People are up in arms about eBay’s latest move to increase its fees. Many people who don’t use eBay don’t realize how much the fees amount to for the privilege of using eBay’s auction listing service. I got a nice little email detailing the increase, but the reality doesn’t hit you until you break it down into real numbers.
See, eBay expects a taste at every part of the process. For example, let’s say you’re just a regular joe who wants to sell a Bruce Springsteen CD on eBay. You start the auction at $.01 for seven days. Right off the bat, you’re hit with a $.30 insertion fee (this is the first of many “insertions” you will enjoy from eBay) , which you’ll pay if you sell the item or not. If you want to add a photo or two you now owe them $.55. You leave the auction up there and someone wins the auction with a final bid of $4.00. This is probably about right for our hypothetical Springsteen CD. So, now you’re thinking, “Okay, cool I have $4.00 and I owe $.55 to eBay. So they get a 14% cut.” Wrong.
When the auction’s over the real pain begins. Now after all this, on top of all the up-front fees, which can amount to anywhere from $.30 to $90.55, it’s time to pay the piper in the form of the dreaded Final Value fee. The Final Value fee hurts. Of that $4.00 auction, eBay now wants an additional 5.25% or $.21. Not bad, but now instead of making $4.00 you’ve made $3.24. eBay made a nice little 19% off your sale. If you’re item sells for $25.01 you now owe them an 8% Final Value fee for a total of $2.55 in fees. Not a bad little business model, but you say, “Okay, I can live with that. eBay and I are now even.” Wrong again.
See, a few years ago eBay took over Paypal, the most popular payment gateway for online auctions, when their own payment system failed to overcome Paypal’s growth. Buying out Paypal gave them away to tax eBayers again. How so?
Here’s how: the overwhelming majority of eBay users do most of their business via Paypal, so if the buyer pays you for that CD via Paypal you get hit with yet another fee. The great part about this fee is that it applies to any incoming funds paid to you for any reason. Not just eBay auction payments. Smart move on their part. In our example, after we pay eBay all the fees from the auction we now have $3.24. When the buyer sends the payment via Paypal you get docked 2.9% PLUS $.30 leaving you with $2.85 of the original $4.00. eBay ends up getting a staggering 29% of your money and it can end up being a lot more.
eBay’s sellers are outraged, especially the “power sellers” whose livelihoods depend on their eBay auctions. One seller I spoke with predicted a change from $7 per $100 in sales to $13. A change of nearly double in total fees. This is a tax all users will find hard to swallow. With no new services proposed nor a timetable or committment not to raise fees again any time soon, many are looking for new alternatives to the de-facto eBay monopoly. One such is Wagglepop, which promises much lower fees than eBay.
There needs to be a real alternative to eBay. The increased fees do not just affect sellers. In the end, everyone will bear the cost of the fees. Buyers will be penalized by increased reserve fees and shipping costs. To adjust to the new fees, many sellers will just increase the shipping costs since eBay does not level the Final Value fee against income received as shipping charges. Thus, much of the cost will be passed to buyers.
We need someone new who wants our business, a company who realizes the essential value of its users and who knows that the company profit comes only through the value they bring.
Without the buyers and sellers, eBay is nothing.
It’s a weird thing. Because in a lot of ways the only reason to use eBay IS that it is a bit of a monopoly. I mean, as someone who buys things on eBay, if I didn’t visit other auction sites it would only be because I thought, “there aren’t as many people selling things there, so the odds are lower that I’ll find things I want when I spend time looking there.” And someone who’s considering selling something there will have similar questions about the amount of customer traffic. It’s funny. I’m always for more competition, less monopoly. But up until now it has been sort of good for everyone that there is this one really popular auction site, because it gives sellers access to the maximum number of customers and vice versa. But apparently that time is over–too bad eBay had to get greedy.
I think there’s a real opportunity for competition especially if eBay continues to alienate the sellers. If sellers even start cross-posting auctions to another service buyers will start moving. If I had the money and initiative I would start such a project.
My approach would be to commit to sellers to only take a certain amount of fees and commit to let’s say 2 years of not raising fees. That will bring people over. Also, I would court the sellers who sell in-game merchandise and especially high-volume sellers. That will get the auctions. You could offer reduced fees for sellers who are the most successful and make that the cornerstone to your approach.
Of all of the alternative sites I’ve visited Bidvill.com seems to be the best. Wish there was a way to coordinate everyone moving to one alternative site. This would insure a stong enough competitor to EBAY. Competition is great for a consumer. EBAY is currently a monopoly
Of all of the alternative sites I’ve visited Bidville.com seems to be the best. Wish there was a way to coordinate everyone moving to one alternative site. This would insure a stong enough competitor to EBAY. Competition is great for a consumer. EBAY is currently a monopoly
Ya sure, ok.
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If we go to Wagglepop, how will people pay for their items?…. with PayPal. Ebay still gets a cut.
I’m starting to think eBay is secretly owned by Bill Gates.
I agree with you and would love to do business elsewhere. The complaints with ebay have even been on our local news several times in the past week. Who else is there offering a good, reliable auction service? Thanks.
Don’t Wagglepop and Bidville both use Paypal, which gives ebay a cut? Is there an auction site with more reasonable pricing for buyers and sellers, that also lets buyers use a credit card without going through Paypal?
It is time for an eBay revolt — and a Wagglepop revolution.
This is one Powerseller/Store Owner who’s leaving FeePay forever — as a buyer as well as a seller. I’ve opened a store at Wagglepop and will start populating it in earnest as soon as I have the store configured to my liking.
Wagglepop offers some exciting new features in their stores: Red Carpet — discounts to loyal customers; InStore promotions, BuyMoreNow — discounts for multi-item purchases, and OnTarget cross promotions. It’s missing some features that I’ve become quite attached to though: sub-categories and the ability to list store items in two categories.
The irony of leaving eBay but continuing to use Paypal is not lost on us — sellers or on the Wagglepop crew alike. But, honestly, it’s a different fee for a different service and the Paypal fees haven’t been continually raised.
The way to do it is to start a sea change via the “dandelion” method: make up a template email and send it to as many ebay sellers as you can, or want. When (notice I didn’t say IF, but WHEN) enough of us contact enough other sellers, and it only takes each of us to contact two other sellers, the seeds of change will start increasing logarithmically.
Dump PayPal! I have just started using GearPay.com . Last year eBay in their infinite wisdom banned the sale of gun parts, I sell antique gun parts they cut my business on ebay by 2/3rd! I moved on to GunBroker.com (thanks eBay). Now with the new fees and feedback system sellers are no longer part of their community but second class Citizens. I have gone on to Olineauction.com (thanks eBay) I will check out Waggelpop,
PayPal now has the option to hold your money for 21 days to insure your customer is happy with the transaction! PayPal like ebay is anti-gun and has frozen the accounts of dealers who use it, I’m not talking 50.00 or 100.00 here, they have frozen accounts of legal dealers who had thousands of dollars in their accounts, and it takes over 6 months before they might release the funds! Even if you don’t like guns
PayPal is making money off other’s hard work with very bad business practices.
Just an observation:
Between 09/14/07 and 12/28/07, these officers of Ebay, Inc.:
Meg Whitman, CEO
William Cobb, Officer
Michael Jacobson, General Counsel
Rajiv Dutta, Officer
Scott Cook, Director
Sold $106,727,738.00* worth of stock in the company, Meg Whitman coming in with the highest individual total, selling off 2.56 million shares worth a total of $88.3 million dollars. I think it goes without saying that during this same period, none of these officers BOUGHT any Ebay shares.
Bart Brown
*Source: MSN Money, “Insider Trading”
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