EBay Sellers Beware
Tech company claims eBay destroys small sellers
Tuesday, July 12, 2011
Millions of sellers rely on eBay to operate their small businesses. They must use eBay because over the years the website has grown to become an online auction powerhouse, controlling approximately 79% of market share. Unfortunately, like many monopolies, eBay is abusing its power to destroy sellers by unfairly shutting down their accounts for trivial reasons. When a seller’s account is shut down, they are instantly faced with financial catastrophe as most sellers use eBay as their main source for generating revenue. Shutting down user accounts with no explanation? EBay doesn’t seem to be concerned.
A specific example of eBay’s unfair practices is a recent account shut down of DG Tech in Silicon Valley, California. Like many companies, DG Tech has employees that act as sellers on eBay. Overall, DG Tech employees have managed to maintain a clean track record for selling products on eBay. These eBay sellers are classified as “elite” based on their high ratings and positive feedback received from customers. As a result, this incident has left DG Tech in complete chaos. From the moment that eBay decided to shut down the company account, all DG Tech sales came to a sudden halt. The CEO at DG Tech, Albert Lozano says, “The closure has forced the company to start over due to the misconduct of a former employee. We now need to regain and rebuild the reputation that we had prior to the incident. All of this could have been avoided with one simple call or email from eBay.”
According to Mr. Lozano, the former company employee continued to use DG Tech’s account after his deployment. This past employee incurred an outstanding balance of $2,000 to their eBay seller account, which caused the shut down. John, an eBay seller at DG Tech says, “Shutting down our entire e-commerce operation for $2,000 seems unreasonable and has caused substantial financial damage to the company.”
Moreover he mentions that, “Listing all items under new IDs to the eBay store will cost DG Tech double the original listing fee for each item posted whereas if the DG Tech account was still active, it would only cost the company half the price per item listing. Nonetheless, eBay is confident that we will return because they are one of the largest online auctioneers.”
Although, the DG Tech staff has tried their best to reverse the situation by contacting eBay in hopes of clearing up the issue, as it stands nothing has been resolved, and the damage has been done. John says, “After contacting a customer service representative at eBay, I was told that I don’t have to list my items on their website. As a customer, I feel that the poor customer service I received demonstrates the lack of concern on eBay’s part to resolve the issue.”
In addition, eBay is tracking down and closing accounts with multiple sellers linked to a shared PayPal account. This in turn forces each seller to create a separate PayPal account, thus eBay will profit from holding the funds until the seller meets the reserve amount. According to Juan at DG Tech, “This policy is bad news because it will force companies that rely on multiple sellers to wait for an extended period of time before the revenues are transferred to their bank accounts.”
What’s more, EBay and PayPal have employed a new policy called a “Rolling Reserve” which evidently indicates that the company is using its monopolistic power to generate more revenue. According to Bloomberg Businessweek, “reserves are typically 1% to 5% of PayPal sales, but can go as high as 20%.” It doesn’t seem like very much, however for a power seller like DG Tech, which generates around $100k of monthly revenues from the sales of approximately 3,500 items on eBay, the high percentage rate of Rolling Reserves will hurt their revenues tremendously. Before the closure of the account, DG Tech was paying $120,000 in fees on sales of $1 million per year, which in total is approximately 12% in total value fees.
According to studio1c, there are many other companies that have already been impacted by this policy, including “830,000 active eBay users [and] 548,000 active registered PayPal accounts. PayPal's revenue in this case would be the interest on $450 million per year. This is what PayPal considers to be a very small percentage.” Unfortunately, if sellers aren’t able to make a steady income with the new policies in place, they won’t be able to efficiently operate their e-commerce business.
John warns, “If there isn’t a stop put to this monopolistic behavior, eBay’s existing policies will put many companies out of business by imposing reserves and shutting down accounts for trivial reasons. Sellers will be forced to start over by picking up the pieces.” DG Tech’s account closure is just one example of a company that will need to rebuild itself from the ground up. If you were in DG Tech’s place, how would you manage to handle the catastrophic situation?
After researching all their options, DG Tech has decided to list their products on another site called orengeo (www.orengeo.com).” John says, “We believe their terms for buying and/or selling products is the most beneficial to our relationship with our clients. We have decided to move our inventory onto their site.” John also explains that orengeo’s e-commerce platform is ideal for the company because it operates similarly to eBay’s auction platform with additional features, such as cross posting.
DG Tech claims that they will continue to use orengeo for all their e-commerce needs. The company strongly advises sellers to explore other options for selling their items online, in order to prevent an account closure from affecting the livelihood of their business.
