eBay to release new weapon in the ‘selection’ battle – InDemand

**Update – several commenters have correctly pointed out that I neglected to mention that the criteria for a seller to use InDemand is that you have to be a PowerSeller with 30-day DSRs over 4.8.  I agree this is a very high bar, and I’m already on the record with my top 5 reasons DSRs are broken here so don’t shoot he messenger here. If you want access, might as well send an email to ‘indemand@ebay.com’.

ChannelAdvisor and some of our eBay selling customers have been giving eBay some beta feedback on a new program they are calling InDemand.  eBay was kind enought to let us blog about this before it hits the radar (with the stipulation that we didn’t have to pull any puches of course).

Introducing InDemand
Indemand0
The general idea is as follows:
  • eBay is (finally!) starting to get some religion around the importance of selection. The prior regime implemented many policies that in my opinion hobbled selection at eBay – frequently I tell folks that eBay “cut off its long tail”.  On the flipside of that coin, Amazon around the same time (mid-06), realised that mid-size retailers can bring some really interesting selection to the site that is filling out the long-tail for Amazon.  They priced their third party offering with this in mind (high bar, but once you are in, no listing fees).
  • There are two major hurdles to selection on eBay:
    •  Information – eBay has tons of data on who is searching for what, what listings are being watched, what millions of keywords they are buying from google, etc.  However sellers never have access to that data.  When your supply is blind to demand – it seems obvious that there will be unmet demand due to a fundamental lack of information parity.
    • Channel Pricing –  Frequently eBay’s listing fee, final value fee or both can make it uneconomical for supply to come to the site.  For example, everyone in the media categories knows that the ebay fees make it a non-starter for brand-new items to be on the site, thus eBay tends to not have big slices of ‘recent releases’s on the site.  (mini rant – In my opinion,listing/insertion fees are the archenemy of selection.  eBay argues they are quality’s friend, but personally I worry more about selection and quality will take care of it self if you have a good search/finding experience.)
  • Enter InDemand – InDemand is a microsite at indemand.ebay.com that looks to address the two selection challenges (Info/Pricing).  It does this by first providing a list of ‘in demand’ products based on eBay’s research (this addresses the Info problem). Secondarily, InDemand gives eBay the ability to offer spot fee discounts (listng+FVF based on my understanding) for the products it feels are important for selection but due to the very broad fee structure, that product is not coming to the site.

Did you say lower fees for InDemand items?!?!

I think this ‘item level fee discount’ capability and big strategic change on eBay’s part in thinking about eBay fees (we went from global to geo to category and now to item) is the equivalent to a tectonic shift and worthy of a moment of reflection….
Ok, now let’s dig into InDemand more.

How InDemand works

A seller logs into indemand and is presented with the entire list of indemand items.  In this screen shot below you will see there are currently 510 items.
Indemand1
If you look at the first item here – a book, you’ll see a couple of things of note:
  • First, you’ll see every InDemand item has a ‘eBay Product ID’ associated with it.  This looks like eBay starting to head to a more Amazon-like ASIN model.  I guess now we have EPIDs and ASINs (that one is for the readers that always comment about my copious use of TLAs).
  • Next, if you look at the little box at the left, that’s where you’ll see any promotion (listing/fvf fees) associated with that item.  At the time of this writing none of the items have promos, but eBay swears they are coming.
  • Next, there’s a ‘currently’ on eBay link that pops a new window with all of the listings on eBay right now for this product.
  • Finally, you’ll see there’s a ‘sell this item’ link. This link will take you to SYI which is pre-populated with that products information.
Use case
Let’s go through a use case. Let’s say I’m a Lego seller and I’m going to order some product tomorrow.  I go to indemand and search for Lego: (full disclosure – Lego is a ChannelAdvisor customer and I’m a Lego customer).
Indemand2
As you can see there are three lego items InDemand, two video games and one toy.  If you click on the toy item, the details are displayed:
Indemand3
So now I know exactly what SKU we are talking about.  Next, I click the ‘currently on eBay’ and am tickled that there are none on the site.  At this point, I may check pricing on other sites to get a feel for what the item is going for and where I need to be competitive on pricing.
(Interestingly enough, when I do a text search on eBay for “Lego Star wars jedi starfighter hyperdrive” I get 14 core results and 15 store that look like the exact product.  This points out the tough transition eBay faces form text-based wild-west to catalogueueue-based organisation.)
Anyway, pretend there aren’t already 30 of these on eBay, I go to my supplier, source this item and now am the first to sell it here (at least in the catalogueueue) and enjoy the benefits of any reduced fees as well as what should be some fast selling product since eBay is telling me there’s lots of demand and a lack of supply.
eBay tells me InDemand has triggers that will monitor the supply and pull the item once the desired number (not published) are listed.
How do the fee discounts work?
I suspect the top of mind question for most readers now is how does the fee piece work.  Here’s a brief excerpt from the InDemand FAQ:

When do I receive the discount?
If an Insertion Fee discount is offered, you’ll receive the discount at the time of the listing. If a Final Value Fee discount is offered, it will applied at the time of the sale.

How long does a discount last?
A discount is valid if units are still needed and the promotional period has not ended.

How do I find out the quantity needed for a certain product?
The first line of the listing requirements indicates the quantity of a product that eBay is looking for.

Do I still receive my PowerSeller discount?
Yes. Any In Demand discount will be in addition to your PowerSeller discount.”

I also asked eBay:
Q: Do sellers have to list the item via InDemand to receive the discount?
A: No – as long as you list using the catalogueueue/item specifics during the promo period (live on InDemand), anyone will receive the discount regardless of if it originates via InDemand.
So think of InDemand as a guide to items that are ‘on sale’ from a seller’s perspective on eBay and you are free to list those items however you want.
 
How does eBay determine what’s ‘in demand’?
The next series of questions I had were around the demand calculations.  eBay was pretty closed lipped on this, but I get the feeling they look at several sets of data including:
  • catalogueueue coverage – one of the nice things of having a catalogueueue is you can run queries such as “how many catalogueueue items have zero listings”.  That’s an easy one.
  • Search data – ebay has a wealth of on-site and off-site search data and subsequently knows how many results are returned.  Another interesting query would be: ‘show me the top search terms internal+external that have null search results.
  • Closed loop data –  John Donahoe (JD)  has been saying for years that ebay has the most ecommerce data on the planet and I agree this is an asset that has gone somewhat unused at eBay.  This data is a great gauge of supply and demand. Historically eBay has licensed it out at very expense rates to tool providers with somewhat mixed results.  At ChannelAdvisor we have elected to not license this data because of the lack of structure and usefulness at the end of the day. With InDemand, you could really finally see eBay using this data to figure out which products have unusually high conversion rates and then make sure the marketplace continues to fuel that demand such that it doesn’t go off-site.

One item to watch is how automated the indemand listings are.  I get the sense that there’s some manual steps to the ‘demand calculation’ process so we may not see ebay update the list as frequently as you may like going into the holidays.  That being said, I’m sure if this product is successful (easily measured BTW), then I could see eBay making whatever the next step of investment is to automated the calc+gen of the indemand listings.

 
Yes it works with third party software! (but we want APIs!)
While InDemand has a handy link to the SYI form for those sellers that use SYI, eBay assures us that a listing of an InDemand item via ChannelAdvisor and other third-party software will receive the discounts.
Long-term what we would love is APIs into the indemand items. Here’s why. Our customers typically have their entire inventory in our software (hosted or via a datafeed) and then they send subsets of that inventory to different channels. Imagine if we were able to ping the Indemand database and highlight in the CA complete inventory screens the items that are ‘InDemand’.  This would cut out several steps for the sellers of going back and forth which in today’s time-limited world can be a big friction point for new systems like this that do things onesy-twosy.
What does this mean for the eBay/Amazon battlefield?
As far as I know, Amazon doesn’t have an equivalent to InDemand, but they do provide a very rich set of APIs that provide lots of transparency on demand.  For example, as a developer you can call APIs that tell you which items in the catalogueueue have zero listings, which ones have ‘wish list’ items set, etc.
Thus it seems Amazon is taking more of a platform approach here – provide the APIs and third parties will innovate whereas eBay is taking more of a ‘if we build it, they will come’ kind of approach.
Also with Amazon as I mentioned because of the fee structure, sellers spend zero time worrying about which products to list there, because they just list them all.  So something like InDemand would only be interesting to Amazon sellers that are looking to source more specifically for that channel, vs. identifying items they already carry that maybe a good match for the marketplace.
On eBay I suspect the InDemand usage will be both for items in-stock and for sourcing.
Conclusion
InDemand is an interesting step from eBay because it shows eBay is willing to head into some previously unknown ground:
  • InDemand is the first eBay foray into SKU-level fee discounts
  • InDemand is the first time eBay has focused on selection at such a granular level
  • InDemand gives us a glimmer of hope that eBay is opening the kimono on some of the great ‘demand data’ they have kept behind iron curtains for 10+yrs.  I’m a strong believer that marketplaces thrive in transparency so hopefully this InDemand experiment will finally convince eBay that’s the way to go.
For these reasons, I think its going to be a very interesting offering to keep an eye on and you can count on eBay Strategies to continue to keep you up to date on it.  You can see a path (small probability, but it’s there), that InDemand can be like a lizard and help eBay regenerate it’s chopped off long-tail, but we’ve got a good 12-18 months before we can see if that’s happening or not.
Stay tuned and as always I’d love to hear your thoughts in the comments.
SeekingAlpha Disclosure – I am long Amazon and Google.