Jun
25
Another Study Shows Bidders Don’t Like Free Shipping!
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Last August, I posted about a study published by University of California and University of Hong Kong researchers who determined that eBay bidders were more prone to bid on auctions that had a separate shipping & handling charge, than auctions that had both charges rolled into the price of the product under the pretenses of “free shipping.” This held true even if the total cost of the “free shipping” auction was less than the combined cost of the auction with the charges broken out.
I wrote:
eBay bidders are more willing to pay $11.00 total for a CD when the price is broken out by product cost ($7.00) plus shipping and handling ($4.00) than $10.00 for a CD where the shipping and handling are free.
Now another study has reached the same conclusion. In their article “Consumer Behavior in Online Auctions: An Examination of Partitioned Prices on eBay” published in the Winter 2008 edition of Journal of Marketing Theory & Practice, John Clark and Sidne Ward examined this phenomena in the eBay collectibles market.
They found that even experienced bidders (categorized as such by feedback history) are prone to be inattentive to the auction’s total cost and focus on the cost of the item itself. Items that included the shipping and handling in the base cost of the item generated less revenue than those with “partitioned prices.”
Why does this happen? From my last post on the subject:
Bidders either disregard (or overlook) the shipping cost when determining the value of a commodity, or create “separate mental accounts” for what they are willing to pay for shipping & handling and for the cost of the item itself. This concept basically says that the bidder is willing to keep the two expenses separate in his or her mind, and as long as both charges are reasonably low, he or she is willing to pay - despite the fact that combined, the expense is greater than the single charge for the item with free shipping.
So how do we reconcile this with eBay’s push (through incentives and disincentives) to get sellers to include shipping costs into the price of the auction and offer “free shipping?”
- First, I think we can all agree that eBay’s assertion that they are encouraging a “free shipping” policy in order to “improve the buyer experience” is bunk. This is the second study that indicates that buyers have proven through their actions that they have a better experience when the price of the item and the shipping charges are separate.
- Therefore, we can conclude that this another tactic by eBay to increase their company’s revenue. Don’t get me wrong, there’s nothing inherently evil with a company in a capitalist society working towards increasing their bottom line. Under their current policy, the shipping and handling fee a buyer charges is not subject to a Final Value Fee - therefore, sellers who charge a low fee for the item and an inflated shipping and handing fee are doing so in an attempt to circumvent the Final Value Fee. I think it’s fair for eBay to have an eye on recouping some of that money slipping through that loophole.
So why not charge a (reduced) Final Value Fee for the entire transaction amount? Bidders will actually be afforded an “improved buying experience” based on the findings of these studies. Sellers could charge what they needed or wanted for shipping and handling with fear of disadvantaged rankings in the Best Match search results. eBay could close the loophole that allows some disingenuous sellers to avoid paying final value fees.
It’s time to stop tip-toeing around this issue and address it straight on. The evidence is in. The current shipping and handling policies, incentives and disincentives don’t work for sellers, bidders, or eBay. Let’s move forward.
Jun
23
eBay Live Best Match Round Up
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There were a few tidbits of information that came out of last week’s eBay Live concerning Best Match.
Best Match One of eBay’s 3 Core Focus Areas for the Next 18 Months
eBay CEO John Donahoe stated that Best Match was among the auction site’s three core areas of focus for 2008-2009. The other two are trust and selection.
Four Factors that Influence Best Match
Jamie Iannone, Vice President of Global Search, confirmed that there are four main factors that influence the Best Match search algorithm. According to AuctionBytes, Iannone stated:
The four factors are Item Information - including category, title, attribute, and information about listings; Seller Information - including seller DSR scores, and other bad seller metrics; Demand Data - what are buyers doing on the site; and, he said, “Time Ending Soonest” plays a role.
He also confirmed that the algorithm varies by category. He said, “For every query and category, there are different implications.” According to AuctionBytes, “there are some categories in which a lot of sellers do not qualify for DSR thresholds.”
Another potentially useful hint into the Best Match algorithm was provided by Iannone according to AuctionBytes. “He recommended sellers describe items accurately and put them in the right category.”
DSR Threshold for Best Match Advantage Lowered
Best Match provides sellers with an aggregate Detailed Seller Rating (DSR) average of 4.7 or greater improved visibility (higher rankings in the search results) under Best Match. Previously, to qualify for this advantage, the seller had to have at least of 10 DSRs to be eligible to be advantaged in Best Match. Saying that they vvaue low-volume sellers, eBay is lowering it to 3 DSRs.
Click here to download a free copy of Best Match Made Simple, the most authoritative document on Best Match anywhere outside of eBay.
Jun
20
eBay Consumer Demographics
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This post summarizes a published academic paper that contrasts the demographics of people who buy on eBay and those that don’t. The study finds that family size, consumption motivation, and perceived economic threat are key characteristics that impact participation as a bidder on eBay.
Identifying characteristics of your customers or audience is a fundamental marketing principle. If you are selling on eBay, what research have you done into the demographics of your customers?
Although different niches within eBay are going to have different demographics — the football jersey collectors are likely to be a different lot than the people who bid on knitting supplies — there are some general characteristics that apply to the eBay customer base as a whole. Some of these are identified in a paper titled “A Comparison of the Characteristics of eBay Consumers and eBay Nonconsumers” written by Professor Gregory S. Black and published in the Sept ‘07 issue of Journal of Direct, Data and Digital Marketing Practice.
Here are some highlights:
The research found that eBay consumers have larger families than do nonconsumers.
Several possible reasons may contribute to this finding. Consumers from larger families have more household expenses and must expend more resources to provide clothing, etc, for their families. eBay is a known source of ‘good deals’, and the motivation to be more fiscally frugal for these larger families may lead them to make eBay purchases. …eBay might also be a time-saving resource to consumers from larger families.
It also noted that eBay consumers have a higher consumption motivation than nonconsumers.
Consumption motivation is a concept describing a consumer’s desire to have an objectively satisfying buying experience. …One can easily compare prices, sellers (by looking at feedback ratings) and products on eBay and then determine how much one is willing to pay for that item. If the selling prices actually exceeds the price the consumer is willing to pay, the consumer will not have to purchase that particular item and will face no discomfort in having to tell a sales person ‘no’. The consumer can then find another similar item and bid on it. This consumption motivation may be more difficult to experience in a brick-and-mortar shopping experience because of the extra time and other resource requirements.
Finally, eBay consumers perceive a higher economic threat than nonconsumers.
Economic threat can be defined as the degree to which a person believes that the security of the domestic economy is threatened by foreign competition.
When’s the last time you thought about who your eBay customers are?
Jun
18
Even though you maintain a 4.8 or better average DSR rating, Best Match will disadvantage your listings in the search results if you have too many individual DSR ratings of 1 or 2 in the past 30 days.
Randy Smythe blogged about the experience one of his readers had recently with eBay’s Best Match. This power seller maintains a 98% positive feedback rating and has a 4.8’s or higher in all of the average Detailed Seller Ratings (DSR’s). Therefore, according to the published information on Best Match, the seller qualifies for higher rankings in the eBay search results under the Best Match algorithm.
However, the seller noticed a 30% decrease in sales an contacted their TSAM (Top Seller Account Management team). This is what was related to the seller:
They called their TSAM and were told that they had a few buyers give them 1 or 2s on their DSRs so eBay lowered their items in the search. She said there were 14 ratings showing 1s or 2s for the past 30 days. Well, as you can imagine, the seller was a little miffed since their DSRs were at the required level for search advantage.
Here’s what we can conclude from this:
- Listings will be disadvantaged in eBay’s search results under the Best Match if the seller has received a certain number (or percentage) of low scoring DSRs (1’s or 2’s) in the past 30 days.
- This factor is weighted higher than the positive effects of maintaining a high average DSR score (4.8) in the algorithm.
This new insight will be included in the next version of my free download Best Match Made Simple.