Last year, eBay made a large acquisition in purchasing Adyen (an Ireland-based payments system) for nearly $3 billion dollars. The goal of this purchase was to weed out PayPal as the third-party payments system, which has been used by eBay for a long time. PayPal has been a source of scrutiny by many sellers and buyers. eBay launched their new payments system using the Adyen technology last fall, and millions have already transitioned. PayPal will remain as an optional provider for a few more years until the eBay/PayPal contract and relationship fully expires.
The positives of the transition:
1. Adyen finally allows eBay's payments and money transfers to be all in one place! You no longer need a PayPal account with a dual set of customer information. This is a great thing and eliminates any confusion due to the duality.
2. eBay's payments system charges a cheaper fee than PayPal: it is a flat fee of 2.7% per transaction. PayPal. PayPal has a fee of 2.9% + $0.35 per transaction for domestic customers, and 3.9% + $0.35 per transaction for international customers.
3. eBay's payments system transfers automatically on a schedule that you set, but is defaulted to every day. You save work and time since you do not to set up a manual transfer.
The negatives of the transition:
1. Slower money transfers with the eBay payments system. With PayPal, you are paid cash up-front while PayPal deals with the back-end banking delay nonsense firsthand. Now that eBay has transitioned to Adyen, the clearance times fall directly onto the eBay seller. Some transactions can take up to a week just to clear! After the moneys are cleared and the transfer is initiated, it takes longer to receive the funds in your bank account than PayPal. Expect wait times of 2-3 business days; sometimes longer! When we were using PayPal you could expect to get your money the next day or even quicker (if you paid a fee).
2. Loans system. PayPal had set up an excellent loan service called "PayPal Working Capital" that eBay sellers had easy access to. Now that the relationship between eBay and PayPal is in shambles, this system is now extremely risky to use. PayPal Working Capital takes a portion of each eBay transaction to slowly repay the loan that you take, but now you can no longer do that if you switch to Payments by eBay (and you cannot go back easily!). Payments by eBay is planned to fully replace PayPal. Unfortunately, PayPal sent a notice to sellers warning them you cannot take out a loan if you use Payments by eBay, and this could be devastating to an outstanding loan or even worse - your Credit Score! This wasn't planned very well by either company in the transition phase. What's worse is that eBay has not been clear about the alternative - Square Capital. eBay claims that the sellers can use Square Capital but we have yet to witness an easy access to this new loan service. Hopefully they will open the Square Capital loans door soon to the eBay community!
3. In the end, its all the same thing. Whether you pay 2.9% or 2.7%, the amount of time, money and maddening effort eBay has spent on the transition/upgrade has been beyond insane. Yes, PayPal was annoying in the way that you had two separate accounts and sure its nice to get a small discount now, but other than that the benefits to Adyen aren't really all that great. And the transfer speeds with eBay Payments is very slow and frustrating sometimes. Ebay was also strongly motivated for Adyen because it has a sleek, simple appearance in comparison to PayPal. For customers, it probably has more benefits to use Adyen, but sellers only get the benefit of the 2.7% rate. Don't forget that PayPal had super fast money transfers to your bank account, since they worked in reverse (cash up front).
Overall, Adyen technology underneath the new Payments by eBay system is kind of neat and since the sellers know its long term, we don't really have a choice but to use it instead of PayPal. Other than that, we have a slightly cheaper rate of 2.7%, but there really isn't much benefit and PayPal had a superior underlying infrastructure to it. We also do not know any kinds of security risks or hazards with eBay's new payments system. With PayPal, all transactions were covered and there were varying levels of departments looking into all types of transactions. Payments by eBay gives us no kind of reassurance - you just type in your bank account number and routing number but there isn't even a deposit confirmation. The biggest downer is that we no longer have access to PayPal Working Capital, which was in my opinion the best, simplest and least expensive electronic Loan service on the web.
New technology is nice and useful, but I think it needs to take into consideration a lack of priorities. Let's see what eBay has to offer us moving forward.
Showing posts with label ecommerce. Show all posts
Showing posts with label ecommerce. Show all posts
Monday, January 7, 2019
Sunday, January 6, 2019
Amazon.com is getting too big
Amazon.com, in recent years, has become the #1 online retailer, selling almost all of your needs in virtually all sectors of ecommerce and receiving your order within 2 days. They are the largest internet company by gross revenue and could soon become the most valuable company. Jeff Bezos, the company founder and CEO has the goal to become the first Trillion Dollar ($) company.
Most are not complaining and are satisfied with Amazon's service. However, we have started to see some cracks developing in their formula which many do not see. There are extreme risks to this type of business that could downplay the efforts to become the most valuable company:
1) Monopoly risk. In 2017 Amazon.com made some large acquisitions in their expansion of the business. Two of these important ones were Kohl's and Whole Foods. Kohl's has remained a clothing store but is also now a hub for Amazon Returns. Whole Foods has largely remained the same, except now customers can use their Amazon.com Visa Credit Card to get 5% back via the points system that can be redeemed on Amazon.com. Amazon keeps pursuing efforts to acquire more and more companies, including buying certain healthcare businesses. They want to absorb and buy out businesses from all different sectors. Eventually, if they are appearing to be too large, the government will come after them and many smaller companies will file lawsuits against them. The same thing happened to Microsoft in the late-1990s/early-2000s when Sun Microsystems (now called Oracle) filed the largest anti-trust suit ever which even reached the US Supreme Court! Since then, Microsoft has tried extra hard to NOT be a monopoly.
2) Labor Practices. Jeff Bezos is now the richest man in the world, worth approximately $150 billion dollars but you don't become the richest unless you are sidelining everyone else. Those who work at Amazon.com have to work extra long hours, meet insanely tough deadlines, go to the bathroom in cups, and do not make a great salary. This has led to multiple strikes and pressure on the executive management. If Bezos caves in to these demands, then the cost for labor will increase and this will eat into Amazon.com's bottom line, defeating the effort to become a trillion dollar company. People's lives are at stake here!
3) Online listing issues. Aside from the legal risks, Amazon needs to step up and make improvements to listings and returns of certain types of products. Amazon doesn't have a really good or solid return policy for third party sellers and certain cheaper items (such as add-ons or anything under $9.99). They tell you these items are "non-returnable" but if you have an issue with the item or the package was incomplete, then you cannot return the item directly or even initiate the refund process. You have to contact Amazon directly and get them to refund you. This is a poorly diagnosed procedure, since often we can find issues with items that are cheaper too. Third Party Sellers on Amazon are usually okay to use, but sometimes you find bad apples who either ship too slowly, are dishonest with the items they resell, or at worst are total scams. For these cases where you have a third party seller issue, you have to use Amazon's A-Z Guarantee procedure, which works sometimes but is a little tedious. If the seller says they shipped to item but there isn't any tracking information, then you have to wait longer. Furthermore, you will run into issues where the wrong picture of an item is displayed and receive a totally different item, but Amazon does not fix the listing. Amazon needs to improve all of the above.
Amazon is no different than any company and now they are reaching their limitations as one of the largest companies, not breaking any limits. With any super large big business, there are always cracks that form. If they truly want to be #1 then Amazon will have to start by first making the above improvements.
Most are not complaining and are satisfied with Amazon's service. However, we have started to see some cracks developing in their formula which many do not see. There are extreme risks to this type of business that could downplay the efforts to become the most valuable company:
1) Monopoly risk. In 2017 Amazon.com made some large acquisitions in their expansion of the business. Two of these important ones were Kohl's and Whole Foods. Kohl's has remained a clothing store but is also now a hub for Amazon Returns. Whole Foods has largely remained the same, except now customers can use their Amazon.com Visa Credit Card to get 5% back via the points system that can be redeemed on Amazon.com. Amazon keeps pursuing efforts to acquire more and more companies, including buying certain healthcare businesses. They want to absorb and buy out businesses from all different sectors. Eventually, if they are appearing to be too large, the government will come after them and many smaller companies will file lawsuits against them. The same thing happened to Microsoft in the late-1990s/early-2000s when Sun Microsystems (now called Oracle) filed the largest anti-trust suit ever which even reached the US Supreme Court! Since then, Microsoft has tried extra hard to NOT be a monopoly.
2) Labor Practices. Jeff Bezos is now the richest man in the world, worth approximately $150 billion dollars but you don't become the richest unless you are sidelining everyone else. Those who work at Amazon.com have to work extra long hours, meet insanely tough deadlines, go to the bathroom in cups, and do not make a great salary. This has led to multiple strikes and pressure on the executive management. If Bezos caves in to these demands, then the cost for labor will increase and this will eat into Amazon.com's bottom line, defeating the effort to become a trillion dollar company. People's lives are at stake here!
3) Online listing issues. Aside from the legal risks, Amazon needs to step up and make improvements to listings and returns of certain types of products. Amazon doesn't have a really good or solid return policy for third party sellers and certain cheaper items (such as add-ons or anything under $9.99). They tell you these items are "non-returnable" but if you have an issue with the item or the package was incomplete, then you cannot return the item directly or even initiate the refund process. You have to contact Amazon directly and get them to refund you. This is a poorly diagnosed procedure, since often we can find issues with items that are cheaper too. Third Party Sellers on Amazon are usually okay to use, but sometimes you find bad apples who either ship too slowly, are dishonest with the items they resell, or at worst are total scams. For these cases where you have a third party seller issue, you have to use Amazon's A-Z Guarantee procedure, which works sometimes but is a little tedious. If the seller says they shipped to item but there isn't any tracking information, then you have to wait longer. Furthermore, you will run into issues where the wrong picture of an item is displayed and receive a totally different item, but Amazon does not fix the listing. Amazon needs to improve all of the above.
Amazon is no different than any company and now they are reaching their limitations as one of the largest companies, not breaking any limits. With any super large big business, there are always cracks that form. If they truly want to be #1 then Amazon will have to start by first making the above improvements.
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