Major eBay changes - a new listing type is born!

**Updated to reflect typo in 'other category tiers' and clarify effective take rate calculations.

Today eBay announced (microsite and ebayink) another package of changes (fingers crossed this is the last of them for 2008!).  The bulk of these changes roll mid-Sept so there's some time to ponder them and change strategies (more on that after the summary of changes).

There are some minor/expected/well predicted changes such as:

1. Electronic payment policy - eBay is eliminating non-electronic payment methods such as cash and money order.  The argument is that these are the least safe methods out there.  Merchant credit-card accounts and paypal (of course) are now the only valid payment options.  There will be lots of consipracy theories around this effectively being a step towards a paypal-only world for eBay and what-not, but for business-oriented sellers this won't be a surprise or a big deal.
2. Shipping limits - eBay tested these in DE and must feel they worked well as they are coming to the USA. Basically certain categories have S+H 'ceilings'.  You are not allowed to list anything that has S+H above the ceiling.  However,  if you have multiple S+H options, only one has to be below the ceiling, others can be above (e.g. if you have standard+expedited shipping, the standard has to be below the ceiling, but expedited can be above).
3. FVF discount for free shipping - There's going to be some pretty compelling discounts for offering free shipping. I'm guessing these will DSR based so my concern here is that it's generally well known by sellers that DSRs are broken (UPI and international) and thus I worry that eBay continues to build on this 'less than perfect' foundation.

The meat and potatoes - Welcome the new FP30 listing!
Prior to today's announcement, sellers effectively had two listing types (and associated 'rate cards' for each): core and store.  eBay has now introduced a new, third, listing type that is kind of positioned in the middle.  It's a 30-day, multi-quantity fixed-price listing (I call it FP30 for short).  I say it's in the middle because it has the lower listing-fee and duration of a store-listing, but it has a lower fvf (by category) and it gets core exposure.   Sellers that wanted FP on core had to kind of wedge their item into the auction pricing (which is expensive because the listing tiers up based on price) and live with a shorter duration (7 days on avg).

Taken individually this is not something that I think would be a big change, BUT when you marry this new listing type with the changes that eBay has made to BestMatch and Finding (de-dupe and 10-limit), eBay's strategy has become much clearer.

With this new listing type instead of fixed-price seller wedging their listings into the auction marketplace, there is essentially a bifurcation of the marketplace.  You'll have the old auction world with it's rate-card  and search algorithm (BM that consideres ending-time)

And now we have a new fixed-price world with it's own listing type, search engine (BM that ignores ending time) and fee structure

The new FP30 fee structure
Here's how I've been thinking about the FP30's fee structure.

First it has a .35 listing fee - regardless of start point.  You can list an item for $1 or $1m and it's still .35.  Also remember this is multi-quantity so you can list quant=1 or quant=1m and it's still .35.

FP30 has different 'tranches' than auction-style listings (auction dips at $25, fp30 at $50).  I call them T1, T2 and T3.

T1: $0-50
T2: $50-$1000
T3:$1,000+

And finally FP30 has FVFs for these tranches that vary per category.  Here's a quick summary of top categories:

Computers: (this is the lowest and very aggressive IMO):

T1: 6%

T2: 3.75%

T3: 1%

 

CE+photo:

T1: 8%

T2: 4.5%

T3: 1%

 

Media:

T1: 15%

T2: 5%

T3: 2%

Motors parts+accessories and apparel:

T1: 12%

T2: 9%

T3: 2%

All other categories:

T1: 12%

T2: 6%

T3: 2%

Example of FP30 economics

To make sure everyone understands FP30, here's an example.
SellerX lists 20 pairs of shoes for $50 (each of course) and sells 10 of them over 30 days.

Listing fee: $.35 (note this is not *10 as it is multi-quantity for one price)
FVF: 12% * 50 = $6 * 10 = $60
Effective take rate: $60.35 for $500 in GMV for an effective take rate of: 8.28%

Comparing this to the auction rate card is a little apples to oranges because there are lots of variables, but let's do an exercise that gives the decent auction economics to see which comes out better.

SellerX lists 10 items for $50 (well that would be dumb so they list it for 49.99) and they all sell (100% conversion rate).

Listing fees:
10 * 1 = $10

FVFs: 10 * (2.19+3.5*25) = $30.65

total fees: $40.65.  Effective Take rate: 8.13%

So in this scenario, auction-style wins. However if you drop the conversion rate to 33%, you get to where the listing fees are 30*1=30 and the total fees go over the $60 FP30 range.

The other variable is ASP and I encourage everyone to experiment with this math for your items using your conversion rates and ASP to see what's right for you.

Impact on seller's strategy
In the economic example above, 33% conversion rate was a tipping point where the FP30 listing's lower listing and higher FVF makes it less expensive from an effective take rate perspective.  So one strategy would be to consider auction+fp30 as essentially three 'buckets' driven by conversion rates (look at it per sku):

• If CRs > 50 - you should probably continue with the auction-style listings, use BIN if you need true fixed-price.
• If CRs between 10-50, you whould consider fp30
• If CRs < 10 you should look at eBay stores or not list the items on eBay.

The pitfall with this approach is my sense is eBay is going to really favor fp30 within BestMatch so most likely SKUs will behave differently under each and you'll have to experiment.  For an extreme example, you could have a boat load of an item that in auction format is basically hidden by bestmatch+dedupe and you get a 5% CR.  You'd be ready to move that puppy off eBay in a heartbeat.  However if you put it in FP where it's not de-duped and hopefully not going over your 10/page, you could bump up to 40/50% CRs which would indicate put it in auction-style, but that wouldn't be right in this case.

Another way to think about this is the fp30 gives you the chance to stuff as much product (opportunity GMV) into your 10 listings/page as possible for great economics.  So there's a 'store shelf' play here too to consider if you are having dedupe/10-limit issues.

ChannelAdvisor + FP30
Realizing the strategic importance of FP30, we've made sure that both our MarketplaceAdvisor standard and premium offerings will launch with support when FP30 hits the streets in mid-Sept (we're ready now).  We're also holding a free webinar for customers and other interested parties to discuss the new format and some other strategy ideas we have. This should be a great foundation heading into the holiday selling season and you can sign up here.

SeekingAlpha Disclosure: I am long Google and eBay.

Comments

[Kay Payne]

Well, I don't know about most of the above. All I know, is that I had to stop using Paypal after many years because I lost over $1,000 for two items after I proved they were received and well accepted. Also, the credit card people let the clients KEEP the items. So, I quit using Paypal. After RAISING the prices of my items, (I wasn't using the bidding feature), guess what, no one minded sending checks or money orders. I didn't lose one sale. Then, Ebay FORCED using shipping I don't use and automatically put it on my item descriptions. Well, that took me a great deal of effort to make my clients understand to totally ignore that and contact me with their zipcodes so I could give the Fedex shipping cost, which is lower. After overcoming that hump.......all of a sudden, Ebay said things HAD to be paid with Paypal. Well, I wasn't aBOUT to get involved with major losses again because I had already learn that Ebay and PAYPAL do NOT protect the seller at all, no matter what. So, I, instead of putting two or three $400, to $1000 items on Ebay, I just put one $55 one, but let it be known that there were other much larger items available. I was extremely careful with my wording in the item description and repeatedly stated things that might be misconstrued. Still some Newbie with 7 contacts, went ahead and paid for something she didn't want. E-mails were exchanged, and she even said she hadn't bothered to read the instructions on the item description. But, guess what? You got it..........I got screwed again. Even though the item was built, she said she didn't want it........she has been confused. I tried to work with her, but........she just got nastier. Now, sure enough, I have to refund her entire amount of money. No more Ebay for me. I have had it. All they care about is the buyers......no support at all for the sellers unless they can ship right away. Custom furniture builders like myself cannot do that.

So, Ebay, I wish you would get back to your wonderful old self. You are a joke now. If I had stock in you, I would unload it as fast as I could and invest it in Craig's List or something like it. Too bad.

[Eran Adams]

Scot,
Your whole posting is flowed, as it ignores the most important thing: Your analysis ignores that the new insertion fees are store level base (At least in the UK).
Go back and learn the eBay announcement (Unless the UK is different from the US).
Stop giving them the bullshit of the numbers, you do not sound that smart really.
The facts you missed are:
1. The insertions fees are ridiculously low if you take the Anchor shop. In effect, the more you list, the less you pay per listing for insertion.
2. The more you sell of an individual listing, the more weight it gets.
3. The search algorithm will give different weight to identical listings if even one element is different: For example, the duration.
4. Auctions listings are ‘being thrown into the mix’ of the search, if using eBay words. Looking carefully at search results, you will notice that (few) auctions are on the top of the searches.
5. As the whole process is really about ‘googlising’ eBay, the most important factor is your hated SDR’s. They are the equivalent of Google’s Backward links. Instead wasting energy telling your readers they are broken, spend the time telling them to start new accounts NOW if their rating is low, as they will never be able to raise them if they are even small business sellers (Like me), medium and large sellers have no hope in hell to raise their ratings substantially.
So the strategy should be:
LIST MANY LISTING (the equivalent of the old spamming at eBay, when one could list an items at different times and different start time).
The devil is in the details:
1. Start a new account if your rating is not good.
2. Change the stock availability to ‘infinity’, and have a many items as reasonable to launch as ‘default’ (I will put 5 or 10 to start with).
2. Find as many relevant categories, including those that in the past were a long shot.
3. Launch each line in the following BIN listing, whit a ‘Re-Launch if & if not sold’: 3, 5, 7, 10 and 30 days.
4. Launch one or 3 days auctions of as many items as you can (here one will need to be careful, and chose what and how many is right for his / her circumstances).
The spam is not gone, it simply changed and now embraced and encourage by eBay. The best way to manage that change is with your (as it was called) Marketworks). So here is what you get out of this process.

[Fruity]

I think you totally are not internalizing the risk of increased internationl presence on the site due to this change. None of those numbers matter if sellers are not able to maintain their profit margins. Its the sellers that shoulder all the risks. Of course, if the sellers use ebay merely as a dumping venue and dont need to use it as their primary or even secondary source of income its FABULOUS. But hey, what do I know... you're the one who makes all this money from these big sellers on ebay

[Arie Shpanya]

Another thought that crossed my mind.

1. Measuring CR for new FP30 is going to be hard. if you list quantity of 20 items on single listing and sell 1 for the 30 days duration, so currently it will give 100% CR in the inventory level (am i wrong?), but is practice CA merchants needs a way to figure out what is the CR for the inventory that is listed in the fp30 format
(Currently this can be can filter: inventory closing percentage last 30 Days. does CA plans some upgrade to that so fp30 items would be possible to evaluate CR too).

2. the Multi quantities listing type in the fp30: a feature that will enable TRUE shared quantity management:
Does CA reconsider it's priority due to the new change in eBay.

in order to fully maximize the inventory quantity on the shelf, and in order to create a true correlation between the inventory on the brick and mortar shelf and the inventory on the marketplace shelf: CA must come up with solution that will enable seller that have 10 items from sku, to list those 10 simultaneously to ebay.com (fp 30 format), ebay.co.uk (fixed 30 days format), amazon.com, and available in CA store.

Thanks
Arie.

[Chris]

I'm convinced that eBay is changing too many things at once to isolate which changes are actually working and which ones aren't. They are making all these separate claims and sometimes conflicting statements as you point out.

Anyway, I think buying stock in the pharmaceutical companies that make prilosec or zantac would be a good idea. I am guessing that all the stressed out eBay sellers are going to start hitting the zantac hard.

[Josh]

Scot,
I don't have your email...apologies for the typo on your name in my blog post, it's been corrected. There probably is a business selling aggregated data on the trends you're seeing, but I would guess you've probably got a bunch of other opportunities lined up ahead of that one.

[Arie Shpanya]

Scot,

A) do we know the fp30 is going to hit the eBay AU, DE , UK marketplaces too?

B) i'm a bit skeptical about this statement: "Multi-quantity fixed price is your friend (MQFP)"

there are a large portion of sellers that take into account the inv on hand.
so if i have quantity of 5 items of unique sku, and i do want to list it to ebay.com, ebay.co.uk, ebay.de, amazon, and CA store:
that leave me with 0 open quantity..
now if i would allocate 5 quantity to the ft30 of list via MQFP, then that would mean our CA store will have 0 quantity available and sometimes we would be able to list to the DE or UK because of allegedly shortage of items in stock, when in practice it just sits on our shelves (and on the MQFP eBay one..)

i would say this strategy is very well can fit for Bulk items sellers,
i would say the magic number is <10, but that depends also on the # of marketplaces the sellers sells to, and also on whether he does Inventory pools

Thanks,
Arie

[David Hooper]

Hey Scot,

Is CA's checkout still going to work with eBay or are we going to be forced to use eBay's checkout?

Thanks,

Dave

P.S. It is nice to see eBay make decisions for the long-term future instead of next quarter's earnings report.

[Sarah]

Hi Scot!

We're really confused at this end. You say "eBay has now introduced a new, third, listing type". However, Lorrie Norrington's announcement says "In addition to the pricing change, **we're extending the listing duration of all Buy It Now™ fixed price listings to 30 days**, up from seven." (My asterices).

This does not sound like a third option. It sounds like a complete CHANGE of options. It sounds like the 7 day option will no longer exist. Has someone at eBay told you otherwise?

We are very concerned about this, as we list ONLY BIN, and we have no idea how these new 30 day listings will show up in search against competitors who are doing 99 cent auctions of similar items.

I have a call in to our TSAM, but I'm sure the poor guy has a lot of voicemail to get through.

[Todd]

Does anyone know how Auction items will display in search results? Is this on the ebay sandbox yet?

[Chuck]

"And now we have a new fixed-price world with it's own listing type, search engine (BM that ignores ending time) and fee structure"

Scot,

Is the fixed price search ignoring ending time speculation on your part or confirmed?

I find that to be a big sticking point with many sellers right now. We may be able to list more to core, but it will not show until it is "ending soon".

Chuck

[Jeremy]

Scot,
Great breakdown of the numbers. I started crunching as soon as I read the anouncement this morning. I am excited about the new listing style. For us amounts to a huge decrease in listing fees while trading off a small increase in FVF. Your numbers go right along with what I came up with (ASP $50 conversion ~30%). The only glitch in this whole thing is how search is going to react. I am already having issues with best match mistaking unique items for one item (color and size differences). Ebay needs to work through these problems to maximize this new format.

[Roy]

Scot,
I think you're rate card is wrong for 'other categories' - middle rate is 6%. See:
http://pages.ebay.com/sell/August2008Update/BasicFees/

What about the checkout changes and CA?

Roy

[Jonathan]

Scot,

The effective take rate for your FP30 example should be ($0.35*20)+(12%*500)=$67/500 = 13.4%

[Mark Chivers]

Do we know when this new listing type will hit the UK shores ?

[Chris @ TameBay]

It's also worth noting that on eBay.co.uk they've introduced FP30 but are retiring SIF entirely. The UK have a choice of auction/auction with BIN for 1, 3, 5, 7, 10 days, or Fixed price for 1, 3, 5, 7, 10, 30 days