Wednesday, January 30, 2008

Ebay's Veiled Fee 'Reduction'

I have long been outspoken about Ebay's ridiculous selling fees. A seller puts up money to list an item and then has to pay a percentage in final value fees. There are also myriad options to go with the listing, such as if you want to put up multiple pictures, display a gallery, have your listing put in bold lettering, use templates, have a "buy-it-now" price where the buyer can skip the auction waiting period and much more. All these extras come with a price, of course.

If the item doesn't sell, no problem Ebay will gladly charge you another listing fee for the next time (refunded if sold the second time). If the seller uses the preferred payment method of PayPal, which is owned by Ebay, another fixed fee and percentage is subtracted from the amount paid to you. The final percentage that the seller gets leeched out of him or her from the time the item is listed until the time that the money ends up in his or her possession varies with the price of the item. The lower the item price, the more the seller is screwed due to the nature of the fixed fees in relation to the small item price. However, after combining all the fees and percentages together, a 10% EBay-skim is not unrealistic., another one of their subsidiaries, is even worse and leeches about 15%. And to top it off, they take 25% of the shipping charge the buyer pays for. Gee thanks.

The problem has been that prices have constantly gone up. Most of us are familiar with prices going down after a product is introduced.

So, in today's news article EBay announces that the seller fees are being reduced! Yip-eeee! Wow, up to 50% off the listing fee! But wait... there's more! The final value fee goes up 67% for the first $25 of an item!

"A majority of sellers will see their fees go down," said company spokesman Usher Lieberman.

I did some calculations and found that fees will go up for those listed items less than or equal to $68.75. So clearly there are some winners and losers with this new policy. If an item sells below $68.75 such as many of the items you'd find under specific categories like music, books, and clothing, then those sellers will begin bleeding more.

I think this will be a move that will increase revenue for EBay because I think there are many more lower priced items being sold than higher priced items. I haven't checked but for every sold auto, I would guess that there are 1,000 items of clothing sold (autos are usually listed multiple times because a 7-day period is too short and it is not sold).

What EBay needs is a competitor, because currently they are a monopoly. They benefit from a network externality where sellers will sell because that's where the buyers are (buyers incur no fees to buy).

There used to be Yahoo! auctions, but for some reason it never really took off. I didn't even hear about it until its death was announced. and Craigslist are the only real alternatives but they do not have the auction feature and craigslist is largely regional. A nice benefit of is that the item lists for $1 each 30 days and there is no final value ripoff.

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