Share:
POST
TWEET
SHARE
SHARE
EMAIL

The end of Auctions, PowerSellers and Fee Avoidance?

By Chris Dawson March 15, 2011 - 5:42 pm

So we’ve seen the fee changes for eBay.com but will they please buyers and who are the winners and losers? I’m hearing words like “we’ve listened to our sellers”, “sharing in seller’s success” and “convenience orientated buyers like immediate purchases” so how does this affect sellers?

Is this the end of auctions on eBay

eBay are touting the changes as good for sales and on the face of it most of the changes do look positive. Casual sellers can now list auctions with a Buy It Now option for free and there are few that can complain about that. What’s more interesting is how eBay are saying that they love the auction format but go on to talk about convenience for buyers removing the need for them to bid on auctions.

Is this the end of the auction on eBay? Almost certainly not – for many unique one off items it’s the only way to achieve the best price the market will stand for that product. However what it does mean is that consumer sellers will now get better visibility in search (as auctions are sorted Time Ending Soonest) but also gain the benefit of offering Buy It Now.

Professional sellers wanting to get visibility in search are reliant on performing well in Best Match for fixed price listings, or using auctions (for which they’ll pay insertion fees) and hoping buyers are prepared to bid and wait for the auction to end before they’re assured the item is theirs.

Casual sellers should be pleased that their items will get great search exposure and in fact better search exposure than if they paid for a fixed price listing. The only disadvantage is that, if their item isn’t purchased on Buy It Now, it might sell for the original auction start price. Setting a realistic start price is now no barrier though as there will still be no insertion fee for their first fifty listings.

The impact of fees on shipping costs

If you already offer free shipping then this change is great news for you. To counter the additional fees garnered from charging on shipping eBay have given a 1% or 2% discount based on the category you trade in. For those offering free shipping that’s lower fees with no downside.

If you do charge for shipping then the additional fees are mitigated somewhat. You won’t be charged fees for shipping overseas or next day shipping costs – so long as you also offer alternatives the first domestic shipping service offered other than next day will be used to calculate Final Value Fees.

The best strategy for sellers who offer next day shipping will actually be to offer a low cost alternative as that’s what you’ll be charged fees on.

The one thing that Final Value Fees charged on shipping will do is to remove any advantage sellers have for overcharging on postage to subsidise the cost of the item. This form of fee avoidance is effectively ended on eBay.com from July.

Lower fees vs charging fees on shipping costs

It’s easy to look at the 1% or 2% reduction in fees and dismiss them as tiny, so what do the discounts actually mean in monetary terms? Firstly the discounts are much bigger than they sound, for instance if you sell clothing and apparel on eBay you previously would have paid 12% Final Value Fees. That’s drops to 10% from July this year but in real terms it’s a 16.67% reduction giving a reasonably generous allowance for shipping costs.

As an example suppose you sell an item of clothing, it can be seen from this table that relatively high priced items with low or free shipping will save sellers money. Sellers of low priced items with relatively high priced shipping in proportion to the item cost will incur slightly higher fees.

Loss of PowerSeller Discounts

Effectively PowerSellers might as well cease to exist on eBay. Whilst it’s still a familiar term and carries some minor benefits there is no PowerSeller Logo, no PowerSeller discounts, no PowerSeller promotion in search. All the real business benefits now apply to Top Rated Sellers only.

The best advice for all sellers is to base your business on the published fee structure and take any discounts as a bonus. In reality a 5% discount on Final Value Fees may be significant but it’s only $50 out of an invoice of $1000. Your actual invoice would be significantly higher than $1000 as you’d also pay Insertion Fees, listing upgrade fees and any subscriptions such as eBay Store fees as well.

Whilst discounts do have a monetary value in reality only Top Rated Sellers are getting discounts worth having so that’s the level all sellers should be aiming to achieve. However if sellers have a complaint about the new fee structure the loss of their PowerSeller discount is probably the most legitimate.

  • Hereford United Fan
    7 years ago

    I currently get a 25% discount would this drop to 20%?

    • 7 years ago

      These are eBay.com changes, they don’t apply to eBay UK.

      We’ll have to wait for the UK announcement to see what’s in store for us 🙂

  • Old Hand
    7 years ago

    It’s a fee increase for most.

    The bigger 2% ‘savings’ are on some of the easiest to ship items. These tend to be lower priced too and with lower postage/packing costs.

    To benefit from the 1% ‘saving’ (11% rate rather than 12%) postage prices needs to be 8.33% or less of the total. That’s a rarity, most things I buy and sell it’s around 25%. About half of my sales are export USA/AU/Japan with proportionately higher postage.

    My fees will increase dramatically as will those of people I buy from which will disincentivise their listing.

    More corporatisation of eBay with a nod to the private sellers so they don’t ruffle too many feathers.

  • Suzanne
    7 years ago

    Today’s, yet another fee increase, announcement by eBay UK means that my seller fees will more than double on nearly all my items.

    We sell in Home & Garden items, and on a £600 item the fee to myself will £60 FVF, and it is currently £37.40!

    The only people that gain is eBay, and the only people who loose are the eBay loyal buyers as they will see prices increase as sellers cannot sustain or absorb the increased costs as margins are already low and business hard.

    How is this listening to sellers and customers! This is just them increasing their costs to us sellers in a decreasing marketplace, and EBAY’S PROFITS!

    Why don’t they get a focus group together to work with sellers because without them, and marketable prices people will go elsewhere. Sellers and buyers.

    • Old Hand
      7 years ago

      eBay don’t really want your business, they want to take the eyeballs that novel goods have brought and show them goods from corporates. Focus groups will make no difference (or make it worse because eBay will learn how to shaft the smaller sellers even better), eBay is already listening to sellers, like Argos and BMW.

      Bain & Co alumni run eBay, Wall Street, the bankers, what else do you expect? Prices for small sellers will keep on rising, corporates will get bigger discounts. The internet is being taken back from the real people and delivered to the faceless ones. Government will start licensing (taxing) small websites soon, ostensibly for some security type reasons but in reality to appease their corporate masters.

      This shouldn’t be news to you:

      Big Sellers Get Special, Back-Room Pricing Deals. Today’s price increases — and make no mistake they are increases — are targeted at small sellers.

      http://venturebeat.com/2011/03/15/whats-up-with-ebay/

    • Warren
      7 years ago

      Just run your businesses around your own interests and not around eBays. eBays golden years are long gone. You should be selling for your own profit and not for eBays. Everyone should be looking after number one, since when has an eBay share holder been number one?

  • 7 years ago

    Yes, when have ebay come out with a sellers update that genuinely helps sellers?

    Sellers are being squeezed between ebay fees, paypal fees, higher postage costs.

    Best to move to ebid etc or open your won website.

  • 7 years ago

    I recently moved to webstore.com. Also I am selling on bonanza.com. I have my own website also. I have heard through a private source of more disturbing rules they intend to impose later this year. This is being done in phases and the person above is correct: they do want many sellers to get disgusted and leave and they want to work with large corporate sellers. They want to be more like Amazon.

  • anthony colacicco
    7 years ago

    It’s a fee increase for small business sellers, A HUGE one, there is no such thing as free shipping anywhere, the total cost is what counts and of course service and item quality. All this does is make sellers mesh their shipping cost to the item cost and hence you have a magical illusion called free shipping. People are in business to make profit and satisfy the customer, this fee on shipping is narcisism and sociopathic abuse by the rich and wealthy in this country, period. SINCE WHEN SHOULD SOMEONE DICTATE WHAT I CHARGE FOR MY BUSINESS. AND THEY DON’T EVEN GIVE YOU TIME TO PREPARE FOR IT, THE SLIME, Don’t let anyone try to sugarcoat what is actully happening, it is a huge increase in profits for a select few ebay ceos period.

  • Brad
    7 years ago

    My partner and I sell about 7,000 items in an Ebay store. All the items cost $12.65 with $7.05 shipping. The new policy will add close to 90 cents to our costs! Right now we each make $500 per month on our store. The new fee structure will force us to increase our prices. Our items are very price sensitive. There is a good chance this will force us to close up shop. We put a huge amount of time into this hobby.

  • elvis
    7 years ago

    “hobby”

    classic!

Recent Comments

6 hours ago
Kevin: Alibaba will fail in Europe as they will have to overcome Amazon and EBay which...
6 hours ago
SAM: Am am afraid eBay recommendations are not worth the email they send out every 5...
6 hours ago
ifellow: These are called BALLS. HMRC need to grow some and quickly....
7 hours ago
james: they usually defy all logic for me. "you're the best price, the best seller, the most...