New eBay president and chief executive John Donahoe’s transformation of the site from an “unruly flea market” to a “strip mall” has angered some users, leading them to call for a global boycott of eBay tomorrow (May 1).
Donahoe joined eBay as president of its Marketplaces division in 2005 from consultants Bain & Co. He took the top job at eBay on March 31 after long-serving chief executive Meg Whitman stepped down.
Donahoe takes charge of an eBay in rude health, with first-quarter profits up 22% to $562m (£282.6m). Despite this, Donahoe is overseeing radical changes, including introducing a policy of not allowing sellers to leave neutral or negative feedback from next month. Until now, eBay traders have been able to rate each other, which allows small sellers to build a good reputation, and to respond to buyers’ abusive or false comments. The change is seen as favouring bigger sellers.
In February, eBay also raised the fee payable on sale completion – based on a percentage of final price – from 5.25% to 7.25%.
An eBay spokesman says that at the same time the sale completion fee was increased, the site reduced the item insertion fee. Rather then paying for the privilege of selling, people instead pay when the deal is completed.
The spokesman points out that in most cases the buyer is placing the most trust in the process because they are sending money, and adds that feedback is being abused. “If a buyer acquires a DVD, but has a terrible experience, then he will give negative feedback about the seller,” he says. “The seller could then hit the buyer with retaliatory negative feedback or the threat of that. You couldn’t tell the bad sellers because they could abuse the system to keep their reputation high.”
The spokesman says that eBay is built on trust between buyers and sellers but adds: “That trust has been eroded over time as online trade has become more popular. The changes will enable that trust to flourish again.”
However, Venture Three strategist Alfred Tonge says that eBay sees buyers as crucial to its success. “But they have done this at the expense of sellers, who are equally important,” he adds. “Sellers are effectively eBay’s customers, buyers are the customers of the sellers.” Tonge says that alienating sellers could be destructive and drive people to use other sites.
Core businessAn advertising source believes eBay needs to “reinvigorate growth”, adding: “The core business is not that different and few businesses stand still. It has big competition from Amazon and Play.com with optimised services, but eBay is still the same.”
He points out that until now eBay has been a level playing field for both buyers and sellers: “How many resellers would be able to criticise their customers? It doesn’t exist in the real world and buyers don’t like being criticised. The freedom has slowed the business down and actually added to a lack of consumer power.”
Brand propositionTonge thinks eBay must be careful not to lose the sense of community that made it popular in the first place. “The great thing was that it brought people together,” he adds. “The community gave it its brand proposition. Now it is in danger of losing that.”
Donahoe’s changes may be necessary to help eBay stay ahead of its rivals in an increasingly competitive market, but he must be careful not to alienate the group of people more responsible for the site’s success than any other: its users.