In an earlier post, I talked about the tough situation for collectibles sellers in eBays SR1 release - specifically around the increase in costs due to eBay now requiring sellers to provide tracking if they want to keep/achieve top rated seller status (eTRS).
I've been active in the eBay World for > 10yrs and part of the fun is there is a great group of super-smart people that come from all walks of life, all geographies, all categories, etc. One of the long-time people in the community that I always enjoy talking to is Larry Phillips. Larry has been a ChannelAdvisor customer since at least 2007 and always has great ideas about eBay, e-commerce and business.
As a stamp seller, the eBay SR1 changes will probably be cataclysmic to his business so I thought it would be interesting to have him explain the impact from his perspective.
Now without further ado, is Larry's take on SR1 - Enjoy and let Larry know your thoughts in comments.
Guest Post from Larry Phillips
First, I want to thank Scot, for giving me the opportunity to discuss SR1, and the impact both for me, and the Stamp category. Now, a little about my business. I sell stamps to stamp collectors, and would call myself a “retail” stamp dealer, as collectors buy individual items from me, and inexpensive packets of stamps. I’ve been selling on eBay since 1999, and have an Anchor store with about 13,500 listings, and an ASP of just under $8.00 (although many of my items sell for $4.00). I complete about 2,000 sales per month on eBay, which represents about 40% of my overall business. My feedback rating has never been below 99.9%, and has frequently been 100%. I have qualified as a Top Rated Seller in all but one month since the program’s inception. Almost half of my business is from repeat customers. So without tooting my own horn too much, I would say that I am EXACTLY the type of seller that eBay wants to put in front of their buyers.
In looking at SR1, I have been focused on one change which affects me and all stamp sellers in a hugely negative manner, effectively preventing me from ever achieving Top Rated Seller status again. That change is the delivery confirmation requirement. Because I sell stamps, which is in effect a piece of paper for shipping purposes, I am able to ship by First Class LETTER rate. Delivery confirmation is only available for First Class PACKAGE rate, NOT for First Class Letter rate.
Doing the math...
I’m going to crunch some numbers here to show you what’s involved, and the impact. If you just want to see the bottom line, please skip to the next paragraph. I currently use either 45c or 65c postage, depending on weight. Delivery confirmation has a minimum cost of $1.64. I am able to purchase old stamps at about a 20% discount specifically to use as postage on the packages, so the 45c and 65c actually become 36c and 52c. Since I’m offering free shipping on most items, the additional cost will need to be added on to the selling price, along with eBay’s FVF on that add-on. So my selling price will have to increase by about $1.35 per item to cover this cost.
So the bottom line is that if I abide by this requirement, the selling price of my items will need to increase by 20 – 35%, just to recoup the additional cost. To compound the issue, my customers EXPECT me to use real postage stamps on the envelope. So it’s a double whammy, since the price will increase by a significant amount, and the buyers will be disappointed by the fact that the envelope does not have stamps. My alternative is to accept the fact that I will no longer be a Top Rated Seller, meaning I lose my discount, which equates to 2.4% of the selling price, or about $400 per month, and I have the unknown factor in how much my revenue will be reduced by losing my search bump. In short, I’m between the proverbial rock and a hard place.
eBay says buyers want it, but do they?
Perhaps the most upsetting part of this is the treatment I’ve received from eBay since the announcement. I've spent a lot of time talking to a variety of people at eBay (some senior) and the answer they give is “The Top-rated seller program is designed to reward the sellers who are delivering that best in class service that the buyers are asking for”, and they’re insistent that my buyers want this.
And based on the way the question was asked, they probably got that type of response. “Do you want tracking on all shipments?” That’s going to get a hugely positive reaction. “Do you want tracking on all shipments at an additional cost of 20 – 35% per item?” I submit that the results will be significantly lower. My DSRs tell the story of what my buyers want. For 1,580 domestic transactions in the last three months, I have one low DSR in Communications, and none in the other three categories. Does that sound like an outcry of customers wanting Delivery Confirmation?
Where do I go from here?
So where does that leave me? I’ve made the decision that I will change nothing. I am making this decision primarily for my buyers. I am convinced that my customers would prefer the lower price and stamps on the envelope, to a higher price with a label. I’ve made almost 200,000 sales on eBay. I know my buyers. eBay has made a decision that for most categories makes total sense, but for the Stamps and similar categories has a hugely negative impact on buyers. I have not decided whether I will raise my prices to offset the loss of TRS status. Part of that will depend on the impact that the loss has on my sales volume. But very simply, I won’t comply, and eBay’s response to that is “It’s your decision. We’re not forcing you to do anything. You’re welcome to still sell on eBay without the TRS badge.” And most importantly, I want to reiterate that I am making this decision based on my experience as to what my buyers want. This is NOT about me. It’s about my buyers.
What does this mean for eBay?
I’m concerned that the real damage will be the long term impact on eBay’s position in the collectibles categories. I will be placing much more emphasis on my website, and the other venues where I sell than I do currently. Some of the alternative venues are growing rapidly. Bidstart.com has almost three million stamp listings right now, and DelCampe has almost a million. Both have contacted me with open arms, suggesting I increase my presence on their sites, which has already commenced. While I have no intention of leaving eBay at this point, there are many sellers that do plan to leave. And as sellers leave, buyers will follow. Very soon, instead of being the first place I list a new item, eBay will be the second. Then depending on the results of that trial, maybe they will become the third. We’ll see.
I truly expect the impact on the stamps category will be significant to eBay. It will be a slow and steady decline, speeding up as more and more sellers invest their time and energy in their own websites and other venues. And all because eBay insists on a “One Size Fits All” philosophy, where every rule impacts every category in the exact same manner. Some day, hopefully, they will find a management team that recognizes that “One Size Does NOT Fit All.” But that does not appear to be the case any time in the near future.
Larry Phillips is owner of Long Beach Philatelics, Inc., http://www.4stampsales.com, and is a Gold Powerseller with over twelve years experience selling on eBay. Formerly a Sales Executive with AT&T, a Consultant with Coopers & Lybrand(now Price Waterhouse Coopers), and Vice President of Telecommunications for credit card giant MBNA, Larry brings over 40 years of business experience to the table.