EcommerceBytes-NewsFlash, Number 1684 - December 13, 2007     2 of 3

Chatter around eBay Fees Reveals Little New

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There has been rampant speculation that eBay will reduce certain fees next year, culminating in a report issued by Bob Peck of Wall Street firm Bear Stearns on Wednesday. "We are expecting eBay to make category price changes in early 08 that would lead to a drastic shift in listings fees to final value fees. More specifically, we expect eBay to reduce domestic non-motors, non-real estate, category listings fees by 50% and increase final value fees by 30%." However, none of the recent reports cite anything new or substantive.

eBay CEO Meg Whitman addressed the issue of pricing in October during an earnings conference call, when she said, "We've not ever really decreased price, and it is possible that by decreasing price, we actually increase the revenues and vibrancy of this market in such a way that this price decrease is self-liquidating," though she said she didn't know if that was going to happen.

Whitman also stated at that time that category-based pricing may be in eBay's future.

eBay spokesperson Hani Durzy said on Wednesday that eBay has not announced anything about fees. However, "we are always looking at ways to adjust the marketplace to make sellers more successful." He pointed to aggressive promotions and testing around price elasticity conducted this year that was done to "explore what we can do with insertion fees, Final Value Fees, and feature fees."

eBay has rolled out category-based pricing in Germany and UK, and has run long-term pricing promotions on eBay.com this year, such as the insertion-fee sale for auction and fixed price listings that ran from October 18 through November 5, 2007, and the final-value-fee sale for auction and fixed price listings that ran from June 19, 2007 through August 5, 2007. eBay also ran a 5-week promotion ending December 12 in which it made the Gallery feature free for sellers.

Durzy said eBay recognized that sellers accept a lot of upfront risk with the balance between insertion and final value fees on eBay. "It's a pain point for them," he said. "One thing that may allow us to be a little more aggressive and open to more possibilities is the finding side." As eBay is fine-tuning finding, it means eBay has a technological issue they didn't have in early 2006, he said.

Many sellers will remember the Stores in Search debacle of last year in which eBay gave more exposure to eBay Stores listings on the main eBay.com search results pages, and quickly rolled it back and raised Store fees. At the time, eBay said the increase in Store listings made it more difficult for buyers to find what they were looking for.

The only hint at what eBay may be currently focusing on came in this statement from Durzy: "It appears that the pain point caused by the ratio of upfront fees versus success fees seems to be a little more severe in fixed-price listings." But, he said, "everything is on the table" as evident by the testing eBay has done in 2007.

In his report, Bear Stearns' Peck advised eBay to implement a "drastic" reduction in listings fees, which he believed would convince sellers to stay on the platform and "stem the GMV bleed to other platforms, particularly Amazon." He believes that could also lead to an increase in the level of quality merchandise on the site, which might lead to an improvement in buyer demand. However, Peck said, "the fee structure change falls short of addressing the full scale lack of buyer demand on the platform."


About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.


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