eBay fee change buzz...

As I've covered since mid-Q4, eBay has been telegraphing some big changes coming to the fee structure.  The only thing we don't know is what and when.

It seems some top sellers are getting calls from TSAMs outlining in general the fee changes that are evidently going to be announced next week with eBay's earnings (eBay is set to announce 1/23 at 5pm EST).  The tidbits I'm hearing:

• Certain categories will go to low listing, high FVF for fixed-price listings - based on who is being told this, I'd say we're looking at BMV, auto-parts and other 'high density/low conversion' categories.
• Bulk discounts - eBay is being vague here, but it looks like they are finally considering some kind of break for sellers that are doing a ton of listings.

None of this is surprising at this point.  I was at a Wall St. event last week and spent lots of time with the folks answering a common question that went something like: "If eBay lowers fees and fixes finding, won't they stem the tide of GMV to amazon 3P?".  My answer to this one is long-term, yes, short-term there's some risk there we should all keep an eye on.

Back in December, I introduced the "3F" program for fixing what ales eBay.  The trick is each F has to be solved in the right order or else it could actually make things worse.    I worry about this fee announcement next week for this very reason.  Here's the exact wrong-way to do the 3Fs that could destabilize eBay's marketplace even further:

1. Fees - Let's say that eBay significantly lowers listing fees.  This is the right thing to do, but not first (actually it should come last - more on that in a second).
2. Finding - after fees let's say they work on Finding.
3. Fraud - Finally eBay addresses the fraud issues.

Here's the problem with this order:

• When you lower fees, listings shoot way up.  Does anyone remember the Store in Search (SIS) "debacle" of Q106?  I'm
• If you haven't FIRST fixed finding, the site is flooded with fixed-price items, thus your auction-listings are starved of traffic and get into a death-spiral.
• The fraudsters love low listing fees, this gives them the ability to just completely hammer the site with all kinds of wacky stuff.

IMO the correct order needs to be:

1. Fraud - Get policies, higher registration bars (buyers and sellers!), etc. in place to keep the bad guys off (and keep them off once booted) the site.
2. Finding - This probably means Finding 3.0, it's hard to go from 1.0 in 98 to 2.0 in 08 and nail it.  I suspect it's going to take another big turn of the crank - what I call Finding 3.0 to get the finding experience on eBay 'right' and most importantly ready for a surge in listings from reduced fees.
3. Fees - Once you have fraud and finding locked-down, you can then safely adjust the fee structure and sleep at night knowing you're not going to drive away the auction-loving-buyers nor the fixed-price-loving buyers when you 10X the number of listings on the site.

The current information points to Fees/Finding (no fraud) vs. the recommended fraud/finding/fees so it will be interesting to see what happens as the fee reductions roll out and listings surge.

Comments

[George]

I was very disappointed with E-bay handling our complaint about being overcharged. Instead of paying 7.00 for listing 2o lots of 8 listed items under 10.00 total @ 0.35 c, we were charged 8 times each time times twenty @ 2.00 bringing a hefty fee from 7.00 $ to over 40.00 $. We were told, that we misunderstood listing the items and all charges were not reversible. What a program setup! Receiving computerized messages under the same human name makes you feel guilty. It must be kind of totalitarian customer service one person handling all complaints. There is no way how to dispute an honest item description, that explains what you were bidding on. We have no objection to pay some user fees for listing our items, but when it comes to fixing the reputation of E-Bay practices of freezing or suspending the accounts, because many of you have already revealed all personal information to them, it is not far from identity theft and abuse. Where is our right to tell them, that what cannot be reveresed signals a problem. Perhaps it is a way how it was designed and how to make more money out of us. No wonder that they already own PayPal, Skype and many internet tools we got used to.

Can our life stop without E-Bay? Certainly not. Can their life stop without us? Certainly yes! It was an interesting experience to do business with them for some time. And at moments like this, our eyes will open and you have to stand up for your defense and use your common sense tools to make a point, that the financial success would not be there without us! You owe us an apology for treating us like dirt. You should do more gesture and not charge any fee for items not sold. It is enough what we already put in in past years, all these fee schemes and structures always hungry to get more and more..... And please stop sending back those lenghty customer surveys, it is a waste of my time.

[Sparticus]

I will be frank! Fuck eBAY,the bastards are greedy! its that simple! All greedy people should die a slow death and then burn forever in HELL, to put it softly. Everyone with common sense should leave eBAY like I have done, after over 10 years of them making money off of me. Im going to craigs list or somewhere else away from the greedy scumbags.

[tony]

I was planning to open a seller store but the increase got me cautious. I remember ebay as an auction place and not a giant online commerce channel. We smaller sellers can't compete against the big boys, that's what they are telling us over and over. So where's the value for buyers and sellers? Don't know what to make of this change but seems they are making these changes too often, making it clear something is wrong at the helm.

[tony]

I was planning to open a seller store but the increase got me cautious. I remember ebay as an auction place and not a giant online commerce channel. We smaller sellers can't compete against the big boys, that's what they are telling us over and over. So where's the value for buyers and sellers? Don't know what to make of this change but seems they are making these changes too often, making it clear something is wrong at the helm.

[Tori]

Anybody who thinks that eBay has seriously done something to help out sellers is DEAD WRONG. Ebay is actually MAKING YOU PAY MORE. Its all a clever manipulation technique. The math doesn't lie, read for yourself:
TRUTH ABOUT EBAY "REDUCED FEES"

http://paidopps.blogspot.com/2008/02/ebay-reduced-fees-is-scam-youre-paying.html

[Kathleen]

I am also a powerseller though my items sell for under $5.00 each usually. With this type of fee structure and the inability to leave neg. feedback for bad buyers, I will have to take my business elsewhere. It seems ebay no longer cares about the success of it's sellers by raising FVC fees, hiding them behind a reduced listing fee which means nothing, not allowing us to leave reciprocal feedback, raising paypal fees and putting a hold on the money. This is a ridiculous policy change and the revolution has already started.

[Tracie]

Yea, Ebay had really done it this time. I have been putting up with higher fees each year and now through the roof final value fees for items under 24.99, which accounts for over half of the items that I sell. Who can pay those kinds of fees, along with high listing fees(whoopie, a 5 cent discount of most insertion fees!) give me a break! I have found a new upcoming site to sell on! I recommend everyone give it a shot. I think by this time next year, it will grow greatly! From all that I have read online, this company can really compete with ebay. Check it out! www.onlineauctions.com
Thanks

[Michael]

"Mom and Pop" say goodbye to ebay. It's recent rules, especially the increased FVF, are prdominantly anti-seller and pro-buyer except for the larger mass marketers. Ebay is a good place to sell unique items. But, it appears that ebay no longer wants the business that halped it grow. Typical American success story - climb to the top on the backs of little people, then show no consideration for them after your pockets fill with money. The FVF increase is dramatic for people with total sales in the $1-$200,000 range.

As for feedback, give the poorly behaved buyers positive feedback but blast them in your comments. There is always a way around these things. Further, you can still block troublesome buyers. There are lots of customers out there.

[Dwight]

I am a smaller PowerSeller, and I think eBay has missed the mark, once again. They state that the new fee structure is intended to increase volume and variety, but the math doesn't work out in my books. I have run my last year's spreadsheets with the new fee structure, and if I sell everything exactly as I did last year, my costs actually increase more than 20%.

I list thousands of low cost, out-of-print books (most are one-of-a-kind on eBay, satisfying eBay's volume and variety intent) so the slightly lower listing fees seem attractive at first, since many of these items may be listed for months before selling. However, I am now hammered by the higher Final Value Fee at the back-end which removes most of my thin profit margin (an extra $2-3 fee for a book is bad news).

This new "One size fits all" fee structure seems to be built around a Walmart model, and small shops like mine can't compete with our thinner profit margins. I think by this time next year, eBay will be dominated by a handful of giant commercial stores like Walmart and friends, and the mom-and-pop variety shops will all be squeezed out.

Oh, and did I misunderstand something in the new "Buyer is always right" plan? The new rules state that buyers can only receive "Positive" feedback now! If a transaction goes bad for any reason, the buyer can leave negative feedback for the seller, but the seller can no longer reciprocate by expressing their own dissatisfaction with the buyer? I seldom leave negative ratings for my buyers, but I want to retain that right if necessary!

[Branden Mann]

I have to go with John above. I sell a number of high density/low conversion items and listing fees just damn near bankrupted me last year. In two different months my ebay fees were actually higher than my total sales. Thank God for a turnaround at the end of the year (a few high priced items finally sold) or I would have had to give up. I have a number of constituents in the same boat as me. Auction style listings simply don't work on large, obscure pieces of industrial, lab or countless other categories of equipment. At over $5 per listing fee, my slow selling items often cost me $50 or more in listing fees alone, then I still have to pay the commission and the paypal fees. We all know that ebay owns paypal as well, so that is just one more sour taste in all of our mouths.

I am with John in that my industrial items, like restaurant equipment don't have near the fraud problems of consumer items. So fees need to be addressed ASAP, not later. Fraud is of course a major issue, and needs to be fixed, but does seem to be somewhat category specific.

A major issue of "find" is the countless searches in google and elsewhere that lead you to poorly executed ebay searches. A search for a specific brand or model number of DVD player for instance, taking you to a generic search of all DVD players. If I want to search ebay, I'll go to ebay, I don't need fifteen results on google taking me there, often under false pretenses, only to do a less effective search than I could have performed myself. I can only assume that ebay is paying commissions to that bombardment of search results, and could fix the problem by not paying them any more. That said however, a number of my store items are found by google, and have helped my traffic. These searches take you directly to the item though and not to some generic keyword search.

Thanks, Branden

[Beth M.]

Interesting article of course. While I am curious about what changes they'll put into place, this time it won't tank my business. I rode out all the SIS/store fee increases and all of that mess. I had an eBay store for four yrs. However, I closed it in Nov06. Why? Because I got tucked behind an eBay black curtain.

I went from record sales with SIS, to almost invisible everywhere but foreign countries. I finally gave up trying to "fix" things that I could not fix, all the while paying the biggest eBay bills ever, and closed my store completely. I still sell on there from time to time, but I did fix the other problems.

The solution? I opened my own store. I'll use eBay as just one venue for a chance to advertise. That is what I should have done all along, but I really truly enjoyed my eBay store for a long long time.

IMHO, they are biting the hand that feeds them. If they want corporate giants to populate the site, it is working. I can't compete with the prices the big boys can get. I can't compete with paying the fees to keep the store open even if no one can find my things.

So, this time around, instead of having my entire business plan written in pencil to try to adjust to eBay's ever-changing rules/fee structures, I'll be watching as an interested spectator.

[Ronald Chase]

I have a quick comment about fixing the fraud issues on eBay and unless they adjust their thinking this is their biggest problem.

I own a domain name and for the past 6-7 years I have been trying to obtain that matching name on eBay. The only problem, it was in use once 7 years ago, BUT eBAY KICKED THAT SELLER OFF for ripping off customers.

Each time I request help from eBay (even Powerseller help) I get the exact same answer from eBay, It is our policy to keep that name in case the seller wants to use it again. WHY? The seller was kicked off, why does eBay want them back?

The second half of their answer is that I can contact the seller to obtain the user name? Really? How do I send an email through eBay' system to user who has been kicked off? It is impossible.

Hopefully someday the powers at eBay will change their thinking and they give a powerseller the username they want to match their web domain, until then I will just keep confusing my customers.

Ron

[Scott Pooler]

We posted an inquiry among our readers for comments on your thoughts regarding this subject. You may review the post at the URL listed above.

[Abe]

My biggest concern about the upcoming major ebay fee structure/policy changes is....will ebay actually stick to them, once they initiate them? The all-at-once great massive Store inventory fee increase in 2006, the SIS debacle, and all the endless other dubious changes in the past few years have made me beyond wary. I want to think positive, I really do, but it still seems too risky to depend on ebay to remain stable in their policies and fee structures.

Will I completely revamp my entire business strategy around the new changes yet again (only to have ebay quickly backpeddle and revise everything within 6 months to a year or so)....I think sellers need to seriously weigh the risks involved before taking out another mortgage, based on these new, upcoming Amazon-styled fees on ebay....

[BILLSTUFF]

I love your column Scot, as I have told you many times. However, I have also commented more than once that it would be useful to hold off on some of the acronymns or at least give us the full term the first time you use it. Did you know that acronymnattic.com has 47 different definitions for the term BMV? Some of them include Bulk Material Valves, Bureau of Moter Vehicles, Banana Mosaic Virus, Beginning Market Value, Bag Mask Ventilation, and Brazilian Men Videos. Did you mean one of those?

[John Stack]

Scot,

I disagree with your thinking. Mainly because it is viewed from a one size fits all perspective. I'm sure your are 'right on' for most of the categories. But, the price change is not for most categories. IMO, a significant part of eBay's problems is from their 'one size fits all' approach in pricing and policies.

Maybe they are beginning to see the light. I just wonder if it is too little too late.

Compared to 05 sales levels, our eBay sales have decreased by 75% even though our overall sales continues to grow. Mostly because of eBay's fee structure making it economically unattractive to post a high number of fixed price / low sell thru items. But, that is the way my category works.

eBay has it right in this case especially for restaurant equipment which is in a 'high density/low conversion' category. In 06 when they launched SIS, my sales increased by more than $100,000 / month. Buyers did not have a difficult time finding products in restaurant equipment. When they removed it, sales continued their decline.

Also, in my category, there is not so much of an issue with fraud or the buyers ability to find items.

regards,
john