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March 19, 2013

Part II/II: eBay Announces Spring 2013 Changes - Seller and Fee Changes

This is part II of a two part series going over the big changes that eBay has announced today (March 19th, 2013) commonly referred to as the eBay 13.1 release.

  • Part I/II - In part I (here), we gave an overview of the changes and detailed the non-fee changes for sellers that eBay is rolling out this Spring.
  • Part II/II - (you are here) The 13.1 release marks the biggest changes that eBay has made (in the US) to the fee structure since April 2011 when they started charging final-value-fees on shipping-and-handling.  We believe that sellers are going to really want to understand these change so have devoted a whole post to just the fee change portion of the 13.1 release.

We are also planning to host a webinar detailing these changes and answering any questions you have this Friday at 10am ET.  Details are here (www.channeladvisor.com/resource-library/webinars).

In this post, we'll introduce you to the eBay 13.1 fee changes that are designed to simplify the eBay fee structure, and will impact all sellers.  We'll also go over a detailed anlaysis of the impact of these changes.

Quick eBay fee refresher

There are several components to the eBay fee structure that we'll cover in this post:

  • Subscription fees - eBay offers stores that have a bunch of features not covered here, but they do impact fees as you'll see.
  • Listing fees - eBay is a unique platform that has the concept of listing fees.   When you list an item to sell, you have to pay for that listing.  This was originally modeled after classifieds and has survived as a way to create an economic dis-incentive to listing 'junk'.
  • Final Value Fees (FVF) - eBay charges a % of sales based on the category and ASP.
  • Miscellaneous fees - These are fees that add on to the above such as listing upgrades, 

One eBay policy to remind everyone of is the eBay Top-Rated-Seller-plus (eTRS) discount - if sellers maintain a very high bar of performance (feedback, shipping, etc.) they are rewarded with a 20% discount on their FVF.  For example, if the FVF would normally be $10, they get a $2 discount. In terms of discounts, if a FVF would be 8% before the discount, it would be (8% * 20% = 1.6% savings, 8-1.6% = 6.4%) 6.4%.  Some sellers I've talked to, do math of (8%-2% = 6%) which is not correct and over-amplifies the discount.

Finally, to illustrate how complex the fee structure is, especially around FVFs, here's a sub section of the current eBay fee section (click here to see the whole thing) for fixed-price sales:

Ebay_sr13_1_current_pricing

As you can tell this is pretty complicated.  What you have to do is first find your category, then take the price that your item sold for, say $85.  You pay $3.50 for the first $50 (7%) and then 5% of the next $35. In the World of eBay we call these price break tiers 'tranches' and they cause both new and 10-yr experienced sellers to scratch their heads and pull out their calculators to try and figure out what the fees are going to be for their items.

In addition to being complex, these fees make eBay more expensive percentage-wise for low ASP items and then the effective take rate declines as a percent as the ASP increases.  This also creates an 'optical' challenge for eBay because it makes eBay seem more expensive than it actually is.  

The eBay 13.1 fee changes summary

You can see the detailed eBay 13.1 fee changes here (www.ebay.com/price-compare).  Here are the highlights:

Note: General (non-store) changes go into effect April 16, 2013.  Store changes are effective May 1, 2013).

Listing fee changes

For listing fees, eBay is including free listing with the store subscriptions, while increasing the listing fee for the Premium and Anchor Store tiers.  This table illustrates the before and after:

Ebay_sr13_1_store_plan_comp

Most of the reader's of this blog are in the higher eBay tiers, so we will focus on the impact to Anchor stores.  As you can see from the table, there are three moving parts to Anchor stores:

  1. The monthly fee goes down $120/m (or $1440/yr) if you pay annually.
  2. Your listing fees INCREASE by $.02 (66%) 
  3. You receive 2500 free listings/m

The analysis section will detail what this means for different sellers.

Final Value Fee (FVF) Changes

eBay is introducing flat-rate FVF fees - getting rid of the tranches and charging a flat-rate percentage FVF based on the category.  If you don't have a store, all FVFs are a flat 10%.  If you do have a store, here are the new take rates which range from 4-9%.

This table summarizes the new FVF values for each category:

Ebay_sr13_1_new_fvfs

Note that the 'FVF with TRS20% discount' column is for those Top Rates Sellers that get the 20% discount.  Also note that eBay has a $250 cap on the fees for a single item (most likely this wouldn't be hit unless you were selling items > $2,000).

Finally, eBay has done something I've never seen before, they have compared the new fee structure to Amazon's to illustrate that eBay has the lowest fees:

Ebay_sr13_1_amzn_comp.jpg

***It's important to note that eBay's fees do NOT include payment, and Amazon does.  To make this apples to apples you need to add ~3% to the eBay column(s).  For example, for CE you have 6% non TRS and 4.8% TRS vs, Amazon's 8%.  The true comparison for eBay would be 9% and 7.8% once PayPal is included.

All of these changes will cause decreases for some and increases for others.  In the next section we go into a detailed analysis of the listing fee and FVF changes to see who is the most impacted and who benefits the most.

eBay 13.1 fee changes analysis

In this section, we will look at three different angles and detail the impact for sellers:

  • Listing fee impacts
  • FVF fee impacts
  • Summary: Biggest winners and losers

Listing Fee Impact

First, let's look at the listing fee impact.  In this analysis we focus on Anchor stores and fixed-pricing, detailed in this table:

Ebay_sr13_1_listing_fee_calculator

This table tries to simplify all the moving pieces and illustrate, based on listing volume in the left column, if you save or will be paying more.  As you can see there's a 'break point' when you balance out the subscription, free listings and listing fee increases at 12,250 listings.  In other words, if you list less than this a month, you will save and if you list more, you will pay more.  As you can see, when you increase the number of listings higher and higher, the positive impact from the free listings is diminished and the price increase approaches the 66% caused by the move from $.03->$.05 which is effectively a 66% increase.

FVF Fee Impact

To understand the impact of the FVF changes, you need to look at three dimensions: category, ASP and old/vs new.  To simplify this, we have five charts that cover a variety of popular categories:

  • Computers
  • CE
  • P+A
  • CSA
  • Sporting Goods

To improve the readability, the images are smaller, but you can click to expand.  Also, these prices are without the 20% FVF discount.  If there was a 20% FVF discount, the $ differences would be different, but the % savings/increase are the same.

Ebay_sr13_1_computers

Unless you are selling > $1,500 computers, you are saving anywhere from 22% to 43% with the lower ASPs seeing the most benefit. 

Ebay_sr13_1_ce_fvf

With CE, if you are under $100 in ASP, you are saving, as much as 14%.  If you are over $100, your FVFs are increasing to as high as 18% at the $1000 range.  Pro audio and TVs are examples of CE items frequently sold at this ASP and higher.

Ebay_sr13_1_p_and_a

P and A sees price breaks as high as 20% at the low ASPs up to $1000.  Above $1000, the fees increase pretty substantially as high 32-58%. Tires and other 'big' auto part items (mufflers, bumpers, body parts, etc.) fall into these categories.


Ebay_sr13_1_csa_fvf

CSA sellers will see a discount as large as 10% for those items under $100 and over $100, the fees increase from 6%-11% at the higher ASPs.


Ebay_sr13_1_sg_fvf

Sporting Goods sellers under $100 ASP are saving 4-18% and for over $100, the fees increase from 6-44% at the high end.  High end sporting goods items include golf clubs, board sports and exercise equipment.

Biggest Winners and Losers

Looking at the biggest winners (savers) and losers (fee increases) is important because not only does it alert sellers that their economic models are about to change, but it also helps us 'read the eBay tea leaves'.  Reading the eBay tea leaves helps us understand:

  • What behaviors is eBay encouraging vs. discouraging?
  • Where does eBay feel they are competitive vs. un-competitive?
  • What categories is eBay making generally more expensive?

Biggest Winners

  • Sellers that list less than 12,250 items/month
  • Computer sellers 
  • Low ASP sellers (everything under $75 has a fee discount)
  • High ASP sellers (if your ASP > $100, you are impacted with the only exception of P+A)
  • Under $75 ASP sporting goods sellers.
  • Under $100 ASP sellers for CSA, CE
  • Under $1000 ASP sellers for P+A

Biggest Losers

  • Sellers that list more than 12,250 items/month
  • Sporting good sellers over $75 (one of the hardest hit categories)
  • CSA and CE sellers over $100 ASP (will mostly be on the luxury apparel and CE/phone guys side)
  • P+A sellers over $1000
  • I didn't cover it above, but other categories that will feel pain: Business and industrial

Conclusions

eBay has definitely achieved their goal of simplifying the fee structure.  I don't think anyone will be mourning the loss of the eBay tranches.  These fee changes definitely make eBay more competitive in most categories with the only negatives being for those sellers with high ASP items or that list over 12,2500 items a month which is a small set of the population.  To put it in perspective, let's look at the most impacted FVF: Parts and accessories @ $2000.

  • Before the price change they would have paid $101 for the $2000 item which is a 5.05% effective take rate
  • After the price change they will pay $160, an 8% take rate

So while, this is a 58% fee increase, from an absolute $ perspective of $59 on a $2000 item, it probably isn't going to change much behavior.

This blog post was written by Scot Wingo, CEO, ChannelAdvisor. eBay is an investor in ChannelAdvisor.

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