Buy.com deal reinforces that eBay will get what it measures. That’s good and bad.

Implications: eBay’s deal with Buy.com represents a tectonic shift in a marketplace known for its “level playing field.”   Will the shift help? As Rany Smythe says in his blog, “If you ever wanted a preview of the "New eBay," I've got a treat for you, it will look a lot like Buy.com's eBay store.”   Since 2002, Buy.com’s eBay division has shown exemplary performance in the one specific metric eBay has chosen for measuring all sellers.   It’s fantastic that eBay is providing incentives for outstanding seller performance. That will have short and long term benefits for the marketplace.   The problem is that eBay is choosing to measure the wrong thing.

Analysis: eBay will get what it measures.  

The good news is that eBay has chosen to measure seller performance, and make dramatic, sweeping changes on the site to incent sellers to do better. Such incentives include:  

-advantages in search results (“Best Match”)  

-fee discounts  

-other benefits and seller protections through the revised PowerSeller program.

This is exactly the right direction: measure seller performance, give incentives to sellers who please buyers, and penalties to those who don’t. Perfect.  

But the devil is in the details.   The bad news is the very specific criterion eBay has chosen against which to measure seller performance.  I’ll get a bit granular to explain.  

How are sellers now being measured?  

In addition to the traditional eBay Feedback system (where buyers rate sellers “Positive,” “Neutral” or “Negative” and can enter a written comment), eBay has joined most of ecommerce in offering a Detailed Seller Ratings system – DSR for short.   The four details on which buyers rate sellers are:  

-How accurate was the item description?    
-How satisfied were you with the seller's communication?    
-How quickly did the seller ship the item?    
-How reasonable were the shipping and handling charges?     

However, sellers are measured specifically against their lowest score of these four. So if you get 5 stars in three categories, and 4 stars in one, eBay measures you as a 4 star seller.  

This rating system specifically encourages sellers to strive for consistent excellence in these four generally-accepted standards of ecommerce quality.  

What’s wrong with that system, and why is getting this right so important for eBay?  

eBay absolutely needs to improve its buyer experience. Giving sellers incentives for performance is exactly right.   But you need to let the customers rate seller performance on their own terms.

In fact, eBay buyers are more “idiosyncratic” than other ecommerce buyers. They come to eBay looking for something that’s harder to find. They are willing to make some tradeoff in order to get something that’s more important to them than plain-vanilla ecommerce excellence. They require good vanilla (call it 4 stars), but what they care about is 5 stars in something that matters to them – the sprinkles if you will.  

What sort of idiosyncratic things do eBay buyers care about?  

-exciting, low-starting price, no-reserve auctions for valuable items  

-rare, special, or hard to find items  

-items with a percentage donated to charity (through eBay Giving Works) 
 
-direct communication with a retail owner who helps throughout  

-special and idiosyncratic bonuses that some sellers provide (gifts with purchase)

-other, many and various factors.

Here’s an example:    

Seller "A" gets consistent 5.0 star DSR ratings for descriptions, communication, and shipping time, and 4.2 star ratings for shipping and handling charges (buyers are instructed that 4 stars is "reasonable" and 5 stars is "very reasonable). Instead of subsidized S&H, Seller A donates 10% of the purchase price to Habitat for Humanity, using the eBay Giving Works program. Seller A's buyers are passionate, think Seller A is the best place to shop in the world, and they have 100% positive feedback.  

Seller "B" (like perhaps Buy.com) get 4.8 star DSR ratings across the board. They are good solid commodity sellers, and their customers think they are just fine, as long as their price is best. They get 99% positive feedback, and are well liked.  

In the new world, seller A is rated 4.2. It will be strongly disadvantaged in search. Since 4.2 is deemed unacceptable, Seller A is kicked out of the PowerSeller program (4.5 DSR minimum). The reason? Seller A's passionate customers simply told eBay that their S&H is just "reasonable." But they didn’t get the chance to tell eBay they loved exactly the way Seller A was doing it.  

Seller B is a 4.8, and will be advantaged in Best Match, and receives 15% Final Value Fee discounts, and gets additional PowerSeller benefits no longer available to Seller A.  

Sadly, the Seller A’s of the world are what bring people to eBay.    

In their (appropriate) zeal to get better on four critical criteria, eBay has inadvertently marginalized factors buyers might deem critical. As eBay president Lorrie Norrington said in New Orleans, "if you cannot, or will not change business practices to provide a great customer experience, then eBay is not for you." In order to survive, Seller A is forced to change, despite providing an even better customer experience than Seller B.    

Why did eBay make this mistake?  

Two reasons (one is easy to fix, the other a little tougher).  

1. eBay has chosen to focus on the four areas where it felt Amazon was taking its lunch money: item descriptions, seller communications, shipping time, shipping & handling charges.  These are clearly critical areas where eBay needs improvement. It makes a lot of sense to focus on fixing these problems.  

2. eBay already has an “overall” rating system. It’s the Feedback system devised by Pierre Omidyar himself. The problems are a) the system is partly broken (that’s what eBay is trying to fix here), and b) the eBay Community has a lot of attachment to it. So eBay kept the system, but has chosen to largely ignore it for the incentive programs. The critical error is not measuring against each customers’ “overall” rating of each seller.  

How should eBay fix it?    

Simply add a 5th Detailed Seller Rating, much like every other ecommerce rating system, that allows customers to “bottom line” the experience. For example:  

“Overall, how happy were you with this seller?”  

Then, instead of measuring sellers against the lowest-of-four-DSRs, simply measure against the consumer’s bottom line DSR. That’s what Shopzilla does. That’s what Amazon does. That’s what most ecommerce rating systems do.   Buyers who are disappointed with a seller’s item descriptions, communications, shipping time or s&h charges will denigrate the “bottom line” rating accordingly.

Buyers who give a seller just-OK marks in an area they don’t really care about can still give 5 stars to a seller that thrilled them overall.   Perhaps penalize sellers with very low scores in any measure (e.g., 3 or below).  

But given eBay’s positioning in the broader ecommerce universe – as a place to get special items, special deals, and a special shopping experience – it’s all the more important to let buyers choose which sellers are special.  

Otherwise, eBay’s special sellers will become just plain vanilla.