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.