March 16, 2011, 10:53 AM

eBay cuts seller fees—or does it?

Sellers’ first 50 auction items per month list free and eBay is cutting its commission.

Stefany Moore

Associate Director of Research

Lead Photo

EBay Inc. announced a new pricing structure yesterday that eliminates some upfront auction listing costs and incentivizes sellers to offer free and low-cost shipping.

Effective April 19, sellers will get their first 50 auction listings per month free and can add the fixed-price “Buy It Now” sales tool, also for free. EBay previously charged five to 25 cents per listing to use Buy It Now. Existing listing rates apply for auction items after the first 50.

The online marketplace also restructured its final value fees, which are the commissions it collects from shoppers and are based on the total value of a sale. EBay will now lump the cost of shipping into the total sale value, while at the same time reducing overall commissions by 1%-2%, depending on the item. 

This means sellers who currently offer free or low-cost shipping will get a break on what they owe eBay. Sellers who charge high shipping costs will pay more. EBay says 30% of items sold by U.S. merchants already ship free.

The commission fee for apparel items, for example, drops from 12% to 10% under the new structure, but the commission will now be based on the final sale price of the item plus shipping.

So if a seller sells an apparel item for $40 and offers free shipping, he will now owe eBay $4 (10%), whereas before he owed $4.80 (12%).  A seller who closes a $40 sale but charges $10 for shipping will pay eBay a $5 commission under the new rules, 20 cents more than previously, as eBay’s final value fee will now be based on a $50 total sale.

EBay says the changes allow both sellers and customers to benefit from an immediate purchase and that the new fee structures build upon a series of similar promotions implemented in 2010, which it says drove significant increases in both new sellers and new listings.

“As we look toward the future of commerce, eBay is positioning small sellers and larger merchants alike for growth,” says Christopher Payne, senior vice president and head of eBay North America. “We are listening to our customers and continue to tailor pricing to ensure the success of our sellers.”

Not all eBay sellers agree. Robert Bitto, owner of the SuenosImports eBay store, says the new fee structure will cause him to remove his products from the online marketplace, as it has become less and less profitable for him over the years. “I will lose at least $1,000 this year with the new fee rules.  That’s a mortgage payment,” he says. 

Bitto says he charges for shipping at the same rate that U.S. Postal Service or FedEx charges him. “This program is to encourage the lowest possible price for shipping, but I do that anyway,” he says.  “I’m going to pump up my web site, pump up my sales on Etsy.com and by the end of the year I will have weaned myself off of eBay.”

Simone Klein, an occasional seller on eBay and owner of DesignKandy.com, says eBay is punishing all sellers for the actions of a small group of sellers that sell items at rock-bottom prices but then jack up the cost of shipping, thereby avoiding paying fees to eBay. For example, a seller might charge 1 cent for a pair of socks but then charge $20 to ship them and pocket the real shipping balance and avoid paying fees to eBay. “There are a few bad apples out there that make money off of shipping by adding huge amounts of handling charges, but most sellers are pretty fair," she says. The only winner here is eBay.”

Rich Rothbard, product manager at specialty camera retailer Cameta Camera which has a daily average of between 8,000 and 9,000 items on eBay and also sells on Amazon and through its own retail site, says web consumers today are savvy enough to look at the total price to find the best deal—and that includes shipping. “It doesn’t matter how you package it, what it comes down to is your overall gross price including shipping,” Rothbard says. “After price, the first thing a person looks at is if you offer free shipping.”

The fee changes will impact sellers differently, depending on the price point at which they sell and the cost at which they ship, says Scot Wingo, a long-time eBay observer and CEO of ChannelAdvisor, a firm that helps retailers sell through online marketplaces, search engines and comparison shopping sites.

 The new rules will impact merchants that sell large, bulky items that are difficult to ship. When the high shipping costs of these types of items are lumped in with the item price, eBay will charge a much larger commission, Wingo says.

Sellers in these low-priced and high shipping cost categories will likely raise prices to offset the higher commissions eBay will charge, essentially passing on fee increases to the online marketplace shopper. “There are maybe 10% of the sellers that are in that bucket,” Wingo says.  “For those kind of items, it will make it tough for eBay to be price competitive.”

Since 1998, Tricia Will has managed eBay auctions for British car parts restoration company Imagination Engineering Inc.  She says the new pricing structure is the latest in a string of policies implemented over the last two years that have affected her business so considerably that she is considering taking her 2,000 items off the online marketplace.  “Our eBay fees used to be $600 a month; they now range from $800 to $1,100 a month and this new fee structure will affect us by a 2% margin,” she says.  “This will put a lot of people out of business.”

The updated final value fee structure takes effect for non‐store sellers April 19, and for merchants that operate eBay stores and fixed-price sellers July 6. 

Comments | 9 Responses

  • Dinesh Lathi VICE PRESIDENT, SELLER AND BUYER EXPERIENCE who concocted this latest horror show of added fees is a Harvard graduate of business. Like most text book ideologues, he brings his theories to the real world with every intent to fatten the wallets of himself and eBay’s stock holders. Every new generation of CEO’s and management changeovers that come into the Ebay fold have one goal in mind. To squeeze more profit out of it’s flock of sheepish eBay members. These members are eBay’s personal corporate livestock, and right now even in a struggling economy, eBay figures it’s time to harvest some more prime steak off its members backs. I personally see this is a down grade of my relationship with eBay which began in 1998. I am also a Power Seller and Top Rated Seller, but that does me little good if eBay engineers itself to make me its slave. I think this crushing fee add-on is going to backfire on Mr. Dinesh Lathi and I hope stock holders ask for his resignation. This man is moving eBay so far away from what made it successful, that he should be joining the government CZAR’s so he can continue to rule without oversight or approval of the people. Tyrant is the word of the day.

  • eBay truly thinks its sellers are stupid. Fees assessed on shipping more than negate any little "freebies" eBay offers. eBay is doing this because it's been losing money to unethical sellers who play the system by selling their items for next-to-nothing and inflating their shipping fees to make up for it, yet eBay refuses to properly deal with these bad apples, preferring to throw a blanket fee over ALL its sellers. It's amusing how eBay pretends to "care" by encouraging its users to report these kinds of listings. I have reported COUNTLESS sellers who offer high priced items for a 99 cent "buy it now" with shipping as high as $1,500.00. eBay refuses to deal with these scumbags and I can prove it. I save all the items that I report in "my favorites", yet these listings are NEVER, EVER removed. Hasta la vista, eBay.

  • This hurts, Shipping is expensive for me. I'm stuck with eBay as they are a monopoly, but I will close my eBay store in July for 1 month in protest to this and the continuing practices of eBay and PayPal.

  • I was just getting ready to go back to eBay because I was so infuriated at the last time they tried doing a "we're lowering the costs" double back flip so they could make more money by changing the store's fee structure that I took almost everything off and did the absolute minimum just so my name could still get out there. And now they turn around and tell me that they have to charge 10% or so of my shipping fees. Well, Mr. eBay, I am sorry to say that the only possible way to counter that is to charge 10% MORE for shipping which I am sure will not make my customers happy. I am glad that I have found auctioninc.com for my own website that I can now have decent shipping prices that don't rake anyone over the coals-- my customer or myself. My dealings with them have been very positive, the few items that I have tested with are accurate to within just a few cents, I plan to have the rest of my parts listed with their 'add to cart' button by the time eBay gets it's fees adjusted.

  • I was progressively getting more and more fed up with eBay fees. They have been frequently and erratically increasing these past years (sometimes without notice even!)  Instead of continuing to loose money as my profit margin getting more and more narrow, I decided to do something about it and branch off with an online store of my own.  I found a great company that specializes in moving companies from eBay over to their own online presence.  They encourage you to keep your store with eBay, and use it as a tool to market your new online e-commerce store. The company I used  is an all inclusive web, graphic, and online marketing consulting firm.  We got up and running really fast, and had complete control of our own site.  If you are interested in protecting yourself from eBay's fees and developing your own brand and site look into stormbraindesigns.com. Honestly, it was a really good move for our store, and the growth of our company.  We now have complete control of our sales, inventory, and most importantly, profits.  Without being subject to the countless hikes in fees, and restrictions that eBay has really now become known for. Think about it. I haven't looked back.

  • If sellers are not to charge a surcharge on postage that is purchased and printed then why is ebay able to take a cut of the price a seller charges. I only charge exact(as possible) postage to my customers.So the idea here is that if I charge my customers for postage ebay will charge me for doing so? In other wards eBay plans to tax postage needed to ship items? It is bad enough that the price of postage and shipping time are subjuect to anonymous low DSR scores that keep sellers from earning discounts. I have heard of both sides against the middle but this is surrounded and no where to bail! Throw is sales tax and there just is not much left....hmmm.hmmm...are they trying to get rid of smal sellers? What i really do not get is why did the company go about the change in such a way that it has mind messed with and raped small sellers? They could have just simply said, "OK you sellers who are not selling at least 25 items per day are going to have two years to find a new venue because ebay is going to become an on-line outlet mall and there will be no place for you here as of April 2011." At least it would have been honest.

  • I have bought and sold on eBay since 2003 under texas_trader_inc and in the past 2 years have been seeing my proffits fall everytime eBay comes up with a new idea. Fees to be charged now on shipping! Shipping is as I have always thought a goverment related charge. USPS as a example raises there price and we follow through and do the same to our buyers. How can eBay really on the legal end charge a fee on shipping? Think about this. Are we buying our stamp from USPS or eBay? Does eBay pay the postal wages or does the postal services pay there workers? Get the right lawyer involved with this and I really do think some suits would be in the makeing. Fact! All eBay owns is there website and now PayPal as well. eBay is a auction site and PayPal is a payment collection site. So what was happing is all sellers are getting a double charge, one from eBay and then from PayPal. PayPal has always collected a fee on the total payment and that also included shipping. So, sellers as of now pay double charges as well. Ebay higher fees that go into the eBay pot, and then PayPal fees that go into the PayPal pot. eBay today as I believe is just a whole bunch of kids that are just getting started and have been taught by eBay how to do there job. Bottom line on eBay is the sellers and the buyers are the ones that keep eBay in business. Without these eBay will in time have to come up with new ideas as to how to stay afloat. 1 or 2 people are never going to get eBay to change. It will take many many thousands. Take your auctions to other sites. There is others out there and some are very good. They want eBay's members and the more they get the more eBay then will see what is happening to them. You can check out my eBay ID, texas_trader_inc and see that I am boycotting eBay. Not for a month or 2, but for one full year. If others would stand up and take action, it will then work. 1 month will never put a dent in eBay. It takes many months to show eBay that we are serious and by doing this everyone has to become a team.

  • I have been with Ebay for 11 years, and I do not see any logical reason for Ebay to add shipping to their final fee, except to collect more fees on the backs of hardworking entreprenuers'. Ebay has created an anti-business structure, that goes against everyone who ever wanted to start their own online business. I' ve made my decision before the fee deadline starts. My opinion is other sellers will be doing the same. This shall backfire to a degree that it may encourage and entice Ebay to rescind this dopey policy and remind them, we are their customers, and when a customer isn't satisfied, they(the customer)take their business elsewhere.

  • As if adding shipping to their final fee isn't enough - I just learned that if a buyer purchases more than one item and gets charged too much shipping because ebay does not have a sophisticated enough rule to handle automatically combining items and the seller refunds some of the excess shipping to the buyer via Paypal, the seller does not get any of the final fees that were already paid for the refunded shipping. I am one of those sellers that ships large and small items and my business is really hurting especially with this new final fee change. I guess I will have to pull all of my items from ebay - again - because it is just not profitable any more. I just wish that there was a big and upcoming online site to list all of my items that would just blow ebay out of the water by getting all of the sellers and business that they lost by making all of the self-serving changes that they have been making. Greed is not a good thing.

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