eBay’s New Store Fees

Monday, 21 August 2006 at 5:00 am Pacific USA Time.

The hottest topic right now is eBay’s fee changes this week. Sellers seem to
be in a panic. Some are asking me how they will ever survive the change,
especially with low selling prices. Obviously, if your selling price is
extremely low like under $10, you may always be struggling have any margin and
profit. But this fee change can work for you too.

Why would a fee change work for sellers?

Because as far as I can tell, eBay isn’t doing it with the sole intention of
making more money. Their intention is to get you to think about your items and
your listing strategy. By making it cost more to list things in Stores, they
want you to think about NOT putting items in there. Think about putting items in
the core, which is where auctions and fixed price items live.

Let’s play out some math!

Let’s say that you sell an item for $40 out of your Store. Under the new fee
structure, that’ll cost you 10 cents to list instead of 2 cents, so that’s 8
cents. The FVF will be $3.55 instead of $2.75, which is an increase of $0.80.
Add that to the additional 8 cents you paid, and eBay is taking 88 cents they
weren’t taking before.

Download our free EverySeller Fee Calculator if you want to play out your own math!

I think it’s easy to see fee increases including percentage increases and
assume that business has to be completely redefined. I think it IS important to
look at these and strategise, but I’m not sure panic is in order. We’re talking
88 cents in the above example! If 88 cents were all you were making after old
eBay fees on that $40 sale, then you can’t afford to lose it, and you’re up a
creek as they say. :) You were probably up a creek anyway if 88 cents comprised
most of your profit! If your mark-up is decent and losing another 88 cents
doesn’t really hurt, then there really IS no life-changing problem!

eBay’s point is to get you to list more things in the core (auctions and
fixed price) rather than have them sit in your Store. Store items rarely show up
in search results. They’re rarely found, and therefore rarely sold, only really
sold when you plug the heck out of your Store and people stumble upon those
items! If you have items that are in demand, listing them outside of the Store,
where excited shoppers will find them in their search results, would be the
right strategy anyway.

But I like my stuff sitting in my Store.

Sometimes people tell me that they just have their "crap" sit in their Store.
Well, if you have something that’s barely selling, why list it at all? eBay is
saying that those Store listings can take you half the year to sell. That means
that you paid the insertion fee (formerly 2 cents per month) for 6 months to
have that item sit there with nobody wanting it. If you had a real bricks and
mortar store, chances are someone would tell you that if you had an item sit for
6 months and not sell, it’s a DOG!

Remember that supply and demand are in effect on eBay. If you research your
items (such as with Terapeak) and you find that over a 30-day period, 14 of
these items sell, running 30 of them won’t make sense! And if lots of people are
running these items, shoppers have their pick of ones in the core and may never
see the one(s) you have sitting in your Store.

On the other hand, eBay is saying that the average item on eBay sells in two
weeks, which means you run it say twice and then it’s gone (assuming there is
demand for it!). So let’s do the math on that $40 item again. Let’s say you list
it for $40. Your insertion fee is $0.60, and let’s say you do the gallery image
on it so it’s more attractive. That’s another 35 cents. Let’s say you have to
list this twice because it didn’t sell the first time. Then, let’s say it
finally sells the second week for $40. Well, as part of the "free relist" thing,
you will get your 2nd set of insertion fees credited back, so then you’ve only
really spent 95 cents getting that item on eBay. The FVF at $40 is $1.76.
Therefore, you just spent $2.71 to run this in the core for two weeks and sell
it in the 2nd week.

The math can work FOR you!

Spending $2.71 to sell an item is better than listing it in Stores for
months! Yes, that assumes that it sells in the 2nd week out in the core, but if
there is demand for your item and room for you among the supply,
it SHOULD. If people want it, then they’re searching for it. If you list it in
the core, you’ll be among the search results they find. Then, you have that
great chance of making that sale.

If you are analyzing your own sales, you will know how long it takes your
Store items to sell. You know if they’re sitting there for months, and you know
how long it takes your core items to sell. You can do the math and know if
moving hotter items to the core should work. Download our fee calculator, as I mentioned above!

Don’t go bonkers. At least not over this! :)

So in rethinking business, I think you should rethink what eBay is trying to
accomplish, which is not to get people to leave and be angry. It’s to get people
to put more items in the core, where they sell better, faster, and more often.
They might even sell for LESS eBay fees as you see from my math example.

It’s easy for people to see fee increase and go insane. But when I run the
math on things, and when I think about things that SIT in people’s Stores
because there might be little or no demand for them, I think that what eBay is
trying to do makes sense. What about when the demand is high? Well, in that
case, I will search for it and find tens or hundreds of that item, and NONE of
the hundreds that might be in Stores. There COULD be huge demand for that item,
but you put it in your Store. I won’t find it, and I won’t buy yours. If you had
listed it in the core, I might have bought yours.

If the fee increase inspires people to rethink strategies (or think about
them for the first time) and list more smartly, then it’s a good thing! If you
are just going to react by assuming you will do things the same old way and pay
more to do it, then of course you’re going to be bothered. The point I think you
may be missing is that eBay wants you to think about things in new ways and try
something different. Don’t think about things in the same old way. Your
competitor might not!

  • Facebook
  • Twitter
  • LinkedIn
  • Email
  • Digg
  • Google Reader
  • Delicious
  • Reddit
  • StumbleUpon
  • Technorati
  • Tumblr

Categories: Just An Observation

Comments Closed

Comments are closed.