Hard Lessons from eBay

This week eBay announced yet another round of substantial changes to its selling structure.  For the past few years, the mega online retailer has re-jiggered its platform and in the process made very few of its sellers happy.

I am a longtime seller on eBay, specializing in collectible vinyl records.  Ebay has long been known as an online auctioneer, but they have been moving steadily away from auctions and towards fixed-price items for several years now,  partially to accommodate big retailers and partially to compete more directly with Amazon.com.

In 2003 I jumped on the relatively new eBay store bandwagon, which provided sellers an opportunity to sell fixed price items for a very small monthly fee.  At the time I think it was a penny per month with a $15.95 per month  subscription.  Low visibility compared to auctions, but search-able.  Maybe two years ago, the price jumped to 3 cents, while they introduced a more expensive fixed-price listing category that was as search-able as auction listings.  These varied in price but were typically 35 cents.  My experience with the store concept was very positive.  Rather than depend on the uncertainty of auction results, a seller could determine the appropriate selling price and wait for the buyer to come along.  Sometimes it took months, but at 3 cents per month it was worth the wait.

Now, they are essentially eliminating the store concept by merging these fixed price listings and store listings.  The price changes are tiered and complicated.  You can still pay 3 cents per listing but instead of paying $15.95 per month for the store fee, you’ll pay $299.95.  Or, you can keep your store fee at $15.95 but each listing is 20 cents per month.  In return for this massive price increase, all store items are no longer segregated from auction items.  Everything is equally search-able.  (There are several other pieces to the fee restructuring, not the least of which are eBay’s “final value fees”  but I’m going to focus on the store listing part of it.)

At the moment, though, I am staring at a whopping 667% price increase for listing items in my store.   To continue my current store strategy, I’d have to have a huge increase in sales to pay the fee increases.  All over the US there are sellers reacting similarly.

I’m trying to see  this as a learning opportunity.  So what are the lessons here?

1. Traffic is King.   eBay occupies a very large niche and owns a huge amount of traffic.  They’ll rent this traffic to you, but you have to play by their rules, or, as my dad used to say, ‘go play on the freeway’.  By achieving near-monopoly status as an online auctioneer, they can and do dictate how things work.  They can tinker and fiddle and the rest of us have to adjust.

2.  Their Business Model Dictates Your Business Model. Tens of thousands of small sellers are making a living by using eBay to deliver their customers.  It has worked well, for many, for a long time.  The problem is that you have no control over what eBay does.  They can force sellers to use Paypal, as they have.  They can tilt the playing field in favor of the buyer, as they have.  They can dictate shipping prices.  They can make the seller responsible for insuring packages.  The seller is simply forced to adapt, or move on.  Many sellers are trying to make that choice right now.  One thing is clear:  they are in charge.

3.  Size Matters. As eBay has cozied up to large online retailers, it has also placed obstacles in the way of the small seller.  This is quite apparent in this new structure.  In their heavily-spun announcement of the changes, they trumpet the opportunity for sellers to get fully search-able 3 cent listings.  Trouble is, it costs the seller $299.95 per month just to be eligible for 3 cent listings.   This won’t be a big problem for Best Buy or other retail giants who sell thousands of dollars of merchandise per day on eBay.  They’ll be able to list items for 3 cents while little folks will have to pay 20 cents.  May the best big man win.

4.  Honesty = Transparency. eBay trumpets “lowest insertion fees ever” but really this is a price increase disguised by a few cosmetic price promotions.  Depending on the individual seller’s situation, some of these changes could actually mean lower fees.  But for the rank-and-file seller, it’s another in a series of price increases and disruptions, each of which has been served up as an improvement for the benefit of the seller.  It’s pretty much consensus now that transparency is a desirable characteristic in business.  eBay is losing the PR war by being less than truthful in its communications to sellers.  They will lose a lot of sellers over this, and perhaps they will alienate enough people to open the door for a real competitor.   A lot of folks who feel abandoned by eBay are hoping that is exactly what happens.

5.  Superior Business Models Win.  And that’s what eBay is thinking when it makes things less palatable for sellers.  In the end, some sellers will stick with it, because, for many, it still beats starting your own e-commerce platform, setting up in an antique mall or starting  a brick-and-mortar retail operation. Until a viable competitor emerges, eBay is still the 900 pound gorilla.  A price increase it may be, but many of us will pay it.