SquareTrade Seller Blog

Profit by capitalizing on the underserved Motorola KRZR camp

Cell phone sellers, listen up. Motorola just announced that the KRZR phone for AT&T/Cingular is now available. That means many of the old RAZR users may be looking at replacing their old RAZR’s with the new and improved KRZR. Actually, the functionality is not that much different, and the look is practically the same. However, it does promise greater durability which will come in handy for buyers who often drop their phones. Although the KRZR has dropped in average price point since last October ($310 in Oct 06, $250 today), sellers will find that it is still slightly more profitable to sell the KRZR given the limited amount of sellers and supply of KRZRs on eBay (only 51 KRZR seller’s per day as compared to 303 RAZR sellers per day). The RAZR market on eBay, arguably is saturated while there is definitely room in the KRZR market if you can supply it. At an average selling point of $250.00, the KRZR seems like a win win for buyers (affordability) and sellers (profitability).

Statistics from terapeak.com

eBay changes final value fees for electronic sellers

Big news for electronic sellers: eBay is changing their fee structure electronic sellers (i.e. cell phones, computers, laptops, and cameras), only this time, the change will actually benefit the sellers! It's hard to believe that eBay is actually decreasing fees for sellers since their primary focus in 07 are on buyers.

Unfortunately, this good news won't apply to US sellers. In fact, it may very well put US sellers at a disadvantage. The change in fee structure will be only for sellers in the UK and is highlighted by a tiered model of fees where higher final selling prices will result in a lower percentage of the final value fee. Exact details here.

What this means is that sellers in UK will have a significant advantage over sellers in the US. Right now, if you say that your items will ship to the US, your items will show up in US ebay site. Sellers in the UK will be able to get a break on their final value fees and could pass that back to the buyers in the form of lowered shipping costs.

Luckily, we think that there are a couple of factors that may keep the scales from tipping on the side of UK sellers. First, outrageously expensive shipping prices turns US buyers away. UK sellers would have to cut those in half to make the cost of shipping tolerable to US buyers. That itself seems unlikely, no matter what type of breaks they get from the restructured final listing fees. Secondly, US buyers are more adverse to bidding on items by non US sellers for fear of fraud and lemon items. With all that said, we hope that this new fee structure for electronic sellers in the UK is a sign for what’s to come in the US.

PayPal to be rivaled by newcomer Microsoft - How it affects you

Bill Gates announced at the World Economic Forum in Davos, Switzerland that Microsoft will become a player in the online payment industry. He described a system that would undercut credit card fees, making it profitable to even charge small fees for individual web based contents, services and products. This could be really good news for many of our higher volume sellers, considering their PayPal fees alone takes up a significant chunk of their margins.

While avoiding PayPal fees would be a huge incentive for sellers, it will also adversely affect one of eBay’s key revenue streams. As we pointed out in a recent post, it will be one of eBay’s 2007 priorities to have every seller on eBay use PayPal (not by choice mind you). With this in mind, it is hard to see them allowing Microsoft into the eBay MarketPlace. On a positive note for sellers, even if eBay did not allow sellers to use Microsoft's payment solution, they may still have to reduce their PayPal fees to avoid losing upset sellers in the long run. It's safe to say that Bill Gates did sellers a favor by choosing this industry to tackle.

Vista your way to more

If you’re a laptop or computer seller on eBay, chances are you’ve considered selling your laptops with Windows Vista as the operating system. Though the reviews for Windows Vista may be a mixed bag, on eBay, the decision is clear.

SquareTrade CarePlus has gone the extra step and taken a more in-depth look at this decision. A review of both our CarePlus sellers and the overall eBay laptops marketplace shows that laptops sold with Vista have an average sold price of $711 (almost $200 more than laptops sold without Vista) but also with a sell-through rate of about 70% (which is 10% lower than the sell through rates of laptops without Vista).

If you do the math, listing 10 laptops with Vista could earn you over $650 more than listing 10 laptops without Vista. So it just makes sense to sell your laptops with Vista if providing Vista is cost effective for you.

PayPal to Introduce the New Must-Have to Protect your Money

If you haven’t already heard, eBay will offer its PayPal users a password-generating key fob that will increase the security of your Paypal accounts within the next month or so. Sellers, be sure to get your hands on one of these! They’re free to PayPal Business Account owners and only $5 for PayPal Personal Accounts.

If you have a good volume of sales on eBay, most of your payments are probably stored in your PayPal account for an extended period of time. This is also a special reminder to all you SquareTrade CarePlus sellers out there to take the added step in protecting the paypal account where your CarePlus earnings are sent. Take advantage of the extra security and make sure your pot of gold is protected.

No doubt, this is may be another way for PayPal to provide peace of mind to sellers in order to convince them to keep their money in their PayPal accounts longer. Still, it doesn’t hurt to protect yourself, no matter how long you keep your money in your PayPal account.

eBay's Q4 2006 Home Run

eBay just released their earnings for 2006.   And it's one Big Home Run.   The ball's sailing out of the park, and I don't think many people expected it.

As Meg Whitman put it: "It was a very strong quarter capping a very strong year". eBay's stock price jumped 10% in after-hours trading from $30 to $33 and Wall Street's love affair with eBay may be restarting.

Let's count all the ways that Meg and Team just plain excelled in Q4 2006:

- Revenue was $1.72 Billion (exceeding even top-end of analyst estimates).

- GMV was $14.4 Billion (20% YoY increase)

- MarketPlace Revenues was $1.2 Billion (24% increase, showing that eBay has re-ignited growth in eBay proper).

- Profits were 25 cents a share (exceeding analyst estimates of 22 cents a share).

- Growth seems to be back in the 3 core markets of US, UK and Germany.

- All other businesses like Skype are back on track.

This is the quarter that eBay management needed to prove to the world (and themselves and their employees) that eBay's back in control.  Clearly, the (mis)steps that occured in 2006 are behind them. 

Like our earlier post on the E-Commerce Forum, I think this is great news for sellers (eBay's clearly getting Core going again), but the flipside is that their buyer-focused strategy is one that they will not deviate from.   

eBay's E-Commerce Forum round-up

eBay held its annual e-commerce forum last week at the Hyatt in San Francisco (picture attached).    250 of eBay's biggest sellers were invited. 

Our summary:  eBay's main 2007 priority is about increasing buyer happiness.  They believe there are enough sellers on eBay, that eBay doesn't need any major seller initiatives.   While sellers will benefit from eBay re-energizing buyers, don't expect a lot of love from eBay - they are clearly prioritizing buyers over sellers.

When eBay had raised fees in early January, Bill Cobb had said: "Later this month, I'll be addressing a group of eBay sellers who will be here in person in the San Jose area, and I'll be sharing some of our plans and priorities for the coming year... I think you'll find we're taking a surprisingly fresh look at some of the old challenges"

That intro clearly made it seem like sellers were going to hear things that would help them justify the fees increases.  But in many ways, not that much specific was said.   

Everything that was said can be summarized as "eBay cares about buyers in 2007.".

a. Buyers find eBay hard to use.  eBay will make it easier and more fun for buyers to use eBay.   

b. More Trust, More Safety.   More driving out bad sellers.  More policing of most things seller-related (shipping fees, auction extension etc.). 

c. Please use PayPal everywhere.   It keeps you safer.  Oh, and you really won't have a choice to not use PayPal soon.

d. Feedback will be changed to include more detail to help a buyer judge and rate a seller. 

Lots of things were not said as well.   And our perspective is that most of them can be summarized as: "eBay thinks that there is no shortage of sellers in 2007 and that seller margins continue to be sufficient"    We'll bring up the key areas that we think weren't mentioned.

a. Seller Fees Discounts.  eBay didn't mention any ways to lower the fees for bigger sellers (perhaps by giving PayPal credits).    

b. Google Checkout.   I guess it's still unsafe.  (even though JP Morgan says that 6% of consumers used it in 2006).   The savings in 2007 of using Google Checkout is equal to eBay rolling back the last 4 or 5 years of fees increases.   But eBay is not willing to give this to sellers.

c. No major seller initiatives.  Very little mention of things like ProStores, Shopping.com, Cross-Platform initiatives etc.   Almost the entire forum was about things that make buyers happier.

d. Many of the buyer initiatives like Feedback 2.0 may have uncertain/negative impacts on sellers.

From a strategic perspective, very little mention of Skype.  This may have been tailored to the audience, but the talk was about re-energizing Core.

We think that sellers can only benefit in 2007 from more buyer activity and ease of use, but be warned - there may not be a particularly sympathetic ear turned towards sellers.

Vegas Post: CES versus MacWorld. And the winner is.....

While the biggest buzz generator here in Vegas at the Consumer Electronics Show was Bill Gate's demo of Vista, Steve Jobs and Apple reveal their next cash machine today at MacWorld, held in our very own San Francisco.

So who will be the clear winner in this showdown of giants? Surprisingly, the cell phone industry is fast becoming the runaway winner this year.

Apple launched an Iphone at MacWorld today with Cingular as their service provider (engadget has some great pics of the phone), which promises to blow every other phone away with it's sleekness and fancy features such as a super chic touchscreen. Here in Vegas, I'm getting the chance to check out the latest stock of ultra phones to hit the U.S market at CES. Samsung debut 6 models, the SGH-A727, the Ultra Music Phone,the A717, the i760, the U740, and the the T329, while Motorola rolled out 2 brand new models that works on a Linux/Java based platform. They're all really cool, and most likely have more bells and whistles than you can handle.

1 thing I'm noticing is that most of these phones, including Apple's iphone are exclusively for Cingular, who also unveiled their 3G technology, highlighted by increased broadband speeds and live video conferencing on 3G enabled cell phones such as Samsung's new SGH-A727. It looks like Cingular is vying hard to claim the incumbent seat in the US broadband cell phone industry which is ironic considering they are infamously known for slower broadband speeds compared to the likes of Verizon.

Regardless, this should spell great news for all our cell phone sellers out there. Plenty of consumers will be craving the new cell phone technology, but will choose to find an alternative to buying a new phone at Cingular's exorbet retail prices. From a buyer standpoint, I'll be looking to eBay for a great deal on a hopefully unlockable iphone (Cingular will have the 4GB iphone for $499 with a 2 yr contract).

Posted by Dave P.

2007 Resolutions: Laptops - Going Strong and Looking Even Better

The most surprising trend of the Holiday Sales period was the strength of Laptop Sales.

Of course, everyone expected TVs to do great (we're going through one of those rare analog - digital transformation moments in TVs, when price points have dropped enough for consumers to transition from one technology to another - e.g., cassettes to CDs).

But everyone expected Laptops to suck.   Vista was delayed.  Everyone already had a laptop.  There was no good reason to buy one.  People were going to wait it out till 2007. 

Well, clearly that didn't happen. 

Again, according to the NPD group - laptops sold exceedingly well during the week of Black Friday - coming in at the 2nd most sold electronics category (LCD TVs was #1 of course).   In fact, laptop sales for 2006 .vs. 2005 were higher than 2005 .vs. 2004. 

It's hard to see 2007 slowing down.  Vista is a huge step forward and it's getting strong reviews (and actually for a Microsoft product - it looks really well engineered and put together; think of it as the Windows equivalent of Excel - a product that does work well).  There's a good New York Times review of Vista if you're interested (free registration required).

You'll need a pretty good set of hardware to take full advantage of Vista, and that'll drive a big buying cycle for laptops - especially towards the latter part of the year.  Most importantly, it may even reverse (or at least stabilize) the free fall in laptops pricing, and inch the average laptop price back to closer to $1,000 (the average laptop price is now approaching $700).

So, if you're selling laptops - we think that you'll find 2007 even better than 2006.   Happy Selling.

2007 Resolutions: Selling TVs is going to get tougher

The NPD Group puts out some great general market data on consumer electronics sales.  It is good recommended reading to know what people are buying.

If you haven't been following the biggest sellers this holiday season, it was about TVs.  Two of the top 5 selling items were TVs (LCD TVs at the top of the list, and Plasma TVs coming in third).   

However, just because a lot of TVs were sold, it doesn't mean that any of the big retailers made money selling them.  As Best Buy's CEO said:  "We will match or beat any pricing in the marketplace"  and they did.  They out-discounted Walmart - which does take some doing.

So, how are people going to make money selling TVs?  Best Buy believes that it will be through services - such as installation and transportation.  There's a really interesting interview that their CEO gave to Reuters, that is mostly about TVs.

So - our view is that making money selling TVs as a stand-alone business is going to be hard in 2007.   Prices are falling tremendously, and everyone's selling them (last time I walked into Home Depot, they were selling TVs!).   And the retailers have decided that they are going to make no money selling the product, they are just going to make money on the backend selling services.

This is going to be hard for the small seller to compete.  They don't have access to the services revenue.  We don't see this as a great opportunity in 2007 for the small seller - even though the market is exploding.