Liberally Conservative

"Freedom is never more than one generation away from extinction. We didn't pass it to our children in the bloodstream. It must be fought for, protected, and handed on for them to do the same, or one day we will spend our sunset years telling our children and our children's children what it was once like in the United States where men were free....... ~Ronald Reagan~

Thursday, July 20, 2006

eBay..er FeeBay Gone Mad

I started eliminating personnel inventory some years ago using eBay. It's my opinion that sellers and buyers made eBay what it is today. They went from a message board to a thriving business at the forefront of business news. eBay has become a generic term similar to Xerox. eBay sellers offered valued advice, which eBay used to improve the venue. The message boards and input by merchants are the key reason eBay built a useful and productive business. Period.

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The difference is eBay has little competition in the auction market and this is unfortunate for the people who made a good living at eBay and have fled because of rising costs. Sellers can't always pass the increases on to consumers as they have competition, something eBay can avoid.
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If you sell "widgets" for a low margin and depend on volume eBay has sunk your ship. If your a big seller your margins are still being cut because eBay will raise fees at a moments notice. The three largest "PowerSellers" left eBay suddenly. Was it because of increasing costs? Most likely.
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Regardless of what some people think I believe eBay greed and mismanagement will eventually catch up to them. Google is attempting to compete with PayPal (eBay owned) and eventually Yahoo will decide to promote their auction venue and use some capital to actually compete with eBay. We can only hope. If Yahoo enhances it's auction venue, advertises it and supports it eBay will be in trouble.
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I left eBay after I was suspended for shill bidding, something that didn't happen. It took three months to get reactivated and by that time I was on my way to building my own e-commerce site. eBay could never explain why I was put on hold. May it was my forthright comments on the economies of scale at eBay, attached to a message board. The jury is still out but with persistence my move to independent e-commerce will have it's success story.
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If every CEO could simply raid the piggy bank, in this case the sellers pockets, to cover so-called increasing costs, life would be grand. This is biting the hand that feeds you and eventually the hand falls off. Today I received an email from eBay with paragraph after paragraph of "blah, blah, blah" before the hammer fell. Not the auction hammer but the fee increase one.
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Keep in mind eBay was promoting stores, offering discounts some time ago to open and place lots of inventory into your virtual brick and mortar. They turned around and increased store fees as well as auction fees. This was in very early 2005 not far beyond the store promotion. Can you imagine deciding to fill your eBay store with inventory and have the rent suddenly go up when you were led to believe this was a solid investment by the landlord. Unfortunately eBay store owners didn't have a binding lease agreement. May the tenant beware! More fee increases have followed.
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Sample eBay gibberish.
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Since its debut in 1995, the eBay marketplace has continually evolved to meet the needs of the eBay Community. For the most part, the behavior of buyers and sellers has naturally adapted to changing conditions -- over time, we've learned to allow the marketplace to direct itself as much as possible. On some occasions, though -- in the interest of the eBay marketplace's long-term vitality -- we've had to step in and implement new policies, introduce new formats, or make changes to our fee structure to create needed incentives for eBay members.
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What is the "incentive" to rising costs? Bankruptcy?
  • Core listings (auction-style, auction-style with Buy It Now, and Fixed Price) deliver the signature eBay buying experience. For sellers, they're the fastest way to sell inventory on the Internet -- the only place where items typically sell within about two weeks.
  • Store Inventory listings were introduced in 2001 and intended as a low-risk way for sellers to display large amounts of product in their eBay Store. This format employs low insertion fees and higher final value fees to encourage an abundance of inventory on the site.

If eBay new "Core" listings were the fastest method to sell inventory then why promote stores? How do you employ lower insertion fees when you keep raising them and implement a higher fixed monthly rent? eBay is exercising "double-talk" and treating sellers as if they are stupid. In some cases they are correct, because sellers keep eating the fees.

eBay admits guilt.

Amid all this change, one thing has remained constant: auction-style listings are the foundation of eBay. Auction-style and other core listings made eBay what it is today -- and they'll always be front and center on eBay.com. They account for about 91% of the gross merchandise value sold on eBay.com. But recently, we've been wrestling with some troubling facts:

  • Store Inventory listings now comprise about 83% of active eBay.com listings on average.
  • While eBay.com core listings typically sell in about two weeks, Store Inventory listings on average take 14 times longer to sell. In some media categories, Store Inventory listings take more than 40 times longer to sell than core listings.
  • And, when you compare our operations costs for an average Store Inventory listing and an average core listing - factoring in the duration of each - our cost to host a Store Inventory listing is more than 50% higher than for a core listing. In fact, current Store Inventory insertion fees don't cover eBay's costs for hosting them.

"Build it and they won't come" is the new motto for eBay stores. This is what eBay promoted in email and at eBay.com. There is another saying: "Plan your work and work your plan." At eBay they assume the seller will gladly follow their advice and eat the fees. BUT WAIT! eBay miscalculated, must backtrack and capture their losses by charging the sellers who either pay up or dump their inventory and close their stores, the same stores eBay encouraged you to open.

Raising the inventory cost is not an option since eBay admits their stores don't sell. Switching to auctions will provide eBay with increase cash flow in addition to the store fees they already received. This is a form of "double-dipping." eBay also controls the search features at their site and stores suffer because the engines aren't set up to place your inventory into the results.

Of course eBay merchants can pay a very formidable fee to have a featured store. This is eBay holding a gun to your head and standing outside your store with gasoline and matches.

The hammer falls:

Today, I want to inform you of changes we're making to eBay.com -- changes intended to rebalance the overall eBay marketplace by further distinguishing the roles of core listing formats and our Store Inventory format. In short, we're improving the advantages of selling in core listing formats -- and taking action to manage the proportion of Store Inventory listings -- to ensure that the buying experience on eBay stays true to shoppers' expectations.

For those of you who operate an eBay Store, we're making changes to Store Inventory listing fees, as well as to the on-site exposure we provide for this listing format.

The Final Analysis.

Merchant product exposure is at the bottom of the eBay totem pole. In another words it will take a very persistent buyer to click your items if they are able to find them. In addition to less exposure your fees will take on a very new look.

For items selling for $0.01 -- $24.99 their will be a 150% increase in fees. Items selling for $25.00 and higher the fee increase is 400%. Vaseline not included.

Thanks for the email FeeBay....er..uh...eBay! I will continue to build it, promote it and stock it, just not at eBay.

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