We are approaching the typical time eBay releases its Spring Seller Updates in most markets. It could come as early as next week if history is a guide.
The company’s earnings call from two weeks ago already clued us into a few changes, including a complete overhaul of how payments will work by mid-2020.
But other platform changes are forthcoming. Some will be new ideas; others will be an expansion of existing technology or processes.
There is a whole world of new thinking going on at eBay. This will require some sellers to step up and make changes to their listings or likely end up dramatically losing views and sales.
At the annual Goldman Sachs Technology and Internet Conference in San Francisco, eBay’s CEO Devin Wenig outlined the future for eBay to investors.
In his talk, it is an interview style presentation, Wenig discusses some of the journey and changes that have happened at eBay over the last three years since he took the job of CEO.
He recounted how at the time eBay was “a little bit complicated and a little bit antiquated.” The model was 20 years old and it lacked a catalog and structured data to move it into the future of eCommerce.
The site was too focused on functional products such as autoparts and that was evident in the buying base being older and skewed toward men.
To become modern, it had to improve the catalog and attract new buyers, more in line with the millennial age.
This required a focus on building up categories such as fashion and home & garden that offered more products to a younger buyer.
Wenig stated the eBay buyer demographics have changed significantly over the three years (the tech world likes to call this the cohort) and he is pleased where it is today.
But with all the fundamental changes the company has accomplished over the last three years, they are just now in the rebranding phase.
Specifically, he said that the majority of people still “misunderstand” eBay and it will take a few more years to change that.
While Wenig did not detail on what he meant by how people misunderstand eBay, it’s pretty obvious he is referring to the popular thought of eBay being an online flea market that mostly offers used goods.
Transition in Retail
In his talk, Wenig also touched a bit on the transition in retail.
He believes 2018 will be a year of mass consolidation in physical retail as the industry cannot get small enough, fast enough.
Before eCommerce, retailers almost had a local monopoly on sales. Buyers mostly shopped at local stores and picked from available inventory.
Now that more inventory and greater choices are available online, local retailers struggle to live only on stock and either have to create experiences or expand to an Omni-Channel retail model which includes high integration with eCommerce.
Fashion and groceries, many thought to be difficult categories for eCommerce, are now becoming part of the eCommerce landscape.
Specifically, Wenig mentioned fashion is growing at a record pace on eBay and in eCommerce in general.
While eCommerce may make up about 20 percent of all retail sales, he believes online sales will eventually surpass 50 percent of all retail sales.
He also believes in five years there will be 2 or 3 major global Omni-Channel brands and eBay plans to be one of them.
Wenig stated eBay’s existing partnerships in U.S. with Best Buy and Target, UK with Argos, and Australia with Woolworths are some examples on how eBay is working with physical retailers to bring more products online.
While he did not mention Always Open on eBay in his talk, the recent announcement by eBay seems to fit into this strategy using small businesses to build out more Omni-Channel partnerships.
But one gets the distinct feeling that if Wenig wants to turn eBay into one of the top-3 global Omni-Channel players, it will require more partnerships with large retailers.
How will the existing seller base, which is mostly small businesses, react to such moves?
The Internet is full of small business sellers dating back to the John Donahoe days complaining about eBay favoring larger sellers.
This could become a tricky proposition and could quickly turn into seller discontent if it is not managed well.
The big news two weeks ago in the Q4 earnings report and by a public announcement from eBay was that they are moving away from PayPal.
As we reported then, there are vastly different believes between the two companies what this transition by eBay means to each business.
While the eBay executive team in the earnings report never mentioned this new payment system was going to be mandatory, it was pretty clear reading between the lines sellers would eventually have to transition to this system.
Stating that PayPal payments were moving to an off-platform method after the operating agreement concluded, effectively telegraphed this change.
eBay and PayPal did sign another three agreement, but it is a bit unclear what this exactly means if PayPal payments are processed off the eBay platform.
Presumably, there will be some sort of logo or buy-button integration with minimal data exchange, but that will not be as native as the new build in solution.
New Integration with Adyen
During the Goldman Sachs Technology and Internet Conference, Wenig was much more upfront about what is going to happen in 29 months.
”You (sellers) will need to have new terms and conditions in your eBay account, and those will include payment. It will be the only way you transact on eBay. We’re basically going to say your eBay account is now your full end-to-end eBay account for all your activities including payments.”
He bluntly said this would not be an optional transition for sellers and that eBay is only following other major marketplaces.
The last part often creates a lot of confusion among sellers who claim they are not being forced to do the same on other marketplaces.
That misunderstanding comes from the fact the tech and investment industry considers Uber, Lyft, Airbnb, etc. “sharing economy marketplaces.”
Hence, when Wenig talks about being like others, it is a comparison to a much larger grouping of marketplaces, not the product only marketplaces such as eBay, Etsy, or Bonanza.
He told investors this change will be a “Significant change for our community.” But it is pretty apparent sellers will be the most impacted as they will have to make operational changes.
Once the original operating agreement with PayPal ends in the middle of 2020, there will not be a gradual rollout as is often the case with some other policy changes.
Sometime within the next 29 months, sellers will be given an “Absolute date beyond which you must be in or you are out.”
He expects this drop-dead date to be within a year after the operating agreement ends in mid-2020.
Again, as in the earnings call, he reiterated there will be a lower payment cost to sellers that should allow them to be more competitive.
Wenig also stated that by using Adyen, they will be able to offer localized options such as Apple Pay to provide more choices to buyers.
There is no doubt that this will be a significant change to eBay and its sellers.
Wenig is not wrong when he states that this will bring eBay more in line with other marketplaces. It is how it works on Amazon and sharing economy marketplaces.
Sellers need to remember they are getting 29 months of time for this change.
Under the operating agreement, eBay can start testing the new payment method for one year with up to 5 percent of sales in two countries.
After that, it can increase the payment processing of orders to up to 10 percent in the same two countries.
A reasonable assumption is that the U.S. will be one marketplace as the company often rolls out new changes on eBay.com first. Likely other candidates for the test phase are Canada, UK, and Australia.
Canada makes a lot of sense as the Canadian and U.S. platform are very similar and often share platform and policy changes simultaneously.
But it may be more prudent to go to the UK or Australia to test in a very different market back-office technical integrations and user experiences.
If the company follows some historical patterns on policy changes or feature additions, expect this to be a program restricted to select sellers either by invitation only or by a limited opt-in program.
It does appear eBay may not be ready to announce many details in the Spring Seller Updates on this new payment program.
But they may provide information to sellers how to request an opt-in or otherwise discuss how they will select sellers for this program.
Wenig said the “Devil will be in the execution.”
That is an understatement of something of this magnitude and will be interesting to see how they will roll it out and progress through the anticipated two-year “trial” phase.
Another significant topic at the conference was structured data. Wenig said the company will continue to build more features on structured data.
Finding ways to better catalog thousands of items into four or so best options for sellers is the ultimate goal, and it will be based on structured data points.
This includes everything from item location, price, condition, features, options, etc.
For example, the marketplace uses item location to narrow the focus for popular items to listings that are closest to the buyer.
This is how guaranteed delivery will continue to expand on the site to achieve their goal of many popular products being available to U.S. buyers within three days or less.
But delivery time is just one of the metrics. Some items, especially unique products, are not dependant on delivery time.
For those, other key points within the structured data will be used to help buyers find exactly what they are looking for.
Wenig said the company does not just want a Buy Box but offer relevant product choices to buyers. Internally, they call this process providing a “Spectrum of Value.”
eBay described the catalog process and structured data in much greater detail at eBay Open 2017. Building a catalog of static pages is not just to improve SEO, but a fundamental shift in displaying popular products to buyers.
Structured data is huge part of the catalog process. Future and current technologies, such as voice shopping, augmented reality or even virtual reality shopping, will heavily lean on this data.
And the company will put a premium on the data to decide which listings are served to buyers. Machine learning algorithms will use buyer behavior and history in conjunction with other per product details and item location to display relevant listings.
Gaming a system that relies on so many data points is complicated. So the best option for sellers is to provide as much structured data in their listings. Wenig said the company runs on data!
Those who follow that advice will succeed in the new eBay. Those who don’t will fall by the wayside. It is as simple as that, and while Wenig and the executive team at eBay won’t be this blunt, it will be a fact.
Other Stuff Wenig Mentioned
- eBay Authentication program will expand to more categories and markets around the world.
- eBay is the largest exporter of Chinese goods around the world. The team develops products and manages seller relationships in China. This seems to explain a bit more why eBay recently made another investment in China.
- StubHub will expand into international and primary markets. Also, to include additional cooperation with eBay.
- Classifieds continue to ring up revenues and work well for specific product categories.
- There is no desire right now to move into fulfillment warehouses, inventory, or make other capital expenditure investments (CapEx) that exceed the current 7 to 9 percent to maintain operations.
- The stock buyback is being extended to offer higher shareholder value, and they consider it the best use of cash right now.
- The company continues to look at acquiring other companies if it makes sense for their business and creates shareholder value. (M&A – Mergers & Acquisitions)
- The use of cash on hand is always in competition between CapEx, M&A, and stock buyback for best use of monies.
- eBay will invest more in the brand, performance marketing, social networks, and grow user base. Believes in a strategy that asks “is your customer lifetime value greater or less than your cost of customer acquisition?”
Between Devin Wenig’s talk at the Goldman Sachs Technology and Internet Conference. The recent earnings call by eBay Executive outlining the future and a blog post from Bob Kupbens, VP, B2C and Seller Experience at eBay.
There is a pretty clear path in direction eBay is taking over the next 2 to 3 years.
Kupbens in his blog post mostly covered already known features, programs, and news to readers of eSellerCafe. But it is just another way how eBay reaches out to its sellers to communicate what they are doing.
Change is frightening, Change can be difficult, Change can mean work, Change can also mean some lost sales that need to be replaced. eCommerce doesn’t sit still. The ability to change is a key ingredient to be successful in eCommerce.
We’d love your thoughts about of where eBay is heading. We know it may be a bumpy road for some sellers. Head over to our Facebook Discussion Group or use the comments section below.