Latest Uproar at Cafepress – Changes to the Volume Sales Bonus

Filed under Can't Stop Thinking, Print On Demand

Every now and then, Cafepress makes a fundamental change in its terms of service for shopkeepers, and almost without exception there’s a huge backlash by shopkeepers who believe that this new change is going to have a severe impact on their income. Often, they’re right. Even when they’re wrong it’s annoying that a party with which you do business can redefine the terms of your agreement with them at any time, while you can’t – ever – do the same thing. Or anything like it.

In fact (especially over the past two years) Cafepress has been nickel and diming away at its shopkeeper/designers in what’s probably been meant as an effort to maximize profits. Often, by the looks of it, this to make the company’s balance sheets continue to escalate quarter by quarter in a way that will be sweet music to to the ears of investors in the event of a probable IPO. Anyone who’s chased that particular dragon knows that once you start it becomes more and more difficult to pull off the same scale of growth in each quarter. It only gets harder if you do go public.

From the shopkeepers’ perspective, though, it looks as though the company is finding every way it can to monetize not the customers who buy all this merchandise, but the shopkeepers who create it. That impression was reinforced a few months ago when very large Cafepress stores (those with more than 500 sections) were abolished, though existing shops were grandfathered in. Shopkeepers who wanted to bloat their ventures with more merchandise than that were going to have to establish additional premium shops, for additional monthly fees.

This month’s brouhaha is all about the Cafepress volume bonus, a plan through which those shops with a high sales volume are rewarded by incremental bonuses: the more you sell, the larger your bonus. The volume sales bonus has often been named by CP shopkeepers as the reason they would stay with Cafepress rather than moving to a competitor.

Back in 2002, when I started my first Cafepress shop, it was understood that this bonus was a reward for the promotion a shopkeeper did to increase sales at his or her shop. And as little as I think of the company’s maneuvers over the past couple of years I think that the new program is better suited to that end. Not that I don’t think it’s seriously flawed – but the flaws I see are of another kind entirely.

Here’s the program change, as described by Cafepress:

• Sales originated from shops will earn larger bonuses at lower thresholds
• Sales originating from the Marketplace will no longer qualify for a Volume Bonus – you will continue to receive your mark-up as your commission
• Shopkeepers will no longer pay the 20% fees on affiliate-driven sales – CafePress will pay this fee
• The “Sales Source” is being redefined: Credit for a sale will now be based on where the item is added to the cart
• The Volume Bonus program will be renamed Shop Performance Bonus

(the whole official description is here, including the tiers and percentages of both the old and new programs.)

The most apparent difference is that CP Marketplace sales are now excluded from the volume bonus (now renamed, in that way that seems more significant to people sitting around a conference table than it does to anyone not sitting around a conference table).

The CP Marketplace is a common ground where merchandise from all participating shopkeepers appears together, outside their own shops, arranged by search relevance or by other factors. The Marketplace is promoted by Cafepress through Google Adwords and other means. While the Marketplace was originally pretty much a joke many newer shopkeepers believe that it’s their bread and butter, based on some combination of reality, CP hype, and a malfunctioning sales report system that has for the past year and a half reported most sales as originating from the Marketplace even though they very often, demonstrably, did not.

That malfunctioning reporting system is the first big danger sign. If marketplace sales are excluded from this program, and CP itself can’t adequately track what is and is not a Marketplace sale – weighted toward “Marketplace” – then it’s clear that the system can’t work fairly, and that where it’s wrong, the errors will favor Cafepress. We’re told that the new system does work correctly. It’s impossible at this point to simply take that for granted, but what the heck; for the sake of argument, suppose that it does.

If everything works properly this revised system will not only better meet its goals (rewarding shopkeepers for their own promotion of their own shops at Cafepress), it’ll also offer larger bonuses, at lower sales volumes, for qualifying sales. It astonishes me to say this, but I think that this is a change in which benefits all parties, except for those who were collecting bonuses on what were truly Marketplace sales – sales that did not result from a shopkeeper’s own promotion, and should not have been rewarded under the volume bonus plan.

People who came in under the old program, and who have been making bonuses based on those sales (or, given the reporting system’s problems, on sales that appeared to come from the Marketplace) are quite upset (login required). Nobody likes to suddenly make less money from the same level of sales. And as the executives at Cafepress look out across the moat and see all those bobbing torches, they have only themselves to blame for telling their shopkeepers that the Marketplace was the source of all good things. There’s some backpedaling going on at the moment, of course, but for the past three years or so the company has been touting the marketplace, and ignoring individual shops, and now they’re paying a price for their hype.

(Fascinating historical note: in the first or second major revamp of their Marketplace, Cafepress redesigned it so that nowhere on their site was there a single link to any shop. I doubt that this was intentional – they were simply so focussed on the wonderful thing they believed they were building that they never noticed that there were no links to individual shops anywhere on their site. To my mind, this is the story of everything they’ve been doing since.)

This week, as they announce that they’re removing Marketplace sales from their volume bonus program, they’ve remembered that shops exist, and they want to be sure we all understand how important it is for us to promote our individual shops. If their latest generations of shopkeepers are upset and confused by this then Cafepress has only itself to blame. It’s a situation they’ve painstakingly created over the past three years.

Interestingly, this is also not the first time the volume bonus program has been changed. The last time was almost exactly five years ago. Changes were made to which products were eligible for the bonus (there were additions) while the amount of the bonus was reduced. In addition CP tried to apply a 5% transaction fee to every sale. They eventually reversed themselves on that single point. There’s a transcript of a 2003 chat with CP founder Maheesh Jain in which he defends this program with the theme “you will make more money once we’ve reduced the amount of money you’ll make”. It’s not a coincidence that any faith I had in the company disappeared on that date, which is immortal in the annals of Doublespeak.

Looking back at the bullet points for the current changes, the bizarre standout is the change to affiliate sales commissions. There’s no apparent connection between that item and anything else on the list. It has nothing whatever to do with the volume bonus program. It stands there, all alone, like the echoing non sequitur of a Tourette’s patient. In some way the corporate mind believes that this change is related to the rest. I can’t imagine how. It ought to be welcome news to shopkeepers, who’ll now retain that 20% they formerly handed over to affiliates who have (possibly) been responsible for some sales. Provided the affiliate sale was made someplace other than the Marketplace, it will also qualify for the new volume bonus. But I’m still scratching my head over this one and wondering how, in some nest of writhing features, it’s related to the other changes. Without going into specifics I’ll say that this one change is also primed to reward behavior that CP has traditionally defined as an abuse of their system.

So, okay. It’s always amusing to watch this company operate, but in this case I think that – provided that they have in fact fixed their sales reporting system – these changes do a better job of rewarding the behavior the system was meant to reward, while not rewarding sales that occurred through the Marketplace – which the old system predates, and wasn’t meant to apply to. I’ve got no problem with that, myself.

Here’s the thing I think is troubling.

Cafepress will now make more money from Marketplace sales than from shop sales. Look at it the other way around: Cafepress will now make less money from shop sales than it will from Marketplace sales.

Cafepress is now competing with its shopkeepers for sales of the exact same merchandise. Whereas they’ve shown before that they believe their marketplace is the bees knees, and they’ve touted it above individual shops – even to the point, once, of making those shops invisible from their main site – they now have a financial advantage in driving Marketplace sales at the expense of individual shop sales. In extreme cases, the difference is 25% of the retail value of the items sold. In a company that seems to be trying, quarter-by-quarter, to increase its profitability by all possible means… and which controls all aspects of distribution and display on the web…

That’s the thing that bothers me.