EcommerceBytes-Update, Number 135 - January 23, 2005 - ISSN 1528-6703     1 of 7

From the Editor

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Oops, they did it again!

eBay raised certain fees for U.S. sellers effective February 18 http://auctionbytes.com/cab/abn/y05/m01/i12/s00. The fact that eBay raised fees was not surprising, but the rate of the increases caught many off-guard, and led to a strong reaction by sellers as reported in AuctionBytes Newsflash on Tuesday http://auctionbytes.com/cab/abn/y05/m01/i18/s01.

The new fees mean the monthly subscription fee for a Basic eBay Store rises from $9.95 to $15.95 per month, and the commission fee for all store sales rises from a base of 5.25 percent to 8 percent.

Three of my own friends who are long-time eBay sellers have closed or plan to close their eBay Stores. They are all long-time sellers who, while not making a fortune on eBay, rely heavily on revenue from their eBay sales. One had already taken a part-time job because of disappointing eBay sales last year. Another plans to open a storefront outside of eBay and is evaluating Vendio. The third has not yet decided what to do.

This is purely anecdotal and is not meant to be a scientific study. Furthermore, none of those three eBay sellers is going to stop selling on the eBay marketplace. But I think it demonstrates the increasing frustration on the part of sellers, and the challenge of making satisfactory profit.

The reason eBay has always appealed to online sellers, large and small, is that it provided the infrastructure to list items easily, and eBay provided the marketing. Sellers listed and fulfilled orders. Marketing was optional in eBay's early years, because there were plenty of buyers.

But in recent years, eBay has increasingly shifted the burden of marketing to its sellers, particularly in the case of its Stores.

Sellers are now asking themselves: if I have to pay for marketing, why send potential buyers to my eBay listings, where I have to pay eBay fees, put up with changing policies and technology problems and face increasing competition? Why not find a marketplace that offers lower fees and a more supportive environment? And why not create my own Website or storefront and drive traffic to it?

This may in part explain eBay's announcement that it plans to acquire technology assets of Kurant http://auctionbytes.com/cab/abn/y05/m01/i14/s01. But given sellers' likely inclination to reduce reliance on eBay, and eBay's own seeming ambivalence about storefronts, it's a questionable move.

I spoke to representatives from two long-time auction-management services catering to large eBay sellers to get their opinions about the ramifications of eBay's increase in Stores fees. Paul Lundy, head of marketing for Marketworks, said, "I think anytime eBay raises fees it is a concern to the seller community and they react accordingly. Even though eBay did not touch the core fee structure for listings (with the exception of the B&I category) and FVF, I think there is a lot of concern relative to the steady fee increases sellers have seen over the last 12 - 18 months. I think some of the reaction is more perception than reality. Bottom line is eBay still delivers a strong buyer market at an efficient cost."

On the other hand, ChannelAdvisor's President Scot Wingo said over 50% of his sellers are closing their eBay Stores and moving into ChannelAdvisor Stores, where sellers load inventory once and can then launch it onto multiple channels, including eBay.

My own personal take on eBay's increase in Store commissions is that it is very short-sighted. Increasing listing fees is not popular, but is seen by some as a way to increase selling prices and sell-through rates. But penalizing Store-owners for successful sales by raising commission fees seems counter-intuitive.

eBay had an incredibly profitable year in 2004 http://www.auctionbytes.com/cab/abn/y05/m01/i20/s01, so I am left to wonder whether eBay is only interested in increasing its bottomline for the sake of its share price.

ChannelAdvisor's Wingo thinks eBay may have hoped sellers would shift Store listings over to the core site where conversion rates and listing fees are higher. But, he said, sellers place slower-moving inventory into their stores, and it does not make economic sense for them to move that inventory to eBay's core site.

Improvements are needed in many areas of eBay: increased customer service, fraud-reduction and site stability are three biggies. But instead, eBay CEO Meg Whitman told investors last week the biggest area of investment in 2005 would be in China. To Whitman I say, "tsk, tsk."

If you agree, disagree, have constructive advice for fellow sellers, or would like to let us know your plans, then take a quick jaunt over to the forums. There's already a discussion going on about the eBay fee increases: http://www.auctionbytes.com/forum/phpBB/viewtopic.php?t=13153

We've gotten some interesting letters from readers, particularly about the eBay fees announcement, so be sure to check them out online at http://www.auctionbytes.com/cab/abu/y205/m01/abu0135/s07

In today's column, Mark O'Neill looks at free or low-cost image-hosting as one way to lower costs. Also, the results are in from our survey of eBay drop-off stores, detailed in today's first article. We have a very interesting Industry Profile with Rajesh Navar, founder of LiveDeal.com, and today's Collector's Corner column provides a nice diversion with Michele Alice's look at the collectability of yo-yos.

Thanks for reading.


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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