The Growing Frustration of eBay Sellers

Changes at eBay, especially its new ratings feedback policy, have many longtime sellers angry. Some are even leaving for upstart sites like Shopify

When Julie Rodarte and her husband started selling on eBay (EBAY) six years ago, they stored their meager inventory in the family garage. As sales grew, and Rodarte carved out a niche in party and wedding favors, the operation expanded and she created JDR Supply. Now, the Bakersfield, Calif., company leases a 2,000-square-foot warehouse and has three employees. Rodarte, a mother of two with a third child due any day, says her 2008 sales revenue has averaged $23,000 a month, providing her with profits to invest in operations and a salary of about $25,000 annually.

"It's not a lot, but combined with the salary from my husband's job it allows us to do fun things like take vacations, while I'm working from home to be with my kids," Rodarte says.

Although the company sells fancy favors to customers all over the world and holds eBay's "power seller" designation, Rodarte's success didn't seem to matter last month when eBay restricted her account based on a new ratings feedback policy that has angered and alienated small sellers on the site. She found herself still able to purchase items through eBay but not able to sell—effectively shutting down her business with little recourse. "I've always done a good job with customer service and my overall feedback rating had always been 98% and above," Rodarte says, echoing complaints by many eBay entrepreneurs.

eBay's Backbone

They say the new ratings policies, which were announced in January 2008 but didn't fully take effect until May 2008, are unfairly aimed at driving away the small sellers who have been the company's backbone since its founding in 1995 as an online auction site. At Web sites like "eBay Exodus" and "ihateebay," disgruntled eBay entrepreneurs complain about management policies, swap horror stories, and post manifestos about the "psychological tactics employed by the powers that be" at the corporation based in San Jose.

In a nutshell, eBay wants its sellers to keep a 4.3 or above (out of 5-star) composite average on several metrics on which customers leave feedback. The most controversial is the shipping and handling feedback. A 4 in this metric means "reasonable," but if a seller starts getting mostly 4s, eventually that will pull her overall rating down below 4.3. If a buyer rates the shipping charges as "neutral" (3) or "unreasonable" (2)—even if that perception is mistaken—the seller's ratings will plummet and her account can be suspended. Sellers do have 30 days to increase their rating while they're suspended, but if they're not selling, it's obviously tough to get better feedback.

EBay did not respond to requests for comment submitted last week at its Web site and via voicemail. But it has long championed its small business owners at entrepreneurial conferences and training sessions for sellers. In 2006 former eBay CEO Meg Whitman gave a speech at the eBay Developers Conference, saying 1.3 million people made their living selling full-time on eBay. This year the company co-sponsored the 2008 National Small Business Summit held in Washington.

And not all of its power sellers are unhappy with the new feedback policies. Dallas entrepreneur Ann Wood says her eBay store, Willow-Wear, is on target to break sales records this month. "The end of September and the beginning of October have been amazing—particularly jewelry sales," Wood says. Since buyers are increasingly asking about the weight of her gold jewelry, she speculates that some customers may be buying gold for its perceived investment value.

Boosting Buyer Confidence

Regardless of what is driving interest, Wood says, she's thrilled with her progress and thinks the feedback changes that are being criticized by many are helping to boost buyer confidence.

"They definitely set the bar high and I'm finding a surprising increase and vitality at eBay that you aren't seeing out there in the economy as a whole," Wood says, though she admits that achieving the stringent feedback ratings is tough—particularly in the area of shipping and handling, which seems to be the most controversial new rule.

"Sometimes the buyers understand shipping costs and sometimes they don't. [Keeping feedback ratings high] kind of depends on who happens to be your buyers in the 30-day period they're measuring and how they're rating you," Wood says.

This is the rub, Rodarte says: "I can't lower my shipping costs or else I'd be giving my products away." But if buyers think shipping costs are too high, or just don't like paying for shipping, they may give a seller lower marks—something that can tank feedback scores. Some eBay entrepreneurs complain that the new rules lend an unfair preference to the larger sellers who can afford to offer free shipping by folding shipping costs into their pricing structure— an arrangement that also boosts eBay's commissions.

The most frustrating thing for small sellers is the lack of communication from corporate headquarters when there's a problem, they say. E-mail questions are met with canned responses and the telephone system is an exhausting maze of automated messages. When Rodarte finally got through to a live person to ask about her suspension, she says, the individual was not able to answer her questions and advised her to send an e-mail.

No Recourse

"They don't allow you to argue a suspension," says Darlene Voosen, of Mesa, Ariz. "Their decisions are unilateral and binding." She says her eBay account has been repeatedly suspended, despite her 10 years selling on eBay and more than 1,000 positive feedback comments. Although she can't find any policies she has broken, she suspects her account has been targeted simply because her last name is the same as her brother's, Tom Voosen, whose eBay stores have been repeatedly shut down over the past several years.

Tom Voosen says he has operated an eBay specialty store selling large-size shoes and Halloween costumes out of his Phoenix home for seven years. He and his wife, who is disabled, have grossed about $25,000 a month in recent years, he says. "We're both in our 60s and this is our main source of income. It gave us a reason to get up in the morning and something to feel good about," Voosen says.

His store has been closed multiple times, he says, though his feedback ratings were high and he did not have customer complaints. When he tried to find out why, he was often stymied. "Satisfaction? Zero. They don't even have a toll-free number, and you can never talk to anybody except bottom-line desk help. You can never get to speak to any management people. Any e-mails that you get are boilerplate auto-responders," Voosen says.

Eventually, Voosen learned that he had been termed a "security risk" to eBay and its subsidiary, PayPal, because cash flow issues with the store had caused his personal credit score to deteriorate. His latest store shutdown, occurring just weeks before Halloween, left him with hundreds of costumes in inventory and 210 unhappy customers who had placed orders. Once a seller is locked out of an account, he can no longer access orders or shipping information, Voosen says, so he can't even contact his customers to apologize.

From eBay to Shopify

Former eBay entrepreneurs with similar stories are helping to increase business at a new online shopping site, Shopify, established in 2006 by Tobi Luetke, who used to sell snowboards on eBay from his home in Ottawa. "A lot of people, especially lately with eBay raising its rates and becoming more protective of its marketplace, have switched to us outright or graduated from eBay to a more traditional shopping cart system," Luetke says.

His frustration at eBay stemmed both from paying commissions and from the obstacles to building the community of clients he felt was necessary for his snowboard business to grow. "We weren't able to build a brand because we couldn't market effectively to existing customers and we couldn't link our auctions to our home pages and so on," Luetke says.

Shopify, which has about 3,000 active sellers, hopes to continue to lure unhappy eBay sellers, some of whom still sell on eBay but put flyers in their shipments that point customers to their Shopify Web sites or to new e-commerce sites they're setting up independently. "EBay is a great sales generator but it misses the component of a long-term plan," Luetke says.

Rodarte plans to open an independent store as well. Meanwhile, she's established a new eBay store, JDR_Favors, where she says she has managed to redirect 85% of her existing customers in the three weeks since her earlier shop was closed. This time, she says, she will be scrupulous about educating buyers on eBay's feedback system. "When we send thank you e-mails for orders, we're notifying buyers about how important it is to leave five stars," she says. "I'm also watching my ratings more closely and telling customers if they have questions about shipping charges to please e-mail me and I'll talk to them." She's also directing buyers to the Web site of the U.S. Postal Service, where they can view shipping costs and be sure they're not paying extra.

"As of yesterday, we're just about back to where we were on terms of hitting sales targets and my rating is 100% again," Rodarte says. "It's all about educating buyers."