The Real Financial Effects of Two eBay Fee Decreases in 2008

Posted on October 16, 2008. Filed under: eBay | Tags: , , , , |

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Twice this year eBay has announced new “lowered” fees for sellers.   And eBay has stated that they have “realigned” their marketplace fees to provide “competitive” rates for online sellers.  But there is a disconnect in what eBay has publicly stated and what is the real truth.

The truth is that successful eBay sellers have been asked to pay more fees in 2008.  Both of eBay’s fee “decreases” have rewarded the unsucessful sellers while the successful sellers have picked up the slack.

From one of my eBay selling accounts, I have copied my figures from 2008.  Below is the total percentage I paid to eBay and Paypal (combined) for the privilege of selling on the eBay platform:

Jan 16.0%
Feb 17.6%
Mar 17.2%
April 15.3%
May 17.2%
June 21%
July 18.1%
August 19.8%
8/31 – 9/6 … 20.0%
9/7 – 9/13 ….. 21.4%
9/14 – 9/20   … 19.9’%
9/21 – 9/27 ….. 20.4%
9/28 – 10/04 … 25%

Not only is the percentage I pay to eBay and Paypal higher than my Amazon fee percentage (total 15% which includes payment processing fees) but my Average Selling Price (ASP) on eBay is significantly lower than other venues.  In addition, eBay continues to provide less service for the increased fees I pay.  One example that comes to mind right away is the Marketplace Research that until recently was included in the eBay stores fee that I pay.  Now, in order to receive similiar Marketplace Research service, which has been discontinued, I have to pay a third party vendor.  My eBay stores fee was not decreased despite eBay providing me lesser service.

The information above might lead you to wonder:

(1) Why am I still one Bay?

(2) How is my business handling the increased fees?

To answer the first question, I am still on eBay because I have product to liquidate and eBay is the liquidation venue of choice for most online sellers.  Given my newfound success on Amazon and the 2008 eBay changes which have made it virtually impossible to remain profitable on eBay, I have redefined my business which means that I have significant inventory of older product lines to liquidate now.  I plan to have the majority of my liquidation on eBay completed by the end of 2008.

How is my company handling the eBay fee increases?  Unfortunately, I have no choice but to pass those costs along to my eBay customers in terms of degraded service.  I cannot raise my prices in the eBay marketplace, where the number of buyers are steadily decreasing, so I have no choice but to provide less service for the same cost.  Whereas I previously provided priority mail shipping service for a flat rate shipping cost, I am now shipping many packages by parcel post for that same shipping cost which is resulting in several hundred dollars savings a month to help offset my eBay fee increases.  And I have altered my product offerings on eBay for one product line so that the I am providing approximately $2 less in actual product value per listing but I have not decreased my price.  I did so for that particular product line because I am the dominant seller in the eBay marketplace for those particular items and I have not seen a decrease in sales on eBay for that line.  As a matter of fact, as a result of the change I made on eBay I have seen my ecommerce website sales increase since the offering and price on my website is now even more attractive in comparison.

My business will continue to adapt to the 2008 eBay changes as will other successful online entrepreneurs.  Unfortunately for eBay, the changes we make in our businesses will not help to make a better eBay community.  Ours is a good company who cares deeply about customer service but if eBay continues to raise our fees while providing less traffic and lower ASPs then we can no longer afford to be even a mediocre eBay seller.  We have no margin to provide the “free shipping” on all items that eBay is so determined to force sellers to offer and the next fee “decrease” that eBay enacts will probably be the point at which it is not economically feasible for us to even liquidate product anymore.  For us, the new and improved eBay fee structure is simply pricing us out of the marketplace.  Fortunately for us there are other choices and we are exploring all opportunities because we have to.  

I am thankful for the many years that I have sold on eBay successfully and I have learned a great many things along the way which has helped me to create a stronger, better business.  Selling on eBay is not personal to me; it is business for me.  I cannot allow myself to be emotional about the many 2008 eBay changes and I cannot give consideration to eBay’s strategic decisions and how they will impact my company in the future.  I do not have the luxury to consider the long-term implications.  My current eBay and Paypal fees are a business expense and like all business expenses that get out of hand, they have to be evaluated for appropriateness now.  I am a business person who sees my eBay and Paypal fees rising to a level which I cannot afford and I have to make rational economic decisions about the venues where I offer my niche product. 

   

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6 Responses to “The Real Financial Effects of Two eBay Fee Decreases in 2008”

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Probably the best post I have read in awhile.

So true. You aren’t alone. I’m seeing similar numbers in my own business. I have relatively high margins on my products, so I can absorb a bit of fee increase, but I’m still expanding to other venues, since the goal of my business is to make me money, not give away a larger percentage in return for diminished services and decreased ASP.

It’s really too bad, since eBay has a great platform (when it’s functioning properly) and so much potential, if they’d just step back and listen to the sellers instead of dismissing them as noisy flea-marketers.

Love your work, brews. Really great, insightful posts. I have made the decision to stop selling most of my items on eBay and concentrate on my own websites. I will be forever grateful to eBay for teaching me how to sell and how to provide great customer service – heck, without eBay I’d still be a sleep-deprived night shift nurse! But the time has come for me to see if I can stand on my own, without hiding behing DRSs, feedback and eBay’s increasingly dodgy search.

Our fees have remained reasonably stable or decreased with every change. We are thus far happy with the recent changes. All selling venues are have increase sales. You must be the best to reap the profits.

@withavegeance I am always looking for good news and tru success stories. What category or categories do you sell in and do you sell on eBay.com or an international eBay site (like Canada, Australia, U.K.)?

Very keen observations – I too have been running the numbers, and while still profitable, I’ve diversified away from eBay, eBay is now only 37% of my sales mix with 22% coming from my website and 22% from a new business venture I launched this year. People should start exploring these other options NOW – and don’t give up on them, it may take time for them to take off, but if eBay collapses, you’ll be glad you’re not crashing with them.


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