eBay Fraud Scams exposed

A year ago, Amazon Shares soared while eBay shares struggled in an effort to retain value. Those of us watching eBay closely knew that Wall Street has become aware of eBay’s inept management who was unable to react to current internet trends and threats, lack of customer service and safety across eBay properties and other issues which prompted eBay customer and seller base to migrating away from eBay and the likely beneficiary of the dwindling eBay business would be AMAZON. Next we have seen eBay desperate efforts to AMAZONITE itself, which so far has proven a complete “feeasco” as eBay management does not appear to “GET IT”, IT being the essence of makes Amazon so much more attractive to shoppers: Customer Service, Integrity, Safety and Security, Stable Selling and Buying environment at a reasonable price. Ebay needed to grow margins, so they increased seller fees and tried to ram PayPal down the sellers throats. Ebay needed perception of higher safety on their site, so they reduced transparency on its site by hiding who bids on what and removing 2 way feedback so you can no longer identify shill bidding and fraudulent buyers. This resulted in even more pronounced seller exodus from eBay so eBay begins losing it’s “edge” of having many unique one of a kind items, one cannot find anywhere else.

Now one year later, we have the benefit of viewing Quarterly Reports of both ecommerce rivals to see who is successfully adapting to constantly changing economic and market conditions. Those who successfully adapt turn out to be winners leaving the ‘has beens’ to dwindle. As I write this, AOL comes to mind.

When a single company reports earnings for a quarter, it is healthy to relate those earnings to the one of it’s closest competitor as well as the market segment as a whole so we can get a true feel if the Company is doing well in the current economical conditions. I have waited for Amazon’s Q2 Report so we can compare eBay’s performance with Amazon numbers.

ACTIVE USER GROWTH

AMAZON = INCREASED TO 18%

The number of total active customer accounts also jumped, rising 18 percent to more than 81 million

EBAY = CONTINUES FLATLINING AT 1%

The number of total active user accounts rose only 1 % to 84.5 million compared to second quarter 2007

MERCHANDISE SALES GROWTH

AMAZON = 35% growth

North America segment sales, representing the company’s U.S. and Canadian sites, were up 35% from a year ago to $2.17 billion.

International sales, representing the company’s U.K., German, Japanese, French and Chinese sites, were up 47% to $1.89 billion.

Excluding the impact of foreign-exchange rates, international sales grew 34%. (Any company still growing US centric sales at pace with foreign sales - you have to tip your hat at least a little)

EBAY = only 13% growth

The Marketplaces business unit, which consists of eBay, Shopping.com, StubHub, Kijiji and other ecommerce sites, had a strong second quarter, generating $1.46 billion in revenue, equating to 13% year-over-year growth

Gross merchandise volume was $15.68 billion for the quarter, an increase of 8% over the second quarter of 2007.

IMPACT OF SLUMPING US ECONOMY

AMAZON : SAYS IT’S POSITIVE

Chief Executive Jeff Bezos said Amazon suspects increased fuel prices may give it a “relative advantage” over other retailers.

“Even just driving 10 miles these days is a few dollars worth of gasoline,” he said during a conference call with analysts. “And consumers, we suspect, are beginning to take that into account and try to do trip consolidation. So our free shipping offers and Amazon Prime are clearly of even more value to customers under that set of circumstances.”

Sales were strong in several sections of Amazon’s massive marketplace. Chief Executive Jeff Bezos also said Amazon’s Kindle digital book reader was gaining readers, while the number of independent sellers offering goods on Amazon’s site continued to grow.

EBAY: STATES IT’S NEGATIVE
Despite a gain in the number of items sold, the average selling price of goods on eBay declined 6%. That means items are selling, but at lower prices. Lower prices hurt sellers and are particularly painful to eBay under its new fee structure, which grabs the most revenue from percentage-based fees on the sale price of items.

Chief Financial Officer Bob Swan also attributed some of the declining growth in eBay’s core shopping business to a slowing U.S. economy. Growth was flat in eBay’s autos business, which brings in about 20% of the revenue for its shopping sites. Swan also said the softening economy was leading shoppers to buy cheaper items.

True, the economy is taking some toll on eBay’s business. But a bargain site like eBay could also have benefited from a weakening economy as increased volume from deal-oriented shoppers makes up for the decline in selling prices.

Moreover, eBay’s growth has long trailed growth in the overall e-commerce market. The U.S. e-commerce market is expected to grow 17% this year, according to Forrester Research (FORR). But revenue in eBay’s U.S. marketplace grew just 12% from a year earlier.

If you are an eBay seller, you may want to checkout AMAZON, it appears that AMZN is attracting buyers and sales on Amazon are increasing while eBay sales continue to shrink. Amazon is lot more stable, management wise so your business is SAFER on a professionally managed marketplace. On eBay, one day you are a star, next day a BOT will block you from selling and PayPal will freeze your assets, effectively ruining your business. If you are an eBay seller, it’s definitely worth testing the AMAZON waters, many many eBay sellers already are and YOU do not want to get left in the dust with the group of eBay sellers being slowly bled to hang “GOING OUT OF BUSINESS” sign on their eBay store. Check out this newsbyte Amazon says active seller accounts up 18 percent

If you are a shareholder, it’s nice to have a comparison of the two e-commerce rivals handy to assist you in recognizing how eBay management fares in adjusting to current economic trends and conditions.

Check out the eBay stock forum on Yahoo Finance.

This image was lifted from eBay Seller Central Forum, directly off eBay site. There are many hot topics discussed, not many pertain to actual selling on eBay, most voice outrage over new eBay policies and contempt for the new direction eBay management took since the beginning of this year.

After eBay posted the Q2 earnings, one of many topics appropriately titled “eBay stock soars today!” discussed why the shares fell so badly inspite of seemingly good looking quarterly report. It is a long thread, worth reading. I think this one post is worth saving and reprinting here, just in case the eBay censor accidentally deletes that topic also:
—————————————————————————
If we focus on improving velocity we know we’re going to monetize that in new and different ways. - John Donohoe

While I don’t like some of the changes ebay has made this year (and far too many at once, it’s like trying to bolt down junk food) I’ve never been a rabid antibayer.

But I am very doubtful that the new management at ebay is going to make anything positive happen.

My view is strictly subjective.

What, exactly, does the above sentence by CEO Donohoe MEAN?

Speaking in shorthand buzzwords means (to me) that you are either hiding something you don’t want out in the open, or to impart an impression of competence that is not necessarily there.

Many listening to this kind of talk will be intimidated by it - fearful of bringing the speaker up short by asking him to state clearly and in English precisely what he is saying. Specifics.

They would be afraid of being considered “out of it.”

So it serves to allow the CEO to get away with impressive-sounding verbiage, a demo that he is so “on top of it” that to question him, to pin him down, would make the interlocuter seem a backward-looking dullard.

Here’s another word that Mr D used in his interview with a stock analyst (posted here earlier): incentivize

Huh?

When puerile stuff like this passes for high-level management skills, Mr D is not to blame. The Ebay Board of Directors got hornswoggled by Sizzlemanship. (Imagine the short shrift a sizzler would get from a plain speaker like Warren Buffett)

Decades ago a super salesman named Wheeler penned a best-seller called Sizzlemanship. It told salespeople throughout the world “to sell the sizzle, not the steak.”

Buzz it up, paint words that sound good, even if they be so vague as to be meaningless.

It this is the kind of con that rises to the top in corporate America, if Mr D’s sizzlemanship is multiplied several thousandfold in the nation’s multinational corporations — it is time for either investor revolt or a people’s revolution.

Or we’ll all be headed into a sizzling black hole.
—————————————————————————

Check out the eBay Stock Forum on Yahoo! : it appears there are hardly any investors left with faith in this company. eBay shares plunged 15% after eBay announced their User growth continues to stagnate at 1% and GMV growth is now reduced to 9%.

This YouTube video illustrates how recent eBay changes “protecting bidder’s privacy” affect you as a buyer when you decide to participate in bidding on eBay items. eBay touted that they are removing transparency from bidding process to protect you. I have a different opinion. eBay prefers to let shill bidding rampant on their site and now you cannot detect it because you have no way of knowing whom you bid against. When sellers shill their items, you as a buyer pay more and eBay makes more money. Simple.

Watch this YouTube eye opener!

And check out other awesome videos by the eBayPirate.
Remember: S.A.F.E. = Stay Away From Ebay

In the article eBay: pro-choice, but only when it suits the writer brought up an interesting point when he said:

“… and certainly hasn’t done much to neutralise the increasing toxicity of the eBay brand.

Ding Ding Ding Ding Ding!, I thought. eBay Brand is becoming increasingly toxic. What caused this? Major Media finally noticed and begun publishing news of too many years with too many complaints by eBay customers who were ripped off, cheated, scammed and simply ignored by eBay management.

Then I found another article by the same Author: eBay trashed its brand for sake of profits he wrote earlier.

Randy Smythe published this Article: eBay death of thousand cuts in February 2008
warning about management’s questionable decisions and changing marketplace conditions.

eBay’s managemen IS aware they are losing marketshare, as eBay’s spokesman Griff mentioned just a few days ago at eBay Live! 2008:

“
Griff: We had to make these changes because, without buyers, there will be no eBay in two years.

“

But unfortunately it appears that solutions offered by eBay top brass are still in the spirit of money grabbing, uncompetitive, monopolistic strategy which permiates everything eBay has done for the past 5 years. Thus eBay continues to be perceived as a marketplace full of fakes, cheats, scammers, stolen goods headed by the type of management who will close their eyes to the crimes perpetrated on their website (since they derive revenues from such crimes) till they get sued out of millions and forced by courts to make the venue safer.

Just before I completed publishing this, another news source appeared with the same observation: Sydney Morning Herald published just one hour ago: eBay pays the price for PayPal debacle

It’s hard to imagine anyone doing more damage to eBay’s reputation than the auction giant has done to itself over the past few months.

Finally bowing to public (and potential legal) pressure, eBay last week announced it has scrapped plans to force its members onto the PayPal payment system, which it owns, by excluding all other payment options except cash on delivery.

Everyone from the Reserve Bank to the Australian Competition and Consumer Commission could see it was anti-competitive and monopolistic. EBay insisted it was for the protection of the buyers and sellers. My only surprise was that it could maintain this public stance with a straight face.

Update: 7/12/2008 Here is a link to eBay Brand discussion from 2005. So three years later time has shown that many of the industry experts were right three years ago.

As predicted, eBay’s stance of ‘just a venue’ bringing buyers and sellers together had no leg to stand on in European courts yesterday. Louis Vuitton, Christian Dior and Givenchy won their lawsuit against eBay and a hefty US $63,000,000 fine will perhaps make those at eBay helm think about ignoring the counterfeit problem across eBay sites.

The case against eBay in a commercial court in Paris was brought jointly by six brands belonging to the LVMH group.

Louis Vuitton Malletier, the group’s handbag and luggage section, and clothing brand Christian Dior Couture accused eBay of “negligence” in allowing illegal copies of their goods to be sold in online auctions.

Four perfume brands - Dior, Guerlain, Kenzo and Givenchy - sued for what they called “illicit sales” of their products.

They alleged that even auctions involving their legitimate perfumes were illegal, because only specialist dealers were permitted to sell them.

The court barred eBay from selling the four perfumes in future

According to the judgement, eBay must pay 19.28m Euros in damages to Luis Vuitton Malletier, 17.3m to Christian Dior Couture and 3.25m to the perfume brands.

The BBC’s Hugh Schofield in Paris says the ruling is seen as a landmark, because it could oblige eBay to rethink its business model.

In the traditional tone spin and deny, eBay spokesman defended eBay platform by saying:

“If counterfeits appear on our sites, we take them down swiftly, but today’s ruling is not about our fight against counterfeit. ”

( WHOAAA! BS - eBay does not take fakes down SWIFTLY! As a matter of fact attorneys involved in eBay VERO program continuously complain and document cases where they reported fakes yet eBay refuses to take them down… I mean why would eBay be reluctant to do so? Simple: every sale = percentage of it goes to eBay pocket.)

eBay spokesperson further spins eBay’s position on this ruling:

“Today’s ruling is about an attempt by LVMH to protect uncompetitive commercial practices at the expense of consumer choice and the livelihood of law-abiding sellers that eBay empowers everyday. “

(GEEEZ! Now eBay talks about “uncompetitive commercial practices at the expense of consumer” HA HA HA HA … Tell me another one! Pot calling a kettle black. Just as we speak eBay is trying to remove PayPal competitors from eBay Australia site being told by the Australian Competition Watchdog Agency this is illegal, preventing Google Checkout from competing on eBay properties, issuing a new rule eBay sellers cannot advertise their own web page on eBay ABOUT ME pages…. the list goes on and on!… how is that for uncompetitive commerce practices? Here is an awesome article just published linking these two issues together: eBay: pro-choice, but only when it suits and some quotes from this article:

” eBay is screaming blue murder over being banned from selling Louis Vuitton goods by a French court… meanwhile it is pushing on with banning all payment methods except PayPal.”

“While eBay has reluctantly backed down from imposing its PayPal-and-nothing-else policy after a strict talking to from the ACCC, it hasn’t officially abandoned the policy. A public meeting in Sydney to discuss issues with the ACCC doesn’t seem to have advanced the cause much, and certainly hasn’t done much to neutralise the increasing toxicity of the eBay brand.“

I suppose I am not the only one making the same connection.)

The court barred eBay from running ads for the perfume and cosmetic brands or face a fine of $79,000 per day.

Heather McDonald, partner at law firm Baker Hostetler, said: “eBay has policies and procedures in place where they will intervene in an action between a buyer and seller if there’s a problem, and they profit directly on the basis of every item that is sold on their Web site.

“This gives them an affirmative obligation to take steps to make sure that illegal goods aren’t sold, and they certainly have the ability to do that.

“They have been able to make sure that you can’t buy a handgun and they have been able to make sure that you cannot buy pornography or prescription narcotics or other medicines on eBay.

“They have the ability to do this, they have just chosen not do and to rest the entire burden of policing eBay on the shoulders of the trademark and copyright holders whose rights are being infringed here.”
Sources:
BBC News
CNN News

The Tiffany lawsuit is next in line…I doubt eBay will win that one….
This is an article from the NYTimes: http://www.nytimes.com/2006/01/29/technology/29ebay.html
Highlights below:
“Company officials say they do everything they can to stop fraud. The company says only a minute share of the items being sold at any given time — 6,000 or so — are fraudulent. But that estimate reflects only cases that are determined by eBay to be confirmed cases of fraud, like when an item is never delivered.”

“The Tiffany lawsuit, in addition to accusing eBay of facilitating counterfeiting, also contends that it “charges hundreds of thousands of dollars in fees” for counterfeit sales.

In 2004, Tiffany secretly purchased about 200 items from eBay in its investigation of how the company was dealing with the thousands of pieces of counterfeit Tiffany jewelry. The jeweler found that three out of four pieces were fakes.”

“The women say that by watching the listings they have uncovered a ring of a half-dozen or so counterfeiters, most of them living in Rhode Island within a few miles of one other. They say the sellers supply one another with fake jewelry, conceal the fact that they are buying from one another to boost their seller status, and regularly dole out positive feedback to each other to fool potential buyers.”

This just skims the surface. Everything from handbangs, makeup, perfume, autographs, software, movies, music, iPods, etc. are fake. Today, the consumer assumes that the item is fake until proven authentic.

You can fool some people all the time and you can fool all people some time but you cannot fool all the people all the time. eBay stock is reflecting the opinions of shareholders. As usual eBay is underperforming Nasdaq, EBAY shares lost 17.66% in June, compared to Nasdaq loss of 13.55%… so this bad economy stock market losses argument is out the window as well.

Feel free to post your opinion on the one of the most frequented eBay stock forums here:
http://messages.finance.yahoo.com/mb/EBAY

Update 7/11/2008 eBay denied stay in LVMH case

The French Court of Appeals today denied eBay’s (EBAY) petition to stay an injunction issued June 30 by a Parisian court that requires eBay to halt all sales of four LVMH (LVMUY) perfumes over any site worldwide that is accessible from France, according to an eBay spokesperson.

An eBay spokesman says the company “will comply as technically and humanly possible” with the injunction while it continues to pursue its appeal of the ruling.

In a statement, LVMH says that today’s denial of the stay “confirms the seriousness of the faults committed by eBay’s sites . . . and confirms the significance of the legal precedent set by the Paris Commercial Court’s Judgment on June 30, 2008.”

The perfumes brands affected are Kenzo, Guerlain, Christian Dior, and Givenchy.

The lower court’s order bans not just sales of counterfeits, but sales of genuine bottles of these perfumes, because LVMH chooses to limit sales of these products to exclusive licensed distributors, and it does not permit its licensed distributors to sell over eBay.

Thus, the order bans so-called graymarket sales — sales of genuine products through unauthorized channels — which are not considered illegal in the United States, but are in France. According to lawyers for both sides, the injunction even forbids individuals from reselling genuine LVMH products that they received as gifts.

The injunction apparently takes effect immediately, and violations will be punishable by daily fines of 50,000 euros (about $80,000).

Here is a notice eBay has placed on its French site about today’s ruling.