Coping with the eBay Stores Fee Hike

eBay raises fees for eBay stores

On July 20th, eBay announced a fee increase for eBay Stores. The initial reaction from the blogs and message boards was "OUTRAGE," but if you take the time to read the entire announcement, eBay’s action is not that unreasonable. It is important to remember that eBay has costs too. Just as you pay a fee for every listing –eBay has a cost for that listing. Store inventories have grown so large that they now comprise 83% of all listings but those listings represent only 9% of the total gross merchandise sold (GMS) on eBay. That is a pretty staggering statistic. According to eBay, the time it takes for an average store listing to sell is up to 14 times longer for most products and up to 40 times longer for media products such as DVDs where there are literally millions of items listed.

If you just look at the raw numbers, the fee increase seems pretty steep, but when you examine it in the context of your cost of sales, it’s not all that bad. eBay’s strategy is to "rebalance" the amount of stores versus core listings. Given the nature of the increase, it should have that effect, as I will definitely be "rebalancing" my listings.

Before we get further into this, here is the new fee schedule: These Store Inventory format insertion fees take effect Aug. 22, 2006: Starting Price New Insertion Fee Current Fee $0.01 – 24.99 5¢ 2¢ $25.00 – and higher 10¢ 2¢ Some Store Inventory format final value fees also will increase, effective Aug. 22, 2006: Selling Price New Final Value Fee Current Fee $0.01 – 25.00 10% 8% $25.01 – 100.00 7% 5% $100.01 – 1,000.00 5% (no change) 5% $1,000.01 and higher 3% (no change) 3% Please note that for current listings, the new final value fees will apply only after these listings are renewed.

eBay states that the effect of these increases on the average seller will be about 6% based on back testing of June 2006 sales. I calculated the effect of these new fees on my store activity over the past month. Had these fees been in place, my actual selling expenses would have increased about 9%. Some sellers will see less and some will see more –with those sellers of store items in the $1 to $100 range seeing the most impact. In my case, since most of my store sales fall in the $100 to $1000 range, I will not experience any change in final value fees which are by far the larger of the two.

My listing fees will increase 500% per item (2¢ to 10¢) , but we are only talking about ten cents on items that sell in the $150 to $600 range –hardly something to get upset about.

Part of the fee increase is also a change in how eBay displays search results for items in eBay stores. Currently if a search returns less than 30 items, eBay will display up to 30 store results. Starting next month, if a buyer clicks on the Buy-it-now tab for search results, eBay will display the store results along with the core results.

The strategy of rebalancing their income makes more sense than an across the board fee increase. I had suspected for some time that the rapid growth of eBay Stores would have an adverse fee impact on eBay –I just had no idea how big an impact it was. So the bottom line for sellers: Relax and take a deep breath. This isn’t that big a deal. It would, however, pay to do some analysis of your listings to optimize your sell through rates and control your fees. eBay is offering store sellers free access to eBay Marketplace Research for the next 8 weeks so you can analyze your selling formats and optimize your listing strategy. For more selling tips and articles, please visit www.skipmcgrath.com.

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