Thursday, September 23, 2010

Why E-Bay Sellers Hate Meg Whitman--And You Should Too

If you are interested in the California governor's race, you may have already read about Meg Whitman's tenure at e-bay. If not, go here. I'm here to give another perspective, that of an e-bay seller.

The original mission statement of e-bay was to create a community for people to sell their stuff online. E-bay treated these small sellers as partners in growth--all could prosper together.

I joined e-bay in September 2004 and started selling a few months later. I opened a store in May 2005 selling books. By this time, the worst of the bugginess of the e-bay system was past. Sellers were grumbling about e-bay rate hikes and a few had left, but there was no mass exodus.

As a seller, I followed a pretty standard path, first getting some auction items together to sell one weekend a month, then moving up to a combination of store and auction. The first month I had a store, I had less than $100 in gross sales. I was excited just to make a profit. E-bay fees were low enough that a new seller had room to ramp up. For a marketing person like me, e-bay also allowed store and listing customization to create an "experience" for buyers.

When I opened my store in May 2005, there were still people with stores with only a dozen items listed for $1 or $2 each. In other words, there were people with no business sense that were paying out of pocket to play on e-bay. There were one or two sellers with over 100,000 books, but after that, it dropped off fast. If you had 1000 books listed, you were a big seller. It really was a community for small sellers.

While I was an ebay seller, my sales grew and so did e-bay pricing for sellers. Many sellers who had built a good following left in disgust, but I reworked my inventory to stay profitable (for example bundling paperback books into lots to create higher per-item prices). It wasn't what customers preferred, but they adapted, so I did too.

Then e-bay introduced the PowerSeller program to reward high-volume sellers. By this time, my volume qualified for the bronze level. I got 15-20% of my e-bay fees rebated each month, depending on my customer service scores that month. Silver and gold members (later platinum was added) received even more rebates.

Without the rebate, I would have quit right then because it would not have been profitable. That, of course, means that true dilettante sellers were being priced out. Thus e-bay, the original birthplace for small business, created barriers to entry.

E-bay argued that the market demanded more seller accountability. However, the market also demanded better policing of gray goods and knockoffs from Asia, and that didn't happen.

I think the last of e-bay's original fans left then, and they were very angry about the promise broken and the community taken away from them. E-bay had gotten its start through the efforts of the original sellers, and now e-bay was trading up to large Asian sellers.

The original sellers argued, and correctly, that e-bay could make plenty of money following its original vision. It could have been the cozy community that it once promised to draw in small sellers.

E-bay under Meg Whitman made a choice to put profits ahead of people, just as so many other companies do, and that is why I don't want Meg Whitman anywhere near the governor's chair. Of all the things that should not be run for profit first, government heads the list.

My last straw with e-bay came when it announced in 2008 that in 2009, it would begin charging fees based on type of item. The sale fees for books nearly doubled, while fees for some categories, like electronics, actually went down. I was still making a profit, but now e-bay was making more on my sales than I was, and I found that unacceptable. And I was a bronze PowerSeller.

E-bay also announced measures to homogenize the site and reduce store customization, thus reducing the last visual signs of community on a site that community members had already left.

So let's recap. During Meg Whitman's tenure, e-bay

1. Nurtured small sellers to establish itself
2. Advertised itself as an incubator for small businesses--and was for a while
3. Drove away the successful small businesses it helped to create.
4. Drove away budding local entrepreneurs
5. Completely sold out its original vision of community for even more profit
6. Welcomed cheap overseas sellers with goods of questionable origin

Just say Hell No to Meg Whitman.

Sunday, September 19, 2010

Some Economic Suggestions:

The government is in a unique position to influence the economy through its actions. Nudging the interest rate nudges the economy. Large tax and spending changes create more substantial impact. These are essential functions.

During the Bush years, the government went into debt to give money to taxpayers at the expense of the overall community and at a time when the economy did not need the stimulation. This contributed significantly to turning an ordinary real estate downturn into an economic meltdown.*

During the last decade, money flowed up to the rich as both tax breaks and big bonuses. When worthless investments disappeared from the economy, jobs and a substantial portion of the nation's wealth disappeared as well. The proportion of wealth held by the rich increased, and money at the poor end started drying up completely. This inequality is bad for the majority of citizens and bad per se for the health of the economy.

Use the power of government to continue to send money to the bottom 90% of the economy now. Unemployment insurance. Public works jobs. Payment for previously volunteer jobs. Open up poverty programs like food stamps to those with minimal incomes even if they have assets. We want to reward saving and preserve the assets of the bottom 90%, not force them to sell off their retirement.

Investing bubbles in real estate derivatives, dotcom startups, and junk bonds have been responsible for the last few recessions. One common thread among these is too much risk for the entire market to bear. There needs to be a mechanism to limit the quantity of high-risk investments in the market.

Another related common thread is investing in speculation rather than in growth. Investing in companies contributes to economic growth. Speculating on which way prices will go skims money off the economy and hurts long-term growth investment. Thus, it should not be treated the same as growth investment. Speculation investment should be limited and burdened with a surcharge. This is not as cut and dried as I have made it sound. For example, you can use foreign currency as a hedge against foreign stocks to eliminate currency risk. This should not be surcharged. Or you can speculate in foreign currency on its own, and this should be surcharged. The professionals have the knowledge to sort it out.

High-frequency traders have been gaming the market with bazillions of bids and asks. Easy solution for this is a ha'penny tax on each bid and ask whether or not it goes through. Long-term traders won't notice the difference because they (should) trade infrequently.

Use taxation to get money back from the superwealthy.
Temporarily apply a high estate tax with a $1.5 million exemption
Charge a higher CG tax on speculation (derivatives, etc.) and disallow losses.
Introduce tiered CG tax for growth investments that ties in with income tax. If a retired person is living on $25K in investment income annually, he shouldn't be taxed the same as a person who has $25K investment income on top of a $2MM salary.

Mandatory retirement contribution from salary

Change tax laws so as not to penalize those who are withdrawing retirement funds to live on. Ideally, these people should not have to live on their IRAs or 401ks before retirement at all.

Add annual tax for those who own residential property but don't live in it.
Offer tax credits for landlords who are renting property on a rent-to-own basis. England has had a formal rent-to-own program for years.

Offer tax credits for bringing jobs into the US and for converting location-fixed US jobs to telecommuting US jobs. Telecommuting offers new employment opportunities for people in areas where jobs are scarce and allows them to stay in their homes (which are probably underwater).

*since this isn't about the causes of the meltdown, I'm only touching lightly here