you will have a much deeper picture of what and why.
To really see the whole picture its really important to take a look at the past. This transformation that EBay is going through really has nothing to do with buyer satisfaction. It has everything to do with the past and what they want to accomplish in the future.**
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Here is a look back to 2004 when EBay entered the China market and I need to say this article below was in no way written by me it is a published Forbes article written by Helen H Wang.
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In 2004 eBay had just entered China and was planning to dominate the China market. Alibaba was a local Chinese company that helped small- and medium-sized enterprises conducting business online. Most people in the West had barely heard about it When eBay entered the China market, Jack Ma, founder and CEO of Alibaba, was alarmed that “someday, eBay would come in our direction.” He knew too well that there was no clear distinction between small businesses and individual consumers in China. As a defensive strategy, Ma decided to launch a competing consumer-to-consumer (C2C) auction site, not to make money, but to fend off eBay from taking away Alibaba’s customers.
A new Web site named Taobao—meaning “digging for treasure”—was launched free of charge for individuals buying and selling virtually any consumer goods, from cosmetics to electronic parts.
In 2004, I visited Alibaba at its headquarters in Hangzhou. It is located on a campus of three ten-story buildings in the northeastern part of Hangzhou, about a ten-minute taxi drive from West Lake. In the lobby, a flat panel TV was streaming video clips of Jack Ma speaking at various public events where his admirers, most of them in their twenties, were cheering him like a rock star. While visiting Alibaba’s headquarters in Hangzhou, I felt the same “insanely great” energy of entrepreneurship as I felt in Silicon Valley. When I asked a senior manager at Alibaba whether the company was worried that it would be bought by eBay, I was blown away by the answer:*“We will buy eBay!”
EBay, on the other hand, began its most aggressive campaigns to dominate the market and thwart competitors. Soon after Taobao was launched, eBay signed exclusive advertising rights with major portals Sina, Sohu, and Netease with the intention of blocking advertisements from Taobao. In addition, eBay injected another $100 million to build its China operation, now renamed “eBay EachNet,” and was spreading its ads on buses, subway platforms, and everywhere else.
Ma fought back cleverly. Knowing that most small business people would rather watch TV than log on to the Internet, Ma secured advertisements for Taobao on major TV channels. In 2004, one could easily feel the heat of fierce competition between eBay EachNet and Taobao. When I was taking a taxi in Shanghai, I noticed the ads of eBay EachNet on the back of the driver’s seat; when I checked into my hotel, I heard the ads for Taobao popping up on TV almost every half hour. Since its name means “digging for treasure” in Chinese, it attracted a lot of attention by a smart play on words. While most people in the West had never heard of Taobao, its name was heard loud and strong in China.
Nevertheless, most industry observers were suspicious about Taobao’s future, particularly its sustainability. Unlike eBay EachNet, which charged its sellers for listing and transaction fees, Taobao was free to use. Neither Ma nor any members from the management team gave a definite timeline as to how long this “free period” was going to last. “Free is not a business model,” the doubters said. Some thought Ma was crazy and nicknamed him “Crazy Ma.”
No doubt Crazy Ma was changing the game. Taobao got a quick start with its free listings and continued to gain momentum as more and more users switched from eBay EachNet to Taobao. According to a Morgan Stanley report, Taobao was more customer focused and user friendly than eBay EachNet. With most users not
sophisticated about auctions, the majority of Taobao’s listings were for sales. Only 10 percent of its listings were for auctions, while eBay EachNet had about 40 percent of its listings for auctions. Taobao had also better terms for its customers: it offered longer listing periods (fourteen days) and let customers extend for one more period automatically. EBay EachNet did not have this flexibility.
Taobao’s listings appeared to be more customer-centric while eBay EachNet’s listings more product-centric. For example, Taobao’s listings were organized into several categories, such as “Men,” “Women,” and so on, while eBay EachNet stuck to its global platform, grouping users into “Buyers” and “Sellers.”
At that time, China had about three hundred million cell phone users versus ninety million Internet users. Taobao offered instant messaging and voice mail to mobile phones for buyers and sellers because Chinese users were cell-phone savvy rather than computer savvy. It was clear that Taobao had an upper hand against its global counterpart because it really understood Chinese customers. As a result, Taobao had higher customer satisfaction than eBay EachNet. According to iResearch, a Beijing-based research firm, the user satisfaction level was 77 percent for Taobao versus 62 percent for eBay EachNet. The experience of competing with eBay gave Ma tremendous confidence. He was determined to win:
“eBay may be a shark in the ocean, but I am a crocodile in the Yangtze River. If we fight in the ocean, we lose—but if we fight in the river, we win.”
By March 2006, Taobao had outpaced eBay EachNet and became the leader in China’s consumer-to-consumer (C2C) market, with 67 percent market share in terms of users, while eBay EachNet had only 29 percent market share. “The competition is over,” Ma exclaimed. “It’s time to claim the battlefield.”
On December 20, 2006, Meg Whitman, eBay’s then CEO, flew to Shanghai to take part in a press conference to announce a new joint venture with Beijing-based Internet portal Tom Online, which provides wireless value-added multimedia services. It was, in reality, a formal announcement of eBay’s withdrawal from the online auction market in China. EBay shut down its China site, eBay EachNet, and took a back seat to a company with only $173 million in revenue and no experience in the online auction business.
Jack Ma represents a new generation of savvy Chinese competitors who should not be underestimated. They study their markets and bring to bear their local knowledge. They learn from their competition and from their own mistakes as they move up the competitive landscape.
The case of Alibaba provides an invaluable lesson for multinationals to succeed in China market:
First, eBay failed to recognize that the Chinese market and the business environment are very different from that of the West. EBay sent a German manager to lead the China operation and brought in a chief technology officer from the United States. Neither one spoke Chinese or understood the local market. It was eBay’s biggest mistake. Second, because the top management team didn’t understand the local market, they spent a lot of money doing the wrong things, such as advertising on the Internet in a country where small businesses didn’t use the Internet. The fact that eBay had a strong brand in the United States didn’t mean it would be a strong brand in China. Third, rather than adapt products and services to local customers, eBay stuck to its “global platform,” which again
did not fit local customers’ tastes and preferences.
Interesting facts about Alibaba:
1-Alibaba has more sales than both Amazon and Ebay combined
2- "On last year's Singles Day -- China's version of Cyber Monday -- sales on Alibaba's shopping sites clocked**in at $5.7 billion, more than double America's Cyber Monday"*This was in a 24 hour period.
3-Alibaba has more money than some third world countries
4-"This is the largest e-commerce company in what will be the largest e-commerce market in the world. Everything about it is: Wow"
Now you might ask yourself, what does this article have to do with the present?*
What's happening now?*
Yesterday Jack Ma released his intension to significantly increase*Alibaba presence in AMERICA and guess who Alibaba is aimed at ?? *Ebay it's former rival who tried to monopolize China's Ecommerce in 2004.*
EBay*has been*preparing for Alibaba's arrival. Ebay is attempting to stage itself as a large volume*arena by getting rid of small and medium sized sellers especially sellers who sell used and refurbished goods and replacing those unwanted sellers with corporations, large chain retail stores and*large volume sellers from China.
How are they doing this? Simple it's called the "defect rate" you see the defect rate only applies to regular sellers.
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The "wanted sellers" such as large corporations, National retail chains and Chinese sellers are "immune" to this new standard.
EBay knows it's virtually impossibble for those who are "not immune" to*the defect rate*to stay within standards with the new system especially when sellers are hit with defects for both: Events that are out of their control: Examples: *lost, damaged or late shipment incurred during delivery or secondly Normal business operation such as a returns or cancelled transaction.*It would be interesting to see what EBay's defect rate is?
When you fall below standard any discounts you may have earned are taken away, your Paypal account assets from sales are he held for up to 21 days and additionally your adds are hidden in a swarm of unrelated items. Thus begins a war of attrition: You will find it nearly impossible to operate because not only are your sales greatly reduced but in addition you have no access to your income for 21 days. *This means zero buying power for up three weeks.
The trap in nearly impossible to escape because if you do not make at least 400 transactions within a 3 month period you will then be rated based on the last 12 months of your transaction and feedback history and of course since they have taken steps to greatly reduce your sales this means you will really have to fight to reach 400 transaction and all with no revenue.
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If one does not make enough transactions in a three month period it will take nearly 1 full year to escape the snare.
By then you are either bankrupt or you have moved to different market.
The 90 day return and HFR "hassle free returns" will be the final blow. The 90 day return policy means that you can get a defect up to 90 days after an item was purchased. In addition the hassle free return is yet another snare. If you implement it any item not as described case that is opened or even escalated will be an automatic victory for the buyer. EBay's response: Those enrolled in the HFR cannot have any item not as described cases removed because the buyer is covered also by the hassle free return program as well.**
Conclusion:*
Ebay is driving away some of their most loyal customers as they kick off more and more sellers. Most small and medium sellers also buy from Ebay on a regular basis. So they are replacing buying customers with Volume sellers like Tiger Direct, New Egg, Best Buy not to mention untold numbers of large volume Chinese sellers. These corporate merchants are there for one sole purpose and that's to sell. So in essance EBay has alienated a large number of buyers from EBay's economy and replaced them with corporate sellers. EBay is the first corporation I have ever seen that chases away it's best customers.
Secondly: EBay is hinting that PayPal and Ebay will become a seperate entity. Investors are putting great pressure on Ebay to do this. * *Why?
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Because PayPal's greatly outperforms EBay. Many investors want to solely invest in PayPal and drop EBay stocks. If PayPal separates this will greatly drop the number of EBay investors and in retrospect it will negatively effect the value of *EBay stock. Let's compare EBay alone (without PayPal) to other online Ecommerce Venues. The last month EBay gained only 5.9 % same sales growth while Amazon gained over 45%. If you were an investor which would you choose? * Alibaba stock is also rumored be going public soon offering a 20% discount on their stock . Which would you put your money into? The under performing EBay? Or would you pick a Venue that has proven higher gains?
Third: Alibaba is coming for Ebay. When this giant Ecommerce site establishes itself in America do you think the chinese sellers and the large volume sellers will remain loyal to EBay? *I can tell you right now the Chinese sellers will switch to Alibaba in a heart beat. *After all Alibaba originated in China furthermore the Corporations will go where it is most profitable as well. The loyal small and medium sellers that have been with EBay from the beginning will already be gone due to the defect system.
Ma Quotes: The founder of Alibaba
1-"In the past decade, we measured ourselves by how much we changed China," he wrote in a letter to investors last week. "In the future, we will be judged by how much progress we bring to the world."
2- "We will buy EBay"
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