Let’s Do Lunch

Anyone who knows me in person knows that I rarely talk about my business or what it is I do.  Being a “professional eBayer” is extremely interesting to people, mostly because everyone’s dream is to quit their job and make millions while working from home.  That fact is evident in those signs you see proclaiming you can “make 30k a week” if you simply call Juan at 1-800-rip-me-off.  People are always asking me the same questions: “How much do you make?”  “Where do you get the stuff you sell?”  “Can you help me do it?”  I used to enjoy talking about eBay back when I was selling Creative Muvo MP3 Players my freshman year in college.  My father’s favorite story about me is how I began on eBay – taking apart MP3 players, selling the Compact Flash card that was inside, inserting a smaller Compact Flash card into the MP3 players, reprogramming it, and reselling the MP3 player.  Back then, the Muvo cost $100, but it had a 4GB Compact Flash card inside of it that was worth about $200 and then the MP3 player could be reprogrammed with a smaller, cheaper card and resold for $50 or more.  I made about $20,000 profit in eight weeks – not a bad sum for an 18 year old attending college full time.  Schemes as simple and profitable as that are rare these days.  Lord knows eBay and PayPal would shut me down in an instant if I started moving that kind of product in such a short time today, with the dozen feedback and a new PayPal account like I had back then.

The eBay golden years, a time I fondly reminisce about now, were back in 2003 to 2005.  I don’t know much about stuffing money in the Caribbean, but I like to think that eBay back then was as easy and profitable as moving money interest free to the Caymans for characters like Tony Montana in Scarface.  Everyone’s story is different I’m sure, but those were my best years.  Sure, I’ve had plenty of success since then, but I doubt anything will ever be as fun as drinking beer, reprogramming MP3 players, and moving $1,000 a day from PayPal to my bank account.  Maybe I am just that nerdy, but it’s hard for me to envision a time in the future where things will be as care free as they were back then.

Getting Harder

You don’t have to be a rocket scientist to figure out things are more complicated in the auction world than they were six or seven years ago.  I keep up to date with just about everything that’s going on in the eBay world and even try my hand at writing tutorials and in-depth analysis from time and time, but even I have trouble figuring out seller releases and new eBay rules and regulations.  I’m tired of being treated like I’m stupid and tired of the eBay brass trying to trick me into thinking their new policies and stipulations will somehow benefit me.  I’m not a big complainer and if you’ve read this website over the last year or so, you would know that I’m actually one of the most pro-eBay “bloggers” on the internet, outside of any eBay owned blog of course.  There’s no doubt that eBay’s core business plan has moved away from people like you and me, in favor of conglomerates and businesses looking to unload stuff they would be embarrassed or unable to sell on their own websites.  As I personally move further and further away from eBay, I am not as concerned as I might be if I still relied on it for the majority of my revenue.  If things were still as easy as they used to be, I would probably have an even larger presence on eBay than I did in 2005, but that is not how things have come to pass.  I don’t have any ill will or the anger that many people seem to possess, perhaps because I feel like I’ve already made my money, but I do find solace in the fact that eBay is hurting even more than I ever will.

Not Just the Golden Age for Me

I spoke earlier about how the years 2003 through 2005 were my best years on eBay.  While I technically made more money in 2006 and 2007, it wasn’t as fun or as fulfilling as those first couple of years.  Not coincidentally, those same years were also eBay’s most successful.  On January 2, 2003, eBay stock was trading at a paltry $16.88.  Exactly two years later, the same share of eBay stock was worth $58.89, an increase of about 250%.  I can only imagine the happiness Meg Whitman must have felt that New Year’s, having built a company that at one time sold for $1 a share into a company with a market capitalization of more than 50 billion dollars.  It’s a truly amazing story of ingenuity, foresight, and a belief that anything and everything is possible.  Of course, eBay quickly fell on hard times.  Just one month after the stock was trading at an all-time high of nearly $60, the share price fell to under $40 just one month later on January 31, 2005 and was just a touch above $30 by the end of April 2005.  Fast forwarding a bit to 2009, I’m sure we’re all aware of eBay shares falling under $10 in March 2009.  They have since rebounded all the way back to as much as $28 in March of 2010, before falling back to under $20 just last week.

Tired of the Amazon/EBay Comparison

My biggest “pet peeve” about the eBay/Amazon/auction blogosphere is our obsession about comparing Amazon and eBay as if they are somehow in direct competition or even similar companies.  Amazon and eBay are so different that you might as well add British Petroleum or GlaxoSmithKline to the mix and compare Wall Street results of all four.  Ever bid on an auction at Amazon?  Ever seen an MP3 available for purchase from eBay’s Music Store?  Ever bought a product directly from eBay?  Ever used Amazon Payments on Dell, Newegg, or any other major internet retailer other than Amazon?  Ever purchased eBay’s e-reader device?  There is just no comparing the two because their business models are so different.  How much of Amazon’s revenue comes from third party sales?  We will probably never know.  I could go on and on about Amazon, but it will have to wait for a future post.

EBay is a Stronger Company than Amazon

At the beginning of this year, I wrote an article about the many ways in which eBay is a stronger company than Amazon.  Titled, “EBay is a Stronger Company Than Amazon and I Can Sort of Prove It,”  I went into detail about how eBay has always been a more profitable company than Amazon and probably always will be.  Amazon’s market cap might be roughly twice that of eBay, but it’s also trading at an astonishing 53 times earnings.  This is an absurd price to earnings ratio and part of the reason why Bank of America and Merrill Lynch cut Amazon’s rating from buy to hold just yesterday.   Amazon is going to be even more pressured in the coming months with significant competition from Sony, Barnes & Noble, and Apple in the e-reader business and Apple will continue to make more money in media sales than Amazon could ever hope to.  Not to mention the fact that e-readers will never catch on with university students because it’s impossible to take notes or highlight important passages with a Kindle device, not to mention attach sticky notes or quickly flip back and forth between pages.    Considering Amazon made such a big deal out of the “student version” of the Kindle, they must have thought it would be a viable tool and a significant market for the device.  Like Amazon Payments, it looks like the Kindle may turn out to be a bust for the company.  Of course, Amazon never admits to how many they have actually sold, so we may not know until they stop selling it.

John Donahoe Sells 50K Shares, Exercises Worthless Options in Front of Q2 Earnings Release

John Donahoe has been selling 16,667 shares of eBay stock on the last Wednesday of the month for each of the last three months, probably as part of his contract or an expiration date on the sales or something.  Over the last six months, eBay insiders have sold 811,161 shares and purchased just 5,400.   The eBay haters may find solace in the fact that John was forced to sell 24,000 shares of eBay stock on May 11th, 2010 with total proceeds equaling $0.  Nothing worse than worthless stock options, except for maybe the $0 paycheck many past eBay sellers are getting from the company these days.

Where Do We Go From Here?

This next week will be an interesting one.  EBay reports earnings on Wednesday July 21 and Amazon reports the following day.  Standard & Poor’s reiterated a “Strong Buy” and $32 price target for eBay on July 14, even after the 3.8 billion dollar patent infringement case came to light. Amazon is probably on the way down, but you never know what their report will look like after several key acquisitions over the last year, including Zappos and Woot.  I am not too worried, considering I own shares of neither stock.  But it has always intrigued me, so I will continue to watch.

Take care and good luck shill bidding, Josh

Introductory Paragraph

One of the most damaging things that can happen to an eBay seller is getting hit with the dreaded “Notification of Limited Account Access.”  PayPal will limit just about every seller who does more than $2,000 worth of sales per month and even limit sellers who sell less, depending on numerous other factors.  I’ve written in length about ways to minimize limitation risk in past articles, as well as how to restore account access once a limitation is placed.   However, to restore account access you’ll likely have to provide personal documents and information, including your Social Security number, credit card information, a copy of your driver’s license, supplier contact information, invoices for the products you’re selling, proof of delivered goods, and succumb to a personal credit check.  Even if you submit all of these documents, it’s still possible that PayPal will deny your limitation appeal and keep your account permanently limited.  They won’t tell you why either, except for one of only three or four canned responses.  In addition, some people may not be comfortable giving out all of the information PayPal requires or may not be able to provide it.  There’s also no guarantee PayPal will even give you an opportunity to appeal the limitation.  PayPal routinely blocks accounts permanently, with no reason provided.  Restoring account access is a painfully frustrating experience that will take at least a week to resolve, if not more.

What Happens If I Can’t Restore Account Access?

PayPal reserves the right to limit a PayPal user’s access to their account and freeze any funds in the account for 180 days.  Here it is, right out of the user agreement:

We may close, suspend, or limit your access to your Account or our Services, and/or limit access to your funds for up to 180 Days if you violate this Agreement, the PayPal Acceptable Use Policy, or any other agreement you enter into with PayPal.

As well as:

We may hold your funds for up to 180 days if reasonably needed to protect against the risk of liability.

and:

10.8 Acceptable Use Policy Violation – User Fines. If you violate the Acceptable Use Policy then we may hold your funds up to 180 Days, fine you up to $2,500.00 USD for each such violation and/or take legal action against you to recover additional losses we incur. You acknowledge and agree that a fine up to $2,500.00 USD is presently a reasonable minimum estimate of PayPal’s damages, considering all currently existing circumstances, including the relationship of the sum to the range of harm to PayPal that reasonably could be anticipated and the anticipation that proof of actual damages may be impractical or extremely difficult. PayPal may deduct such fines directly from any existing Balance in the offending Account, or any other PayPal Account you control.

The bottom line is that PayPal can, and will, hold any funds remaining in the PayPal account for 180 days if you are not able to resolve your limitation.  On top of that, you will be unable to send funds, receive funds, or close your account at any time in the future.  You will receive an email similar to the following if your account has been selected for permanent limitation:

Notification of Limited Account Access RXI034

Hello Meg Whitman,

As part of our security measures, we regularly screen activity in the
PayPal system. During a recent screening, we noticed an issue regarding
your account.

We are very sorry, but in accordance with the PayPal User Agreement, we are
no longer able to have you as a customer.

We have had to close your account for the following reason:

PayPal Account Review Department

How To Withdraw Money From A Limited PayPal Account

First of all, check the Resolution Center to be sure that you do not have the ability to withdraw funds.  All PayPal limitations are different and you may get a “soft” limit before the permanent limitation sets in.  Withdraw all of your money to your bank account immediately if you do have the ability to withdraw.  If you do not have the ability, then try to restore account access by completing the steps with the help of this guide.  If that fails, then your goal becomes getting the money out of the account as quickly as possible.

First of all, it’s unlikely that PayPal will release any funds until after at least 45 days have gone by since you received the initial notification of limited account access.  This is because buyers can file a PayPal dispute up to 45 days after payment was sent and PayPal wants to be sure they have your money to cover those refunds.  After 45 days has passed, send an email to executiveoffice@paypal.com containing something similar to the following:

Subject: Status of Limited PayPal Account Withdrawal

Body:

Dear PayPal,

My account has been limited since (date of first received limitation email) and I have not had the ability to withdraw the (insert amount) that is remaining in the account.  When will these funds be made available to me?

I would appreciate any help you can provide.

(Name)

It may take a while to get a response.  The usual turn-around time is about five days.  Your initial success depends on how long your account has been limited and whether there have been a lot of complaints or other problems with the account.  If the account has been limited for more than 120 days then it’s likely you’ll receive an email with the subject “Your PayPal Funds are Eligible for Withdrawal” along with a response to your original email with a case number in the subject line along with your original subject.  In the example above, it will look something like “Re: Limited PayPal Account Withdrawal (KMM156434026391L0KM) :ppk1.”  If the account has only been limited for a short time then it’s likely you’ll receive a response similar to the one below.

Dear Poor Seller,

As stated in section 10.4 of our Legal Agreement outlines that if we

have reason to believe that you have engaged in any Restricted
Activities, we may take various actions to protect PayPal, eBay, a User,
a third party, or you from Reversals, Chargebacks, Claims, fees, fines,
penalties and any other liability. The actions we may take include but
are not limited to the following:
a.      We may close, suspend, or limit your access to your Account or the
Services (such as limiting access to any of your Payment Sources, and
your ability to send money, make withdrawals, or remove financial
Information);
b.      We may contact buyers who have purchased goods or services from you,
contact your bank or credit card issuer, and warn other Users, law
enforcement, or impacted third parties of your actions;
c.      We may update inaccurate Information you provided us;
d.      We may refuse to provide our Services to you in the future;

e.      We may hold your funds for up to 180 Days if reasonably needed to protect against the risk of liability; and
f.      We may take legal action against you.

Again, I apologize for any inconvenience caused in respect of this
matter.  If you require clarification on any of the issues raised,
please feel free to contact us directly at executiveoffice@paypal.com.

Sincerely,
Carrie
Executive Escalations
PayPal, an eBay Company

This is their standard copy/paste email response.  If you get this kind of response then you will need to press harder.  It’s unlikely PayPal will release all of the money at once in this situation, so you should try to get half of the funds transferred to your bank account at this point.  In this email, you want to sound serious and professional.  Don’t threaten to sue or assault anyone.  Reply directly to the email you received before with the case number in the subject.

Dear (name of person who sent the last email from the Executive Office),

I appreciate the level of risk PayPal is taking on by offering their services.  My account has had zero credit card chargebacks at any time and I have zero open disputes and claims.  There is no justification for holding (insert amount of money) since (insert date).  From the research I have done, there is no legal justification to hold my money for this amount of time either, regardless of what your terms of service say.  I will be filing a complaint with the California State Attorney General, Federal Trade Commission, Better Business Bureau, and (insert local congressman’s name).  I will forward the complaints to your office as well.  I am a reasonable person and all I am asking for is the release of half of the funds now.  If you look over my account I am sure you will see that there is zero risk of loss to PayPal.  Thank you for your attention and I am sorry we were not able to come to an amicable solution.

(Your Name)

EBay/PayPal read everything I put on this website within 20 minutes of it going up.  Take a look at the information I have in the email examples above and put it in your own words.  If you just copy/paste it then they’ll know where you got it from and won’t take you as seriously as they would if they think it’s an original email.

An email like this example will show them that you mean business and know what you’re talking about.  A lot of people will start threatening class action lawsuits and other ridiculous threats.  PayPal knows 99.999% of people are going to do nothing.  Your promise to file complaints with those agencies is reasonable and something you can actually do.  Wait about two days for a response.  You should get one much faster than it took to get the first one.  Ideally, you’ll receive something like the following:

Dear Josh,

Thank you for your response. I apologize for any confusion in regard to this matter and I can see how this situation could be frustrating. I have reviewed your PayPal account and your recent inquiry. Based on our review we are prepared to make a one-time exception, and release $3,000.00 USD. The funds will be manually transferred from your PayPal account balance to the Confirmed bank account on file. Please allow one to two business days for the transfer to complete. Once the funds have left your PayPal account, please allow three to four business days for the funds to reach your bank. Due to the inherent risk of Reversals, the remaining balance will be held for the full 180 days. You may log into your PayPal account after January 1, 2010, and withdraw the remaining funds.

Again, I apologize for any inconvenience caused with respect to this matter.  If you have additional questions, or would like further assistance, please feel free to contact me directly at 402-952-8338 or email me at executiveoffice@paypal.com.

Sincerely,

Connie

Executive Escalations

PayPal, the safer, easier way to pay online

It usually takes about 24 hours for the money to leave your PayPal account and the usual two to four days for it to show up in your bank account.  They may also ask for confirmation of which account you want the funds transferred to.  If they want you to call, try emailing them the answer to their questions unless you want to get on the phone with them.  Don’t give out the whole bank account number – the last four digits is fine.

If you still get denied, follow through with the complaints.  The reason you got denied is probably because it hasn’t been long enough since your account was limited.  There is a lot of fraud that goes on through PayPal and they have no idea if you’re “one of the good guys.”  If you still get denied and it’s been 90 days or less then try again around the 90 day mark.  Chances are that PayPal will be more comfortable releasing some of the funds at that point, provided you don’t have any complaints or credit card chargebacks.

California State Attorney General Complaint Form: http://ag.ca.gov/contact/complaint_form.php?cmplt=CL

Better Business Bureau Complaint Form

http://sanjose.bbb.org/ComplaintDetail.aspx?CompanyID=0000204015

Federal Trade Commission Complaint

https://www.ftccomplaintassistant.gov/FTC_Wizard.aspx?Lang=en

If you don’t know the name of your congressman, simply “Google” your city and “congressman” and it should be the first result (if your congressman is any good).  There will be a phone number and an email address for you to forward your complaint.

Conclusion

There are very few people at PayPal that have the authority to make decisions.  I have fairly good intelligence that says there are only about six people in Omaha, Nebraska that decide whether accounts are reinstated after a limitation.  Computers do almost all of the work, but a human makes the final determination.  Your best chance of getting your money prior to the 180 day mark is the process I have explained above.  Calling the 1-800 number and trying to email random people at PayPal won’t do you much good.  The chances of getting anyone on the phone that can actually do anything about it are just about zero.  The trick is always to stay calm and never say anything you can’t follow through with doing.  If you have any additional problems you’re welcome to post here or email directly at my email listed in the “About Me” section above.  Of course, I will never ask you for any personal information.  I don’t even want to know your last name, let alone your password or banking information (no offense).  Don’t give it out to anyone that attempts to contact you directly either.

Good luck and I would be happy to help if you have any additional questions.

EBay Helpful Guides For Listing, Selling, Surviving

Block an EBay Bidder in a Specific Country Using Site Preferences

Create An eBay Fixed Price Multiple Quantity Listing To Maximize Views and Profit

eBay Auction Vs Fixed Price Fee Structure – The Best Way to List

EBay Gallery Image Upload Errors Reported

Free Feedback and eBay Bidding Tools from Toolhaus.org, Goofbay.com, and Sellerdome.com

How Do I Schedule An eBay Listing In Advance?

How Many Listings Are There on eBay and Other Alternative Auction Sites?

How to Create the Perfect eBay Item Title

How to Easily Contact eBay Live Help Chat

How to Effectively Use eBay Feedback Revision (Formerly Mutual Feedback Withdrawal) to Get Negatives Removed

How to File an eBay Unpaid Item Strike or Cancel A Transaction

How to Raise Your Listing and Gain More Visibility in eBay Best Match Search

How to Remove Negative Feedback on eBay – And Deal With Those You Can’t

How to Use eBay Gallery Picture and Gallery Picture Plus Upgrade

How to Use Inserts in the Item Description to Save Time Listing on eBay

How to Use Texter to Save Time Creating eBay Listings

My eBay Item Isn’t Showing Up in Search Results – What’s Wrong?

Understanding eBay Selling Limits – What They Are and How to Get Around Them

Using the eBay Subtitle Upgrade to Maximize Views and Guarantee the Highest Price Possible

What Should My eBay Payment and Shipping Terms Be?

What Starting Price Should I Set for My eBay Item? An Introduction to eBay Pricing Strategies

EBay Policy

EBay Accused of Manipulating Detailed Seller Ratings in Order to Deny Sellers Fee Discounts

EBay Finally Addresses Recent Customer Service Woes Through E-Mail Contact

EBay Finally Figured Out Anonymous Email System? Nahhhhh

EBay Search Broken Like Really Broken Not A Euphemism

EBay Search Visibility Report and Best Match Analysis Broken, Worthless

EBay Spring 2010 Seller Update Revisited – Ebay’s Highest Fees Ever

EBay Using Policy Violations to Strip Users of Powerseller Status and Right to Fee Discounts

eBay’s “5 Free Insertion Fees Every 30 Days” “Discount” Costs Sellers More Money In Fees

EBay’s Real Problem – An Erosion of Trust Between Buyer and Seller

How to Return an eBay Item to the Seller Part 1 – Am I Eligible?

How to Return an eBay Item Part 2 – Contact The Seller and Return Shipping

Important eBay Seller Announcement

MC042 EBay Reinstates Thousands of Suspended Accounts

Spring 2010 Fee Update – EBay Thinks We Won’t Notice

Tend EBay’s Garden for Free and Experience New Search

PayPal Guides

A Tutorial on How to Use Paypal MultiOrder Shipping Efficiently to Save Time and Money on Postage

Beware of PayPal Personal Account Gift Payment Scam

Contact Paypal Executive Escalations Department By Email

eBay and Paypal Seller Protection Policy – What’s Really Covered

EBay Expands 21 Day Payment Hold Policy To All Sellers?

How to Enable Paypal Merchant Rate Pricing and Save Money on Paypal Fees

How to Fund PayPal Account With Cash Via MoneyPak – No Credit Card or Bank Account Required

How to Remove Paypal Limitation and Restore Account Access

Paypal 21 Day Payment Hold on eBay Sales – What It Is and How to Deal With It

Paypal Policy Update Coming June 3 – July 1, 2009

Paypal Rolling Reserves Rolling Out For Many July 23, 2009

Verify and Lift Limit on Paypal Account Without Credit Card or Social Security Number

Shipping Tips, Guides

Can I Use My Own Box to Ship USPS Flat Rate?

Can USPS Signature Confirmation Be Used to Ship to P.O. Box?

Does USPS Require A Signature For Delivery?

Guide Roundup – How to Ship on eBay and Paypal

How to Print USPS International Shipping Label With Required Customs Forms

How to Use USPS Signature Confirmation Effectively with eBay and Paypal

Is It Less Expensive to Ship an Envelope or a Box With USPS/Fedex/UPS?

Print USPS Small and Large Flat Rate Box Labels With PayPal On EBay

The Limitations of USPS Delivery Confirmation

The Perils of International Shipping With eBay and Paypal – A Guide to Successful Shipping Practices

USPS Shipping Tips and Tricks For Buying and Selling With eBay and Paypal

Utilizing USPS Priority Mail Flat Rate Boxes For Your eBay Business

What the May 11, 2009 Postal Rate Increase Means For Your eBay Business

When to Buy Shipping Insurance Part One – The Buyer’s Perspective

When to Buy Shipping Insurance Part 2 – The eBay Seller’s Perspective

Stock and Corporate News

As Expected, eBay Inc. Results Exceed Expectations

EBay Beats Estimates – Revenue, Earnings, and Guidance Improve

EBay Is A Stronger Company Than Amazon – And I Can Sort Of Prove It

Where is eBay Headed in 2009 and Beyond? Today’s Earnings Report May Give Us Some Ideas

USPS News

The Great October USPS Track and Confirm Debacle

USPS Delivery Confirmation Labels Erroneously Returning “There Is No Record of This Item”

USPS Prices Going Up, Staying the Same, Going Down in 2010

USPS Track & Confirm Search Results Online Update

EBay has been busy the last few days reinstating what appears to be thousands of previously suspended accounts.  Why would eBay allow thousands of users it had previously deemed undesirable back on the site to defraud even more helpless victims?  That isn’t necessarily what eBay has in mind.  Instead, eBay is trying to persuade account holders with long overdue fees to finally pay up.  You see, eBay’s biggest problem isn’t fraud or user dissatisfaction – it’s people refusing to pay their fees.  By sending out emails offering to restore users’ accounts, eBay is promising a potentially clean slate.  It’s basically what they’ve always promised – pay us and we’ll unsuspend you.  In fact, that’s exactly what they say at the end of every email they send trying to collect money, “If this past due balance is the only reason for restricting your account, it will be reopened for bidding and listing when your full payment is received.”  What’s different about this tactic?  They actually state that they have reinstated the account prior to receiving payment.  Of course, once the user logs in, they will see that their account is still suspended.  Here’s what the email says:

MC042 MegWhitman, we’ve reinstated your account

How can an account simultaneously be reinstated, in good standing, and still suspended at the same time?  Let’s have a look at what’s really going on here.

EBay Doesn’t Know If You Actually Exist

While certainly not the majority of eBayers, a great number of eBay users use fake names, addresses, phone numbers, and banking information to conduct business.  EBay has a terrible time figuring out who is real and who is fake and tend to suspend as many honest people as they do potential scammers.  In order to increase their chances of weeding out the frauds, eBay has begun using public records to check whether new users are likely to be who they say they are.  Many, if not all, new sellers will receive a “soft suspension” depending on what information they use to register their account.  This comes in the form of the following email:

MC011 MegWhitman: eBay Account Update — Action Needed

We’ve noticed some activity on your account, and we need your help in verifying some information. We’re sorry for this inconvenience, but while we’re working things out with you, you’ll have limited access to your eBay account.

eBay Customer Support

Before that happens, users may receive a phone call from eBay with a representative that wants to ask verification questions.  If you don’t answer that phone call, you’ll get the following email with the subject: FR0RC002 eBay is trying to contact you and the text:

Hello Meg,

John
eBay Trust & Safety

Once they get you on the phone, eBay will ask you similar questions to the ones Experion would ask if you were trying to retrieve your credit score online.  They’ll ask about past addresses, whether you have a mortgage, and which bank you used to get your mortgage.  They’re odd questions if you’re not expecting them, but if you refuse to answer or question who’s calling, chances are you’ll get the previous MC011 email with the soft suspension.  The answer to these questions is almost always “None of the above” so if you’ve managed to create an account and you don’t know the answers then that’s your safest bet.  Either way, be prepared to answer multiple choice questions about your past addresses and credit history.  If you fail to answer the questions correctly or don’t respond, eBay will send you an email similar to the following:

Hello,

Where to Mail:
Attn: Seller Vetting
PO Box 1469
Draper, UT 84020

This is eBay’s way of figuring out exactly who you are so they can collect money from you should you fail to pay at a future date.  Unfortunately for eBay, the information they ask for can be easily faked, although it does make it more difficult for casual fraudsters to create numerous accounts using fake information.  Luckily for scammers around the world, it doesn’t stop the best, many of whom continue to thrive selling counterfeit items or goods that they have no intention of delivering on eBay.

It’s Hard to Collect Money from Someone That Doesn’t Exist

EBay uses a variety of tactics to try to get users to pay their fees.  Unfortunately, it’s exceedingly difficult to collect from someone/something that doesn’t actually exist.  After a user’s account is past due, eBay will send a few gentle reminders asking nicely for payment with the subject, “eBay Payment Reminder – Action Required USPRE.”  If payment is still not received, you’ll receive an email with the subject “Your eBay Account Has Been Placed On-hold: Action Required US200” explaining the various ways you can pay your fees.  An additional warning is issued in the email: “If we do not receive your payment, your account may be suspended and additional collections remedies may be used to bring this account to current. All current listings will be ended and you will no longer be part of the eBay community.”  You’ll get one of those emails every few days for a month.  Then comes the permanent suspension with the accompanying email: “MC197 EBI NOTICE: eBay Registration Suspension: NonPayment” and the text

Your eBay account has been suspended because you currently owe a balance of US $1 million Dollars.

eBay will gladly consider reinstating your account, but only after this balance has been paid in full. If this past due balance is the only reason for restricting your account, it will be reopened for bidding and listing after your complete payment has been processed.
Please follow these steps to make a one-time payment of :

eBay Global Collections

At this point, eBay will continue to send you an invoice to your email each month asking for payment.  They will also send your bill to I.C. System, a particularly annoying collections agency.  I.C. will call you a few times a day and send you several letters through the mail trying to get you to pay.  They can, and will, go after your credit report as well.  The problem is, they can’t do a thing if you’re not who you say you are.  There are thousands of eBay users actively buying and selling on eBay with nothing more than a disposable cell phone, a Simon Gift Card, and a bank account in someone else’s name.  EBay can’t do anything to figure out who these people actually are, so they have no way to make them pay their fees.  There are really only two reasons to pay eBay fees on a suspended account – to get the collection agency to leave you alone and to save your credit report.  If you can just turn off your disposable cell and don’t have a credit report to worry about then there’s nothing eBay and their collection agency can threaten you with.  Thus, eBay has a serious problem.

Why EBay’s System of Suspensions and PayPal’s Use of Limitations Doesn’t Make Any Sense

I’ve always questioned eBay’s use of suspensions and PayPal’s use of limitations to shut sellers down.  First of all, the funny thing about PayPal limitations is that sellers with a limited account can’t send payments.  This includes sending a payment to eBay to pay fees.  A seller with a permanently limited PayPal account can’t pay eBay fees with PayPal at any time and eBay can’t go into the PayPal account and remove money to pay the fees themselves.  EBay is completely stuck unless the seller pays their fees via another method.  Even after PayPal finally releases the funds to the buyer and allow them to withdraw their money, the PayPal account remains limited and eBay still can’t touch the funds.  You might think that PayPal would wait to limit a buyer’s account until after the seller has paid their eBay fees, but that isn’t how eBay and PayPal operate.  It’s a classic case of the left hand not knowing what the right hand is doing.

EBay has a new problem that is even more potentially dangerous to their bottom line.  By moving dispute resolution from PayPal to eBay, eBay now has more control over sellers and a better idea of how they’re performing.  However, now eBay is forced to refund buyers even when they can’t recoup the cost of the refund from the seller.  With PayPal dispute resolution, PayPal would put the buyer’s payment “on hold” immediately after a buyer opened a dispute.  This guaranteed that PayPal would have control of the seller’s funds to cover the dispute because the seller could not withdraw or spend the held funds.  PayPal was also able to refund buyers using the seller’s funds even when the seller’s account was permanently limited.  EBay can’t do either of those things with disputes in their own resolution center.   EBay then runs into an even more expensive problem.  The eBay resources any particular seller uses (in the form of bandwidth, customer service needs, etc) are low compared to the actual fee amount owed.  A seller might owe eBay $500 in final value and listing fees, but the actual cost to eBay is only a few dollars in bandwich and services, if that.  With buyer refunds, eBay actually has to pay the full amount of the refund to the buyer in cold, hard cash.  Oweing eBay $75 in resolution fees actually costs eBay $75, not a few pennies like with final value fees.  What happens when eBay has to issue full refunds to numerous buyers after they’ve limited the seller’s PayPal account and they don’t have any other way of collecting?  It’s a serious problem for the company and one that is only increasing costs that they will never be able to recoup.

Second, when eBay suspends a user with legitimate contact information they potentially lose track of the seller forever.  A professional seller that’s holding $25,000 worth of merchandise to sell on eBay isn’t just going to give up after an eBay suspension or PayPal limitation.  They’re going to go underground and sign up with family members’ names or use completely fabricated information to register again.  There are dozens of websites and forums dedicated to nothing more than selling people information on how to get back on eBay after a suspension.  It’s big business.  I can guarantee you that nearly everyone who gets suspended on eBay at some point will search on Google, “How do I get back on eBay after a suspension?”  What has eBay really achieved then?  They end up with thousands of people selling on eBay that aren’t really people at all – just made up names, addresses, and phone numbers.  Even worse is the fact that these account holders no longer care about their accounts or who they’re defrauding.  They can just skip from account to account when problems arise or one account gets suspended.  When you’re doing business anonymously on the internet, there is very little to worry about as far as repercussions are concerned, especially if you aren’t doing anything outright illegal.  For eBay, this anonymity makes it almost impossible to collect fees.  There is simply no reason to pay eBay after a suspension or limitation if you aren’t registered with legitimate contact information.  EBay doesn’t get paid because their system of suspending users doesn’t work.

An Alternate Theory

Where were we again?  I recall something about eBay reinstating thousands of suspended accounts over the last few days.  I’ve been talking about this turn of events as though eBay will simply suspend users again after they pay.  This may not actually be the case as several people are reporting that their accounts are left in good standing and they have successfully listed and sold items as though they had never been suspended.  This brings up our next question.

Has EBay Finally Screwed Up So Bad They Need All Those Suspended Users Back?

EBay announced their first quarter earnings for 2010 this afternoon.  While the numbers weren’t bad, the outlook into the future was not particularly stellar.  Investors punished eBay stock by sending it down a staggering 8.48% after hours for a total drop of about 9% on the day.  In terms of money, today’s loss cost eBay and their investors about three billion dollars ($3,000,000,000) in market cap.   Why not try to get previously suspended sellers to pay what they owe and then have them go right back to putting more money in eBay’s pockets?  Is it a coincidence that all these suspended users were reinstated the day before eBay’s announcement that they don’t plan to make as much money as expected?  It certainly looks like eBay is looking for additional revenue streams and they’re apparently willing to reach out to those it previously thought it could shun.

Let’s Conclude Today’s Lecture

What exactly is eBay up to?  It’s hard to tell.  One thing is for certain – they want their money.  If I were a buyer, I would pay special attention to who I’m buying from over the next few weeks.  If a seller has a high feedback score, but no feedback from the past six or twelve months, then I would be wary of purchasing something from them.  Chances are good they’re a previously suspended seller.  Like always, be careful out there.

Google gets all of the best names – “Labs,” “Buzz,” “Talk,” “生活搜索,” “Base” and pretty much every other four letter word worth trademarking.  This leaves other companies with scant choices.  This is why there are so many made up words these days.  Skype, Twitter, Bing, and Wii are all just a symptom of the fact that there simply aren’t any real words available.  When I was trying to come up with a metaphor for eBay’s last fee increase I had to use the movie “2012” starring John Cusack because Google owns every other metaphor.  From now on I will have to use “2012” whenever I want to compare anything to anything else.  Google doesn’t own “Google Garden” though, probably because it sounds dumb.  Luckily, eBay jumped on the rare opportunity to grab the rights to a real life English word and now we have “Garden by eBay.”

Is the Soil Fertile Enough for Green Beans?

Good question.  According to http://pages.ebay.com/garden/, “Garden by eBay is where we plant the seeds of new ideas.”  Although this doesn’t make any sense, it does sound like an assignment my son’s fourth grade teacher would send him home with so I sort of understand where this is going.  At least they don’t continue by saying the community needs to water the seeds in order for the ideas to blossom.  Maybe next time.  Once every year or so, usually after eBay is forced to retract a ridiculous policy or fees are increased, eBay gives the “community” a sneak peek into a single forthcoming change; usually one of little consequence that never materializes anyway.  It looks like they’ve planted this year’s in the form of a search tweak rhododendron.

Streamlined Search Sneak Peek

Anyone can “opt-in” to preview eBay’s new “streamlined search” and can then opt-out at any time.  I don’t want to ruin your new search experience by giving any details other than I do like the side-by-side auction and fixed price view.  Just go to http://pages.ebay.com/garden/, click opt-in and away you go.

(I wrote this section, but it doesn’t necessarily have much to do with the topic at hand.  Skip down to the section titled “The Scam” if you’re in a time crunch.  I have also written a condensed version of this entire post at the end if you only want to read one paragraph about it.  It’s all “interesting” though).

PayPal has recently taken a page out of Microsoft’s marketing handbook by offering a smorgasbord of account types and varieties designed to fit the unique “needs” of various types of people.  The current trend is that one size no longer “fits all” and customers want a product designed specifically for their individual needs.  Remember when upgrading to the new Windows meant driving out to CompUSA and picking up a copy of ‘98?  Microsoft now offers an endless array of versions – Home, Premium, Business, Ultimate, Professional, Downloadable, Upgrade, Starter, N, Enterprise, 32bit, 64bit, and those are only a few.  PayPal has “progressed” in a similar vein over the years by offering a wider variety of products and options to expand their user base.

As recently as a couple of years ago, all PayPal users either had a “Personal” or “Premier” PayPal account.  The major difference between the two was that Personal account holders could not accept credit card payments.  Personal PayPal account holders did not have to pay fees on payments funded by an instant transfer between PayPal accounts or a payment funded directly from a bank account.   At one point, PayPal even allowed Personal account holders to accept a few credit card payments per year without having to “upgrade” their account.  Regular fees still had to be paid on those credit card payments, but it was still cheaper than a Premier account.   On the other hand, Premier account holders had to pay fees on every payment received, whether it was a credit card transaction or an instant transfer of funds between PayPal accounts.  This is precisely why PayPal is so wildly profitable.  The cost to transfer funds between two PayPal accounts is virtually zero, yet PayPal charges the same 2.9% + 30 cents per transaction as if every transaction is a credit card transaction.  This is also why PayPal has historically made it as difficult as possible for users to actually pay with their credit card.  Every time a user chooses to pay with a credit card it is a loss of revenue for the company.

Companies offer a range of products not because they like variety, but because it is a means to their ultimate goal – maximized profitability.  Microsoft and PayPal don’t really care if you’re happy per se.  They merely desire to extract the most money out of your wallet without offending you so much that you won’t return to spend more in the future.  By offering a medley of Windows editions with a huge pricing gap, Microsoft can charge $300 to a business that needs an expanded set of features while at the same time selling a dumbed-down version to your mom for $100.  People are more likely to spend money upgrading Windows if there is a version that they identify as both affordable and necessary.  Of course “more” is not “always better” and Microsoft ended up going a little overboard with their launch of Vista.  Instead of feeling taken care of, customers were confused by the endless array of options and editions.  PayPal hasn’t quite taken it that far, but the addition of Business and Student accounts is a sign of where the company is going in the future.

Personal Accounts Change

As first reported back in May, PayPal made significant changes to Personal PayPal accounts back in June of 2009.  A Personal account holder can no longer accept payments for “commercial transactions.”  Not even one.  Once a Personal account holder makes a sale for a good or service they must “upgrade” their account.  Personal account holders no longer enjoy the benefits of receiving unlimited payments funded by a bank account or instant funds transfer at no cost.

The Difference Between Personal and Commercial Payments

PayPal spells it out clearly in their user agreement:

“4.2 Receiving Payments for Commercial Transactions and Personal Transactions. a. Fees depend on whether you are making a commercial transaction or a personal transaction. A commercial transaction involves buying and selling goods or services, and payments received when you send a “request money” using PayPal. A personal transaction involves sending money to and receiving money from friends and family without making a purchase. b. If you are selling goods or services, you may not ask the buyer to send you a personal payment for the purchase. If you do so, PayPal may remove your ability to accept personal payments.”

Difference in Fees

There is no fee for personal transactions as long as the source of funds is either the PayPal account or a bank account.  This is why personal payments have become increasingly popular as a payment method on forums and other selling platforms.  People do not like to pay money when they perceive there is no advantage.  If the funding source of a personal payment is a credit or debit card then the fee is the same as if the transaction was commercial, or 2.9% + 30 cents by default.  All commercial transactions are charged the same rate regardless of funding source.  There are additional fees for “cross-border” transactions for both personal and commercial payments as well.

The Scam

The scam is fairly simple.  The scammer convinces the victim to pay for an item via a PayPal gift or personal payment.  This can be set up in a variety of ways, many of which do not appear to be fraudulent at first glance.  For example, there are many online forums and communities where members can buy and sell items of mutual interest as well as Craigslist and others.  A scammer might list their item for sale and state that they require a gift payment so they do not have to pay the 2.9%+30 cent fee or to avoid the PayPal 21-Day Payment Hold Policy.  They might state that the price is $100 via a PayPal gift payment or $100 + 5% for a PayPal credit card payment and the buyer, wanting to save $5, may opt for the gift payment option.  The seller might say that they cannot accept credit card payments or any number of other excuses for why a gift payment is necessary.

When a buyer sends a gift payment for an item they think they are purchasing, there is no mention of any item or service being sold nor is there a shipping address attached to the transaction.  There is a space for a “personal message” of 300 characters, but even if the buyer inputs details of the transaction there is little that can be done.  This means that the “seller” is not obligated by PayPal to actually ship an item or provide the service that may or may not have been agreed upon outside of PayPal through email, text message, or whatever else.  There is nowhere for the seller to input tracking and nowhere for the buyer to dispute the transaction if a problem occurs.  As far as PayPal is concerned the transaction is exactly what it says it is – a gift.  This is stated in section 13.5 of PayPal’s User Agreement; PayPal clearly states, “You may not file a dispute for a Personal Payment.”

Another problem with using a gift payment to pay for an item is that the seller may not intend to scam at all, even though that may be what ends up happening.  All shipping services lose and damage parcels.  Many transactions also run into problems due to some kind of miscommunication or dispute over the quality of an item.  “Excellent” condition to me may be “below average” condition to you, for example.  Sellers often over exaggerate the condition of their item in order to sell it for more money, while at the same time minimizing the appearance of flaws.  PayPal does not cover “Item Not As Described” disputes for most transactions outside of eBay, even for commercial payments.  For commercial transactions, it is at least possible to dispute an item that is not received.

PayPal and eBay go out of their way to make PayPal feel safe for buyers, but the truth is that there is startlingly little protection for transactions outside of eBay.  Even though dispute resolution on both PayPal and eBay is skewed in buyers’ favor, it is still possible for sellers to manipulate the system and “win” disputes on items that were either not delivered or not as described.  PayPal offers no protection for buyers when there is a problem with the quality or condition of an item when the transaction occurs outside of eBay.  This is due to the fact that it would be impossible for PayPal to try to figure out the terms and details of any particular sale.  On eBay, there is just one page to take into consideration – the eBay listing.  Outside of eBay there could be any number of emails or details to try to sift through in order to make a “fair decision.”  If a buyer disputes the quality or condition of an item on a transaction outside of eBay it is almost guaranteed that they will soon receive an email from PayPal that their dispute has been decided in the seller’s favor, because PayPal dispute resolution does not consider the quality of an item, only whether or not something was received.  A gift payment multiplies this risk, because it will not be possible to dispute the delivery of the item with PayPal or file a credit card chargeback.

How to Protect Yourself

Never pay for an item or service online with a PayPal personal payment.  There is no way to dispute the payment directly with PayPal and it against the PayPal User Agreement.  PayPal states:

4.1 Receiving Personal Payments.

If you are selling goods or services, you may not ask the buyer to send you a Personal Payment for the purchase. If you do so, PayPal may remove your ability to accept Personal Payments.

If you are on a website or forum where items are being bought and sold with PayPal personal payments, you may want to advise the moderators and/or the community about the risks of using personal payments for purchases.  Respectable websites should not allow its users to ignore and break the User Agreement of a payment service such as PayPal and at the very least should include a disclaimer about the risks involved.

When using PayPal it is always best to pay with a credit card.  A credit card payment allows buyers to file a credit card chargeback directly with their credit card company or bank.  A buyer may file a credit card chargeback on a PayPal payment even when PayPal denies a buyer’s claim or on a commercial payment where it is not possible to dispute the payment directly with PayPal.  Almost all credit card chargebacks are decided in the buyer’s favor and the credit card company may even let you have access to the disputed funds before the chargeback is resolved.  Some debit cards also allow buyers to file chargebacks, but it is rarer.  Also, I am not aware of any credit card “gift card” that allows buyers to file chargebacks, so it is unlikely that you will be able to file a chargeback with a Simon Gift Card or an American Express gift card purchased from a grocery store or similar outlet.  When choosing a credit card, you may want to research which one has the best chargeback and fraud protection and use that card online.

What To Do If You Already Think You Have Been Scammed

If you think you have been scammed by a seller, it is usually beneficial to call PayPal at 1-888-221-1161.  PayPal’s dispute resolution services are generally automated online, but there are employees at PayPal customer service who can override the computer’s decisions and possibly do something for you.  You may also have luck contacting PayPal’s Executive Escalations Department.  Emailing won’t get you anywhere.  More and more, it seems like whoever calls PayPal and whines and complains with more vigor will win the dispute and it’s possible you will reach someone with a sympathetic ear.  Keep trying if you aren’t successful.  Make sure you make it clear that you have been a loyal PayPal customer, but your current situation makes you question whether you will use the service in the future.  This is the key point to make in most merchant disputes.  Keeping you as a customer is likely to be cheaper in the long run than obtaining a new one.   At the very least, you can let PayPal know that the seller is accepting personal payments for merchandise and they are more likely to shut the seller down.  If the item was purchased on a forum, make sure you let the community and/or forum administrators what happened.  It’s usually better to state facts rather than go into hysterics.  If you paid with a credit card then you should contact your bank and inquire about the chargeback process.  Most credit card chargebacks are successful.

Condensed

Never pay for an item with a PayPal personal/gift payment.  Sellers may use various tactics to convince you that paying with a gift payment is necessary or encouraged, including adding fees for credit card payments or claiming that they can only accept personal gift payments.  Not only is it against PayPal’s user agreement, but you will also not be able to dispute the payment with PayPal should you not receive the item.  For off-eBay transactions, PayPal will not allow you to escalate a claim for an item that is not as described.  For this reason, it is imperative that you pay with a credit card whenever possible.  Even if PayPal dispute resolution does not refund your payment, you may still file a credit card chargeback with your bank and you should be able to recover your payment using that method.  If you think you have already been scammed, make sure you call PayPal to explain your situation and ask to speak to as many people/supervisors as possible until you receive a satisfactory resolution.  The bottom line is that using PayPal online is always risky, but using a PayPal personal payment to purchase an item is by far the riskiest method.  Although the transaction may go as planned, it is not worth the risk of paying for an item that you will never receive to save a few dollars.

What transpired after the release of eBay’s Spring 2010 Seller Update is similar to the storyline of this past summer’s blockbuster “2012” starring John Cusack.  In this metaphor, the Spring 2010 Seller Update (S2010SU for short) will represent the heating of the earth’s core which led to the devastating earthquakes, torrential flooding, and volcanic eruptions that threatened John Cusack’s life.  John Cusack is representative of all eBay sellers.   Of course, AuctionCope.com will be the life-saving arks.  You’re welcome in my ark for the price of one billion dollars or your entire eBay store inventory, whichever is lower.  Unfortunately, I don’t want to ruin this fantastic movie so the metaphor will continue only after the movie hits cable or the next Seller Update, whichever comes last.

New Auction Fees Aren’t Good For Anyone

There are two kinds of basic fees on eBay that everyone (unless you’re Buy.com) pays – insertion fees and final value fees.  The insertion fee is the most clearly visible on eBay because it is stated right before the submission of every auction.  Because of their visibility, eBay continues to lower insertion fees to make eBay appear as though it is getting cheaper and cheaper.  EBay isn’t necessarily getting cheaper though, as insertion fees make up only a fraction of total fees paid to eBay.  Insertion fees are also a fixed rate fee based on starting price, so it is much cheaper to lower insertion fees, which are mostly under a dollar anyway.  Even a slight decrease in final value fees would lower eBay’s revenue sharply, so it is not an option and has never been done.

Final value fees are paid after an auction ends with a winning bid or a sale is made on a fixed price listing.  The final value fee is much less visible, although it is stated along with the insertion fee on fixed price listings.  On auctions, the final value fee is not shown because the closing price hasn’t been established and thus, can’t be calculated.  EBay does not include the final value fee of a specific sale in any email.  The only place actual final value fees are available is the invoice, which can be found by logging in, going to “My eBay,” clicking “Seller Account,” clicking “View Invoices” and then selecting an invoice from the pull-down menu.  Because final value fees are less visible and the “casual seller” eBay likes to talk so much about is generally unfamiliar with the fees that will be paid after a sale, eBay prefers to raise these rates while keeping the more visible insertion fee low.

The current final value fee structure on eBay is tiered.  Sellers pay a higher rate (8.75%) on the first $25 of the closing price, a lower fee (3.5%) on the amount between $25-$1000, and an even lower fee (2%) on the amount above $1000.  Most auction houses, including the famous Christie’s and Sotheby’s, operate on a similar sliding scale.  The final value chart for auctions currently looks like this:

Beginning March 30^th, eBay is “simplifying” the final value fee structure by charging a flat rate of 9% regardless of the selling price.  You will notice from the chart that 9% is higher than any of the current rates.  It is only one quarter of one percent higher than the fee on the first $25, but it is 5.5% higher than the rate for amounts between $25-$1000.  As we will see from the following charts, 5.5% is a sizable amount, especially as auction price rises.

Even though eBay final value fees are going up, eBay still markets their Spring Update as bringing its “lowest fees ever.”  This is because insertion fees on auctions are going down.  For example, if you list an auction with a starting price of $10.00, it will cost 50 cents come March 30^th instead of the 55 cents it currently costs.  This represents a possible savings of 5 cents on insertion fees, or as eBay puts it, “dramatically reduced upfront costs.”  What eBay is really excited about though, is offering sellers 100 “free listings” per month so long as the auction starts at 99 cents or less.  “Free” relates only to the insertion fee – the more expensive final value fees are still paid.   Currently, the insertion fee of an auction starting at 99 cents is 15 cents.  If you chose to take advantage of all of your “free listings” each month, you would save a total of 15 cents * 100 auctions, or $15.00 total.  However, the increase in final value fees erases any potential savings in almost all scenarios.  Let’s take a look at some examples.

This chart assumes the auction was started at 99 cents and the seller does not operate an eBay store.  For the “total fees today” column the insertion fee is 15 cents and for the March 30^th column the insertion fee is zero, or “free.”  This represents the cheapest insertion fees possible for both time periods.  A positive number in the “D” column indicates a savings over current fees.  A negative number indicates how much more the fees will cost beginning March 30th, or in other words, how much money you can subtract from your profit.

As we can see from the chart, there is a maximum savings of 15 cents on auctions that end at $25 or less.  This is because the 9% flat rate final value fee is almost the exact same as the current 8.75% fee on auction values up to $25, so sellers will save the 15 cent insertion fee here.  On auctions that end for more than $25, the total fees are going up.  An auction ending at $100 will cost $4.04 more beginning March 30^th.  An auction ending at $200 will cost $9.54 more beginning March 30^th.  An auction ending at $500 will cost $26.04 more beginning March 30^th, and so on.

EBay’s best known talking heads, “Richard Brewer-Hay” and “Griff” have been trying to convince eBayers on Auctionbytes, eBayInk, and the eBay forums that sellers who can’t figure out how to take advantage of the changes to the auction fee structure simply aren’t “doing it right.”  Either our volume is wrong or our listing strategies are wrong, or we simply are incapable of understanding eBay’s genius new fee structure.  As we can easily see in the chart, there are no savings to be found.  The maximum anyone could save on “free” insertion fees is a total of $15.  Those savings are erased by increased final value fees on just one $300 item or four $100 items or twelve $50 items – and that’s assuming a total savings of $15.  If you only sold one item for $300 then you would only be “saving” 15 cents in order to pay $15.04 more in final value fees.  There is simply no way to make up the increased final value fees with insertion fee savings.

When eBay says their final value fees are becoming “simpler” they are omitting the fact that there is actually another final value fee structure that will be available exclusively to eBay Store subscribers.  For a monthly fee as high as $300 a month, sellers will have access to a tiered fee structure reminiscent of the current offering.  Store subscribers will not receive any free insertion fees, but their overall fees may be lower because of the tiered rates (which are also going up).  Richard, of the “official eBay Blog,” insists that “volume is the key” to figuring out whether or not an eBay store subscription will lead to savings (when I say savings I really just mean a fee increase in the double digits rather than triple).

In fact, eBay has provided a fee calculator for sellers to try to guess what their sales will be and then decide if spending $16+ a month is worth access to the fee structure that may or may not represent a savings.  If eBay is trying to make things “simpler” then I have to wonder why there are dual fee structures, why a fee calculating crystal ball is necessary, why some receive “free” insertion fees while others do not, and why eBay has confused the word “lowest” with the word “highest” in their headline, “lowest fees ever.”

Fee Structure Numero Deux

EBay sellers who subscribe to a store will have yet another fee structure come March 30^th.  Remember, you are allowed to have as many User IDs on eBay as you want, so you can have several Store accounts and several accounts without a Store subscription if you want.  EBay has also stated that they will not “penalize” members who use multiple User IDs to get more than 100 “free” listings.  This isn’t because eBay wants you to have more than your fair share of “free” listings, it’s just because they know the “free” listings actually cost sellers more money than had they opened an eBay store and used that fee structure.  Let’s have a look at the insertion and final value fee structures for eBay Store subscribers.

The insertion fees are exactly the same as for sellers without a store, except there are no “free” listings and there is no mention of the $50 cap on final value fees.  The major difference between this chart and the current chart is that the highest fee, 8.75%, now applies to the first $50 of a sale, rather than only the first $25.  This means that the final value fee on a $50 item will be $4.38 on March 30^th, up from $3.06 today.  This represents a 43% increase.  Let’s look at a chart of the total current fees, the total fees paid without a store subscription, and the total fees paid with the store subscription

A negative number in the “Savings No Store Vs. Store” column means that the total fees are lower for sellers without a Store subscription.  A positive number indicates the savings you would enjoy with a Store subscription over the non-store price.  Keep in mind also that this is all assuming that the non-store insertion fee is zero.  Any listing created after the first 100 each month would add an additional 10 cent insertion fee and erase most of the savings seen over Store subscribers.  For auctions that close at $50 or lower, the non-store price is lower by a few pennies, as long as there is no insertion fee.  Above $50, Store subscribers will enjoy a savings over non-store owners.  Even so, the total fees for Store subscribers are still at least $1 more than current fees, all the way up to more than $20.

Store subscribers will also enjoy several other benefits in addition to possibly saving money on the alternate fee structure.  Fixed price insertion fees are lower.  For $15.99, sellers will get a Basic Store, 20 cent insertion fees for fixed price listings, up to 12 free pictures per listing, and access to a variety of “great marketing tools.”  For $49.95, sellers receive free pictures, the marketing tools, 5 cent fixed price insertion fees, and Selling Manager Pro.  For the truly elite, $299 a month will buy an Anchor subscription enjoying all of the same benefits of the Premium store plus 3 cent insertion fees for fixed price listings.  Fixed price final value fees are the same whether you have a store subscription or not.  All informed sellers will have to decide whether or not opening an eBay store is the economical decision.

As we can see from the various charts and calculations, volume is not as important as price, no matter what the talking heads say.  This isn’t a case of buying something for $5, selling it for $4, and making the loss up on volume.  The more you sell the more you lose, if you make the wrong listing decisions.  Since the cheapest Store subscription is $16, you might want to run some numbers and see how much savings a store would bring.  Also take into consideration that you are allowed to have a User ID with a store subscription and one without, or any combination you want.

Conclusion

There are a few certainties come March 30^th.  Most fees are higher than ever.  “Simpler” final value fees aren’t better.  If McDonalds raised the price of all of their tasty hamburgers to $25, it would be simpler to calculate how much my order would cost.  That doesn’t mean I would rather pay $100 instead of $5.38.  Many sellers will have to wrestle with whether or not they want to subscribe to a Store and how they will want to distribute their listings across multiple accounts.  Sellers with a current Store subscription will have to go through all of their current listings and decide whether or not it’s worth it to pay increased listing and upgrade fees as Store Inventory Format no longer exists.  Nothing is getting simpler.

“Americans” aren’t a particularly smart bunch.  Our offspring are among the stupidest worldwide.  It’s pretty easy to trick us.  We’re too busy to read the fine print.  We would rather pay less now, no matter how much it will cost later.  Credit card debt, Columbia House, and the Ab Rocker are a testament to that fact.  EBay has figured this out and takes advantage of our collective inability to reason and process calculations in our brains every chance it gets.  EBay isn’t alone.  All publicly traded companies are out to extract as much revenue as possible.   Today’s “Lowest Fees Ever” announcement is just another example of eBay cleverly masking fee increases and complicated changes with propaganda and slick headlines.

The Five Free Insertion Fee Scam

Several months ago, eBay came out with their most successful “fee decrease that’s actually an increase” yet.  The way you can tell if an eBay “sale” is a good one is by how much time they give you to prepare for it and how long it lasts.  This is true of most stores.  “Black Friday” ads, for example, come out on Thanksgiving Day and the best deals usually only last a few hours on Friday.  Prices found on page nine of the weekly Best Buy Ad in August are rarely as good.  When eBay announces a one day sale, often times less than 24 hours before it starts, there’s a good chance there might actually be some savings.  I still don’t recommend listing during eBay promotions, because they’re usually run during the slowest times of the year and eBay is usually flooded with crap, but at least there’s a decent opportunity to list some items with potential savings.  The way we know the “Five Free Insertion Fee” promotion is a sour deal for sellers is because it’s lasted for almost a year.  EBay is not in the business of losing money and there is an ulterior motive behind every listing promotion and policy change.

Although the “up front” cost of these “free listings” is zero, the final value fee of 8.75% almost always makes these listings more expensive than had the seller simply paid the regular insertion and final value fees.  Ask yourself this question.  Would I rather pay 3.5% in taxes or 8.75% in taxes?  Unless you really love supporting public education, the answer is 3.5%.  On eBay’s “five free listings” you’re paying the 8.75% rate on those listings when you could be paying 3.5% instead.  Read all about the particulars if you’re interested at EBay’s Five Free Listings Promotion Costs Sellers More Money.  Oddly enough, probably 97% of people listing on eBay think that the “free insertion fee promotion” is one of the best deals on the internet.

Changes to Auction Pricing

EBay is touting its new fee structure for auctions as “easy” because final value fees are 9% no matter the closing price.  This is different than the current structure, where final value fees decrease as auction price increases.  For example, if your item sold for $50, the final value fee on the amount from $0-$25 is 8.75%, or $2.19 and the final value fee on the amount from $25.01 to $50 is 3.5%, or 88 cents.  Confusing, I know.  Although the current variable rate structure is certainly more complicated than a flat rate, it is also much cheaper than a flat rate, as 3.5% is obviously much less than 8.75%.  I would rather be confused and pay less than be enlightened and pay more.  There’s also plenty of fee calculators out there that will tell you exactly how much your PayPal and eBay fees will be in any possible scenario.  Here’s a chart I stole from eBay User exclusively_red_tag showing the new final value fees compared with the current fees.

As we can see, the new final value fees are as much as 141% higher than the old fees.  If you sold say, 100 items a month for an average of $50, your new final value fees would add up to $450, or 9% of your $5000 revenue.  If you sold the same amount of items under current conditions, your final value fees would add up to $306, or 6.12%.  There is no way to make up this $144 difference in insertion fee savings.  Multiply that $144 a month by 12 months in a year and you have a fee increase of $1728 annually.  No vacation in 2010.

I guess I should mention that sellers without an “eBay Store” will have the insertion fee waived on up to 100 listings that start at 99 cents or less.  Listings that start at 99 cents or less cost a whopping 10 to 15 cents each at current prices. The total potential savings on insertion fees for a seller that lists all 100 “free” items at 99 cents or less is $15.  Based on the chart above, it’s not particularly difficult to rack up an extra $15 in final value fees on just a single item.  This would negate any potential savings instantaneously.

But There Is Another Fee Structure Too

If the new fee structure is “easy” then that means the old fee structure, used for the last decade plus, was uneasy.  Luckily, eBay will let us continue to use the more complicated, uneasy fee structure.  For a price.  EBay store subscribers have a separate final value fee structure for auctions that looks conspicuously similar to the old structure.  Of course, these fees have also gone up, but not nearly as much.  Does it seem like this is starting to get a little complicated to anyone else?  Multiple fee structures?  “Free” listings for some, but not for others?  Paying money for a store subscription merely for the chance at saving money in fees?  Things are starting to get a bit more interesting.

This is what auction final value fees will look like for store subscribers come April:

Let’s compare that with the current chart.

EBay is being even trickier than usual with this little picture.  If you look closely, eBay has expanded the 8.75% final value fee level from $25 all the way up to $50.  This means that instead of paying the current 3.5% on the price from $25.01-$50, you’ll be paying the full 8.75% fee.  Remember our $50 item example from earlier, where the first $25 cost $2.19 in fees, but the second $25 only cost 88 cents?  In April, each $25 increment will cost $2.19, for a total fee of $4.38, instead of the current $3.06.  The final value fee is also going up one half percent to 4% over $50 and 2% over $1000.

Let’s look at the stolen chart to see how this affects listings beginning in April.

At least there aren’t any numbers in the triple digits.  Unfortunately, the percentage increase is the highest on auctions ending between $25 and $50.  Many of the items I sell fall into this range, as I have found it’s a sweet spot for many buyers who aren’t willing to spend any more on a site full of fraud and counterfeits.  EBay is a bit like gambling; never buy something for more than you’re willing to throw away.

When Opening An EBay Store Make Sense

It seems that subscribing to an eBay store is going to make a lot of sense here pretty soon.  I will go over the benefits of the store subscription along with the potential fee savings and costs in the next couple of days.

Conclusion

I think this is the greatest fee hike I’ve ever seen.  What’s annoying is that somehow eBay plays it off like their fees are getting lower – and people believe them.  When is the last time Starbucks raised prices 141% and somehow managed to convince people the prices were their lowest ever?  I’m not a big whiner, but I don’t like being treated as though I’m as stupid as my aptitude tests say I am.

We know eBay’s “fee decrease” is really an increase.  We know nothing eBay ever does is in our best interest.  But you’ve got to give them credit.  The “royal we” seems to be getting smaller and smaller.

Until next time, sell some stuff before it’s really gonna cost you.

First of all, eBay is more profitable than Amazon.  EBay has always been more profitable than Amazon.  Every single quarter of every single year, eBay’s profit is higher than Amazon’s.   Last quarter, Amazon had a profit of 199 million dollars.  EBay turned a profit of 350 million dollars last quarter, or 151 million dollars more than Amazon.  If profit is how we measure success then I could just stop now.  But, as you wish, I will continue.

A lot is said about Amazon’s stock price compared to eBay’s.  Amazon’s current stock price is $127.61, down 12.5% from its 52-week high of $145.91.  EBay’s current stock price is $23.26, down 9.8% from a 52-week high of $25.80.  Had you purchased $10,000 worth of eBay stock exactly one year ago, it would be worth $23,471 today.  That’s a profit of $13,471.  Had you purchased $10,000 worth of Amazon stock exactly one year ago, it would be worth $26,741 today.  That’s a profit of $16,741, or about $3,300 more profit than eBay.  Amazon is the better performer here, but not by nearly as much as the haters might suspect.  Let’s also not forget Amazon stock was worth a measly $34.68 just 14 months ago, down from a previous high of $101.  Had you purchased the stock for $101 and sold for $34, you would have lost almost $67 a share.  Not exactly the definition of a perennial power house.

Of the 22 independent stock ratings I have access to, Amazon is rated a “strong buy” from five, a “buy” from eight, and a “hold” from nine.  Standard & Poor’s rates Amazon three stars, or a hold, with a 12-month price target of $110.  Of the 21 independent stock ratings I have access to for eBay, five rate a “strong buy,” seven rate a “buy,” and nine rate a “hold.”  Standard & Poor’s rates eBay stock four stars, or a buy, with a 12-month price target of $26.  The ratings of the two stocks are almost exactly the same, although the fact that S&P projects Amazon stock to be about $20 lower in 12 months is a sign that many expect  that Amazon may not meet its lofty revenue and income goals.  Amazon’s rise in the last 14 months, from $34 to almost $146 is amazing, but it’s based mostly on guidance and expectations.  If Amazon is unable to meet those expectations, the stock will fall just as fast as it rose.  EBay is a victim of the exact opposite phenomenon.  We know what to expect from eBay, so their stock no longer rises and falls based on fairy tales and pipedreams.  Stock price is rarely any indication of how well a company is actually fairing, so it’s somewhat naïve to base any conclusions on current pricing trends.

Amazon’s traffic may be higher than eBay’s, but Amazon and eBay have two completely different business models and comparing their traffic is silly.  Amazon has earned the reputation of being one of the best e-tailers on the internet – and they deserve that reputation.  Their customer service is generally excellent and their prices and selection are some of the best found anywhere, both online and off.  When you “Google” a product, Amazon is usually at the top of the search results.  Many people check Amazon for pricing information and user reviews.  Forums like Slickdeals and Fatwallet link to Amazon in almost every thread for exactly the same purpose.  People are interested in what others think about products and Amazon’s product pages are usually the easiest way to find them.  On top of that, Amazon sells MP3 files similar to the iTunes store and Kindle books for its proprietary book reader.  They have also added fresh groceries, top of the line televisions, and a wide range of other products over the past few years.  All of this translates to increased traffic and unique visitors for Amazon.

On the other hand, eBay doesn’t sell anything.  They don’t manufacture the Kindle.  Selling fresh lettuce on eBay would likely get you suspended.  This is all fine and well as far as eBay is concerned.  Certainly they would like to increase unique visitors and overall traffic, but 50 million unique visitors a month is hardly slouching.  According to Alexa (owned by Amazon), eBay.com is the eighth most visited website in the United States.  Amazon.com is the seventh.  EBay trails by only one slot and they barely even do anything!  Imagine if they let us sell cabbage!  We also have no idea about the accuracy of these ratings.  Counting unique visitors isn’t an exact science.  Sometimes I load up some proxies on my Mom’s computer and tell her to refresh it a couple of times and then get excited when it says I received seven visitors instead of my usual three and a half.  For all we know Amazon outsourced jobs to India where poor little children just plug and unplug in their modems while refreshing Amazon.com all day.  You just never know.

Amazon also sells many of its products at a loss.  Remember that Amazon only made 100 million dollars profit on over five billion dollars in sales?  Exxon Mobil made a profit of about 110 times that during a quarter they characterized as “rough.”  Imagine if they had more than one product!  The pricing war with Wal-Mart has been well publicized this year, as the two dueled it out over books and video games.  It got to the point where Amazon was selling books for less than it cost independent bookstores to buy them from the publisher, so Amazon had to limit orders to one per title because bookstore owners were buying from Amazon for less.  Pricing wars may be good for the customer, and increase traffic, but as we can see it certainly doesn’t help their bottom line.  Amazon sells items in other categories for great losses as well.   For example, I bought the Seinfeld Monopoly board game for five dollars with free two-day shipping last month.  There’s no way Amazon made any money on that sale.  I don’t even like Monopoly or Seinfeld for that matter; I just bought it because it was a Slickdeal.  On the other hand, eBay never loses money on a sale.  In fact, they make money even when products don’t sell.  What a business!

Amazon is written about like it’s some kind of Mecca.  It’s almost as if Jesus returned to earth solely to create a third-party marketplace where we can all sell used video games and phone chargers in peace.  In reality, Amazon is far from ideal.  I could talk about how Amazon holds payments for up to 180 days and only lets sellers withdraw funds on a specified schedule.  There are few categories available to third party sellers.  I could point out that Amazon’s listing restrictions are much stricter than eBay’s and their tolerance for buyer dissatisfaction is nonexistent.  I could say that most people have no idea that the third-party marketplace on Amazon even exists and that it only confuses customers who are only interested in buying from Amazon.  I could go on and on, and I will in the future, don’t worry.  Just remember, Amazon can always sell a product for less than we can – and in most cases they do.

EBay reports their fourth quarter earnings January 20^th and Amazon follows suit January 28^th.  It will be interesting to see how the two faired.  I expect Amazon to post a sizable profit, mostly from music, Kindle, and third-party sales revenue.  With free shipping, they simply don’t sell products for enough money to profit on them.  EBay revenue will probably be flat at best as they continue to try to figure things out.  PayPal, as always, will be strong.

Take care, and I will holler in your general direction soon.