eBay Updates Fees With Mixed Results

Old-fashioned auction dynamo, eBay, sent an e-mail to it’s members today detailing changes in their fee structure. Starting February 20th the fees to initially list an item regardless if it sells or not will be reduced.

Starting or Reserve Price Current Insertion Fee Insertion Fee (effective 02/20/2008)
$0.01 – $0.99 $0.20 $0.15 Lower fee!
$1.00 – $9.99 $0.40 $0.35 Lower fee!
$10.00 – $24.99 $0.60 $0.55 Lower fee!
$25.00 – $49.99 $1.20 $1.00 Lower fee!
$50.00 – $199.99 $2.40 $2.00 Lower fee!
$200.00 – $499.99 $3.60 $3.00 Lower fee!
$500.00 or more $4.80 $4.00 Lower fee!

As an added bonus the $0.35 gallery fee has now been dropped meaning eBay will include a picture of every item in the search results. The price cuts up front came with an increase of the final value fees assessed at the end of successful auctions.

Closing Price Final Value Fee Final Value Fee (effective 02/20/2008)
Item not sold No fee No change
$0.01-$25.00 5.25% of the closing value 8.75% of the closing value
$25.01 – $1,000.00 5.25% of the initial $25.00, plus 3.25% of the remaining closing value balance ($25.01 to $1,000.00) 8.75% of the initial $25.00, plus 3.50% of the remaining closing value balance ($25.01 to $1,000.00)
Over $1,000.01 5.25% of the initial $25.00, plus 3.25% of the initial $25.00 – $1,000.00 plus 1.50% of the remaining closing value balance ($1,000.01 – closing value) 8.75% of the initial $25.00, plus 3.50% of the initial $25.00 – $1,000.00 plus 1.50% of the remaining closing value balance ($1,000.01 – closing value)

To put this final value increase into perspective here is a sample of fees for a range of final auction prices.

Final Value Old Fee New Fee Difference
$4.99 $0.26 $0.44 $0.18
$9.99 $0.52 $0.87 $0.35
$19.99 $1.05 $1.75 $0.70
$49.99 $2.12 $3.06 $0.94
$99.99 $3.75 $4.81 $1.06
$199.99 $7.00 $8.31 $1.31
$499.99 $16.75 $18.81 $2.06
$999.99 $33.00 $36.31 $3.31

All calculations were done at http://www.ebcalc.com which allows you to change fee values.

Auctions that sell for under a dollar benefit the most with these latest changes as the lower insertion fee plus the free gallery upgrade outweigh the increased final value fee. Sellers who do a high volume of business will be hit hard as more of their earnings will come out of the already slim margins and go toward more fees.

eBay has been on the decline for the past couple of years. They are already the dominant auction site with a virtual monopoly on the industry. Computers have been getting more efficient as technology advances but apparently eBay can’t lower its costs fast enough. And let’s not mention that billion dollar Skype purchase which has done absolutely nothing to eBay’s auction business.

eBay has become a victim of it’s own success. In the beginning people went to eBay to find rare collectibles or heavily discounted items. Some even considered eBay to have the perfect business model as a middle-man connecting buyers to sellers with no inventory to keep on it’s own. Now eBay is littered with suspicious listings, outrageously high shipping prices, and generally more distractions to wade through in search of the desired item. The selling process is a laborious one requiring lots of time to specify all of the necessary options to help auctions stand out from the crowd. What eBay needs to do is simplify everything as much as possible starting with the listing process. They also need to focus on helping it’s biggest asset: the buyers and sellers. Buyers want a safe, friendly environment to do business in and sellers want the least amount of obstacles to selling their goods. More fees result in less incentive for sellers to consider eBay which results in a less lucrative market for buyers to enter. eBay should take a page from the Amazon Marketplace which provides a much better experience for both buyers and sellers.

That improved experience is why when I need to sell something to a stranger I turn to the efficient book dealer rather than the decrepit auctioneer.