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January 16, 2008

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.


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