Ken Lewis, your turn comes tomorrow.
Today, I want to discuss, in the first of two posts, how the overall mediocre performance of companies can sometimes be explained from simple, daily contact with those firms and their frontline employees.
Just as a river the size of the mighty Mississippi swells from countless tiny rivulets of drops which flow into one another, eventually comprising our nation's largest river, so, too, do millions of individual, small transactions at EBay, UPS and BankAmerica combine to form the companies' top line revenues.
Each of the three is an intensively retail operation. And, within the past three business days, each has failed miserably at some sale- or customer-service related task. With me.
I don't think my experiences are all that atypical. The nearby, Yahoo-sourced charts depict the failure of Whitman, Eskew and Lewis to lead their firms to outperform the S&P500 Index's total return over two years, and only Whitman to manage the task over five years. Even so, EBay clearly has been inconsistent, falling in value since early 2005, making it, in effect, a timing play, not a consistent long-term market outperformer.
My recent experience with EBay and UPS involves selling some sports equipment for one of my children. It is, in many ways, a simple story. But I now believe the ending foreshadows the obvious difficulties these companies are having in providing their shareholders with consistently superior returns.
I have bought items on EBay for years. As a buyer, it's a relatively simple process. Sign up for Paypal, and it's truly a snap.
But for sellers, who actually fund EBay, it's a totally different story. Last year, while selling various toys and electronic items for my children, I first encountered problems with shipping. On one irregularly-shaped item, we took a bath, due to the difficulty in quoting shipping costs to an unknown location. Neither the US Post Office, nor UPS, made it easy.
This year, one of my children had a leftover toy to sell, because the winner of its auction had never completed the payment process. We were left trying to sell the item too close to Christmas to get a buyer. The other item was a set of little-used sports equipment with a retail value of just under $200.
The sports equipment drew many browsers, some watchers, and several bids, resulting in a winning bid of around $50.
In EBay's profit model, sellers pay the bills. There are listing fees, auction completion fees, and Paypal fees. Though small, all those little droplets of revenue, $2, $3, $5 at a time, add up to EBay's top line, and, eventually, bottom line.
Shipping, as everyone knows, is expected to be paid by the buyer. But how to be sure of the shipping costs? This is why the US Post Office created those handy free boxes for Priority Mail. You get the box free, and pay a fixed rate to send it. It's very EBay-friendly. You list with a fixed shipping cost, and both buyer and seller bear no risk.
But the sports equipment we sold was irregularly sized. So I chose UPS. After experimenting with various zip codes, because UPS prices by distance, I found a 'shipping cost calculator' which EBay allows you to place on your auction. It even has UPS's name attached to it.
Long story short, the winning bidder's zip code, when plugged into the actual UPS shipping calculator, along with the weight and dimensions of the package, came to $11. And that is what EBay's invoice used, and the buyer paid.
Next, using EBay's allegedly sophisticated tools, I chose to pay for and print out the UPS shipping label on my computer's printer.
Upon entering the same exact package and destination information, Paypal charged my account $18, due UPS.
That's right! The actual shipping cost was $7 higher, on an $11 quote. A 64% mistake in UPS's favor.
Having already sent his payment via Paypal, the buyer was safe. My daughter had to eat the $7 error out of her profit on the equipment.
Are you with me so far? EBay and UPS have just conspired to treat me, as a seller, abysmally by giving me 'selling tools' which include malfunctioning shipping cost calculators that err on on the low side when I send the invoice for payment by the buyer.
Now it gets really good.
I contacted EBay to inquire about the malfunctioning calculator. First, I received an automated response essentially pointing me back to the calculator in their help pages. Next, I received this reply,
"Please understand that eBay can't guarantee the amounts given by the shipping calculator. We provide this information only as a free service to our members. Additional services, such as signature or delivery confirmation, may cost extra and are not included in the shipping calculation. In addition, if the seller accidentally selects the incorrect weight or package size, the calculated amount will be incorrect.
eBay does try and be as accurate as possible. As such, eBay works with Pitney Bowes to validate the eBay Shipping Calculator calculations monthly.
In future we suggest that you confirm the shipping charges from your shipping provider and then list them as a flat shipping rate on your item listing. "
Translation: We never actually guaranteed that the tools we give you will work. We don't stand behind them. Further, you're probably either a liar or a moron, and have entered incomparable shipping information for the invoice and the shipping label. Finally, while we provided the shipping calculator in full recognition that UPS prices by distance, we recommend you just wing it and risk getting underpaid by quoting some single 'average' shipping cost.
Who treats their customers like this and expects repeat business? Sellers drive the actual profitability of EBay, and it's no wonder they are now beating the bushes to try to lure back one-time customers, as the company's sales growth has flattened.
As for me, I'm not sure I'll ever sell on the site again. Buy, yes. Sell, probably not. If I do, it will be in some convoluted form stipulating that I determine the shipping price before sending an invoice. Either way, it's horrendously inconvenient.
So much for EBay's service management and provision, and customer "service" function.
Now to UPS.
When I dropped the package off this morning for shipping, I asked the service agent about my EBay experience. Her first response was,
"I'm not really with UPS. We're just an agent. But I can give you a main phone number to call."
OK. Off to a tepid start with Big Brown.
Then the woman says,
"Do you mean charge back? A lot of EBay shippers tell me that happens."
At first, this is incomprehensible to me. Then, after a few minutes of conversation, the truth emerges. A stunning proportion of EBay shippers using UPS have this happen to them, as well. The calculators under-estimate the shipping, forcing the sellers to eat the overage from their profits.
But, wait. The Big Brown tale isn't over yet. I go home and call the number with which the service agent provided me. After several bounces to and from a front-line telephone agent, I finally get a "manager."
Upon beginning to explain my question, the manager, Sandra, cuts me off, saying,
"You probably want customer service. Let me transfer you....."
At this point, my frustration building, I reply,
"No, Sandra. I really don't want customer service. I've run out of patience. So I'm going to tell you what the problem is, and you can relay it. I've spent minutes bouncing back and forth with your agent. This is something UPS should know about and fix, if you still want to work for a company with future revenue growth....."
As I pause to breathe, I hear music.....Sandra has dropped me back into the service queue.
Maybe it's just me, but I think Meg Whitman and Mike Eskew are in for a rough ride. One has services wrongly represented to her paying customers as useful, accurate and reliable. The other has service managers who deliberately ignore their customers' questions.
Do these sound like enterprises in which you would invest? No, they don't, do they?
And, as it happens, neither has been selected by my equity portfolio selection process in years. EBay was in the portfolio long ago. UPS never has been. Small wonder.
I cannot help but think that my idiosyncratic, tiny customer experience with each firm, EBay and UPS, is emblematic of their performance problems. I imagine my experience occurs daily for the two firms, multiplied a thousand times over.
You can use other auction sites. You can ship via USPS or FedEx.
Neither EBay nor UPS has a lock on their business anymore. Certainly not so firmly as to deliberately mistreat and cheat their customers, and behave as if nothing untoward has occurred.
Tomorrow, I share with you my recent challenge to Ken Lewis' frontline troops at BankAmerica to propose a solution to my partner's and my options investing needs.
Care to guess how the financial titan will fare with my request? Tune in tomorrow.....