Mercent CEO Eric Best is no online retail newbie. He helped bring Toys R Us onto Amazon.com, and later worked on Amazon's third-party seller program, known as Merchants@Amazon. Now his company is a key part of eBay's strategy to attract major, high-volume retailers. I sat down with Best to learn more about this new approach to listing on eBay.

Mercent is an online advertising agency and has been working on the "eBay Large Merchant Services APIs" (LMS) behind the scenes for 6 months. Announced 2 weeks ago, eBay's new LMS technology lets merchants send very large amounts of inventory to the eBay site and download order and transaction information. Mercent launched a "catalog merchandising and order-integration software" that is integrated with eBay's LMS technology. With almost 100 clients who represent 300 brands, Mercent launched its first client - SmartBargains.com - onto eBay 2 weeks ago.

Best explained that Mercent runs campaigns for large retailers who don't want to manage a multi-channel online advertising function themselves. The company also offers a software subscription service on a pay-for-performance model. Retailers generally pay 3 - 5 percent of sales for the subscription service, depending on size and service level.

"There's a couple of key things that set us apart from a typical online advertising agency," Best said. "One is, we're exclusive to the retail vertical. And because of that, we're focused on how product merchandising impacts or interplays with online advertising campaigns. Our whole philosophy is that a product listing or an online advertisement on any channel is really only as strong or effective or as compelling as the underlying product and offer itself.

"What that means is that if Amazon has trained consumers to look for free shipping when they're buying on Amazon, we need to make sure that our retail clients understand that and that they're being aggressive in terms of free shipping offers when they're promoting their catalog on Amazon. Conversely, a buyer on Yahoo Shopping might be much more prone to react positively to a discount coupon or to a, "buy x - get y free" cross-sell promotion.

"So we do a lot of testing of how specific offers within specific product listings on specific channels can affect the overall performance of the retailer's catalog."

Mercent's eBay Solution
As for eBay, it's "early days" for them, Best said. "We've got about 6 months of integration history now with the platform in terms of our own investment in integration with these new Large Merchant Services APIs, and I think the jury's still out." eBay may prove incredibly compelling for some retailers, it may not be appropriate for others. "I'm not sure we're at a point yet where we can predict who will see success and who won't," he said.

Mercent does not have a proprietary shopping-cart. "We're taking orders and the associated payment information from eBay and PayPal, and we're writing that data directly to back-end warehouse management systems that are already in place within our customers' infrastructure," Best said. He explained that Mercent gets product data from its merchants' existing ecommerce websites, catalogs, platforms, and pulls real-time inventory data directly out of the warehouse.

In the case of merchandising offers, Mercent may pull from proprietary, third-party, retail planning systems or merchandising systems. Mercent studies the information to determine how specific products are going to be promoted based on seasonality, based on the customer's own sales calendar and promotional calendar.

Why eBay
There were two elements that elevated eBay's importance to Mercent as a service provider, according to Best. First and foremost was the roll out of the Large Merchant Services API. "Relisting tens of thousands or hundreds of thousands of items through single-item web services calls is just not really a practical approach."

The second element was, Best said, "eBay's transition from more of a listing fee model to a, I guess you'd call it a commission-weighted approach, I think makes it more practical for some of the larger merchants that we serve to see foreseeable economic returns, the right return on investment. Or at least, lower risk as a function of fixed cost of advertising to the listing fees. There's a breadth of selection and a convenience factor that plays in when you have large sellers. And Amazon has no doubt benefited from this."

eBay Stumbling Blocks for Retailers
Best said there are three stumbling blocks for retailers coming onto eBay. The first is, how easy is it for merchants using the platform to facilitate multiple-item purchases and to handle the whole order pipleline the way they might handle it with their own shopping cart or third-party cart from a program like Amazon Merchants@.

The second stumbling block, according to Best, is product attribution and handling of variants. "eBay for a very good reason has had to take a very flexible approach to that, and I know that it can create some logistical or practical challenges in terms of how merchants that are dealing with complex size or color or screen resolution, or pixel depth - characteristics of their products - end up listing similar items that might be variants of a parent product."

Best believes eBay is addressing those two challenges, and he expects eBay will have a more sophisticated cart in the future. But the biggest potential stumbling block overall, he said, is how retailers perceive eBay as a brand, and how they perceive eBay will reflect on their brand.

Mercent's Ad Strategy
Mercent clients are looking at the eBay platform as an opportunity. In many cases they're looking at it as an unknown, and Best believes they are optimistic about the impact it can have on their business.

"Certainly the overarching perspective among these large sellers is, hey this is a challenging economy, we're going to look at ways to reach the consumer any way that we can, and eBay is making some strategic changes and technology changes that are making the platform more accommodating to these larger sellers that scale, and so maybe this is a time to go give it a try. But lest anyone think that these large sellers are coming in with the attitude that they're going to crush the little guy or somehow render the auction business obsolete, I think that's ridiculous."

Mercent serves a very large customer, and is not targeting the typical eBay PowerSeller, according to Best. "We don't facilitate auction selling in any way. Our whole focus is different." Giving an example, he said, "REI's anniversary sale is coming up in May, and this is the opening of the camping and hiking season, and so they've got these 200 specific products that they need to promote. Where can we be promoting these things across the web in a way that is consistent with their offline merchandising in the stores and in their print catalog, online and on their own website that's going to maximize revenue for every dollar of advertising that we end up spending on their behalf? I think that's a very different problem from what Vendio, Infopia and ChannelAdvisor and other folks in the market are solving, at least among the majority of their clients, anyway."

Large vs. Small Sellers on eBay
Those who follow eBay closely know there is some dissatisfaction among long-time sellers with eBay's push to bring on large retailers. When asked about it, Best said, "Because our clients are selling cross-channel and want brand continuity across channels, individual sellers are going to find these large sellers have less flexibility than the traditional eBay sellers in terms of how aggressive they are on shipping offers, merchandising offers, product pricing, pricing discounts."

That's because of potential confusion if retailers offer different prices on different channels. "If you're REI, or Guess or PetSmart and you've got clients going to eBay and seeing an entirely different offer for the same product, you're creating confusion for your customer. Even worse, you're creating a credibility problem."

Does the large retailer see listing on eBay as advertising? Best said it depends on whether the retailer is focused on direct marketing, dollar-for-dollar, or whether they're looking for brand advertising, and then whether or not they believe product listings on eBay are compatible with their consumer brand.

As for special treatment of sellers brought on through the Large Merchant program, aka Operation Catalog, Best said he is not privy to that information. "We don't have insight into the contract terms that our clients have with eBay. I have no idea what SmartBargains is paying or not paying in terms of their listing fees or commissions or otherwise."

A Rocky Start?
Mercent's first launch under its new integration with eBay's new Large Merchant Services API was SmartBargains.com, trading under the eBay ID, SmartBargains. Users began noticing that a shopper had christened SmartBargains with its first rating - a negative, giving it a -1 overall.

Best said SmartBargains is an early adopter under eBay's new program, as is Mercent. The LMS program is still in beta testing. "As with anything, there are always bugs to work out in the early days." He pointed to SmartBargains' feedback and reputation on other channels, such as Amazon.com, where it has accumulated over 16,000 positive ratings in the last 90 days with a 91 percent positive, according to Best. "I can't speak for SmartBargains, but as for Mercent, I believe in our technology. We're fast learners and entrepreneurial. We're getting familiar with the intricacies of the platform."

The shopper leaving the negative rating indicated in the comment that SmartBargains had cancelled the transaction because it did not have the item in stock. As far as product availability, Best said that there could be an issue with inventory synchronization caused by eBay's API, the Mercent platform, or the seller's own system. There are certain default customer messages in place, he said, and there's an opportunity for message improvement.

We asked eBay whether it was treating SmartBargains differently than other sellers who accumulated negative feedback. Spokesperson Usher Lieberman said, "Every seller id - which includes SmartBargains - is treated the same with regards to feedback and DSRs, period. SmartBargains will earn their feedback score the same as every other seller, one transaction at a time. SmartBargains DSR scores will reflect how well they are satisfying their eBay buyers just as accurately as they reflect the buyer satisfaction for every other eBay seller. It is as plain as that."

More Retailers on the Way
Mercent is in the process of integrating a number of other merchants onto eBay, but Best did not disclose their identities. "It's still a small percentage of our overall portfolio of clients," he said.

As for SmartBargains, Best said the listings would be rolled out incrementally. "I would expect you'd see more products very soon."

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