eBay responds to critics: Q&A with exec Todd Lutwak

When I wrote a piece last week about the impact of a number of rule changes in eBay's (EBAY) seller program, many commenters weighed in against eBay. The article asked whether eBay's core of collectibles sellers would be hurt by the new system.

Online, in our comments and via Twitter retweets, many eBay sellers voiced their ire. eBay contacted me to respond to both the comments and the article. So in the interest of being a fair and balanced news site, here's an edited transcript of a Q&A with Todd Lutwak, eBay's Senior Director of Seller Development.

DailyFinance: So could you explain a little bit more about the changes that just took hold?

Todd Lutwak: All the changes are aligned behind the notion of rewarding sellers for creating great buyer experiences. We came up with a new formula to reward seller who are creating great experiences.
The new formula focuses on recognizing sellers who get the least amount of very low ratings. They will get a better discount rate (20 percent) on eBay's fee structure and will be recognized with a badge on their page.

DailyFinance: Some critics said these changes would penalize collectibles sellers, sellers who specialize in higher priced items because it's harder for them to maintain perfect feedback ratings.

Lutwak: That's absolutely not true. With this announcement, there are 86,000 sellers who will qualify for the top-rated seller program who did not previously qualify for the program as before. On the collectibles front, as it turns out, that is the number one category in which eBay sellers are top ranked. So the new program will actually put more collectibles sellers into the top-rated ranks than before, not the opposite. We're also lowering the threshold for number of transactions per year or value of transactions to allow more sellers to enter the program. That is enabling a lot of the collectible sellers by lowering their volume requirement.

DailyFinance: But will this still leave some sellers out who deserve to be rated top-seller but just get hit with one bad rating?

Lutwak: Not at all. Now that we've told them what the metric is, a lot of sellers will make the changes they need to make in the business in order to optimize and take advantage of the new system. In January of 2008 after the last big rule change, we saw the number of PowerSellers increase dramatically over the next six to 12 months. I think we'll see the same thing happen here as well. Within the first two days of the announcement, over 100,000 sellers went into the seller dashboard to understand where they are in the (new) ratings system. And the calls have been coming in with them asking us how they can improve. We've been really pleasantly surprised.

DailyFinance: Another complaint has been that the new system, by putting even stronger emphasis on ratings from past transactions, penalizes newer sellers.

Lutwak: Quite the contrary. New sellers starting out on eBay are the best place to start a small business in America. If you put an auction up on eBay and the ending time approaches, you get outstanding visibility, regardless of how long you've been selling on eBay. Even if they sell on fixed price, we will allow much more visibility on new items listed, particularly for a product that sells in relatively high volumes. But we also changed our algorithms to skew away from recent sales somewhat. Before, our primary source mechanism for picking those listings was number of recent sales. A listing that had sold 100 items got better placement than a listing that had sold 10. Now the new algorithm is based on recent sales divided by recent impressions. This benefits the newer listers on eBay. The new listers will get a quality ranking based on previous listed items under that description. We'll give it a certain number of impressions and based on the success or lack thereof we will move it up in search results if the listing does well.

DailyFinance: What about complaints that you are slowly phasing out the auction model?

Lutwak: We are format agnostic. We love auctions and fixed price. What's most important to the buyer is that we provide value, selection and great buying experience. Research we have says they can get that in multiple formats. We are not choosing one format over another. That choice is made by our buyers or sellers.
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