eBay Transaction Losses Up 19% In Q3, Mostly Due To Simple Delivery Claims

[valueaddedresource]

Interesting stat from the Q3 earnings call for those who missed it - Transaction Losses spiked a significant 19% year over year with CFO Peggy Alford telling investors it was mostly due to increased consumer protection costs of Simple Delivery, ie. paying out loss and damage claims, as well as some non-specific increase in general buyer and seller fraud.

Alford said on the call: "...and then lastly Transaction Losses were up 19%. A lot of it had to do with our higher consumer protection losses that were due to the ramp of the UK managed shipping program as well as some unfavorable fluxuations in buyer and seller fraud. This is an area that fluctuates quarter by quarter but nothing really concerning in the trends."

So I suppose that answers the question of whether the carriers or eBay are taking on the cost of paying out claims (clearly eBay is at least paying some of it from their pocket) and it also might shed some interesting light on recent reports around here that some buyers are only getting partial refunds on SD damage claims. 

[suelel1968]

@valueaddedresource interesting that they blame SD which is only imposed on private UK sellers of goods over £20. Something doesn't stack up. 

[valueaddedresource]

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@suelel1968 wrote:

@valueaddedresource interesting that they blame SD which is only imposed on private UK sellers of goods over £20. Something doesn't stack up. 

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@suelel1968  it's a year over year comparison and remember that SD was introduced for fashion categories in early 2024 and didn't start rolling out to all categories until ~ late September/early October - and even then it was voluntary.

So the 2024 stats for that time period barely had SD included compared to 2025 when most private sales were moved over into mandatory SD.

In that light, I think it's definitely plausible a decent amount of that increase was really due to SD damage and loss claims, though of course they don't say what the breakdown is between that, the non-specific fraud they mentioned, and the normal level of transaction losses they usually see from other things like chargebacks.

[moonlight-rhapsody]

"interesting that they blame SD which is only imposed on private UK sellers of goods over £20."

The £20+ barline only applied after 5 September.  For the first 2 months of the quarter in question, £10 was the barline.

[suelel1968]

@valueaddedresource but those are worldwide figures and they are up 19%. If it is related mainly to SD in the uk then how can they claim it isn't concerning? 

[suelel1968]

Hi @moonlight-rhapsody  true, but does that mean they weren't "listening" to sellers and they were reacting to the amount of claims when they put the bar up? But then they added SD to jewellery which is ripe for theft and scams. 

[moonlight-rhapsody]

Perhaps the figure wouldn't have been so high if ebay didn't actively encourage scams - as in "yes of course the item is exactly as described, but since you've opened a INAD case, we'll refund you and let you keep the item as well".  It's a scammer's paradise.

[moonlight-rhapsody]

"does that mean they weren't "listening" to sellers and they were reacting to the amount of claims when they put the bar up?"

That could indeed be the reason.  At the time I think we all assumed they'd raised the barline in order to get some sellers back, but it could well be because of the claims.  So let's hope the claims trend continues and then they might raise the SD barline some more (or even make it optional, I'm never going to give up hope!) 🤣

[valueaddedresource]

@suelel1968 because she's the CFO and it's her job to tell investors what they want to hear? 😂

Honestly though, my guess would the "not concerning" part is meant to try to convey the fact that it wasn't an unforeseen/unplanned for increase. They knew going from almost zero to almost full (with some exceptions) SD adoption for private sellers would come with increased costs for paying out claims and so it isn't a shock/surprise and is something eBay had considered as a cost of changing the shipping model that they believe will still be worth it for the longer term revenue gains they expect from SD.

Think of it a bit like eBay's push to provide authentication in some categories - building out the in house authentication centers and/or third party partnerships to make that happen added a whole bunch of new costs for eBay, but they say those costs are more than offset by the benefits of increasing sales in those categories due to increased trust etc.

Not saying I necessarily agree completely with either of those arguments by the way, just saying that's largely how eBay has presented it.

Also, once they get to where reporting "laps" the previous quarters where there was no or very little SD activity, things will even out somewhat.

At that point, transaction losses would be expected to stay around the "new" level with maybe a few points of fluctuation here and there across quarters, but (hopefully) nowhere near as big a spike as going from almost zero SD to almost full SD.

So again to investors that may be "not concerning" if it is expected to be a limited/one time event that basically sets then maintains the new "normal" level rather than a cost that is expected to continue growing significantly/ exponentially in the long term.

That being said, the change in September to allow more lower value items to opt out of SD plus the reports of some buyers receiving partial refunds does seem to me like eBay knows they are walking a tightrope here and that they have to keep those losses under control/near that new "normal" in order to keep the "not concerning" bit going.

[suelel1968]

Hi @valueaddedresource 

I guess we will never get to know the value of revenue that SD creates, but it must be huge to soak up those potential losses and offset the reduction in sellers and buyers and still be worth it. 

Thanks for posting on the forum.

[technthread]

The spike in buyer fraud was a given but I also thought at the time they rolled SD out that some sellers would feel less pressure to package items as carefully knowing they didn’t have to deal with damage and loss claims themselves anymore. 

In future they might decide to allow the seller to voluntarily upload packing photos to an order (visible to eBay, not necessarily the buyer), to show internal and external packaging of the parcel they are sending. I’m thinking from eBay’s perspective of how to monitor those standards, that’s what I would trial if I was them.

[moonlight-rhapsody]

"In future they might decide to allow the seller to voluntarily upload packing photos to an order (visible to eBay, not necessarily the buyer), to show internal and external packaging of the parcel they are sending."

That would certainly be consistent with ebay's conception of what constitutes "Simple" Delivery 🙄

[suelel1968]

Just incase anyone wasn't sure what the eBay CFO really meant...

"Parcels go missing, stuff gets smashed, fraud’s up—and eBay’s coughing up. But don’t worry, we knew that the British were a creative bunch who can come up with a scam for every occasion and they are not above nicking off the doorstep or sending a bedsheet instead of an iPhone.  It’s not concerning, it's what they do!’

[valueaddedresource]

@suelel1968  because it is a global stat, my reading of it was the managed shipping costs were UK specific but the buyer and seller fraud wasn't....but reading it again I can see how it could be open to your interpretation too. 😂

[ett1954]

At least eBay now get to experience the environment they created for sellers and which the sellers have been putting up with for years.

[department28]

'The spike in buyer fraud was a given but I also thought at the time they rolled SD out that some sellers would feel less pressure to package items as carefully knowing they didn’t have to deal with damage and loss claims themselves anymore.' 

It would be nice to think it was only a very small minority of sellers that would care so little about their item arriving safely - and their buyer receiving an undamaged item - that they would take less care over packaging because eBay will pick up the tab for their laziness... 🙄