WASHINGTON—Online auction retailer eBay, Inc. recently announced that it was revamping its fee structure and making other changes to combat fraudulent sellers.
Overall, four changes were implemented—including fee reductions, seller rewards, tweaks to customer feedback and general trading issues. eBay will also make its trading standards tougher for dishonest sellers and buyers.
Last week, the company decreased upfront nonrefundable vendor fees, called Insertion Fees by 20 to 50 percent for selling products and services over its online sales platform.
Alas, the commission that eBay takes after products and services are sold has increased. The final sales cost to online sellers has increased from 5.25 percent to 8.75 percent for sales of up to $25. For items between $25 to $1,000, the commission is 3.25 percent.
"We are serious about making eBay easier and safer to shop," said John Donahoe, eBay's President and CEO-elect in the press release.
Vendors Boycott
EBay vendors subsequently announced a boycott. But was it successful? According to "eBay boycott begins, to uncertain effect" on CNNMoney.com, the effect was minimal—only 3 percent fewer listings. The article suggests that even this number is suspect due to normal sales "fluctuations."
A survey carried out by AuctionBytes, a blog for eBay sellers, 90 percent of 1,640 people surveyed believe the new eBay feedback system to be unfair to vendors. AuctionBytes' Ina Steiner suggested that sellers in the past usually refrained from boycotting because of not wanting to lose out on business, and many vendors needed eBay to make a living, in the article titled "Is eBay Boycott for Real?"
"This year is different, however, eBay is making changes that cause many sellers to question whether they'll be able to depend on eBay for a living going forward," Steiner said.
Postings on AuctionBytes showed that eBay vendors agree that changes needed to be made, but they felt that eBay tried to pull wool over their eyes. The company lowered initial fees for listing the product by a mere fraction, but increased the final fees substantially—with an overall net increase in fees.
Many eBay merchants are looking at other options, including Amazon.com, Google and Yahoo. Another option being considered is moving to online classifieds, such as Craigslist.org (which is 25 percent owned by eBay) and LiveDeal.com that are free of charges and include forums on various topics. The only source of income for those Websites is advertisements.
EBay's Growth Potential
On Mar. 31, long-time eBay CEO Meg Whitman will turn the reigns of a company that has reached maturity over to John Donahoe.
Growth for the Internet giant has stalled, as total goods for sale in 2007 increased only by 4 percent over 2006 and there are not many active new users, according to a Knowledg@Wharton (KW) report titled "For New CEO John Donahoe, It's eBay's Game to Lose." KW is the publishing arm of Wharton School of Business and the University of Pennsylvania.
EBay made some wrong business decisions, said Professor Raffi Amit of Wharton, such as acquiring Skype, an Internet-based tool for making telephone calls, instant messaging, file transfer and video conferencing, for a whopping $2.5 billion.
"In 2007, eBay took a $1.4 billion goodwill impairment charge—an acknowledgement that a particular acquisition didn't generate the value initially expected—related to the Skype deal," according to the KW article.
To turn eBay's fortunes around, CEO-elect Donahoe announced the fee changes in hopes of bringing in more revenue. Donahoe had obtained the advice from Marianne Wolk, an analyst at Susquehanna Financial Group, who suggested that eBay charge higher fees once a sale is complete and not when the product is listed on eBay.
KW feels that merely changing fees and tweaking its business structure are not enough. EBay has to go back to the drawing board, change its strategies and come up with some innovative approaches. "eBay has to be more aggressive and think about strategic planning five to 10 years down the line," said David Hsu, Professor at Wharton in the KW article.
Surfing eBay
At first glance, the new eBay homepage looks a lot less cluttered. The layout looks simple and the Website is easy to read and navigate.
The seller dashboard is difficult to handle for the novice eBay user. It's unknown why the toolbar is needed in the first place. The announcement description on eBay's Website is full of qualifiers. To be eligible for "vendor rewards," the merchant has to meet certain conditions to receive rewards. There are pages and pages of conditions and not all are in the same place—it's just too bad if you think you qualified, but missed a qualifier because it wasn't easily found.
For example, PowerSellers—eBay vendors with 98 percent positive feedback and at least $1,000 per month in gross sales for three consecutive months—can earn up to 15 percent in fee discounts if they maintain a "star" rating of either 4.6 (up to 5 percent discount only) or 4.8 (up to 15 percent discount). The rating covers quality of item, item description, shipping time, communication and shipping and handling charges.
Feeds