If You Want It Google Already Owns It

Google gets all of the best names – “Labs,” “Buzz,” “Talk,” “生活搜索,” “Base” and pretty much every other four letter word worth trademarking.  This leaves other companies with scant choices.  This is why there are so many made up words these days.  Skype, Twitter, Bing, and Wii are all just a symptom of the fact that there simply aren’t any real words available.  When I was trying to come up with a metaphor for eBay’s last fee increase I had to use the movie “2012” starring John Cusack because Google owns every other metaphor.  From now on I will have to use “2012” whenever I want to compare anything to anything else.  Google doesn’t own “Google Garden” though, probably because it sounds dumb.  Luckily, eBay jumped on the rare opportunity to grab the rights to a real life English word and now we have “Garden by eBay.”

Is the Soil Fertile Enough for Green Beans?

Good question.  According to http://pages.ebay.com/garden/, “Garden by eBay is where we plant the seeds of new ideas.”  Although this doesn’t make any sense, it does sound like an assignment my son’s fourth grade teacher would send him home with so I sort of understand where this is going.  At least they don’t continue by saying the community needs to water the seeds in order for the ideas to blossom.  Maybe next time.  Once every year or so, usually after eBay is forced to retract a ridiculous policy or fees are increased, eBay gives the “community” a sneak peek into a single forthcoming change; usually one of little consequence that never materializes anyway.  It looks like they’ve planted this year’s in the form of a search tweak rhododendron.

Streamlined Search Sneak Peek

Anyone can “opt-in” to preview eBay’s new “streamlined search” and can then opt-out at any time.  I don’t want to ruin your new search experience by giving any details other than I do like the side-by-side auction and fixed price view.  Just go to http://pages.ebay.com/garden/, click opt-in and away you go.

Unnecessary Microsoft Comparison and History of PayPal Accounts

(I wrote this section, but it doesn’t necessarily have much to do with the topic at hand.  Skip down to the section titled “The Scam” if you’re in a time crunch.  I have also written a condensed version of this entire post at the end if you only want to read one paragraph about it.  It’s all “interesting” though).

PayPal has recently taken a page out of Microsoft’s marketing handbook by offering a smorgasbord of account types and varieties designed to fit the unique “needs” of various types of people.  The current trend is that one size no longer “fits all” and customers want a product designed specifically for their individual needs.  Remember when upgrading to the new Windows meant driving out to CompUSA and picking up a copy of ‘98?  Microsoft now offers an endless array of versions – Home, Premium, Business, Ultimate, Professional, Downloadable, Upgrade, Starter, N, Enterprise, 32bit, 64bit, and those are only a few.  PayPal has “progressed” in a similar vein over the years by offering a wider variety of products and options to expand their user base.

As recently as a couple of years ago, all PayPal users either had a “Personal” or “Premier” PayPal account.  The major difference between the two was that Personal account holders could not accept credit card payments.  Personal PayPal account holders did not have to pay fees on payments funded by an instant transfer between PayPal accounts or a payment funded directly from a bank account.   At one point, PayPal even allowed Personal account holders to accept a few credit card payments per year without having to “upgrade” their account.  Regular fees still had to be paid on those credit card payments, but it was still cheaper than a Premier account.   On the other hand, Premier account holders had to pay fees on every payment received, whether it was a credit card transaction or an instant transfer of funds between PayPal accounts.  This is precisely why PayPal is so wildly profitable.  The cost to transfer funds between two PayPal accounts is virtually zero, yet PayPal charges the same 2.9% + 30 cents per transaction as if every transaction is a credit card transaction.  This is also why PayPal has historically made it as difficult as possible for users to actually pay with their credit card.  Every time a user chooses to pay with a credit card it is a loss of revenue for the company.

Companies offer a range of products not because they like variety, but because it is a means to their ultimate goal – maximized profitability.  Microsoft and PayPal don’t really care if you’re happy per se.  They merely desire to extract the most money out of your wallet without offending you so much that you won’t return to spend more in the future.  By offering a medley of Windows editions with a huge pricing gap, Microsoft can charge $300 to a business that needs an expanded set of features while at the same time selling a dumbed-down version to your mom for $100.  People are more likely to spend money upgrading Windows if there is a version that they identify as both affordable and necessary.  Of course “more” is not “always better” and Microsoft ended up going a little overboard with their launch of Vista.  Instead of feeling taken care of, customers were confused by the endless array of options and editions.  PayPal hasn’t quite taken it that far, but the addition of Business and Student accounts is a sign of where the company is going in the future.

Personal Accounts Change

As first reported back in May, PayPal made significant changes to Personal PayPal accounts back in June of 2009.  A Personal account holder can no longer accept payments for “commercial transactions.”  Not even one.  Once a Personal account holder makes a sale for a good or service they must “upgrade” their account.  Personal account holders no longer enjoy the benefits of receiving unlimited payments funded by a bank account or instant funds transfer at no cost.

The Difference Between Personal and Commercial Payments

PayPal spells it out clearly in their user agreement:

“4.2 Receiving Payments for Commercial Transactions and Personal Transactions. a. Fees depend on whether you are making a commercial transaction or a personal transaction. A commercial transaction involves buying and selling goods or services, and payments received when you send a “request money” using PayPal. A personal transaction involves sending money to and receiving money from friends and family without making a purchase. b. If you are selling goods or services, you may not ask the buyer to send you a personal payment for the purchase. If you do so, PayPal may remove your ability to accept personal payments.”

Difference in Fees

There is no fee for personal transactions as long as the source of funds is either the PayPal account or a bank account.  This is why personal payments have become increasingly popular as a payment method on forums and other selling platforms.  People do not like to pay money when they perceive there is no advantage.  If the funding source of a personal payment is a credit or debit card then the fee is the same as if the transaction was commercial, or 2.9% + 30 cents by default.  All commercial transactions are charged the same rate regardless of funding source.  There are additional fees for “cross-border” transactions for both personal and commercial payments as well.

The Scam

The scam is fairly simple.  The scammer convinces the victim to pay for an item via a PayPal gift or personal payment.  This can be set up in a variety of ways, many of which do not appear to be fraudulent at first glance.  For example, there are many online forums and communities where members can buy and sell items of mutual interest as well as Craigslist and others.  A scammer might list their item for sale and state that they require a gift payment so they do not have to pay the 2.9%+30 cent fee or to avoid the PayPal 21-Day Payment Hold Policy.  They might state that the price is $100 via a PayPal gift payment or $100 + 5% for a PayPal credit card payment and the buyer, wanting to save $5, may opt for the gift payment option.  The seller might say that they cannot accept credit card payments or any number of other excuses for why a gift payment is necessary.

When a buyer sends a gift payment for an item they think they are purchasing, there is no mention of any item or service being sold nor is there a shipping address attached to the transaction.  There is a space for a “personal message” of 300 characters, but even if the buyer inputs details of the transaction there is little that can be done.  This means that the “seller” is not obligated by PayPal to actually ship an item or provide the service that may or may not have been agreed upon outside of PayPal through email, text message, or whatever else.  There is nowhere for the seller to input tracking and nowhere for the buyer to dispute the transaction if a problem occurs.  As far as PayPal is concerned the transaction is exactly what it says it is – a gift.  This is stated in section 13.5 of PayPal’s User Agreement; PayPal clearly states, “You may not file a dispute for a Personal Payment.”

Another problem with using a gift payment to pay for an item is that the seller may not intend to scam at all, even though that may be what ends up happening.  All shipping services lose and damage parcels.  Many transactions also run into problems due to some kind of miscommunication or dispute over the quality of an item.  “Excellent” condition to me may be “below average” condition to you, for example.  Sellers often over exaggerate the condition of their item in order to sell it for more money, while at the same time minimizing the appearance of flaws.  PayPal does not cover “Item Not As Described” disputes for most transactions outside of eBay, even for commercial payments.  For commercial transactions, it is at least possible to dispute an item that is not received.

PayPal and eBay go out of their way to make PayPal feel safe for buyers, but the truth is that there is startlingly little protection for transactions outside of eBay.  Even though dispute resolution on both PayPal and eBay is skewed in buyers’ favor, it is still possible for sellers to manipulate the system and “win” disputes on items that were either not delivered or not as described.  PayPal offers no protection for buyers when there is a problem with the quality or condition of an item when the transaction occurs outside of eBay.  This is due to the fact that it would be impossible for PayPal to try to figure out the terms and details of any particular sale.  On eBay, there is just one page to take into consideration – the eBay listing.  Outside of eBay there could be any number of emails or details to try to sift through in order to make a “fair decision.”  If a buyer disputes the quality or condition of an item on a transaction outside of eBay it is almost guaranteed that they will soon receive an email from PayPal that their dispute has been decided in the seller’s favor, because PayPal dispute resolution does not consider the quality of an item, only whether or not something was received.  A gift payment multiplies this risk, because it will not be possible to dispute the delivery of the item with PayPal or file a credit card chargeback.

How to Protect Yourself

Never pay for an item or service online with a PayPal personal payment.  There is no way to dispute the payment directly with PayPal and it against the PayPal User Agreement.  PayPal states:

4.1 Receiving Personal Payments.

If you are selling goods or services, you may not ask the buyer to send you a Personal Payment for the purchase. If you do so, PayPal may remove your ability to accept Personal Payments.

If you are on a website or forum where items are being bought and sold with PayPal personal payments, you may want to advise the moderators and/or the community about the risks of using personal payments for purchases.  Respectable websites should not allow its users to ignore and break the User Agreement of a payment service such as PayPal and at the very least should include a disclaimer about the risks involved.

When using PayPal it is always best to pay with a credit card.  A credit card payment allows buyers to file a credit card chargeback directly with their credit card company or bank.  A buyer may file a credit card chargeback on a PayPal payment even when PayPal denies a buyer’s claim or on a commercial payment where it is not possible to dispute the payment directly with PayPal.  Almost all credit card chargebacks are decided in the buyer’s favor and the credit card company may even let you have access to the disputed funds before the chargeback is resolved.  Some debit cards also allow buyers to file chargebacks, but it is rarer.  Also, I am not aware of any credit card “gift card” that allows buyers to file chargebacks, so it is unlikely that you will be able to file a chargeback with a Simon Gift Card or an American Express gift card purchased from a grocery store or similar outlet.  When choosing a credit card, you may want to research which one has the best chargeback and fraud protection and use that card online.

What To Do If You Already Think You Have Been Scammed

If you think you have been scammed by a seller, it is usually beneficial to call PayPal at 1-888-221-1161.  PayPal’s dispute resolution services are generally automated online, but there are employees at PayPal customer service who can override the computer’s decisions and possibly do something for you.  You may also have luck contacting PayPal’s Executive Escalations Department.  Emailing won’t get you anywhere.  More and more, it seems like whoever calls PayPal and whines and complains with more vigor will win the dispute and it’s possible you will reach someone with a sympathetic ear.  Keep trying if you aren’t successful.  Make sure you make it clear that you have been a loyal PayPal customer, but your current situation makes you question whether you will use the service in the future.  This is the key point to make in most merchant disputes.  Keeping you as a customer is likely to be cheaper in the long run than obtaining a new one.   At the very least, you can let PayPal know that the seller is accepting personal payments for merchandise and they are more likely to shut the seller down.  If the item was purchased on a forum, make sure you let the community and/or forum administrators what happened.  It’s usually better to state facts rather than go into hysterics.  If you paid with a credit card then you should contact your bank and inquire about the chargeback process.  Most credit card chargebacks are successful.

Condensed

Never pay for an item with a PayPal personal/gift payment.  Sellers may use various tactics to convince you that paying with a gift payment is necessary or encouraged, including adding fees for credit card payments or claiming that they can only accept personal gift payments.  Not only is it against PayPal’s user agreement, but you will also not be able to dispute the payment with PayPal should you not receive the item.  For off-eBay transactions, PayPal will not allow you to escalate a claim for an item that is not as described.  For this reason, it is imperative that you pay with a credit card whenever possible.  Even if PayPal dispute resolution does not refund your payment, you may still file a credit card chargeback with your bank and you should be able to recover your payment using that method.  If you think you have already been scammed, make sure you call PayPal to explain your situation and ask to speak to as many people/supervisors as possible until you receive a satisfactory resolution.  The bottom line is that using PayPal online is always risky, but using a PayPal personal payment to purchase an item is by far the riskiest method.  Although the transaction may go as planned, it is not worth the risk of paying for an item that you will never receive to save a few dollars.

“2012” Starring John Cusack

What transpired after the release of eBay’s Spring 2010 Seller Update is similar to the storyline of this past summer’s blockbuster “2012” starring John Cusack.  In this metaphor, the Spring 2010 Seller Update (S2010SU for short) will represent the heating of the earth’s core which led to the devastating earthquakes, torrential flooding, and volcanic eruptions that threatened John Cusack’s life.  John Cusack is representative of all eBay sellers.   Of course, AuctionCope.com will be the life-saving arks.  You’re welcome in my ark for the price of one billion dollars or your entire eBay store inventory, whichever is lower.  Unfortunately, I don’t want to ruin this fantastic movie so the metaphor will continue only after the movie hits cable or the next Seller Update, whichever comes last.

New Auction Fees Aren’t Good For Anyone

There are two kinds of basic fees on eBay that everyone (unless you’re Buy.com) pays – insertion fees and final value fees.  The insertion fee is the most clearly visible on eBay because it is stated right before the submission of every auction.  Because of their visibility, eBay continues to lower insertion fees to make eBay appear as though it is getting cheaper and cheaper.  EBay isn’t necessarily getting cheaper though, as insertion fees make up only a fraction of total fees paid to eBay.  Insertion fees are also a fixed rate fee based on starting price, so it is much cheaper to lower insertion fees, which are mostly under a dollar anyway.  Even a slight decrease in final value fees would lower eBay’s revenue sharply, so it is not an option and has never been done.

Final value fees are paid after an auction ends with a winning bid or a sale is made on a fixed price listing.  The final value fee is much less visible, although it is stated along with the insertion fee on fixed price listings.  On auctions, the final value fee is not shown because the closing price hasn’t been established and thus, can’t be calculated.  EBay does not include the final value fee of a specific sale in any email.  The only place actual final value fees are available is the invoice, which can be found by logging in, going to “My eBay,” clicking “Seller Account,” clicking “View Invoices” and then selecting an invoice from the pull-down menu.  Because final value fees are less visible and the “casual seller” eBay likes to talk so much about is generally unfamiliar with the fees that will be paid after a sale, eBay prefers to raise these rates while keeping the more visible insertion fee low.

The current final value fee structure on eBay is tiered.  Sellers pay a higher rate (8.75%) on the first $25 of the closing price, a lower fee (3.5%) on the amount between $25-$1000, and an even lower fee (2%) on the amount above $1000.  Most auction houses, including the famous Christie’s and Sotheby’s, operate on a similar sliding scale.  The final value chart for auctions currently looks like this:

Beginning March 30^th, eBay is “simplifying” the final value fee structure by charging a flat rate of 9% regardless of the selling price.  You will notice from the chart that 9% is higher than any of the current rates.  It is only one quarter of one percent higher than the fee on the first $25, but it is 5.5% higher than the rate for amounts between $25-$1000.  As we will see from the following charts, 5.5% is a sizable amount, especially as auction price rises.

Even though eBay final value fees are going up, eBay still markets their Spring Update as bringing its “lowest fees ever.”  This is because insertion fees on auctions are going down.  For example, if you list an auction with a starting price of $10.00, it will cost 50 cents come March 30^th instead of the 55 cents it currently costs.  This represents a possible savings of 5 cents on insertion fees, or as eBay puts it, “dramatically reduced upfront costs.”  What eBay is really excited about though, is offering sellers 100 “free listings” per month so long as the auction starts at 99 cents or less.  “Free” relates only to the insertion fee – the more expensive final value fees are still paid.   Currently, the insertion fee of an auction starting at 99 cents is 15 cents.  If you chose to take advantage of all of your “free listings” each month, you would save a total of 15 cents * 100 auctions, or $15.00 total.  However, the increase in final value fees erases any potential savings in almost all scenarios.  Let’s take a look at some examples.

This chart assumes the auction was started at 99 cents and the seller does not operate an eBay store.  For the “total fees today” column the insertion fee is 15 cents and for the March 30^th column the insertion fee is zero, or “free.”  This represents the cheapest insertion fees possible for both time periods.  A positive number in the “D” column indicates a savings over current fees.  A negative number indicates how much more the fees will cost beginning March 30th, or in other words, how much money you can subtract from your profit.

As we can see from the chart, there is a maximum savings of 15 cents on auctions that end at $25 or less.  This is because the 9% flat rate final value fee is almost the exact same as the current 8.75% fee on auction values up to $25, so sellers will save the 15 cent insertion fee here.  On auctions that end for more than $25, the total fees are going up.  An auction ending at $100 will cost $4.04 more beginning March 30^th.  An auction ending at $200 will cost $9.54 more beginning March 30^th.  An auction ending at $500 will cost $26.04 more beginning March 30^th, and so on.

EBay’s best known talking heads, “Richard Brewer-Hay” and “Griff” have been trying to convince eBayers on Auctionbytes, eBayInk, and the eBay forums that sellers who can’t figure out how to take advantage of the changes to the auction fee structure simply aren’t “doing it right.”  Either our volume is wrong or our listing strategies are wrong, or we simply are incapable of understanding eBay’s genius new fee structure.  As we can easily see in the chart, there are no savings to be found.  The maximum anyone could save on “free” insertion fees is a total of $15.  Those savings are erased by increased final value fees on just one $300 item or four $100 items or twelve $50 items – and that’s assuming a total savings of $15.  If you only sold one item for $300 then you would only be “saving” 15 cents in order to pay $15.04 more in final value fees.  There is simply no way to make up the increased final value fees with insertion fee savings.

When eBay says their final value fees are becoming “simpler” they are omitting the fact that there is actually another final value fee structure that will be available exclusively to eBay Store subscribers.  For a monthly fee as high as $300 a month, sellers will have access to a tiered fee structure reminiscent of the current offering.  Store subscribers will not receive any free insertion fees, but their overall fees may be lower because of the tiered rates (which are also going up).  Richard, of the “official eBay Blog,” insists that “volume is the key” to figuring out whether or not an eBay store subscription will lead to savings (when I say savings I really just mean a fee increase in the double digits rather than triple).

In fact, eBay has provided a fee calculator for sellers to try to guess what their sales will be and then decide if spending $16+ a month is worth access to the fee structure that may or may not represent a savings.  If eBay is trying to make things “simpler” then I have to wonder why there are dual fee structures, why a fee calculating crystal ball is necessary, why some receive “free” insertion fees while others do not, and why eBay has confused the word “lowest” with the word “highest” in their headline, “lowest fees ever.”

Fee Structure Numero Deux

EBay sellers who subscribe to a store will have yet another fee structure come March 30^th.  Remember, you are allowed to have as many User IDs on eBay as you want, so you can have several Store accounts and several accounts without a Store subscription if you want.  EBay has also stated that they will not “penalize” members who use multiple User IDs to get more than 100 “free” listings.  This isn’t because eBay wants you to have more than your fair share of “free” listings, it’s just because they know the “free” listings actually cost sellers more money than had they opened an eBay store and used that fee structure.  Let’s have a look at the insertion and final value fee structures for eBay Store subscribers.

The insertion fees are exactly the same as for sellers without a store, except there are no “free” listings and there is no mention of the $50 cap on final value fees.  The major difference between this chart and the current chart is that the highest fee, 8.75%, now applies to the first $50 of a sale, rather than only the first $25.  This means that the final value fee on a $50 item will be $4.38 on March 30^th, up from $3.06 today.  This represents a 43% increase.  Let’s look at a chart of the total current fees, the total fees paid without a store subscription, and the total fees paid with the store subscription

A negative number in the “Savings No Store Vs. Store” column means that the total fees are lower for sellers without a Store subscription.  A positive number indicates the savings you would enjoy with a Store subscription over the non-store price.  Keep in mind also that this is all assuming that the non-store insertion fee is zero.  Any listing created after the first 100 each month would add an additional 10 cent insertion fee and erase most of the savings seen over Store subscribers.  For auctions that close at $50 or lower, the non-store price is lower by a few pennies, as long as there is no insertion fee.  Above $50, Store subscribers will enjoy a savings over non-store owners.  Even so, the total fees for Store subscribers are still at least $1 more than current fees, all the way up to more than $20.

Store subscribers will also enjoy several other benefits in addition to possibly saving money on the alternate fee structure.  Fixed price insertion fees are lower.  For $15.99, sellers will get a Basic Store, 20 cent insertion fees for fixed price listings, up to 12 free pictures per listing, and access to a variety of “great marketing tools.”  For $49.95, sellers receive free pictures, the marketing tools, 5 cent fixed price insertion fees, and Selling Manager Pro.  For the truly elite, $299 a month will buy an Anchor subscription enjoying all of the same benefits of the Premium store plus 3 cent insertion fees for fixed price listings.  Fixed price final value fees are the same whether you have a store subscription or not.  All informed sellers will have to decide whether or not opening an eBay store is the economical decision.

As we can see from the various charts and calculations, volume is not as important as price, no matter what the talking heads say.  This isn’t a case of buying something for $5, selling it for $4, and making the loss up on volume.  The more you sell the more you lose, if you make the wrong listing decisions.  Since the cheapest Store subscription is $16, you might want to run some numbers and see how much savings a store would bring.  Also take into consideration that you are allowed to have a User ID with a store subscription and one without, or any combination you want.

Conclusion

There are a few certainties come March 30^th.  Most fees are higher than ever.  “Simpler” final value fees aren’t better.  If McDonalds raised the price of all of their tasty hamburgers to $25, it would be simpler to calculate how much my order would cost.  That doesn’t mean I would rather pay $100 instead of $5.38.  Many sellers will have to wrestle with whether or not they want to subscribe to a Store and how they will want to distribute their listings across multiple accounts.  Sellers with a current Store subscription will have to go through all of their current listings and decide whether or not it’s worth it to pay increased listing and upgrade fees as Store Inventory Format no longer exists.  Nothing is getting simpler.