Internet auction giant eBay (Nasdaq: EBAY) incurred the wrath of many of its members Tuesday by announcingthat it will hike its listing fees at the end of January.
The announcement came one week after Yahoo! Auctions began charging listing fees, and in advance of eBay’s fourth quarter earnings announcement, scheduled to come after the stock market closes Thursday. Analysts are expecting a profit of 7 cents for the quarter.
The fee increases, which take effect January 31st, are the company’s first since December of 1996, eBay told users. The fee increases will also apply to items listed on eBay Canada in U.S. dollars.
“We recognize that price increases directly impact our sellers,” eBay said. “We will continue to build a vibrant marketplace by investing heavily in technology, marketing and customer support.”
Users Unhappily Staying
Users of eBay were quick to denounce the move on Web message boards, but few said they would stop using eBay, which attracts far more buyers than competitive sites such as those run by Yahoo! and Amazon.com.
However, many eBay users were already disgruntled over eBay’s announcement inlate December that it would step up enforcement of policies restricting its members from conducting off-site sales with each other.
In its note to users, eBay noted the need to continually improve the technology of its site, a fact driven home by a 10-hour outage the company suffered on January 3rd.
At the time, the company said it had postponed a planned upgrade until after the holidays and that additional work would be done to avoid future problems.
The increases will vary depending upon the price of the item being listed, with the largest hikes — as much as 65 percent — being tacked onto high-end auctions.
For instance, the insertion fee for an item worth between US$10 and $25 will increase from 50 to 55 cents, while the fee for items worth $200 or more will move from $2 to $3.30. The company is also instituting a 10 cent fee for the option of holding an auction open for 10 days.
While some users may initially leave eBay for other auction sites that charge lower fees, “the overwhelming majority will continue to list through eBay,” said Derek Brown, an analyst with W.R. Hambrecht & Co.
Cheers on Wall Street
Indeed, most analysts applauded the move by eBay, one of the few profitable e-commerce companies, with several saying the fees could boost revenue by 5 percent and add up to 6 cents per share in earnings during the coming year.
“This price increase is a powerful indicator of the health of eBay’s franchise,” Brown said.
In addition to being upbeat about the future, Brown is also bullish on eBay’s current performance, saying the annual “January effect” boosting the site’s traffic seems to be stronger this year than before.
“The company’s performance and outlook should serve as beacons of light for technology investors in these challenging times,” he added.
The fees are likely to change eBay, at least at first. Many users seem prepared to lower reserve prices to avoid higher fees, a move that may increase the rate of sales on the site.
Users may also think twice before listing some items, which may help to address recent complaints, primarily from other sellers, that too many items are appearing for sale.
Some users speculated that the 10-day auction fee would bring more traffic to eBay on Sundays. Sellers often list items so that auctions end on Sunday, giving the item as much weekend exposure as possible. Rather than pay the 10-day fee, many sellers said they would start auctions on Sunday instead, possibly leading to heavier traffic on that day.
I also have seen other sites that won’t replace eBay, but have started to make a dent in their membership. I have started to move all my auctions to ioffer.com, I think they have progressed alot since I tried them last year. You should to…
I have a comment for Keith Regan. In the article, you stated: "The company is also instituting a 10 cent fee for the option of holding an auction open for 10 days." That information is incorrect. Ebay currently charges an additional 20 cents for a 10-day listing and will be DOUBLING that fee to 40 cents on Feb. 18. This is a direct quote from ebay’s announcement: "The [additional] fee for a standard listing of 10 days will double, from 20 cents to 40 cents."
ebaY’s Fee Increase
16 Jan 2001
Effective Wednesday, 31 January 2001, ebaY is increasing insertion fees and adding a charge to the 10-day listing option. Final value fees, other feature fees and insertion fees for vehicles, eBay Premier and Real Estate remain unchanged.
Here are the old and new price schedules for insertion fees.
Opening Value or Reserve Price: $0.01 – $9.99
Current Insertion Fee: $0.25
New Insertion Fee: $0.30
Opening Value or Reserve Price: $10.00 – $24.99
Current Insertion Fee: $0.50
New Insertion Fee: $0.55
Opening Value or Reserve Price: $25.00 – $49.99
Current Insertion Fee: $1.00
New Insertion Fee: $1.10
Opening Value or Reserve Price: $50.00 -$199.99
Current Insertion Fee: $2.00
New Insertion Fee: $2.20
Opening Value or Reserve Price: $200 and up
Current Insertion Fee: $2.00
New Insertion Fee: $3.30
ebaY will now charge a ten-cent ($0.10) fee for the 10-day listing option. The three-day, five-day and seven-day auctions will not have an additional fee.
TAG thinks this increase is not justified. ebaY continues to have persistent ongoing problems that they have not fixed, and persistence and ongoing reliability problems. Until ALL past problems are resoved we do not feel ebaY can justify or is entitled to this, or any increase. We are not currently getting what we pay for, and they now want us to pay more for it.
ebaY currently takes up to 36 hours for an item to index in Title and Description search. Until that indexing happens, your item does not show up when buyers search, therefore you are paying for that 36 hours and receiving no value. The reason to list a 10 day auction was to make up for this lost time on the front end, a loss due to ebaY’s failure to provide the service you are paying for. They are now going to charge sellers for ebaY’s failure to perform.
There have been many reports on the OAI/OTI boards about the increase in deadbeat bidders. When ebaY charges a listing fee and a seller has a bidder who does not follow through, ebaY does NOT refund the listing fee, only the final value fee. ebaY should refund listing fees or allow a free relist on auctions that end up with deadbeats. If ebaY wanted to cure this deadbeat problem, they would charge the listing fees to the deadbeat buyer.
ebaY currently has an up time of approximately 90%. This is an unacceptable level in an industry whose STANDARD is 99%.
The only relatively fair way that ebaY could increase fees without our severe censure, would be an increased final value fee. Since this fee directly ties ebaYs success to their sellers success, it would motivate ebaY to find more ways for their sellers to succeed. If ebaY really cared about the ability of its sellers to thrive, they would not have added these regressive and destructive fees. ebaY could have also offered a 12 or 14 day auction option for an additional fee, rather than adding a fee for its own incompetence that force sellers into using 10 day auctions just to achieve 5 to 7 days of exposure.
As a seller of Electronics on Ebay, I have found additional sites which offer unique selling opportunities. One of these is http://www.prizewise.com
While this site can not replace Ebay, it does offer a unique selling venue. Since there is no charge to list your item (you only pay a % if the item sells) this offers a relief from Ebays constant rate increases.