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EcommerceBytes-Update, Number 171 - July 23, 2006 - ISSN 1528-6703     2 of 8

eBay Fee Hikes: Strategies for Store Owners


By Ina Steiner
EcommerceBytes.com

July 23, 2006
 



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eBay Store owners posting on discussion boards last week reacted strongly to eBay's announced fee increases. Sellers are considering various options, from "clearing out deadwood" inventory, to taking the drastic action of closing their Stores.

eBay is increasing both listing and commission (Final Value) fees for Store inventory effective August 22. Listing fees will rise 150 percent for items under $25 and will rise 400 percent for items priced at $25 and over. Commission fees will rise 25 percent for items $25. For items priced over $25, the percentage increase in rates is variable depending on the selling price (http://pages.ebay.com/sell/announcement200607/overview/fees.html).

The way the fee increase is structured, some items and categories are affected more than others. For low-margin sellers whose strategy is to make money through a high volume of sales, the news was devastating. For instance, a $15 Store item, assuming it sells in the first 30 days of being listed, nets eBay $1.22 in base fees currently, and this jumps 27 percent (33 cents) to $1.55 under the new fee structure. Sellers in the media category (DVDs, CDs) are bound to be particularly hard-hit.

So what should eBay Store sellers do in light of last week's announced fee increases? I decided to ask some experts for advice on how they thought eBay Store owners could cope in an even more challenging and costly environment.

Robin Cowie, President of Worldwide Brands Inc. (http://www.worldwidebrands.com), said there are two ideas eBay Store Sellers should be thinking about: maximizing their conversion through a smart product mix, and looking into diversifying their sales platforms.

"eBay is a fantastic channel and you need to use it for all of the advantages it has, but if you are serious about online selling then you need to be using multiple channels." For a simple solution for hosting your own ecommerce site, Cowie recommended Yahoo Stores. "With the warming up of the relationship between eBay and Yahoo, this seems like a natural option. We have been a big fan for 7 years now." However, Cowie recommends keeping your eBay Store, calling it one of the best traffic-generating machines available.

Cowie, whose company sells product-sourcing guides, addressed the issue of Store inventory. "eBay sellers need to carefully select how the products in their store complement each other and really take advantage of the traffic that is coming there. Price increases might give you the temptation to pull back. Rather, I suggest looking at how your store is functioning and working on the total product mix, and how you're giving customers additional products they can purchase."

He recommends working with suppliers, which can be terrific sources of information. "One of our suppliers at Worldwide Brands sells picnic baskets. They also sell napkin sets, wine bottle chillers, and some very interesting wine bottle openers. They can tell you about all the latest developments in this market sector."

Skip McGrath is Publisher of "The eBay Seller's News" (http://www.skipmcgrath.com). He said too many sellers use eBay Stores as a dumping ground or a parking place for non-performing inventory instead of using Store listings as part of an overall strategy. "What I do is place the same items I am selling at auction in my Store at a high price but with free shipping. I use my auction description to drive the bidders who want it now to my store with a free shipping offer and a direct click-through link."

McGrath said sellers need to focus on profit margins. "I don't think selling $3 anywhere on eBay makes sense. My personal minimum is $20. The real issue is margins. In my opinion, you need a minimum 30% margin to make money on eBay with any item that sells for less than $50, and 22-25% on items $50 to $500. Over that you can accept a smaller margin, but even then, only if you have a high STR (Sell Through Rate)." McGrath recommended QuickBooks to track expenses and help sellers determine if they are really making adequate profits in their businesses.

McGrath also advised sellers to be cautious about opening their own websites. "Most small websites cannot be found in the major search engines, so owners have to spend funds on PPC (Pay Per Click) marketing. If not done correctly, this can actually become more costly than eBay fees."

Janelle Elms is a best-selling author, educator, speaker and eBay University instructor (http://www.JanelleElms.com/eBay). Elms said success on eBay comes from creating a business plan with goals; researching tools and people to automate your business; finding legitimate product sources; and fully utilizing eBay, PayPal and other companies to their fullest potential. She believes that 99 percent of eBay Stores aren't set up correctly and recommended several tips:

Elms also recommended sellers take advantage of the educational resources eBay makes available, including the taped eBay Stores class from eBay Live (http://www.ebayuniversity.com/features/ebay_live_2006) and current and archived workshops (http://pages.ebay.com/community/workshopcalendar/current.html). In addition, eBay hosts Brown Bag discussions for eBay Stores (http://forums.ebay.com/db2/thread.jspa?threadID=1000288496).

Elms said doing business on eBay is no different than doing business in the real world. "You must take responsibility for your vision - no one else is responsible for your success (or lack thereof) except you."

And while none of these experts addressed the issue, if you simply can't make a profit despite your best efforts, the best thing may be to close your eBay Store. Selling online isn't easy, and delaying a painful decision can only make you feel worse. Ultimately each seller must decide on her own how to run her business.

I'd like to hear from eBay Store owners on their thoughts and strategies (after all, you are the real experts). Please visit the AuctionBytes Forum and let us know how you're coping and if you have constructive advice: http://digbig.com/4mbmm

eBay Advice
I spoke to eBay North America President Bill Cobb and eBay's Senior Director of Seller Development Todd Lutwak on Friday about Store strategies. They suggest Store owners call eBay customer service. Representatives can show them how the new fees would have effected their June listings so sellers can better understand the impact of fee increases on their businesses. The reps can offer coaching and recommendations on best practices going forward.

Todd Lutwak recommended sellers use best practices, such as using Store custom categories and custom headers, to increase searchability. He said eBay Stores allow sellers to merchandise more efficiently.

Some Helpful AuctionBytes Articles:
Note: check current pricing and features on services mentioned in these archived articles.

eBay Store Owners Can Save Money with Referral Credits (11/7/04)
http://auctionbytes.com/cab/abu/y204/m11/abu0130/s03

Getting Your Buyers to Buy a Little Bit More: eBay Stores Cross Promotion (9/12/04)
http://auctionbytes.com/cab/abu/y204/m09/abu0126/s04

Care for and "Feed" Your eBay Store (7/9/06)
http://www.auctionbytes.com/cab/abu/y206/m07/abu0170/s03

eBay Email Marketing: A Strategy for Repeat Business (1/9/05)
http://auctionbytes.com/cab/abu/y205/m01/abu0134/s03

eBay Rolls out Custom Categories for Stores (3/19/06)
http://auctionbytes.com/cab/abu/y206/m03/abu0163/s02

Turn eBay Data Into Dollars: Cross Promotion Strategies (4/16/06)
http://auctionbytes.com/cab/abu/y206/m04/abu0165/s03

Selling Strategies: Looking for Life Beyond eBay (12/4/05)
http://www.auctionbytes.com/cab/abu/y205/m12/abu0156/s02

Knowing the Value of a Good eBay "About Me" Page (4/18/04)
http://auctionbytes.com/cab/abu/y204/m04/abu0117/s02

Using the eBay Affiliate Program to Boost Your Income (7/11/04)
http://auctionbytes.com/cab/abu/y204/m07/abu0122/s03

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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