Tuesday, April 19, 2011

The Day eBay Changed

Today is the day eBay changed to a new business model. For years, eBay has had a fee structure based on a few things (for small sellers, anyway):
  1. Listing Fees (a cost for posting an item)
  2. Listing Upgrade Fees (want your listings to appear in bold? go for 10 days? etc.)
  3. Final Value Fees (they take a percentage of the final sale value)
In addition, eBay bought Paypal a number of years ago, so they also take a percentage of each payment processed.

For years in my CIS 152 course at PCCC and more recently my INF 163 class at Bergen, I've discussed how having an item go for 99 cents is not a good thing for eBay, in my opinion. It would be better for them to let people set a starting price and give them a free listing fee, because they would make more money off a final value fee. For example, if I list an item for $1.00 and it sells for $1.00 cents, eBay would get about 19 cents (10 cents to list the item and 9 cents for a final value fee). I might list an item so cheaply to avoid paying a large listing fee, which I am responsible for even if the item doesn't sell. Many sellers avoid risk, so they start items cheap in case the item doesn't sell, minimizing cost for listing fees.

My personal opinion was that if eBay cut out listing fees and simply raised final value fees, they would reap two benefits:
  1. Sellers would list items for higher prices, therefore leading to higher final value fees.
  2. Sellers would be more likely to sell items that might not sell, due to reduced risk of wasted fees.
eBay has seemingly decided to go with this, and will now allow sellers to sell 50 items a month with no listing fee, regardless of starting value. In addition, these auctions will be eligible for a free "Buy It Now", which allows an anxious buyer to purchase an item for a set price and preempt the auction.

Link to new fee information

Listing upgrade fees still exist, as do final value fees.

Of course, there are always catches. First of all, eBay will no longer just be taking a percentage of the final sale. They are also taking a percentage of the shipping cost. There still seem to be some workarounds, but eBay has done this because a seller could list a $200 item for $0.01 with $199.99 shipping and pay no fees on an item (and sellers did try to exploit this).

It seems like eBay's idea here is to keep small sellers around, while motivating medium sellers to move to eBay stores. The eBay stores are a system which has monthly subscription fees ranging from $15.95 to $299.95.

The loser in all this is the buyer who is looking for bargains, because in my opinion, they are going to be harder to find.

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