eBay Users Up in Arms Over Billing System

eBay (EBAY Quote) wants a piece of the action, but its loyal users have a message: Leave us alone.

Sellers on the online auction site are turning up their noses at a new feature that streamlines the payment process for the large customers eBay seeks to attract more of. The feature, dubbed Checkout, presents sellers with the option of settling transactions through Billpoint, a payment-clearing joint venture of eBay and Wells Fargo (WFC Quote); in most cases, sellers pay a small fee based on the transaction's value.

Ordinarily, buyers and sellers on eBay arrange payment by mutual agreement, whether by credit card, check or 3 a.m. meeting at the Hempstead, N.Y., Long Island Rail Road station. eBay stresses that those options, which allow users to avoid paying a transaction fee altogether, remain open. But some eBay users, furious about the company's supposed intrusion into their community, are claiming they'll leave for Yahoo! (YHOO Quote) auctions. The scrum raises questions about eBay's famous customer loyalty as the online auctioneer seeks to expand its business. The stock rose 89 cents Tuesday to $53.41.

Confusion?

Checkout is now active on all auctions and has touched off a spirited debate on eBay's discussion boards, with some enraged sellers posting their telephone numbers, asking reporters to call them. Sellers say eBay has taken the settlement step out of their hands and has confused buyers.

"It's causing confusion," says collectibles seller Linda Neff of San Diego. "I am so upset I'm ready to leave."

eBay says the new feature was intended to make things easier for buyers by creating a standard payment process, and it will respond to users' concerns. "The idea was to provide users with an easy-to-use checkout process," says Kevin Pursglove, eBay's spokesman. "Clearly, there is some fine-tuning that needs to be done."

Yahoo!, meanwhile, says auction listings have risen in the past eight days as disgruntled eBay sellers moved items there. It has also heard complaints from some large-volume eBay sellers, dubbed powersellers, over the Checkout feature, says Norm Hullinger, Yahoo!'s vice president and general manager for auctions.

Hullinger says Yahoo! does not have similar plans. "We like to keep our site all about choice," he says.

Elm Street?

eBay, whose stock has fallen twice in recent weeks on earnings worries, has frequently been accused of abandoning the interests of the small-time collectibles dealers as it woos large-volume, corporate clients such as Disney. While eBay has increasingly relied on business from large-scale liquidators of practical items to meet its ambitious growth targets, it has also said it sees collectibles as a growth area. Thus, a mass exodus of smaller mom-and-pop dealers could hurt growth, and also spur a rash of negative publicity for a company that has largely avoided the type of controversy that has plagued rival Amazon.com (AMZN Quote).

"It's a nightmare," says David Steiner, who runs the online auction newsletter AuctionBytes. "The bottom line is they've taken another process out of seller's hands." In the past, eBay forbade links from auctions to a seller's own Web site, a decision sellers still grumble about.

Previously, buyers would receive an email from eBay notifying them of their victory. The buyer and seller would then make payment arrangements. Now buyers receive an additional email that directs them through a checkout process, which includes the option to use Billpoint.

"eBay is a 'venue' for me to sell auctions," writes one seller in an email. "I rent space from eBay to run my business, and have designed my business to serve my needs and the needs of my customers. ... eBay is clearly taking my choices away."

Regina Harris, a collectibles dealer in Omaha, Neb., who began selling on eBay in 1999, and some months does about $2,000 in business on the site, agrees. "Now they're doing everything for us," she says. "I refuse to list. I don't know if Yahoo! is the answer."

None of this is to suggest eBay is in imminent danger of losing large chunks of market share to Yahoo!, which has lagged far behind eBay in the online auction business. But clearly a large number of disgruntled customers should grab the attention of investors.