Bidville and beyond: EBay refugees' options

Even Amazon says it's seen a spike in seller registrations since word broke of eBay's controversial new policies.

More than 350,000 sellers are registered on Bidville, but 25,000 active accounts provide most of the site's 1 million listings, Hoffman said.
Overstock - the site best known for liquidating retailers' excess inventory at low, fixed prices - also sees opportunity in eBay's new policies.
Following eBay's announcement last week, the Overstock (OSTK) team worked through the weekend to design a new strategy highlighting its lesser-known auctions space, said Overstock CEO Patrick Byrne.
The result? Overstock, in Salt Lake City, will redesign the header on its homepage to direct more traffic to its auctions tab. It plans to accelerate a software rollout that will beef up its auctions community message boards - and it's laying plans to produce 15-second Internet commercials to get the word out.
"We think the time is right to position ourselves in this category," Byrne said.
Even Amazon has noticed an uptick in new seller accounts in the last week. Best known in its early days as an online bookstore, Amazon (AMZN, Fortune 500) expanded into consumer electronics and other categories, and in 2000 began allowing third-party sellers to list their wares alongside Amazon's offerings. All products are offered at a fixed price.
Today, 26% of all items sold on Amazon come from its 1.3 million third-party sellers, who range from mom-and-pop vendors to Target Corp (TGT, Fortune 500).
Amazon refrains from offering auctions because its buyers and sellers prefer the convenience of a set price, according to business solutions general manager Matt Williams. Amazon has devised a number of different rate programs for sellers; one takes a percentage of gross revenues, while another charges a referral fee per item.
"We've certainly heard of frustration with other marketplaces, and we've seen a significant increase in registrations," said Williams.
Longtime eBay seller Debi Lee said Amazon has worked well for certain items in her repertoire. She tired of eBay's tactics and now uses the site primarily to educate consumers about her products, which include silk clothing for plus-sized women. Lee has also launched her own Web store and advertises through Google's AdWords, where she pays only when consumers click on her ad.
The Google question
A number of sellers are clamoring for Google (GOOG, Fortune 500) to launch an auction site, and Lee said she might conside that option if it were available. Lee also plans to investigate Buy.com and Etsy, which focuses on handmade crafts.
"Why sell only through one venue?" said Lee, of Oakland, Calif. "Those 100%-reliant on eBay for their livelihood will now understand that folly."
Google is being customarily tight-lipped about any plans to examine the auction space. "We don't comment on market rumor or speculation," said a company spokeswoman.
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Yahoo retired its U.S. and Canadian auction sites in June 2007, but it still operates Yahoo Auctions in select Asian markets. Company spokeswoman Diana Wong declined to speculate on whether Yahoo (YHOO, Fortune 500) might get back into the U.S. auctions business.
Representatives of Microsoft (MSFT, Fortune 500), which last week launched a $44 billion bid to buy Yahoo, also declined to comment.
Meanwhile, eBay's corporate response to the seller backlash is to downplay it.
While sellers are burning up Internet forums, including FSB's discussion board, with vitriolic criticism of the planned new policies, eBay spokesman Usher Lieberman said sellers' reactions in eBay's town hall forums have been "balanced."
"The community understands the rationale behind these changes," he said.
At the same time, Lieberman acknowledged that eBay's sellers are, first and foremost, entrepreneurs.
"They have a lot of different channels available to them, and we expect they're evaluating what the changes mean for their business," he said.

EBay rivals circle vulnerable auctions kingpin

Sellers fleeing eBay are flocking to a crop of upstarts.

(FORTUNE Small Business) -- In the online auction space, "eBay" is a verb. Since launching in 1995, eBay (EBAY, Fortune 500) has been the online marketplace for people seeking to unload or pick up anything and everything.
But a week after eBay announced massive changes to its fee structure and its vaunted feedback policy, competitors say the behemoth seems suddenly vulnerable. Outraged sellers have begun seeking new outlets to hawk their products, and alternative marketplaces are seeing significant jumps in new-user registrations.
OnlineAuction.com, based in Grants Pass, Ore., reports that roughly 7,500 new sellers have opened accounts since eBay announced its new policies last week. That's a 15% jump in the site's user base, within a matter of days.
"eBay has dropped the ball, and there's a huge window of opportunity," said OnlineAuction CEO Chris Fain.
Another contender, eCrater, has registered 1,400 new sellers within the last few days. That's more than double the site's average weekly total.
"They call and introduce themselves as eBay refugees," said eCrater founder Dimitar Slavov.
Creators of eBay alternatives say their time has come.
"People are seeing the light, and it's very exciting," said OnlineAuction's Fain, who is a former eBay "PowerSeller," eBay's designation for its highest-volume sellers.
Fain's sales of vintage watches and specialty cars reached $1 million a year on eBay, but he became disenfranchised with the company's steady rate increases.
"I was paying eBay $7,000 to $8,000 a month in fees," said Fain, who launched OnlineAuction in 1998 but continued selling on eBay until 2005. "They were taking too big a piece of my bottom line."
While eBay charges sellers a percentage of an item's final sale price, OnlineAuction refrains from taking a cut. Instead, it allows vendors to list as many items as they want for a flat membership fee levied on a monthly or yearly basis.
"We're the Costco (COST, Fortune 500) of online auctions," Fain said.
Should OnlineAuction reach the 250 million-strong user base that eBay currently holds, the company could be "six times more profitable without being as greedy," Fain claims.
He estimates that 85% of OnlineAuction's sellers are eBay defectors. The site now has 50,000 sellers, with more than 11 million items currently listed.
That's still a mere fraction of eBay's 113 million items, Fain admits.
"Because eBay is such a huge entity, it's hard to compete unless you get the people behind you," Fain said. "But that's what's happening right now."
Sellers seek alternatives
Part-time vendor David Cox is one of those people. Last week, he concluded a 10-year run selling computer accessories on eBay and opened an $8-a-month account with OnlineAuction. Cox, of Marble Falls, Ark., said his new home reminds him of eBay's early days.
"I feel they will be more responsible to me as the seller," Cox said. "It certainly won't have the market that eBay does now, but I'm positive in time buyers will migrate to other sites."
Cox plans to also check out eCrater, which allows sellers to use its marketplace free of charge. ECrater founder Slavov said vendors will never be asked to pay anything.
"There are too many fees on eBay and Amazon," said Slavov, a software developer who launched eCrater in 2004. eCrater, based in Irvine, Calif., turns a profit by charging vendors for premium positions, selling Internet advertising and partnering with Google Checkout.
ECrater now has 33,000 active sellers and lists nearly 1 million items, according to Slavov.
Another upstart attracting attention from fleeing eBayers, San Francisco's iOffer, is built around a focus on friendly engagement between buyers and sellers. In lieu of using an auction format, iOffer has sellers state a starting price or ask buyers to make an offer. Both parties negotiate until they're satisfied.
"Overall, I'd say sellers like being more interactive," said iOffer CEO Ryan Boyce. "There's more flexibility, and you can sell a lot more when you engage with the buyer."
Listing items on iOffer is free. Final value fees are levied on a sliding scale but are significantly lower than eBay's, Boyce said.
Also a plus for former eBayers: Sellers can transfer their eBay feedback scores to iOffer.
"They're not starting from zero," Boyce said. Another iOffer feature allows users to trade items.
"With the recession, people don't have as much free cash lying around, so swapping has become more popular," he said.
iOffer has accumulated 75,000 sellers and nearly 1 million total users since its 2002 launch.
Another auction site, Chicago-based uBid, targets bulk sellers liquidating excess inventory. Its 7,000 participants include Sony (SNE), Motorola (MOT, Fortune 500) and Dell (DELL, Fortune 500). All sellers submit to a 10-point financial exam to ensure they're qualified to do business on the site: "That's part of our stringent anti-fraud stance," said uBid CEO Jeff Hoffman.
However, uBid is not a viable alternative for eBay vendors who aim to sell products at or close to retail price. Most uBid auctions start at $1 and carry no reserve price.
"If your eBay store is the way you feed your family, you sell for profit," Hoffman said. "Ubid is for asset recovery on products that aren't selling at retail."
On the other hand, the auction site Bidville, which uBid purchased in 2006, does focus on what Hoffman calls "consumer-to-consumer" sales - the market eBay now dominates. Listing an item is free, and final value fees start at 5% for items under $25. For items that sell for $1,000 or more, sellers pay a flat $25 fee plus 1% of the amount over $1,000.

EBay's PayPal funds freeze plan draws fire

EBay's new policy of holding PayPal funds on "high-risk" transactions for up to 21 days has business owners spooked.

(FORTUNE Small Business) -- In the uproar that erupted over the planned fee hikes and other policy changes eBay announced last week, one drew particular ire and incredulity: eBay's plan to hold payments sent through its PayPal payment service for up to 21 days in certain circumstances.
The freeze will apply to transactions eBay (EBAY, Fortune 500) considers high-risk, and is intended to protect buyers from the hazards of a bad transaction. By hanging on to funds, eBay can easily refund them if a seller doesn't ship a purchased item or sends damaged goods.
What is sparking reactions ranging from annoyance to panic among some of eBay's sellers is the company's criteria for determining what transactions fall into the "high-risk" category. Factors beyond sellers' control, including the number of "feedback" comments they have from previous buyers and how many of those comments are positive, can trigger the freeze.
"It's like a bad dream, really," said Dana White, an eBay seller who lives outside Ocean City, Md., and deals in used clothing, shoes and accessories. "I'm a small seller. All I need is two negatives in a 30-day period, and they will hold funds."
Representatives from PayPal, which eBay acquired in 2002, declined to comment on how the new policy would affect individual cases, but noted that the changes are paired with increased protections for merchants who use the service.
If Paypal deems a transaction fraudulent, it currently covers merchants for up to $5,000 per year. That cap will be lifted for eBay's PowerSellers, the site's highest-volume merchants, who will now receive unlimited coverage. PayPal will also offer PowerSellers protection on items sent to any address (not just confirmed addresses, the current policy) and expand its merchant coverage for international sales.
PayPal estimates that its new hold policy will affect less than 5% of eBay transactions, and it emphasizes that only relatively untested sellers risk incurring a freeze. Merchants who have been registered with eBay for more than six months, have a feedback score of 100 or higher (meaning they've received positive comments for at least that many transactions), and have a "dissatisfied buyer" rate of less than 5% will never have their funds held.
But on a site that hosts an estimated 113 million listings worldwide at any given time, a policy affecting as many as 5% of those transactions puts millions in jeopardy. If funds are frozen after a sale, PayPal will release them after the buyer leaves positive feedback, three days after the item's confirmed delivery, or at the end of 21 days without a dispute, whichever happens first.
Paypal says the factors that will play into its formula for triggering a hold include the length of time a seller has been on eBay, the seller's feedback rating, and the final cost and shipping fees for the item.
Because PayPal has sole discretion over whether to freeze funds, sellers are upset about a perceived lack of accountability. They're also grouchy about eBay's efforts to force buyers to rely on PayPal: in some categories and for all new sellers, eBay requires vendors to offer PayPal as an option or have their own merchant credit card account. The site has blocked rival payment systems such as Google (GOOG, Fortune 500) Checkout, saying they are not yet proven safe.
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"The feeling among my forum members is that this new [21-day hold] policy is beneficial for buyers but negatively affects sellers," said Bob Lee, who runs PowerSellersUnite, a popular outlet for entrepreneurs who run businesses on eBay. "A seller is at risk of being taken advantage of by the buyer. Not having access to revenue and having to wait for a buyer to leave positive feedback leaves sellers in the lurch. PayPal and eBay are not allowing sellers to play on a level field."
The new policy has some questioning its legitimacy: Can PayPal legally freeze funds at will for up to three weeks?
The answer is yes. While PayPal offers interest-bearing accounts, debit cards, and other trappings traditionally associated with banks, it legally isn't one.
PayPal is classified as a "deposit broker," according to David Barr, a spokesman for the Federal Deposit Insurance Corporation (FDIC). A deposit broker can perform some of the same functions that bank might, but it ultimately depends on banks to hold its money. Other examples of deposit brokers include companies like Charles Schwab (SCHW, Fortune 500), the discount brokerage house.
Buyer and seller money passes through PayPal - "a conduit, so to speak," Barr said - and is then deposited in a traditional bank. That means money parked with PayPal can be eligible for so-called "pass-through" insurance by the FDIC. However, that protection doesn't apply to funds held in a PayPal money market account, which are not FDIC-insured. (Coincidentally, PayPal money-market holders were recently issued incorrectly low January dividends, but that mistake stemmed from a third-party glitch and is now being corrected, according to a PayPal representative.)
While PayPal's operations lie outside of U.S. federal banking regulations, states can individually decide to regulate the company - and in the past some have made overtures in that direction. In 2002, Louisiana banking officials asked the company to cease offering its services to the state's residents until it received a money transmitter's license. PayPal did, and hasn't faced any significant state-level action since. A spokeswoman for the Louisiana Office of Financial Institutions confirmed this week that PayPal is a registered money transmitter with the state.
Some sellers have talked of challenging PayPal money freezes in courts, something that's been done before. In 2002, PayPal users in California sued, arguing that PayPal violated the state's consumer-protection laws by locking accounts containing money involved in a fraud investigation. (PayPal froze all cash in affected accounts, not just the money involved in the investigation.) However, the case did not result in any determination of liability: PayPal paid a $9.5 million settlement to end the case in 2004.
PayPal spokeswoman Amanda Pires said the issues at stake in the California case were "totally unrelated" to those being raised in relation to the new 21-day hold provision.
"Obviously, it's legal. We wouldn't do it if it wasn't," Pires said of the provision, noting that the right to temporarily hold funds is reserved in PayPal's user agreement.
PowerSellersUnite's Lee conceded that point: "Everyone who joins PayPal agrees to their terms. Unless a court finds PayPal subject to the same regulations as a bank, it would be a hard case to make."
PayPal's Pires says the changes will increase buyer confidence and generate more sales for eBay's merchants. Some eBay entrepreneurs agree with that assessment.
Jon and Stacie Sefton are the owners of B & H Factory Outlet, a Cedar Rapids, Iowa, designer-clothing retailer that sells exclusively on eBay. What began as a home business five years ago now has 70 employees and is eBay's largest clothing merchant. The Seftons are in favor of PayPal's new policies, and believe the changes will achieve PayPal's aim of boosting protections for both buyers and sellers.
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B&H does 20% of its business internationally, so PayPal's expanded global protections will directly benefit the company's bottom line, as will its move to expand PowerSeller protections for shipments to any address, not just confirmed ones. Overall, Paypal's effort to weed out unreliable sellers helps everyone who does business through its marketplace, Jon Sefton said.
Also backing the changes is Jonathan Garriss, CEO of eBay shoe store Gotham City Online and executive director of the eBay Professional Sellers Alliance, an influential outside lobbying group.
"That is a big deal because now eBay and PayPal are getting involved in the transaction to make sure buyers get what they are expecting," Garriss said.
His group has long been frustrated by the hands-off, "buyer beware" stance eBay's management has traditionally had about its marketplace: "Imagine if that was the case at the local mall," Garriss said. "That's no way to shop."
But eBay's PayPal changes have already cost the company Suzy Lancaster, a 52-year-old seller from Wichita Falls, Tex., who has been selling on eBay for more than a decade - or, as she puts it, since "back when [eBay founder] Pierre Omidyar started it as Auction Web and ads looked more like e-mail." Lancaster remembers the days when bidders sent cash to sellers through the mail to pay for their purchases.
After last week's announcement of eBay's upcoming policy changes, she closed her Pigeon Alley Books store on eBay and began working on a standalone e-commerce website. EBay's PayPal changes will make small sellers even more vulnerable to unscrupulous buyers, because they will have every incentive to avoid getting dinged with bad feedback that might trigger a freeze on their PayPal account, she said.
"We've spent years trying to build up a good business reputation," she said. "It's going get shredded by someone who doesn't realize [the impact of their feedback]."
Lancaster echoed a common sentiment expressed by eBay business owners in this week's uproar: concern that the site is transitioning to a marketplace only for professional sellers, with no room for smaller vendors or hobbyists. John Donahoe, elevated to CEO-elect two weeks ago when Meg Whitman announced her impending retirement, fed those fears with an oft-repeated dismissive comment to the Financial Times in December, complaining that "our home page still looks like a flea market."
Lancaster said she is sad to see eBay becoming a marketplace only for businesses that "buy inventory by the boatload."
"They already have a place for that," she said. "It's called Wal-Mart (WMT, Fortune 500)."

5 PayPal alternatives

Sick of PayPal? Check out these e-commerce solutions for business owners.
By Emily Maltby

Set up and grow
Digital River
Digital River, based in Eden Prairie, Minn., has worked with 40,000 online stores to build e-commerce functionality, starting with basic shopping cart features. Understanding that each business has different needs, Digital River can implement new features as its clients grow, such as multi-currency support for overseas expansion or integrating "try before you buy" options. Best selling point: Digital River does not hold sellers' money and will take the hit if a product needs to be returned.
"Digital River understands that small business owners need that cash immediately," explains David Heath, CEO of Matrix Games, a computer game company that has worked with Digital River for three years.
Digital River has no up-front cost and won't charge until the first sale. Then, its fee is based on performance, beginning at 2.9% plus a $1.00 transaction fee.
"Our cost analysis shows that it would be foolish for us to try alone what Digital River does," Heath says.
Credit card heaven
2Checkout.com
"I knew I had to start accepting credit cards on my online site or my company wouldn't grow," says Troy Godshall, owner of APlusTemplates.com. "I had poor credit at the time and knew I wouldn't get a merchant account, but 2Checkout.com allowed me to accept credit cards without all the paperwork."
2Checkout.com processes credit cards and checks while monitoring for fraud and ensuring data security. The site has about 50,000 active vendors and signs up 1,500 new clients every month. For each transaction, there's a 5% rolling reserve for 90 days. Vendors with an existing shopping cart system can integrate their platform with 2Checkout.com or chose to use 2Checkout's own shopping cart.
2Checkout.com has a one-time setup fee of $49.00 and takes a 5.5% commission plus $0.45 for each sale. "My product is about $30," says Godshall. "So the commission isn't bad, considering the headache I avoid, not having to deal with fraud issues."
Payment processor
AlertPay
AlertPay founder Firoz Patel saw a problem: PayPal and other payment processing companies catered well to mainstream merchants, but fell behind when it came to less serviceable markets.
"We saw this particularly with multi-level marketing," he says. "Some clients simply need more time and attention when it comes to payments."In 2004, Patel launched Montreal-based AlertPay to make online payments easier. AlertPay.com simplifies bank transfers, bank wires, direct deposits and other payment methods - everything except cash. AlertPay's team of 25 works to ensure extra security for all transactions. Back-end flagging services alert banks to security breaches, and automated fraud-tracking tools lock down accounts when activity is abnormal.The introductory rate for AlertPay is 2.5% per transaction. But if your company is off the beaten path and requires more service, be prepared to pay 3.9%.
Uniting users
TrialPay
TrialPay is a particularly unorthodox payment option. It pairs merchants with advertises to boost sales for both and offer consumers a chance to get products they're looking at for free.
Here's how it works: Merchants enlisted with TrialPay give away their products for free when a shopper completes an offer from one of TrialPay's client advertisers, who then pays the merchant a bounty that equals or exceeds the product price. The system works best for software and online services vendors that can offer instantaneous digital delivery.
TrialPay has worked with more than 2,500 merchants. You can see it in action at WinZip and Skype. Vendors can use TrialPay's shopping cart system or integrate it with any other existing shopping cart.
"Once you get the set-up done, it's all hands off," says Rick Trefzger, vice president of sales at Boynton Beach, Fla.-based iS3, which sells StopZilla anti-spyware software. "TrialPay's reporting is great -- you get a link that tracks each campaign and TrialPay will track it in real time."
Shopping Cart options
E-junkie
Tucson-based E-junkie is one of many shopping cart providers, but it distinguishes itself in the market by automating delivery. The shopping cart is an integral part of an e-commerce site experience; choosing the right one for your business takes time and research, but will make purchasing an easier experience for the customer. E-junkie particularly well-suited for do-it-yourself artists and creative freelancers. For tangible goods, its system can automatically determine what size and shape packaging works best for each product in a vendor's inventory. For digital products, it streamlines file storage and instantaneous delivery. Prices vary depending on the services selected, but start at $5 per month for 10 products.