Payment-System Discontent Spreads at eBay

A Mitsubishi unit pulls its auctions, out of frustration with a new payment system.
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It's not just the little guys who are upset.

Online auctioneer


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also may have alienated some large corporate clients with its new automated checkout process, people in the auctions business say. At least one big customer has pulled its auction listings from the site since eBay rolled out the new system, aptly dubbed Checkout, last month.

Mitsubishi Electric Automation, a division of Japan's Mitsubishi Electric that sells gear such as generators to other businesses, has suspended its auctions because of concerns the new feature would interfere with the company's own auction payment system, says Scott Whitsitt, manager of Internet business for the firm.

"The process that we have now works," says Whitsitt, who planned to discuss his gripe with eBay officials in a Friday afternoon conference call. "And the checkout that eBay has imposed upon us could throw a wrench into it." He says his company typically sells about $75,000 to $100,000 a month in goods on eBay.(In the most recent quarter the company raked in $185.4 million in online revenue. It takes as revenue about 8% of the total value of goods exchanged on its site.)

eBay recently launched the new feature in response to buyers who wanted a more convenient checkout process, says Kevin Pursglove, a spokesman at eBay. He has acknowledged that some sellers have been upset, and says eBay will "fine-tune" the feature. eBay fell $1.54 Friday to $51.70.

Control Problems?

Checkout's rollout sparked a chorus of

criticism on eBay's own discussion boards, mainly from small-time collectibles dealers who felt the new system was intrusive and took the payment process out of their hands. Some of these sellers also pulled auctions on eBay and put them on other sites, and an official at



auctions has said listings there have risen since eBay launched Checkout.

Pursglove says he has not heard of Mitsubishi Electric Automation pulling its listings. He forwarded, in an email, several glowing comments on the feature from the company's discussion boards to

. "I was thrilled to try the new checkout with the auctions I listed last week which ended today," wrote one seller in a message dated Nov. 1. "So much less hassle, all the information anyone would want to pay."

The feature gives sellers the option of setting transactions through Billpoint, an online payment system co-owned by eBay and

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. Previously, buyers and sellers settled transactions however they wanted to, and they still can. eBay says the feature is optional. But some sellers, such as Whitsitt, say that buyers can still be confused into thinking they must go through Checkout.

"It's not an issue of if we want control," Whitsitt says. "We must have control."

Other corporate sellers, whose business eBay has increasingly sought to attract as it evolved from a quirky seller of trinkets to the global bazaar it is today, are also upset, says Alec Peters, chief executive of, a company that automates the auction process and acts as a middleman between large sellers and eBay.

His clients include Mitsubishi Electric Automation and Home Depot. "We've directed all our companies to talk to eBay," he says. "This is the first time when we've worked with eBay that we've been very unhappy." (A spokesman at Home Depot, which in the last couple weeks started auctioning off items at eBay, says Checkout is "not a major issue on anyone's radar screen.")

Green Grass and High Tides

eBay's stock has fallen twice in recent weeks as it failed to exceed Wall Street's ambitious earnings targets. The company, whose stock trades at a premium valuation, has weathered the dot-com shakeout and retained the confidence of Wall Street because it is profitable and has a business model with no analog in the physical world.

But the stock price has remained sky high -- eBay currently trades at a pricey 113 times this fiscal year's estimated earnings. Investors evidently still have faith in the company's ability to meet its ambitious target of reaching $3 billion in annual revenue by 2005, but the recent selloffs suggest they'll punish eBay whenever it happens to fall short of investors' lofty goals.

This certainly doesn't mean eBay is in imminent danger of losing its throne as the king of online auctions, or even of losing large chunks of market share to Yahoo! or other sites. But it surely shows that it's hard to keep everyone happy.