Digesting The Changes to eBay Fees and Feedback. eBay Stock Drops on The News.

I think Wall Street may be getting this one wrong as the fee schedule changes are a net positive for many ebay sellers and probably for eBay too.

eBay announced the largest fee realignment in their history today and eBay’s stock dropped 2.79% to $26.12. Just a week ago, eBay hit $29.20.  That’s a 10% drop in less than a week. (eBay is down a little more to $22.03 today). 

Wall Street seems to think that either the listing fee decrease was not enough to generate more listings, or that the increase in final value fees will not be enough to make up for the decrease.  I think Wall Street is getting this one wrong.

What I think investors missed was the impact of the elimination of the 35-cent gallery fee.  Gallery is used on 95% of all listings, so you really need to factor that into the overall listing fee reduction. So for lower cost starting bids, the listing fee dropped 5-cents, but when you factor in the 35-cent gallery fee, the new listing fee really dropped 40-cents.  This change should increase the number of listings by medium and large sellers.

The final value fees rose more than I would have liked as a seller.  3% is a pretty hefty increase. From eBay’s perspective this increase should more than make up for the cut in listing fees.

Let’s look at the impact on an actual sale:  One of the products I sell on eBay is a $97 Chef’s Knife Set. With the current fee schedule my total fees for listing, bold, gallery and final value are:$5.60. The new fee schedule increases this to $6.25 –an increase of $0.65.  On a $97 sale, that works out to a .67% increase in total fees.

What is not included in the example is the conversion  factor (sell through rate).  My auction-style listings for this product convert at 75% which is pretty good.  But this does mean that I have to add 25% to my listing fee to account for the items that don’t sell. If I do this then my total fees under the new schedule are slightly less. Adding 25% of my listing and gallery fee under the current schedule increases my total selling cost to $5.84. Adding this to the new schedule increases my total fees to $6.39.  But this narrows the margin between the current and new fees to $0.55, or an increase of .56%.

So yes this is an increase, but my listing fee risk is lowered.  Theoretically I can list more items for less money. If this generates additional sales, my total income is increased.  Right now I seldom list an item that will end on Friday or Saturday as my products tend to convert poorly on those days. But now with the lower listing fee I can do this with less risk.

The other opportunity is for Fixed-price listings. If I list my knife set at $97 fixed price, the total listing fee (including gallery) drops from $2.75 to $2.00. Since my fixed price listings only convert at 50% this is pretty significant and I will now list more fixed-price items. 

The impact on eBay store listings is even greater.  All of my eBay Store items are in the $25-$199 tranche where the listing fee is cut 50%, from 10-cents to 5-cents.

Feedback Issue 

The biggest disappointment for me as a seller was the elimination of the ability for sellers to leave negative feedback for buyers.  I don’t get this. eBay’s two-way feedback process is the heart and soul of eBay and this move changes the culture forever. It levels the playing field between eBay and Amazon by bringing eBay down to Amazon’s level.

This move takes eBay from being someplace special to just another shopping site and will forever change the very essence of eBay. In Bill Cobb’s message, he said that eBay consulted Pierre Omidyar, eBay’s founder and the inventor of feedback and that he agreed to the change. I can’t tell you how disappointed I am in Pierre.

If sellers can only leave positive feedback –then what is the point?  All buyers will have nothing but positive feedback. I can no longer identify buyers who are slow payers, unreasonable, poor communicators and other who are just plain troublemakers. The fact that buyers could earn a negative feedback in return made them think twice about leaving negative feedback and more willing to work something out with the sellers when there was a problem.

The feedback issue will have little effect on eBay’s profits –or on mine. As a seller who makes his full time living on eBay, I will go on. But, feedback has always been an emotional and personal issue for both buyers and sellers.

When Bill Cobb explained why they were changing the feedback system he stated that:

 "…the biggest issue with the system is that buyers are more afraid than ever to leave honest, accurate feedback because of the threat of retaliation. In fact, when buyers have a bad experience on eBay, the final straw for many of them is getting a negative feedback, especially of a retaliatory nature.

Now, we realize that feedback has been a two-way street, but our data shows a disturbing trend, which is that sellers leave retaliatory feedback eight times more frequently than buyers do … and this figure is up dramatically from only a few years ago.

So we have to put a stop to this and put trust back into the system."

How does putting all the power in the hands of the buyer put trust back into the system?

I have had three negative feedbacks over the past nine years. I managed to get all three removed by working with the buyer, so I have managed to keep my feedback score at 100%. Of the three, one was a newbie who didn’t understand the system and thought checking the negative box meant I didn’t do anything negative.  One was a non-paying bidder, who once I left him negative feedback agreed to pay and do mutual feedback withdrawal. The last one was due to a shipping error on our part during the busy holiday season. To get the feedback removed we had to fully refund his money ($104) AND send him the product. Had I not already left him positive feedback, I could have worked out a solution for him that may have been a little less costly.  With the new system, sellers who want to protect their feedback will be held hostage to the small percentage of unreasonable and/or dishonest buyers.

I know a lot of sellers hold feedback until they receive feedback from the seller. We always leave feedback within 24 hours of receiving payment. The 24 hours gives us time to see how the seller communicates.  If we get a weird question or the seller’s communication sounds a little strange, then we hold off leaving feedback until the transaction is complete.  For example, last night we sold a product Buy-it-now to a buyer in Hawaii with zero feedback.  Within minutes of the auction ending, we got an email that said unless we can ship immediately by air to cancel her bid. But she hasn’t paid yet and didn’t indicate anything in her email about how she planned to pay.  When I get an email like that, I will hold off leaving feedback until I see how everything resolves. But now – what is the point?

Don’t get me wrong. I am sympathetic to eBay’s problem. Unfortunately there are some unscrupulous sellers who abuse the feedback system, but I can’t believe this is the right way to deal with the problem. 

How about just placing a red number next to the total feedback number that indicates how many negative feedback this seller has left for others. Everyone should be able to leave a negative feedback without being punished, so the red number would only show if the seller exceeds some threshold like:

If more than .5% of feedback left for others is negative, your "negative feedback left for others" will display next to your user ID.

Here is an example of what this would look like:   Essexxed99 (697) (7)
Feedback score is 500 to 999

I don’t know about you, but I would hesitate to buy from a seller with a negative number like that next to his or her name. This would seem to be a better solution than the radical changes announced by eBay yesterday.

See Also

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