How eBay is Fueling Small Business Success with the Power of Capital

0:00From Entrepreneur Media, this is Problem Solvers, a show in which entrepreneurs do what entrepreneurs do best, solve unexpected problems in their business. We were completely wrong. And I'm just like, it's not selling. It was like we have to start from scratch. I'm Jason Pfeiffer, the editor-in-chief of Entrepreneur Magazine.

0:21This episode of Problem Solvers was produced in partnership with eBay. Here's the story of the greatest thing I've ever sold on eBay. It was 2014. LeBron James had just left the Miami Heat, which was a big bummer for me personally because I have been a Heat fan since childhood. So to cheer me up, or maybe to just rub salt in my wounds, I'm not really sure, a friend who worked at Sports Illustrated mailed me an enormous LeBron James Miami Heat jersey. Like, XXL or something. It was huge. It had apparently been sitting around the Sports Illustrated office and nobody wanted it. So now, this big thing was mine.

1:00I kept the jersey on my desk for a while and then decided, eh, I don't need this Miami Heat jersey for a guy who doesn't play for the Heat anymore. So I put it on eBay. I figured somebody might offer me like$10 for the jersey, which was better than throwing it away. But I almost immediately started getting direct messages from people who were saying things like, I will give you$100 if you stop the auction and sell this to me directly. And at the same time, people were bidding on the auction heavily. So the direct messages were now getting more desperate. They were saying, I will give you$150. I will give you$200.

1:38Clearly, this jersey was valuable for some reason that I, and I guess my friend at Sports Illustrated, did not understand. And I was smart enough to not take any of those direct offers. By the end of the auction, it had sold for nearly$400. I got paid, I mailed the jersey to the winner, and more than a decade later, I still have no clue why this jersey was so valuable. Millions of people sell their stuff on eBay like this. It's simple. It's straightforward. It is a delight. It's no problem. But millions of other people use eBay in a more complex way. They're not just selling random stuff. They are building businesses.

2:21eBay is a primary sales channel for things that entrepreneurs make or things that entrepreneurs resell. And of course, that can become complicated work because that work requires money. I mean, think of it. Selling one LeBron James jersey was easy. It was just a thing I had sitting around. But if I wanted to make a business out of selling collectible jerseys, now I need the upfront money to buy that stuff and to store it somewhere to manage it. And I need to make sure I'm getting paid in a timely way to recoup my investment and on and on. And well, that would make me a small business owner in need.

2:56And small business owners have a really hard time getting the capital they need in order to build their businesses. This is something eBay knows well. We find that about 77 % of small business owners were really concerned about their ability to access capital to operate and grow their business. This is someone at eBay who thinks about this every day. My name is Avrithi Mittal, and I am the vice president and general manager of global payments and financial services at eBay. My team is responsible for delivering seamless, secure, and innovative payments and unique eBay financial services to millions of eBay buyers and sellers globally.

3:36And today on this bonus episode of Problem Solvers, she's going to explain how it all works. We'll talk about the financing challenges that many small businesses face and how eBay built a solution called Seller Capital to help its sellers access financing on transparent terms. Then we'll talk about how it works and how it's helped some real-life sellers on eBay. And to start, I asked Averti to step back and give us the big picture. Like, what kind of problems are we looking at? What financing challenges do small business owners typically face? Thank you for starting with the problem statement.

4:11I always love when we start with the problem statement, and I think it's so very reflective of the name of your podcast as well. Look, so we know that small businesses are really the lifeblood of the U.S. economy as well as economies across the world. And at the same time, we are aware that traditional financing institutions clearly are unable to meet the needs of these small businesses. And the reasons for that can range from reasons such as being too small, not having sufficient revenue, a lack of consistent and strong credit history, rigid payment terms, and also a process that can be really clunky and opaque for small businesses.

4:53And when I think about it, it's really a little bit of a chicken and egg situation for these small businesses where in order to grow, they need timely access to capital. But at the same time, that requires them to be of a certain size so that the traditional financial institutions have confidence in providing them with the capital. So ultimately, the challenge here is their experience and this quest for capital is laden with a lot of fear, uncertainty and doubt for these really small businesses. Can you give me an example of maybe a seller on eBay that you've spoken with? You can use their name or you can just generalize it, but who embodies this problem?

5:39Sure. Lots of examples. So let's talk about Stephanie Franco. Stephanie is the business owner for a business called Lady Suburbia on eBay, and she began reselling items she found at thrift stores and garage sales on eBay back in 2017. and as you can imagine during the pandemic her business took a hit and she lost lots of clients as well as contracts and given the slump in her sales as well as she had time to prepare for the upcoming holiday season she realized she didn't actually have capital to buy inventory and if she were to have capital to buy inventory her setup was just not big enough to actually accommodate even storing that inventory.

6:30And so these were some of the challenges that she was dealing with. I'll use another example. We have a very thriving collectibles business as part of our overall business at eBay and within collectibles, things such as trading cards. Now, when you think about it, traditional banks know how to underwrite and understand traditional businesses. So there could be a seller who has a business on eBay selling these rare trading cards that can be extremely valuable and they could sell for hundreds and thousands of dollars on eBay. But a traditional financial institution might actually not have the perspective in terms of really assessing any risks and credit risks associated with a collectibles business.

7:17It's just these are businesses they don't typically come across. And this, which is sitting on the shelf right next to me, is exactly a collectible such as you described that I purchased on eBay. It is a 1989 Bill Ripken obscenity on bat Orioles card, which I love and had wanted to buy for a long time. Are you familiar with this card? Do you know what I have held up? No, tell me more. My God, it's my favorite. So in 1989, Bill Ripken, who was on the Orioles, posed for this baseball card, just a regular baseball card. He's standing there. You can picture any old baseball player bat over the shoulder, smile into the camera.

8:03but handwritten on the knob of the bat is not for children's ears so i won't say but there's an obscenity nobody at fleer noticed this so it went out in the packs of baseball cards in 1989 of course somebody did notice it once it was in people's hands and it was like a whole big thing and fleer recalled them and destroyed them the ones that made it out into the world are collectibles And I just think this is like the funniest mistake because as an editor, you look over things over and over and over again to make sure stuff like this doesn't happen. And how they did not notice this on the baseball card is just such a delight.

8:38So one day I was telling a friend about how this is like a baseball card I've always wanted to have. And then it occurred to me I'd never actually gone to eBay to see what these things cost. And it wasn't that much, relatively speaking. It was perfectly affordable. And I was so happy. And I immediately bought it. And it showed up and I got a nice little case for it. And it sits on my desk and it's wonderful. Yet I never really thought about how the person who sold this to me might have more complex financial challenges than that they have it and they got my money and they sent it to me. So now I'm thinking about it.

9:15I'm thinking, well, this person had to acquire this before selling it. So there's a lot of money that they have to spend betting that they can acquire things that they can then resell on eBay. And so they need the financing for that. And then I assume that there's a lot of insurance involved in this kind of thing. So they're needing financing for that. And this is just the kind of thing that you're saying a traditional financing channel is just not set up to help them with? Yes, absolutely. And so it's the access, but also the timeliness. So as you can imagine, with small businesses, time is money.

9:48And in many instances, such as the trading card sellers, they often end up going to these expos and trade card shows where new inventory pops up. And in order to be able to buy that inventory at a specific point in time, this inventory becomes available at a very short notice. They need the capital quickly. Otherwise, they just miss the opportunity to acquire the inventory I mentioned. And so there's this element of timeliness and also the access. And why I bring up timeliness is because when it comes to traditional financing experiences, these can range from online through offline. This involves getting lots of documentation in place, making visits to physical bank branches, waiting a lot.

10:37And it can take anywhere from days to months. And again, as I mentioned earlier, time is of the essence for these small businesses. So I would call out both the timeliness and the access itself to capital as a challenge. Yeah, I love this, by the way. So this person, whoever sold it to me, saw it somewhere at some trade show and knew that there was someone like me out there willing to spend on it. But that means that they got to acquire it first, which means that they need cash in hand. And this is a chain of financing that needs to be solved for. How did eBay start to design this solution? What specific pain points were you looking at as you tried to assess how to help these sellers?

11:19Yeah, great question. At eBay, I will say everything we do starts with the customer. And so unsurprisingly, when we started on this journey, we started with a lot of customer research and really listening and leaning into the voice of the customer with a deep sense of empathy. and we learned quite a few things that informed our strategy and approach to solving for this problem. As an example, about 87 % of eBay sellers want to increase their sales on the platform, yet many lack the resources to fuel their growth. About 61 % of sellers needed finance to manage inventory and 51 % are really looking for funding to expand, whether it's in new product areas or new geographies.

12:07And both of these needs, these types of needs really require flexible and highly accessible solutions. And then finally, over 50 % of sellers expressed a strong desire for products that can adapt to their changing business needs through the lifecycle of their business. And the last one is really important here, because as we know, the sales cycles are quite unpredictable, especially for small businesses. And it can depend on shifting consumer demand or seasonality as well. And so making sure that whatever solution we design for our customers really took into account the need for flexibility, the need for speed, and the need for transparency in terms of what the terms are, et cetera, because these small business owners have way too much on their mind to be able to read the fine print.

12:59So I would say the timeliness, the availability, and the transparency and convenience were very important for our sellers. That's great. So how does it actually work? Can you take me through the major opportunities for eBay sellers who are looking for financing? Sure. So in terms of our overall strategy, what we quickly realized, and this is the big opportunity we have, eBay caters to sellers of very different sizes from the accidental entrepreneurs that I mentioned all the way up to relatively larger business to consumer sellers. And so in order to meet the varying and unique needs of these businesses, we have to ensure that we are offering a breadth of financing solutions that can cater to their respective needs.

13:47And so the way we have approached the space is we partner with industry-leading lending partners and work with them to offer these financing solutions through some very seamless, transparent, and quick solutions. In terms of the overall experience, three things I'll call out. One, we have a very unique insight into the seller's performance history on eBay. And so with us, the seller then is not really starting from scratch the way they would start with a traditional financial institution. We look at their price sales data and understand what the nuances of that are. And by doing so, we can make sure that the funding amount and the payment schedules that we set up for these sellers are in line with their sales cycles.

14:35and this ensures that they have affordability and flexibility in the access as well as payment of the financing. The other thing that we've hyper-focused on, and this is personally just as the leader of this organization I'm really proud about, is that the application experience that we've created is very quick and user-friendly. So I'd mentioned to you earlier that in traditional financing experiences. It can take anywhere from days to weeks to months, and there's a lot of uncertainty. In the case of eBay seller capital, eligible sellers can apply online. The entire process is online end-to-end in as little as three minutes and receive funding very quickly, anywhere between 12 to 24 hours.

15:24The terms are very clear. There are no gotchas or no hidden fees. We're very transparent and we present the terms up front. And then, as I mentioned earlier, experience matters. And so one of the things that we learned as we researched this place with our sellers was that they have a lot on their mind. And we, because of the relationship we have with the sellers, we can actually enable automatic payment of the financing from the seller's sales on eBay. sellers do not need to keep track of when the payment is due. It's all taken care for them on eBay. Oh, that's really cool. Can you just give a quick example of what that might look like so people can imagine that flow?

16:10Absolutely. So let's say we have Jason's trading card store on eBay. Although I'm not selling my Billy Ripken. Well, you might want to hang on to that one.

16:23It Jason needed some capital to buy inventory at a very short notice. Some amazing trading cards showed up, and he wants to take advantage of the opportunity. So Jason goes online. He applies for capital through our easy experience. Most of the fields in the application are pre-filled because we know Jason really well, and we know Jason's business really well. and then Jason receives an approval as well as the funding in his bank account within 24 hours. Jason moves forward and spends that capital to buy inventory and have lots of sales on eBay. Now, when it's time to pay the payment for the capital, as Jason is selling on eBay, we are holding those sales on eBay before the seller actually exits them from the marketplace.

17:17and in doing so, we are able to actually disperse the payment for the capital directly and automatically from Jason's eBay earnings. And that's it. Jason does not need to worry about and keep track of when the next payment is due. The one more beautiful thing I'll highlight about this is Jason's business sales cycle is quite dynamic. It will go up and down depending on various factors and depending on how the sales cycle is shifting, the payment is really percentage of the sales amount. So if in a month Jason has not had really strong sales, the payment amount is actually calibrated based on that total amount so that there is no extra financial pressure in months that might be slow.

18:04And then in months when the sales are much higher, the percentage of the payment actually is higher. So it really nicely lines up with Jason's unique business needs and helps him from a cash flow perspective. I love that generic example. And actually, I'm stepping outside of this conversation now. This is just me talking to you, the listener. And the reason for that is because although that generic example of Jason's business was great, we can actually get more real than that. Remember earlier in the conversation when Avrati gave us a real life example of an eBay customer who needs financing and was facing constraints.

18:42It was a woman named Stephanie. Well, Stephanie is a eBay seller capital user now as well. And we also heard directly from her. So here's a little bit of her journey once she started using the program. My name is Stephanie Franco, and my store name is Lady Suburbia. In 2019, I was on the verge of working with some larger companies during that time, the pandemic hit. So I lost those contracts and opportunities and digging really deep. I looked at eBay as a form of additional income. I decided to apply for eBay's seller capital program. So I wanted to scale up my business and I needed that capital to do so.

19:24The process was straightforward and easy. It just took a few minutes to apply. And within a few days, I received funding. I was able to lower my cost of goods. I now rent a storage unit where I can sell all that extra inventory. I literally have gone from 200 listings to nearly 700. eBay offers a lot of flexibility as a seller and it allows me to grow as my business grows as well. I'm able to attend my family's events, my kids' soccer games. I get to pick up my son from school. eBay's seller capital program empowers me to be the businesswoman that I want, the mother that I aspire to be, and the seller that's making strides on a global scale.

20:06I was so pleased and touched to hear when Stephanie shared this, that she saw about a little over 55 % increase in her sales from 2023 to 2024. And within the six months post getting this capital, she was able to make revenue that was actually higher than what she did the entire prior year. So it really helped her accelerate her business growth. Yeah. Wow. It's a real testament to what happens when entrepreneurs get to focus on the thing they do best at and not just be constrained by or scrounging around for cash, which is the thing that nobody wants to actually be focused on. They want to be making or selling great things and connecting with customers and doing the thing that they actually got into business to do.

20:53All right. So I imagine that it doesn't stop here. So what exciting things are coming up in the world of eBay seller capital? Many, lots of things. So a couple of things we're very excited about. One, we are currently available in our top three markets, US, UK, and Germany. And we are actively exploring opportunities to expand beyond these markets, given the opportunity to really serve sellers in a lot of additional markets. The second thing I'll highlight is we've learned that making the end-to-end experience as seamless and frictionless for these sellers to your point can really help them take care of this acquiring of capital very quickly and then focus on what matters most to them which is running and growing their business and so we're very excited about the potential we have to further embed these experiences within the eBay platform so the seller does not have to leave the platform altogether.

21:54And so the end-to-end seller capital application and management journey can reside on eBay itself, which makes it very easy and convenient for the sellers. I'm also personally very excited about the potential of all things AI. And so we're already harnessing the power of AI to transform the program into a much smarter, targeted and personalized financing solution for our sellers. And that's one of the greatest beauties of what we are seeing with AI is that you can scale infinitely and you can personalize infinitely. And I cannot think about a customer segment that needs that kind of support ever more than small businesses and entrepreneurs who simply don't have the tools and resources that really large businesses have.

22:44Oh, this is great. All right, final question. It's a curveball. I told you my favorite thing that I've bought on eBay. What's your favorite thing that you've bought on eBay? Thanks for the question. Brings back so many wonderful memories. So I am a mom of two kids, six and nine. And my son, who is nine, is a major, major Lego enthusiast. Yeah, so is mine. It's incredible, Jason. And he actually started building Legos meant for 18 years old. At the time, he was, I believe, seven years. It's quite wild. We have a pretty big collection of Legos. And he has quite a bit of patience. So I have bought a lot of Lego pieces that are not just rare, but also new Lego pieces from eBay.

23:31And since you asked the question, I think as much as I have loved buying a lot of things on eBay, what I've really enjoyed is selling on eBay. and the reason it's so important is because it really helps us put ourselves in the shoes of our customers and understand their needs as well as what we can do better in terms of creating experiences. So some of my most memorable and fun experiences with eBay as a customer have been on the seller side where I've been able to find a new home for items that were very close to my heart let's say a pair of skis that my daughter used when she was four years old.

24:08And it's in very great shape. And I was able to find an awesome family to take it on and then make memories with it. So a lot of amazing selling experiences as well. I love that. Well, Averti, this has been so fun. And thank you for taking us into this world and also for building these solutions for entrepreneurs. It has been a pleasure. Thank you so much, Jason. and that's our episode but hey let's keep the conversation going i write a newsletter called one thing better where each week i offer one way to be successful and satisfied and build a career or company you love you can find it at one thing better dot email that's a web address just plug it into a browser one thing better dot email and if you respond to any of those emails i'll get it and I promise to reply back.

25:01Problem Solvers is a production of Entrepreneur Media and it comes out every Monday morning. So make sure you're subscribed so you don't miss an episode. Thanks to the team at Entrepreneur and particularly Deepa Shah for production. My name is Jason Pfeiffer. See you next week.