Shoestring Theory

Currently documenting the house that is eating our lives, we will return to regularly scheduled programming in a couple of more months

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Panic at the auction house

January 30, 2008 at 2:33 pm by thetheorist

Smoke and Mirrors
Smoke and Mirrors by ravenheart-tka: CC on Flikr

My hopeful anticipation of eBay’s changes in fee structure quickly turned to panic as I clicked through the links in the announcement email. My heart beat quickened, the room seemed to shrink around me, everything started to get a little fuzzy. I saw my business going down in flames, customers gaining all control over the eBay marketplace, fees devouring every hard earned dollar I make. It was the end, might as well start polishing up the resume and looking for a real job. That blog I was about to start, this one, kiss that idea goodbye.

Quickly scanning the official eBay forums, I wasn’t the only one seeing the virtual sky crashing down. The boards were flooded with righteously angry sellers.

After a day of crunching numbers and talking to others in the industry, I’m still not happy with what eBay has done but I don’t think it is the end of the world. This was a confusing change and so far I haven’t seen eBay handle it as well as they should have. (Hit the read link below for my in-depth analysis of what the new fees mean.)

I suggest reviewing eBay’s total changes, but for this discussion the most applicable numbers are a slight decrease in listing fees, a sizable increase in the Final Value Fee for the less than $25 tier and the addition of free gallery pictures (previously a premium charge).

I was quoted (anonymously) on one of ZDNet’s blogs yesterday saying I expected the fee changes were a smoke and mirrors attempt to hid a fee increase that would result in a 10 to 60 percent increase in fees for many sellers. In the worst case scenario, I still think that is true. After running last year’s monthly averages through the new fee schedule, I estimated that my fees would have increased by six to nine percent (depending on which PowerSeller discount I would have qualified for). With no PS discount, it came out to a 10.5 percent increase.

It’s complicated to figure out, but the people who are worst off are those who sell a high volume of items worth less than $50, have a high sell-through rate and use no premium services (like gallery pictures). This would represent direct increase in their fees of 40+ percent. The fee reduction on low value items is just too small to offset the large change in final value fee. For a $24.95, the listing fee was reduced by five cents while the final value fee increased by 87 cents. So previously, to sell this item on its first listing would have cost $1.91 ($0.60 list fee plus $1.31 FVF). Now, it would cost $2.73 ($0.55 list fee plus $2.18 FVF): an increase of about 43 percent in fees.

So, we know this represents a fee increase for some sellers, but does it also represent a fee decrease for others, as eBay has hinted at in previous announcements. Maybe. If you sell high dollar items, have to relist items several times before a sale or used Gallery Pictures on a regular basis, you may save money under the new structure.

The gallery picture represents $0.35 per listing. I’m honestly hesitant to even use this as a savings. eBay has needed to add free, standard gallery pictures to auctions for years. The web has moved on and eBay has lagged in the virtual dark ages by charging people to slap a thumbnail picture next to their auction title. But, it is a change for the better, so we’ll take it for what it is.

Anyway, let’s take a scenario where someone is selling a $250 dress and previously used a gallery picture. Under the old system, they would have paid $12.57 in total fees if it sold the first time it was listed. New system results in $13.06 total fees. Now, if this dress has to be relisted 3 times before it sells, the old system would result in $20.47 in fees. The new system: 19.06.

My final analysis is that eBay is shifting the burden of its fees to high volume, low dollar items. If that’s the kind of category you work in, expect to send more money to eBay this year. If you happen to sell slow moving, high dollar items, congratulations, you hit the eBay fee jackpot.

I still need to address the other changes in this update, like feedback and added seller protection (of which I am skeptical). Hopefully I’ll get to that in the next day or two.

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  • 1 JoshDM Feb 21, 2008 at 12:43 pm

    I completely agree with the smoke and mirrors analogy.