An Analysis of the New eBay Pricing Change by a Seller In-the-Trenches

Posted on February 2, 2010. Filed under: eBay | Tags: , , , , , , , , |


I have been in the trenches on eBay, selling on the platform for more than a decade so I am admittedly skilled at adapting to change.  I must say, though, that I’m getting really weary of eBay’s never-ending drama especially when compared to the uneventful calmness of selling on Amazon.  eBay recently made their first major Announcement  for the 2010 year and we have taken a week to digest what the announcement means for us.  Given that eBay is dramatically changing their complicated fee structure once again, there is obviously going to be different impacts of varying degrees on eBay sellers.  I think Henrietta of Red Ink Diary  has put together a good analysis of the direct financial impact of the fee change.  So I’ve decided to analyze other important but indirect issues concering the announcement. 

Delivery of the Message (Communication with Sellers)

According to the eBay Announcement on January 26, 2010:

Our Lowest Insertion Fees Ever Coming This Spring: Free Auction-Style Listings; Fixed Price as Low as 3¢ with Full Search Exposure

Great news: Starting March 30 the upfront cost of selling on eBay will be dramatically reduced for sellers of all sizes with our lowest Insertion Fees ever. Whether you’re running a business or selling to earn extra cash, choose from a range of options designed to make your selling easier and more profitable.”

So, at first glance it would seem to be “great news” for sellers.  That is, until you begin reading the details.  You can get fixed price insertion fees of 3¢ OR free insertion fees for auctions but NOT both.  And to get the inexpensive insertion fees you have to pay $299.95 every month.  Or to get the free insertion fees for auctions, you have to start your listing for 99¢ or less AND pay higher final value fees as well as much higher insertion fees for fixed price (50 cents each item not the 3 cents as “advertised” in the headline). 

The headline touting the lowest insertion fees ever was captivating.  Was it untruthful?  Technically no.  But it was clearly misleading.  Think of it like this — suppose an eBay seller was offering a couch for $500 plus $175 shipping.  Then the next week, the eBay seller put in their title “Sofa now only $200 Lowest Price EVER” but also had changed their shipping cost to $600.  Would the potential buyer who clicked on the $200 sofa, only to see the increased shipping fee, be frustrated and think of the seller as untrustworthy?  You betcha.  It is unimaginable that eBay would think most sellers would be overjoyed at first glance from reading the headlines and then skimming the full article.  It doesn’t take a rocket scientist to know that most sellers monthly fees are going to go up under the “new and improved” pricing plans.  While that may be great news for eBay, it isn’t so great for many of the sellers in the trenches.

For so many years, eBay has written sensational headlines to capture the attention of mainstream media who often read no further than the headline and even if they read the details, they likely don’t understand the details or the impact.  I so strongly believe that unless and until eBay hires someone who can “speak the language of the average seller” that eBay will continue to fail to motivate sellers to stay on the platform.  eBay continues to communicate ineffectively with sellers and the biggest reason is because they don’t have the right folks within the company. 

While it’s true that eBay hired a spokesperson for their corporate blog who is clearly very genuine, Richard would be the first to tell you that he doesn’t have experience as an eBay seller to really know and understand what we are complaining about sometimes. 

The announcement headline and opening paragraph were so misleading that I don’t consider it to be simply poor communication but rather failed communication.   At that point of initial failed communication, I think most sellers didn’t proceed to really analyze the details unemotionally to ascertain the real financial effect upon their business.  It was clear that eBay misled sellers with the title and, thus, how could anyone believe this was anything other than a price increase in the guise of “great news”?  No further evaluation was necessary for most sellers.  Price increase, and in some cases huge price increase, was all that some sellers could see from the first glance.

Nonfinancial (Indirect) Reasons Sellers Used Store Inventory Format

The eBay system is famously “broken” in many ways.  Successful eBay sellers have learned to find workarounds.  In an effort to keep this blog post from becoming a “book”, I’ll mention just two technical issues that made it necessary for us to use the store inventory format rather than the fixed price format.

Collectibles / Toy Sellers:  Beginning late September 2009 eBay changed the Best Match criteria for Art, Antiques, Coins & Paper Money, Collectibles, Dolls & Bears, Pottery & Glass, Toys & Hobbies, Stamps, Sports Mem, Cards & Fan Shop, and Entertainment Memorabilia.   In order “To keep the freshest inventory on top and surface a broader selection, the main sort factor for Fixed Price listings in these categories will be recency of listing instead of listing performance score

Translation is that putting items in the above categories on fixed price Good Til Cancelled (GTC) is not a good strategy.  I’ll explain with an example.  Assume you sell new Barbie collectibles (toys) and you get in a new Barbie doll this month.  You list a quantity of 48 on fixed price good til cancelled.  Assume 40 dolls sell this month and so at the beginning of next month you replenish your inventory and increase your quantity from 8 dolls back up to 48 dolls available.  Then the next month you sell 46 dolls and you do the same thing.  At the beginning of April, you have a quantity of 48 dolls available and you have sold a total of 86 dolls over the last two months.  However, a new seller lists the same Barbie doll at the same cost as you and from the minute that seller’s listing gets indexed the listing is boosted above your successful listing because it is newer (more recent).  So a competitor who has sold none of the same item will find their listing above yours simply because they came later to the game. 

So, with this example, I go back to my statement that the fixed price good til cancelled listing is not preferable for selling toys.  As such, we have chosen to list the majority of our items in store inventory format good til cancelled and then list some items on fixed price 30-days to bring traffic to all our items.  Doing so allows us to pay the lower insertion fee for store items since they won’t get core visibility anyway with good til cancelled, no matter the format.  And, then, of course we have to manually manage the 30-day fixed price items and manually relist them every month which is very time-consuming. 

Given that eBay is getting rid of store inventory format soon, we have had to decide whether we could manually manage all of our toy items on fixed price 30 day listings.  As you would expect, we cannot manually manage 30 day fixed price listings for all the different items we currently have available and putting the items at fixed price good til cancelled would mean that every month those items would receive decreased visibility because they are not as recent.   So, it is not just the increased transactional costs for this new fee change that impacts our decision about how many items to list on eBay but it is also the technical challenges we face by having to manage those listings manually. 

Limitations of Bulk Activities for Fixed Price Items: Currently, it is very easy to send a store inventory item to auction.  Just click the dropdown arrow and a few more clicks later and you’ve sent your item to auction.

Say, for example, you have a quantity of 10 for an item and you want to send one to auction.  A few seconds and you can accomplish that if the item is listed in the store inventory format.  However, if the item is in fixed price format it is much more complicated.  You have to first go in the listing and revise it to change the quantity manually.  After reducing the quantity in the listing you then have to choose “sell similiar” and go through several screens to list your item in auction format.  It is a cumbersome and very time-consuming process.  So, going forward we will be running considerably fewer auctions, if any, on eBay.

All Traffic is Not Equal

On the Auctionbytes Blog Richard Brewer-Hay, the eBay corporate blogger, made the following comment:  “Yes, it’s true that some sellers will see their FVFs go up with this change (even though up-front insertion fees go away and final fees are simplified greatly).  Having said that, the new total fees are considerably lower than alternative sites with equivalent traffic. “

As ecommerce merchants such as myself have said numerous times — traffic doesn’t equal sales and even the quality of sales transactions can also be different between platforms.  I have a concrete example I’d like to share.

Late August I had the opportunity to purchase a closeout item and I bought all that was available which was 30 units.  I retailed these items at $49.95 each and because they were fairly heavy items, I charged $19.95 shipping on Amazon but calculated shipping on eBay which was about $14 on average.  I initially listed half the quantity on Amazon and half the quantity on eBay.  I used fixed price format on eBay for maximum exposure. 

Now what is unique about this “test” is that I was the ONLY one with this item on both platforms.  Not one other seller on Amazon or eBay had this item or any other similiar item.  So I felt it was a good test especially because my feedback was exactly the same on both platforms (100%) so I felt that potential buyers would view me as a trustworthy seller on both platforms.

I had the items listed in early October and I barely had the listing up on Amazon before my sales on that platform began.  I kept selling so many on Amazon that I kept having to reduce my quantity available on eBay and increase the quantity on Amazon.  Shortly after Thanksgiving I had sold a total of 29 on Amazon and zero on eBay.  I had only one item remaining which I kept listed on eBay to see what would happen.  

Finally, less than a week before Christmas, I sold one on eBay.  However, from the time I listed the item on eBay until the time a quantity of one actually sold, I did  have traffic.  People were seeing my listing on eBay.  It was my number one viewed item on eBay.  And people asked all sorts of questions — most of the questions were about information that was already included in the listing but not one buyer until the very end.  

I used “Instant Payment Required” on eBay so that I could be sure I would be paid.  So, a few days before Christmas an eBay buyer purchased my item then immediately called and emailed me after purchasing to ask if they could pick up the item instead of having it shipped in order to save on shipping costs. 

So, while I had traffic for this item on both eBay and Amazon, my sales transactions experiences were very different.  Therefore, when I consider the “cost to list an item” there is much more to consider than simply the insertion fee and the amount of traffic that listing will generate.  If it takes me the same time to list the new item on Amazon as it does to list the new item on eBay but my sales will be 29 times greater on Amazon for the effort and the “after-care” required on Amazon will be zero versus 100% on eBay then it is a no-brainer to list more on Amazon and less on eBay.

Final Comments

The fee “change” impact for me is a significant increase in overall fees (more than 10%) and an enormous investment of time to manage fixed price 30 day listings for my toy items and to manually move fixed price items to auction format if I continue on with the same strategies I have now.  Obviously I have to make changes for my eBay accounts…. once again.  I currently have very little listed on eBay for two main reasons: first, Amazon sales are keeping me hopping and I had put all my eBay stores on vacation in December and have not ramped up my listings again because I was waiting on the January announcements.  So I am not in any rush to make changes since I have very little listed at the moment anyway. 

The only way I can afford to stay on eBay is to cut costs again and I’ll do so by consolidating eBay stores (to reduce the monthly stores fees) and by listing much fewer items in my main category of toys and collectibles.  Several of the items I list in that category are not carried by other sellers on eBay or only by a handful of sellers so, at least in my case, transferring more inventory from eBay to Amazon (where I have little or no competition for most items I sell) will result in eBay buyers having decreased selection on eBay. 

Now I’m not boycotting eBay or making an emotional decision to list less on eBay so that I can “hurt” eBay.  I am a business person and, after careful consideration, I have concluded that I have to reduce the number of stores I manage and the number listings on eBay so that I can save money and time (and time is ultimately equivalent to money).  The new pricing structure, with all it’s choices, may be great news for some ecommerce merchants but for me it is simply news that I have used to make plans for 2010 where eBay is still a part of my business strategy albeit a much much smaller portion than ever before.

Make a Comment

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

8 Responses to “An Analysis of the New eBay Pricing Change by a Seller In-the-Trenches”

RSS Feed for TheBrewsNews Comments RSS Feed

What I find most fascinating about this blog post is that you are the type of seller eBay wants. Not me with my low ASP inventory and since the recession, low sales volume in my highest inventory shop.

eBay wants real businesses, yet the platform is so clunky that real businesses have no choice other than to go with a merchant system like ChannelAdvisor, adding significant overhead in secondary fees unless they want to drown in time/cost overhead.

In today’s tight margin for business I wonder just what the ROI looks like for them, and am very glad that my primary income is from rentals where the ROI is excellent.

Each time the eBay selling rules change I silently give thanks that I chose to shutter the doors at that site and move on. How much time was spent dealing with the drama I will never know; I’m just happy that my stress levels have dropped to much more manageable levels! (Uh, Canadian Caveat: I’m not saying it’s a bad place to do business on; for all those people that do so, more power to you!)

When I ran my December sales through a spreadsheet comparing old and new fees, I got an 8% increase in fees overall for the new scheme, due primarily to the higher FVF for FP compared to SIF.

I sell antiques and have a Premium Store averaging 300 items already, so the lower insertion fees on auctions are helpful to me. With the lower FVF as compared to FP, it now makes sense to run more items as auctions with a high starting price, even several times, before listing them as FP. FP search issues are less important for my mix because I try to list items where natural search will return fewer than 20 items anyway. Moving more items from FP to auction format might cut down the fee increase. IF I get any increased exposure from the new format I might even come out ahead; but I’ll wait and see.

So I feel like I dodged a bullet on this change. But it will just gut the number of smaller sellers on the site.

> The BrewsNews
“I was waiting on the January announcements”

What’s amusing about the January news, is a couple of analysts wrote about them. In the middle of Q4 2009. eBay either has a leak problem, or eBay passed out some gems to see who was doing the leaking.

Anyway, the bit about the changes to stores was completely predictable as eBay tested AND THEN implemented this scheme outside the U.S.

The sad part about the changes are the store owners who are completely dependent on eBay and do not know what to do next. They are the ones who will fuel eBay’s record breaking Q2 2010 profits.

> TheBrewsNews
“eBay hired a spokesperson for their corporate blog who is clearly very genuine”

{cough}Insert “Top Gun” cough quote here.{cough}

Genuine enough to provide a partial FTC-type disclosure AFTER he was called on it. He did forget to mention that eBay provides compensation to him for blogging. Again, not necessary if he does that service gratis.

Could do his job for 2/3 his compensation; plus full medical, work at home, and travel allowance. With more precision and believability. Sign the NDA too.

Nothing personal, just business. Since 1984.

//

“Last one out is a gooey mess.”
Ace {after placing explosives and exiting}, Doctor Who

I missed you during the Christmas season, Brews. You always explain things with such clarity and simplicity. Glad to see you back-another excellent post. The folks at eBay really need to read you-then they might understand why they’re going to ultimately fail.

eBay’s smoke and mirrors spin about their “lowest fees ever” reminds me of the typical credit card promotions that sucker people in. You know, the great deals that consumers sign up for yet just don’t read the fine print for….until it’s too late and they’ve lost their shirt.

Great post, Brews. Sellers need to look beyond the fees and quantify how their selling catagory may be changed by their competitors likely responses to these changes. Best Match is going to be an absolute killer for those expecting new core tranche exposure to offset the fee increases.

Great anecdotal evidence re: same-item sales on E vs A, Brews. Quality traffic is what eBay seriously lacks.

You might consider setting up some booths on Bonanzle – it’s fast-growing (especially since the ebay fee annoucement), with 2.5 million items added in about a year. It might be a good place to set up all the inventory you no longer want to list on ebay, since there are no upfront fees to do so, and it is fairly hassle free both to list and maintain multiple stores, takes paypal and google checkout, and most importantly provides a daily automated feed to Google, which is where I find most of my hits coming from (for books). I moved my father’s antique store over to bonanzle this month also from ebay; we are using a mixed strategy of maintaining our items on bonanzle to get the google feed (and twitter, rss, facebook interfaces) at no cost, while rotating a handful of higher-value, more desirable items through ebay’s fixed price format on a monthly basis (or occasionally, auctions). Do check it out: http://www.bonanzle.com, it could be an easy way to ensure you have a Google-searchable inventory online.


Where's The Comment Form?

    About

    The BrewsNews information blog about online sales, eBay, Amazon, Bonanzle and oh so much more!

    RSS

    Subscribe Via RSS

    • Subscribe with Bloglines
    • Add your feed to Newsburst from CNET News.com
    • Subscribe in Google Reader
    • Add to My Yahoo!
    • Subscribe in NewsGator Online
    • The latest comments to all posts in RSS

    Meta

  • Archives

  • Top Posts

  • Most Recent Comment

  • Calendar of Posts

    February 2010
    M T W T F S S
    « Jan   May »
    1234567
    891011121314
    15161718192021
    22232425262728
  • Topics

Liked it here?
Why not try sites on the blogroll...

%d bloggers like this: