Ebay Changes Feedback and Fee Structure

Ebay announced a fee structure change this week, and also announced changes to their feedback system. The fee changes are welcomed by most sellers, who thought the fees should not have been raised that high in the first place. However, the changes to the feedback system have many sellers concerned.

Ebay's recent battle to keep the attention of buyers and sellers reflects the struggles that many older web businesses face – keeping up with the Web 2.0 Joneses. As new companies emerge that build on Ebay's idea in a newer, fresher way, people gravitate to the newer, shinier interfaces.

Even if they go to a site just to try it out for a while, it still hurts Ebay's bottom line in the short term, and those that stay on the new wave of Web 2.0 auction sites hurt the site's profit margin in the long term. The thing that has set Ebay apart from some of their newer, shinier competitors has been their feedback system.

Long established as a reliable, consistent way to find trustworthy sellers and buyers, the changes to the feedback system Ebay has been so well known for trouble many. Up until now, the feedback system has been reciprocal. Buyers could flag sellers as deadbeats, slow shippers or untrustworthy, and sellers could also flag buyers who didn't pay or who took too long to pay if needed. Having a 100% positive feedback record on both sides has been a prized, honored status that let people know immediately you could be trusted to buy or sell.

As of February 20, 2008, sellers will no longer be able to rate buyers. I certainly hope that Ebay can be swayed from going through with this. I know I won't sell anything else on the site, ever, if I can't see a buyer's rating and rate them when the transaction is done. Without that rating system sellers have no protection against the deadbeat buyers that slow pay or refuse to pay. That creates an untenable situation.

Why be concerned, as a seller, about deadbeat buyers? Because it happens more often than Ebay likes to admit, though if pressed Ebay will address the issue: Company spokesman Usher Lieberman said about 6 percent of auctions end in nonpayment by the winning bidder.

Ebay claims that negative feedback drives buyers away. Users claim that the current system has a tendency to encourage retaliatory rating between buyer and seller or seller and buyer (that one bad rating begets another, in other words). Even though a small percentage of users do use unethical rating practices, a far greater number use the system as it was intended – for information and vetting buyer or seller before deciding to place a bid.

The last time Ebay got this much flak from its user base was when it bought online payment processing company PayPal and made it a more integral part of the site. At the time, sellers and buyers were worried that they would lose control over the choices of payment offered. Ebay proved them wrong by keeping a variety of payment options available and simply making PayPal the preferred choice, with a fraud protection guarantee attached.

This current decision, however; is likely to be a poor one that Ebay wont recover from. I foresee a future for Ebay where people flock to sites that better suit their needs once the one thing that has been keeping them on Ebay is removed. It will be interesting to follow the changes and see how, or if, Ebay as we know it survives.