Can Dropping Fees Revitalize eBay?

from the time-to-reinvent dept

Over the past few months, more and more people have been noticing that eBay seems to have stagnated. Sure, it’s been making plenty of money and still gets a ton of traffic, but it’s not growing as fast as people would like, and there are numerous signs that it’s starting to plateau. With Meg Whitman stepping down and John Donahue stepping up to the CEO position, the company has now announced lower fees and “tightened” seller standards to try to cut down on the rampant fraud that has managed to scare off many potential eBay buyers. Amusingly, this lowered fee comes just a day after new research hyped up how much eBay was saving people. The researchers behind the report suggested that, if the economy does go into a real recession, eBay should benefit as people switch to eBay searching for bargains. If that were truly the case, though, then it would seem eBay wouldn’t have to be cutting fees.

The real problem may simply be that eBay is too constrained by its own success. It’s attempts at branching out with things like Skype and StumbleUpon certainly haven’t done much to help eBay, as the eagerly prayed-for synergies turned out to not exist. eBay’s own attempts at revitalizing its core business have been equally pointless. So, it seems like something of a desperation play to lower fees, but it’s difficult to see it having much of an impact. Certainly, it will make eBay sellers happier, but the transaction fees aren’t the barrier eBay is facing in staying relevant. In fact, eBay itself should know this. When Yahoo tried to compete with eBay, it’s key selling point was lower transaction costs for sellers, and that didn’t do much to attract users.

eBay finds itself in a tough position. If it changes anything in its core business too drastically, it risks alienating those who helped bring the company to its current position. But, not changing will continue the stagnation process and certainly make the hole it needs to dig itself out of that much deeper. In figuring out a new path, it may want to take a few lessons from Amazon, which has been successfully reinventing itself from the inside with its web services offerings, while still striving to keep its core userbase satisfied. Amazon recognized that it could expand into a non-competing business that leveraged its strengths. While some might say that’s what eBay tried to do with Skype, that was an acquisition, rather than a ground up offering, and it’s still never been clearly explained what synergies there are between the two. In contrast, Amazon’s web services offering clearly builds on its experience managing large scale backend operations, as well as its ability to handle a massive number of transactions. eBay probably should be trying to become the “Kinkos” of the web — a small business’s ideal partner — but has yet to figure out how to do so.

Update: As noted in the comments and elsewhere, this isn’t so much a cut in rates as a change in rates. For many sellers, the fees will actually be higher.

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Companies: ebay

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Comments on “Can Dropping Fees Revitalize eBay?”

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Anonymous Coward says:

I’d say in High Tech, especially in the dot-com area, business process should be re-evaluated every 5 years. The world doesn’t stand still anymore.

For example, five years ago, camera phones didn’t exist, nor did VisualStudio, or the iPod. eBay’s lost it’s “Grarage Sale” athmosphere, and is now it seems too commercial. For example, Circuit City sells on there. Heh…

Bring Meg Whitman Back!

Hellsvilla (user link) says:

Re: Re:

The “lower fees” are just for items that DON’T sell. Otherwise, you pay MORE for anything that sells for over $2 (woohoo). Talk about massive spin!
If ebay was interested in helping itself, it would reverse that algorithm. You should charge more when the seller does NOT make the sale. Otherwise you are just trying to be a retail chain without having to pay the taxes.

everysandwich (user link) says:

I crossed them off my list.

I was horribly burned on a used car purchase off eBay, and as I investigated my legal remedies I discovered that the seller, who had a 98.6 eBay rating, had an “F” rating with his local Better Business Bureau. To me, that means the feedback system is nonfunctional.

Secondly, the auction model loses effectiveness as scale increases. The point of auctions is to find value by recognizing it better than your fellow shoppers. When your fellow shoppers are the whole world, that’s not too easy. Now I just use eBay for really odd items or as a real-world street price research tool.

Will says:


A few simple fixes: 1) Start enforcing the rules and quit turning two blind eyes toward power sellers who bend and break them. 2) Put more effort into fraud prevention and less into “improving the Ebay experience.” 3) Separate the true auctions and the retail stores/sellers. 4) Clean up the listings or allow me to.

The last one is a biggy. I’m tired of running a very strict search and getting a dozen pages of results to wade through when most are multiple listings of identical items by the same few sellers. I’m also tired of all the garbage misleading, overly broad, or non-descriptive titles. For the first group let me block sellers listings from my results.

I used to spend several thousand a year on Ebay. Now I visit if and only if I have no alternative source.

Steve Baumann (user link) says:

Dropping Fees (see: poorly masking increases)

This is one of the biggest laughs I’ve seen (at our – the seller’s – expense) in a long time. All you need to do is look at the few cents someone is going to save when listing an item, versus the greatly increased amount they’re going to have to pay after they sell it, to see this is going to end up putting a HUGE revenue increase in eBay’s pockets.

By their own numbers, let’s look at this ‘lower’ fee structure:

The insertion fee on a $25 auction will drop from $1.20 to $1.00 – a savings of 20 cents; With the final value fee jumping from 5.25% to 8.75% (yes, that’s raising the final value fee for that auction by 66.7%), that would mean that the final value fee on that item would go from $1.31 to $2.19 – an extra 88 cents (or net increase of 66 cents) into eBay’s back pocket. Since the majority of auctions are payed for through eBay’s subsidiary company, PayPal, there is an extra (roughly) 5% going to the company; they charge 35 cents, plus 4.9% for each transaction they handle that’s paid for by credit card, America’s favorite way to pay.

So let’s look at a typical eBay seller who is selling flash memory, coffee makers, or anything else that might roughly sell for 25 bucks. It will cost one dollar to list it, $2.19 when they sell it, then $1.58 ($1.23 + the 35 cents) when they sell it… WAIT, W A I T, wait a minute… that’s right, PayPal collects its’ fee on the ENTIRE amount received, including what the seller received for the shipping cost; so if it costs $8.75 to ship that coffee maker or whatever it is, then PayPal is collecting on $33.75 ($1.65 + 35 cents), for an actual total of $2.00. All together, eBay/PayPal is taking $5.19 from that $25.00, or 20.76% (remember that you have to deduct it from the $25, not the $33.75, because the seller has to use that $8.75 to actually ship the item).
So, even if the seller is able to double the price he paid for the coffee maker – doubtful though, that a seller is going to be able to get new coffee makers that retail for 25 bucks for only $12.50 – but let’s assume he can, then his profit on every $25.00 sale after he pays for his merchandise is ($12.50 – $5.19) $7.31, not including gas to take it to the Post Office, UPS Store, or wherever. Now if eBay/PayPal together were getting about 10%, that would leave our coffee maker guy with about 10 bucks profit, or an extra $17.00 for every hundred than he’ll be getting starting in February.
I think if eBay started figuring out how they can make the site more enticing for both buyers and sellers, instead of how they can wring every nickel possible out of the sellers, there would be a lot more profit to go around for everybody, and they wouldn’t have to worry so much about the looming threat of Amazon, Kijiji, Craigslist, and everyone else who actually makes it worthwhile for a seller to use their site.

Justine says:

A different view from a veteran Ebay seller

I have been an Ebay customer since 1998 and a seller since 2000. My happiest days are when the seller fees are RAISED, not lowered. Why? Because when it costs more to sell on Ebay, the riff raff run away in droves, and the selling environment is more conducive to high-dollar sales.

Also, my selling experience has been that the buyers of more costly items are wonderful customers. The riff raff buyers who buy penny merchandise make lousy customers, complainers, whiners and negative feedback leavers. So I set my sights high from the first year, and have never had to deal with the PITA buyers that most sellers complain about.

In my eighth year as a seller, I have a four thousand plus positive feedback rating, and only three negs, left in my first year of Ebay selling, by miserable buyers of items costing less than $5. So I fired those losers early on in my selling career, simply by selling higher priced merchandise, and I have always been happy as an Ebay seller. I beg Ebay RAISE the fees. Please, don’t make it cheaper to sell on Ebay. Make it more expensive.

icepick314 says:

No Changes for Casual Sellers

So what’s the good news for those who sell items that they want to get rid of?

For regular sellers, not the stores or power sellers, the higher Final Value fee mean less profit but doesn’t have any extra services provided.

I THINK the galleries are free for everyone but still doesn’t cover higher overall fee charged by eBay…

and why doesn’t still eBay allow Google Checkout system?

Justine says:

Re: Agreed!

I don’t know why Ebay won’t do anything about this practice, sellers listing merchandise for .01 cent and then charging the full retail price in the shipping and handling charges. My experience as a buyer has been that these are shoddy sellers, and I stay away from them. The crazy thing is that you can make such good money selling anything on Ebay that there’s no reason to rip people off on the s&h charges.

Ticked Off! says:

Why Shipping Is So High

Gotta love America, happy to get items for pennies on the dollar but refuse to pay appropriate shipping charges. Infomercials consistently sell product for $19.99 + $8.00 shipping when it costs them $1.30, but I ask for $3.50 to cover a small item and buyers get their panties in a wad.

Figure it out. 20 cent listing fee + 30 cent paypal fee + 5 cent Final value fee + $1.41 postage + shipping materials and that’s where your $3.50 comes from.

eBay has stuck it to the very people who created their wealth, the low level seller who sells the odd item that you can’t find elsewhere.

I am a powerseller and once my inventory is sold, I’ll be done with eBay. eBay has cheated me for the last time.

Anonymous Coward says:

Re: Why Shipping Is So High

but I ask for $3.50 to cover a small item and buyers get their panties in a wad.
Figure it out. 20 cent listing fee + 30 cent paypal fee + 5 cent Final value fee + $1.41 postage + shipping materials and that’s where your $3.50 comes from.

If you want to charge for shipping and handling, that’s fine. But the $0.20 listing fee, $0.30 cent PayPal fee, etc., should be covered by your gross profit on the item.

Specifically, it is forbidden by eBay rules to add charges that cover your eBay or PayPal fees. The only way they police this is if you directly ask for that in the auction, but the spirit is obviously “price your item to sell so that it covers your fees and gives you the profit you want”.

Personally, I don’t really care if you (or other sellers) want to scam the system to avoid final value fees by selling for $0.01 and charging $50.00 shipping. If the item is worth $50.01 to me, I’ll buy it. If not, I won’t. It’s undeniably part of the problem that many buyers only think about the actual bid, and not the final cost (including shipping and insurance).

coolbabyshoes says:

Re: Why Shipping Is So High

I to am getting out of ebay selling. Ebay has really lost its luster to me on two fronts,
First without quality low volume and high volume sellers ebay would be nothing, after all this is where ebay makes its money, from the sellers not from the buyers!!! The sellers are ebays really true customers.

Second as a buyer there is really no protection from ebay that they proudly tout. They use feedback which I consider a joke. they won’t even look at an issue. By not taking care of there good sellers and buyers they are getting what they deserve, the fees should be going to provide some form of service.

I used to be able to sell my baby shoes for 6-10 dollars, now I would be lucky to get a bid on them for .99 cents. For that I will just take them to the local goodwill store and save my time and money. Ebay has truly lost interest from buyers and sellers because the only thing they are interested in is there bottom line. As a seller just like ebay I have to be able to make money to stay in business.

There fees are such a rip off, I figure they take anywhere from 15 to 25 % right off the top.

dvdchris (user link) says:

The last three commenters need to look at the changes that are happening. Standards for sellers are being raised. Charging fair and accurate shipping costs are going to be an area your buyers will be grading you on. If buyers are leaving you a 1 or 2 on your DSR, they count as a dissatisfied buyer.
From the announcement page: sellers with a high percentage of buyer dissatisfaction will receive reduced visibility in Best Match search. Also, because excessive shipping and handling continues to be one of the biggest pain points for buyers, sellers with the worst DSRs for shipping and handling charges will see a decrease in their listings exposure, as well.

Twinrova says:

Ebay's shooting itself in the foot

Two years ago, my wife lost her job of 14 years. Instead of returning to work, she decided she’d do the “ebay thing”. For the most part, things seemed to work out for her.

Now with this news, she and others are questioning if it’s worth it to stay. Reading the new changes, sellers are being screwed by ebay with their “bait and switch” fee system. Sure, they tell people they’re lowering fees but tend to ignore the fact they’re raising fees to 8.75% on sold items.

Add in transaction fees, Paypal fees, and wow. Buyers will ultimately be hosed because sellers WILL make this up by either raising the value of their goods, making it worthless to use ebay to find items for less, or can the fees into their “handling” charge, which ebay is also going to nix.

Ebay hit its peak 2 years ago and has been going downhill ever since. While their business continues to “thrive” (remember, they’ve raised fees several times since inception), buyers like myself have returned to Amazon for very good reason: We KNOW we’re not going to get screwed at Amazon.

Like anything else in America, once greed hits the picture, it all goes to hell in a handbasket. Ebay is just another victim because people just don’t understand what it takes to maintain supply and demand but instead look for the “quick buck”.

Ebay needs to do much more than restructure its (screw you over) fee system and, as the article states, they’re way to big to do it now without offending someone.

I can only sit back and laugh while giving Amazon my money.

Michael Ward (profile) says:

Amazon can eat eBay's lunch any time it decides to

I’ve sold spare books, magazines, and (very) miscellaneous items on both eBay (as michael_ward) and Amazon Marketplace (as MikeAndKaren). Amazon is a much more pleasant experience.

You can list things for sale on Amazon and **they don’t charge a new listing fee every week**. And if you pay them $40 a month for a storefront, they let you create thousands of pages for a wide variety of items without making you renew the listing. And Amazon has millions of customers.

eBay has a storefront program, but they charge you a listing fee every month and a rather high percentage for the transaction, and extra fees for credit card clearing if you use PayPal as everyone does.

What’s keeping Amazon from taking over the eBay ecological niche? They are not organized in terms of categories the way eBay is. Their search mechanism is not quite as good. Feedback is still primitive. And… people don’t yet go there looking for the collectible kinds of things they find on eBay. Not enough customers, not enough offerings; chicken::egg.

However, that hasn’t stopped various people from trying to offer collectible items for sale. An unfortunate side effect of the dealers’ attempts to use the Amazon Marketplace for small, collectible, and niche items is the number of dead listing pages that come up on a search, the result of offerings of unique items that sold, or were taken off sale. This is a consequence of Amazon’s original model of retail sales of high-volume, commercially widely available standard items.

In the Marketplace for used books, there are only so many titles/editions ever published; once those all have a listing page, no more listing pages need be created. This is not the case with souvenirs of Paris. Amazon needs to hire a few more people, or some smart AI software, to clear out the deadwood. (While they’re at it, they could merge the multiple listings for identical items, created by dealers who failed to find the existing listing pages that cover their title/edition.)

eBay, with a stroke of the pen, could compete with Amazon in this market. It simply has to decide that its current pricing model, even as modified by the latest changes, is out of date. But it’s huge, and rich, and stuffed to gills with time-servers who are afraid to endanger the income stream. So we get deck-chair rearranging like this latest bit.

ShamanBooks says:

eBay's Increased Fees and Those Outrageous Shippin

I have bought and sold items on eBay for years and if fact have two eBay accounts, with extremely high feedback ratings so I speak with considerable experience when I say eBay’s recent ‘fee reduction’ is nothing but a cheap bait and switch maneuver. As Steve Baumann’s example clearly points out, eBay’s very slight fee reduction on the front end is all smoke and mirrors. While we all acknowledge that fraud is rampant on eBay, almost endemic, it seems to be tolerated by the brass as long as the gravy train rolls merrily along. The spin eBay has put on their latest ‘fee reduction’ is nothing short of corporate fraud (and greed) perpetrated on those who don’t read the fine print.
And speaking of fraud… I have had, and will always have a problem with sellers who grossly inflate their shipping fees in order to cover expenses and/or to avoid eBay’s now increased final value fees. All I ask is that a seller list the CORRECT USPS or UPS fees to ship an item and to come straight with their actual costs. Some years ago there was talk of the need for Federal regulation to control eBay’s ongoing tolerance of shipping fraud. eBay responded by instituting their almost useless “Gosh… did they over-charge you on shipping again?” feedback system.
The message is simple: YO EBAY BRASS… WAKE UP!!! CONTROL THE FRAUD IN YOUR BACKYARD before the Feds do it for you. If you refuse to get your house in order… and continue with ‘business as usual’… count on your loyal customer base to flee the sinking ship for the greener pastures at Amazon and the like. What does it take to get through to you guys???

4-80-sicks says:

…eBay seems to have stagnated. Sure, it’s been making plenty of money and still gets a ton of traffic, but it’s not growing as fast as people would like…

Can someone please explain to me the requirement that a huge company grow? If a company continues to make money hand over fist, why is it necessary that they make *more* money than last year?

Mike says:

I used to be a regular eBay shopper

I used to do a lot of eBay shopping. And I wouldn’t characterize myself as a “riff raff” or “PITA” buyer as Justine says (It’s so nice to see how sellers view buyers). But eBay seems do to very little in the way of helping customers who have been hurt. After having problems with a number of high-dollar items (A $300 shaver that took 2 months to get to me, a DOA vacuum that the seller refused to take back) and being extremely dissatisfied with both eBay and PayPal dispute system, I decided that I’ll just do my shopping with regular retailers and etailers. With them I never have any of the issues that I had on eBay.

Besides, nearly everything on eBay ends up going for close to market price anyway, so the savings really are insignificant. Things that do go for less than Market do so because they are either used or refurbs.

Anon in Alaska says:

eBay Rates

The changes weren’t intended to lower the price on stuff that sell, the changes were intended to lower the price onthings that _don’t_ sell. Lowering the listing fee means that it is cheaper to relist things that didn’t sell. This means that there will be more things for sale on eBay. With more on sale, eBay becomes more of a destination. This helps them compete with Amazon.

EBay also stopped charging extra for photos. This is good because it lowers the cost to list even more. Sure the cost to sell has gone up, but the cost to _try_ to sell has gone down. It has to do with marginal revenue.

tony nguyen (user link) says:

Market will correct itself

Ebay was built on pricing, it will correct itself on pricing for better or worse, it made these changes for profit margins, keeping up with the bottom line, but the market will correct itself, it is not doing anyone a favor by helping itself first. Sellers that can’t make a living will leave. Communities like are popping up. Shopping carts and e-commerce softwares are practically free, ebay will invite so much more competition from the very customers it decides to compete with. It should be an easy fee structure but it’s not. It’s like uncle Sam getting you on every corner, inviting cheats to the system (i.e. making it back in shipping fee). The uncle can put you in jail, but the Internet can provoke competitive innovations even ebay can’t respond to. Case in point…Amazon. Can’t pass good deals to customers when our profits are dwindling.

Bubba Gump says:

Ebay Security

Security on Ebay is a joke. If you catch someone circumventing fees, Ebay will nail them. If you catch someone using forged checks across state lines to purchase rare coins, Ebay could care less. I was nailed by a crook out of Hollywood, Ca. for 200$. She sent a forged check that bounced 15 days after being deposited. Local cops would do nothing, Hollywood cops would do nothing. When all 12 victims got together and contacted the FBI, we were told unless the crime loss was over 100,000 dollars they would do nothing either. So if you accept checks you will soon be a victim. If you accept Paypal only you can get burned by the item never received scheme. You send the item, buyer claims they never got the item. They get a refund of their money and then keep the item.

The lax security that Ebay has used on their site is finally coming around on them and they are losing users big time. It serves them right. Couple the lax security with the insane shipping price increases and Ebay has run it’s course. I closed my account last year and I say good riddance. You reap what you sow.

Gayathri says:

Alternative to ebay is the best solution

I feel that ebay is so greedy that they will never lower the fees that benefits both buyer and seller.. I was searching some alternatives for ebay and cme across They charge just 15 cents per listing and no commissions or final value fees.. Just give a try.. Better protest ebay..

Jocelyn says:

Re: Alternative to ebay is the best solution

Yes guys, the best way is to bycott ebay and sell on other website. I can’t imagine how ABSURDLY GREEDY ebay is!!!!!!!! Who are they trying to kid about the fees restructuring? 8.25% final value fees? That’s RIDICULOUS!!! Any biz that takes its customers for a ride and suck them dry will definitely spiral downwards eventually.

Ebay Alternative (user link) says:

I agree ebay has become a hog … sucking its users dry in listing fees, they don’t care a bit about there users and as long as we keep using the site it will continue. I started using Online Auction Exchange Free Online Auction Listings its a great abay alternative No Listing Fees, No Commission or End-of-Auction Fees. List your goods and services for a fraction of what you will pay eBay. Get your own online store for .99 cents a month. Online Auction Exchange. A must see.

Alfredo says:

EBay will continue on ......

Unfortunately, most people are just like brainwashed slaves, because they can’t visualize another way. I think that EVERYONE should boycott ebay because right now they have it where YOU cannot even leave negative feedback for buyers who stiff you or charge back. Plus recently I sold some shoes $28.00 and $10 s/h. Well I sent the shoes by UPS with tracking and they arrived at the woman’s house. She had the shoes for 2 months. I got a charge back 8 weeks later from paypal. They REVERSED the money. That meant I lost my shoes. I lost the s/h fees. I lost listing fees and everything. Not to mention it took me a month to collect from her. Then I wrote her asking for my money. She of course acted like she didn’t know anything about it and was all like, “Oh I will send. What’s the address. O I lost your address.” I was so mad at myself I finally said, “Forget it. It’s my fault for using this lowsy piss poor screwed up company Paypal/Ebay Dictatorship.”

They are doing what’s best for them and I’m gonna do what’s best for me. Right now seems like they are trying t screw over CRAIGSLIST too.

We pay the high fees to list, sell, final value fees, and then PAYPAL fees. I started taking MONEY orders seemed like I made more money but it takes longer

I can’t make a profit on paypal/ebay. I think a lot of people are simply advertising on there and selling it off site. I did that a few times I had people contact me and they came to my area and I met them next door got cash. I had to make up some of my losses. PHUCK EBay/Paypal

Pam says:

Meg Whitman and now John Donahoe have ruined the eBay experience for individual sellers (and, as a regular buyer as well, their disastrous policies have also degraded the buying experience). It is disheartening and says a lot about where our economy is now and why (one has to wonder what our nation’s business schools are teaching and how MBA candidates would possibly graduate if a prerequesite might be that they create and run their own businesses). It would appear the American business (or at least eBay) has sacrified decency, long-term goodwill and steady success with immediate profit, criminal behavior and greed. Imagine being a grown adult, running your own business … and having the all omnipotent “powers that be” treat you like a child, patronizing you with obscure and senseless rules that change on a daily basis, stealing your money without rhyme or reason, awarding you “stars” for “good behavior” like you are in kindergarten and doing everything in their power to see you fail? And eBay had such great potential!

Did eBay ever realize that their CUSTOMERS are their SELLERS?

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