If You Want It Google Already Owns It

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.

“2012” Starring John Cusack

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.

EBay announced fourth quarter results today.  In regular trading, eBay stock dropped $1.03, or 4.43% to $22.23 amid a massive market wide sell-off.  The stock is currently trading above $23 after hours.  Analysts expected earnings of 40 cents a share on revenue of 2.29 billion dollars.  EBay performed better, with actual earnings of 44 cents per share on revenue of 2.37 billion dollars.  Revenue from the eBay marketplace grew 15% for the quarter to 1.5 billion and revenue from PayPal was up 28% to 795 million dollars.  EBay reported earnings of 1.36 billion dollars for the fourth quarter, up from 367 million dollars one year ago.  That’s an increase of about 370%.   EBay’s guidance in 2010 is in line with estimates.  The conference call is about to start, so we should know more momentarily.

It’s earnings season for Amazon, eBay, and the rest of corporate America.  If you’re unfamiliar, it means that publically traded companies are about to announce how much money they made in the fourth quarter of 2009, among other things.  Every quarter, eBay’s arch-nemesis Auctionbytes throws up Nielsen’s traffic and visitor statistics to show how eBay is in decline while Amazon is flourishing.  In addition, eBay “bloggers” around the world go on about how eBay’s stock is in the toilet and the company is doomed.  Since Auctoncope.com really isn’t a normal website and I am by no definition a normal human being, I will spend the next few paragraphs playing the role of the devil.  I will prove, beyond a shadow of a doubt, that eBay is actually the stronger of the two companies.

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.

Hello and sorry I have not been with you for some time.  I know you are all madly refreshing the website for new updates and my family and I appreciate all of the emails,  phone calls, and letters we have received concerning my well-being.  Actually, I haven’t received any such correspondence, but I am sure at least one of you was thinking about shooting me a quick email and I appreciate your sentiment.  To ring in this arbitrary change of year to “Two Thousand And Ten,” I have updated the look of the website temporarily until I can find a theme as awesome as the content.  I have my doubts about whether that will be possible, but I have been assured by the “Wordpress Community” that I will find a theme at least 75% as awesome.

Hopefully the (C)Han(n)uk(k)a(h) holiday brought the usual increase in sales that only the Maccabees and dreidels can provide and you are celebrating in grand style by purchasing me a bottle of midshelf liquor as a gift.  It’s tax deductible if you tack on an extra 20 bucks to your next Salvation Army donation. My overall revenue was down slightly in December, but I ended up with higher profits (don’t tell the IRS) as far as I can tell.  My calculations may be somewhat optimistic as I try to justify purchasing another 55″ LED TV for my upstairs bathroom.  It’s just impossible to tell when there will be fourteen programs on I want to watch at the same time.

On occasion someone I know will bring up this website in “real life” conversation and the comments are usually the same.  “Really awesome site bro, but most of it is just too technical.”  I try to explain that I’ve dumbed things down so much that any moron should be able to grasp the ideas, but it seems as though my attempts at dumbness are for naught.  Luckily I have been preparing content for the new year that I am sure will be just as mind-numbing as the last.  Unfortunately, arbitrary date changes have limited impact on one’s auction blogging skills.  Maybe the smash sequel to last year’s “2012″ will be “2010 – Josh’s Auction Website Gets Slightly More Popular.”  Don’t hold your breath.

“Twenty Ten” promises to bring more changes to eBay.  Personally, I am excited that the last remnants of “eBay Live” will supposedly be hobbling into Seattle.  I plan to have you all over for a “pre-funk” before we roll out in yellow school buses to the grand spectacle which I imagine will take place at a retirement center just outside of town.  There’s always a lot of hubaloo (my word, not theirs) surrounding what eBay will do to screw us all over in the new year, as if there’s some kind of eBay death panel set up by the liberals in Washington.  I’ve heard Meg is running for governor so I guess anything is possible.  Personally, I’ll just wait it out.

Should have a few articles dropping in the coming days.  Nothing worth a movie deal I don’t think, but I’m sure at least one will be the next Watergate.  Will catch you on the flipside, Josh

Took the day off today.  Not by choice, mind you, but because eBay was broken and I don’t have anything to do other than tell people in Cyprus I really don’t ship via $1 horse and carriage.  In this case, I don’t mean broken like not conforming to what I want as I have in the past.  I mean broken like a dozen armless UPS employees decided to play “Super Bowl” with your Xbox 360 packaged in nothing but newspaper and prayer.  Normally I reserve Saturdays for playing with my IP address, buying stuff from my competitors, asking them how much shipping is to Cyprus via horse and carriage, and then leaving negative feedback.  I couldn’t even do that today though because every search I tried resulted in either zero matches or a message stating the “function” I requested was temporarily down.  At first I thought maybe all those listings I reported for bogus reasons had actually been taken down, but when a search for “expired pretzels” didn’t result in any hits I knew something was wrong.  I did what I always do when I think there’s a problem and called my mother.  She confirmed that her search for “Beanie Baby” resulted in an error and we agreed that it was unlikely no one was selling Beanies this week.  I followed up by doing what I always do and went to the internet to try to find doomsdaymongerers complaining about similar problems.

The best part of being a faceless eBay whiner with a clever URL is that there are so many people just like me.  Feels like I’m part of a real life family because we all love to complain about the same things so much we’re basically friends, if not lovers.  Today the internet was truly ablaze with hate because eBay’s own search function was not functioning properly, among various other things.

Most people found it impossible to search for items using eBay’s search on November 20^th, starting around 11am in the morning.  No matter what the user searched for, they would be greeted with either an error or zero search results.  This made it impossible for buyers to purchase or bid on items they weren’t previously watching or found via a method other than eBay’s search, like Google or via magic.  EBay made an announcement acknowledging the problems at 1:37pm on the System Announcements Board stating:

Due to errors in some of our backend systems, members may be seeing different errors in Search. This could be that “We were unable to run the search results you entered. Please try again in a few minutes” or a blank page, or simply the browser being unable to display the page.

This is also affecting the ability to access eBay Stores through search directly, and sometimes from the store URL.

Please note that we are working as quickly as possible to get this resolved. Thank you for your patience as we continue to work to resolve this.

The problems continued throughout most of the day.  Users have been reporting all kinds of issues including an inability to bid on items they could actually find and an inability to send or pay invoices.  Finally, around 11pm, eBay announced that they had found the problem and were working diligently to fix it.  Everything should be back to “normal” on Sunday the 21st, whatever that means.

Supposedly eBay is going to issue some kind of refund, but it is unclear exactly what that compensation will look like.  In reality, whatever eBay is willing to refund, be it insertion and final value fees or even some kind of “above and beyond expectations” package, will pale in comparison to the losses suffered by lower auction prices.  If you were selling an item you expected would sell for around $200 and it ended up selling for the $19.24 price it was at the day before because no one could find or bid on it then no fee refund could possibly make up for that loss.  Any eBay seller knows that the auction price can double, triple, or go up even more in the last 30 seconds of an auction.  This gaffe, probably the most serious I’ve ever seen, has no doubt caused some sellers serious money.  Granted, Saturday is not a popular day to end auctions, but that certainly doesn’t mean there are no items ending.  Once eBay realized the magnitude of the problem they should have extended the end time of the affected auctions until the next day.  Unfortunately, eBay chose not to act and millions of dollars were lost worldwide.

It must be November.  The weather deteriorates.  I wake up in the dark and go to bed in the dark even during months I remember to pay the electric bill.  Whole Foods tries to convince me their $34.99 a pound turkey will bring a smile to my children’s face the way a 39 cent turkey simply wouldn’t.  I have to upgrade (sad, but true) to Ezra Brooks because 80 proof doesn’t warm in the winter months the same way it does in the summer.  The United States Postal Service ruins my life.  Just another November.

On November 4 the Post Office announced pricing changes that will go into effect January 4th for Priority Mail, Express Mail, Global Express Guaranteed, Express Mail International, Priority Mail International, Parcel Select and Parcel Return Service.  Pricing changes for Media Mail and additional services such as Delivery Confirmation and Signature Confirmation are announced at a later date and will remain the same for at least the first half of 2010.

Just the Facts, Jack

What’s Going Down

The price of a Priority Mail Flat-Rate Envelope will decrease a nickel to $4.90 from $4.95 when purchased at the Post Office and decrease to $4.75 from $4.80 when purchased online.

The price to ship one pound Priority Mail locally (defined as only one or two zones away) is also decreasing a nickel from $4.95 to $4.90.

What’s Staying the Same

The price of domestic and international First-Class Mail, Standard Mail, and Parcel Post will remain the same in 2010.  This means a First-Class stamp will still cost 44 cents and a 19 pound Parcel Post package will still cost $24.64.

Customers who pay for shipping online through Click-N-Ship, PayPal, etc. will continue to receive a discounted rate when compared with the price paid at the Post Office or equivalent retail location.

The price of the recently introduced Small Flat-Rate Box will remain $4.95 when paid for at the Post Office.  When postage is purchased online the cost of the Small Flat-Rate Box goes up a nickel to $4.85.

No earth-shattering changes announced.  No mention of charging for shipping supplies, delivering only on days that start with the letter “T,” or a completely new class of mail.

What’s Going Up

Priority Mail

According to the press release, Priority Mail rates are going up 3.3% on average which is about the standard yearly increase.  Domestic Express, International Express and Priority, and Parcel Select and Return Service are also going up across the board.

The most glaring pricing change for those of us who sell on eBay is how USPS is treating Priority Mail that weighs one pound or less and is shipped in variable rate packaging (either your own packaging or branded Priority Mail packaging that is not Flat-Rate).  As you may be aware, the current price to ship a package weighing one pound or less is the same no matter where it is shipped.  The price of variable weight Priority Mail that weighs more than one pound is based on both the weight and how far the package will be traveling. For example, today I can send a one pound package from Seattle to Portland Priority Mail for $4.95.  I can send that same one pound package Priority Mail to Boston for the same price, $4.95.  Come January 4, 2010, I can ship a one pound package Priority Mail to Portland and it will cost $4.90.  If I ship that same package Priority Mail to Boston it will cost $5.55, an increase of 60 cents or a whopping 12.12% over 2009 prices.

Although the average price increase on Priority Mail is advertised at 3.3%, the price increase on lower weights is much, much higher.  For example, a two pound Priority Mail variable weight package from Seattle to Boston currently costs $8.70.  That’s going up to $9.55 in 2010, an increase of 85 cents or 9.77%.  A three pound package goes up from $11.95 to $12.70, an increase of 75 cents or 6.3%.  A four pound packages goes up from $14.70 to $15.30, an increase of 60 cents or 4.08%.  Finally, a 70 pound variable weight Priority Mail package goes up from $108.25 to $111.50, an increase of $3.25 or 3% even.  As you can see, the price increase on lower weights is much higher than on heavier weights by percentage.

The price of Flat-Rate Boxes is also going up.  Medium Flat-Rate Boxes go up from $10.35 to $10.70, an increase of 35 cents or 3.38% when purchased at a retail location and from $9.85 to $10.20 when purchased online, also an increase of 35 cents or 3.55%.  Large Flat-Rate Boxes go up from $13.95 to $14.50, an increase of 50 cents or 3.44%.

Express Mail

The price of the Express Mail Flat-Rate Envelope is going up from $17.50 to $18.30 at retail and from $16.63 to $17.40 when purchased online.  Both represent about a 4.5% increase.

Express Mail variable rate prices look to go up about 4.5% across the board as well.

International Mail

Priority Mail International Flat-Rate Envelopes are going up 50 cents to $11.45 for Canada and Mexico and 50 cents to $13.45 everywhere else.  The price is identical to the new cost of the Small Flat-Rate Box.  Medium Flat Rate Boxes are going up $1 to $26.95 for Canada and Mexico and $1.50 to $43.45 to all other countries.  The Large Flat-Rate Box is also going up $1 to $33.95 for Canada and Mexico and $2 to $55.95 everywhere else.  The maximum weight remains four pounds for Flat-Rate Envelopes and Small Boxes and twenty pounds for Medium and Large Flat-Rate Boxes.

Priority Mail International prices are also going up 2-6% for variable weight packaging.

Express Mail International Flat Rate Envelopes are going up $1 to $26.95 for Canada and Mexico and $1 to $28.95 everywhere else.

Express Mail International in variable weight packaging is also going up 3-4%.

“Innovations”

The USPS news release mentions “several innovations” that we can look forward to in 2010.  These include further discounts for those who qualify for “Commercial Plus Pricing” and also ship in whatever USPS defines to be environmentally friendly packaging.  To qualify for Commercial Plus Pricing one must ship 6,000 pieces Express Mail yearly or 100,000 Priority Mail pieces yearly.  Also available to Commercial Plus shippers will be a new 9.5 x 12.5 Priority Mail Flat-Rate padded envelope.

Commentary

Disappointment

I was going to turn this into one of my usual comedyfests, but decided since it’s a serious topic about all the money you’ll be losing in 2010 I would stick to the nuts and bolts.  Not sure you got through it, but if you did congrats.  I hope you learned something and are in a better position to prepare yourself for the changes coming.

I was “really” hoping that Priority Mail International Flat-Rate Envelopes would be scanned at the time of delivery and PayPal would treat these packages the same way they treat domestic packages with Delivery Confirmation (i.e. grant a claim in the seller’s favor for “items not received” when the Delivery Confirmation shows it was delivered).  This has been my dream for several years now and what I wish for every year my Mother remembers to bake me a birthday cake with candles to blow out.  The cost of trackable international shipping is ridiculous.  Thirty dollars for an International Flat-Rate Express Envelope?  Twenty dollars as an absolute minimum to ship a package with tracking abroad?  Customers scoff at paying $20+ for shipping on a package that’s anything less than a 25 pound solid gold bar. Shipping with tracking is the only way to protect ourselves as sellers accepting PayPal, so shipping without tracking simply isn’t worth the risk.  I know my sales would skyrocket if I could offer $10 Priority International shipping, but I also know my bottom line would suffer at the losses from fraudulent PayPal claims and the dreaded “lost package.”

The price increase on Priority Mail variable weight packages is rough.  Shipping a one pound package Priority Mail has always cost the same amount no matter where it’s shipped. The 12%+ increase in 2010 will take a noticeable cut out of my profits.  I will be utilizing Flat-Rate Envelopes even more to stuff in whatever I can.  I know in the past I’ve gotten some funny looks from Postal employees who balk at my “creation,” but the envelopes usually get to their destination more or less.  I know my customers are happier to receive a nice, well-packaged box, but if it means saving a McDonalds Small Fry I know how I’ll be packaging January 5^th.

This year’s “innovations” are a joke.  There aren’t even 50 sellers on eBay who ship 100,000 Priority Mail packages yearly to qualify for Commercial Plus.  The cubic volume-based pricing discount for whatever “space-efficient packaging” is would be welcome I’m sure, but I doubt whatever the discount is would cancel out the money companies save by only using one standard box for shipping everything from a camera battery to a mattress.  Let’s be real here.  The number one reason why USPS loses nearly a billion dollars a month is because companies are sending less dump-clogging catalogs.  No one at USPS was looking to slow down that fluff when the dollars were pouring in. Plus, how is USPS going to identify who’s packaging efficiently? Will they take Amazon’s word that the box is full of precious merchandise rather than plastic bags full of air? Most of us will never know unless we decide to start shipping 100,000 individual Lego pieces around the country just for fun.

I was hoping USPS would offer tracking similar to Express Mail or the more advanced tracking UPS and FedEx offer on Priority Mail.  If USPS could offer advanced tracking for a dollar or two per package many customers would likely be interested. It might also be enough to land them accounts with some of the larger corporations that tend to go with UPS or FedEx.  From personal experience I know that tracking a package is more fun than actually receiving whatever it is I purchased in a moment of weakness half the time.  I have a dozen damaged pears I bought from Harry and David coming on Tuesday that I’ve tracked online at least a dozen times.  I’m sure the pears will be good, but I doubt they’ll bring me as much joy as when I saw them finally leave Hodgkins, IL online at UPS.com.

Could Be Worse

We’re smart enough to know price increases are coming.  The price increase on Priority Mail variable weight will definitely be an issue for many in 2010 and will dramatically change how I package many of my items.  There was no mention of charging for shipping supplies or basic carrier pickup which were two of my fears.  There was also no mention of closing every single Post Office in Washington State which gives me hope for the future.  I actually expected USPS to do away with Flat-Rate Envelopes.  Some of the items I’ve crammed into one of those things have been ten times or more the original size of the envelope. I know many people “abuse” their originally intended purpose which was a sturdy way to ship documents.  Instead, USPS is giving us even more incentive to cram because it will now be cheaper to use a Flat-Rate Envelope than ship Priority Mail any other way.

Overall I am not crestfallen by any of the announcements, but time will tell how they play out.

Feel free to check out some of the literature USPS has provided us about the pricing changes:

See the USPS Press Release
See the Full List of 2009 Prices
See the Full List of 2010 Prices

Until next time, good luck and try not to get suspended.

At noon today eBay announced a new seller promotion that discounts auction-style insertion fees by 33% until October 11th.  I have not received an email on any of my accounts alerting me to this promotion, but it is clearly laid out for us at the eBay General Announcement Board.  Unlike the Five Free Listings Promotion that actually increases overall fees, there seems to be no strings attached with this discount.  The last week of September and the transition to October is generally a slow time for retail sales as consumers have finished up back to school shopping and aren’t yet ready to tackle the holidays. In addition, eBay announces third quarter earnings on October 21 and this may be a ploy to increase listings and traffic going into the fourth quarter to make their quarterly earnings report seem more positive.  Either way, sellers can’t balk at 33% savings. Of course, this promotion will likely increase the number of listings on eBay, but does not necessarily increase the number of buyers. This means that there will be more competition for your listings.  Generally speaking, promotion time is not the best time to list those items you’ve been putting off listing.  You may save 50 cents in insertion fees, but the added competition from other listings may bring the winning bid for your item down much more than that 50 cents.  List carefully.

If any of you have had the misfortune of trying to contact eBay customer service by email over the last several weeks, you probably realized that you have not received a response.  Email support from eBay has been increasingly slow over the last year.  EBay fired most of their customer support staff located in the United States in October of 2008.  Over 1,600 people were terminated, largely because eBay’s stock at the time was trading at a six year low of just under $18 and they deperately needed to cut costs.  Of course, share prices deteriorated even further in 2009, bottoming out below $10, but who’s counting.  EBay customer service has always been atrocious.  Most any email to the company will return a canned response generated by a computer that scans the email for “keywords” and returns the response most likely to address at least one of the customer’s concerns.  Nonetheless, most emails receive at least some response within 48 hours.  Not so these past couple of weeks.

After the 2008 terminations, eBay outsourced to a firm in India to take care of customer’s basic problems.  If you call Paypal’s 1-800 number, eBay’s 1-800 number, or go through eBay’s “Live Chat,” India is their first line of defense.  The problem is that India can’t really do much for you and they have no authority to restore accounts, issue or remove violations, or go into any depth beyond what pops up onto their screen for them to read at you.  Nine times out of ten their answer will be “Contact the buyer/seller.”  The good news is that it’s so loud at the call center that you can hear seven or eight answers to other people’s problems which may lessen your need to ask follow-ups.  They also talk so fast you’ll probably be off the phone 30 seconds after you finally get connected to someone.  If you can convince India that your problem is significant enough they will tell you how to contact eBay’s “Trust and Safety” team or the relevant intermediate department.   If you’re on the phone with PayPal, India will forward you around an endless loop (India is a large country) until your call may finally find its way onto American soil where a real life, possibly American person, will give you the run around instead.  Unfortunately this is the nature of the beast in the 21^st century.  EBay is in a particularly difficult position because they have literally hundreds of millions of “customers” around the world.  It would be impossible to hire enough staff to respond to emails and calls personally, so this broken system is what we’re stuck with.

About two weeks ago I received an email from a user threatening to burn my house down with me inside of it.  Whoever said eBay isn’t a dangerous place obviously did not have the joy of entering into a transaction with this sweetheart.  Such a threat might scare a normal person, but since I have the strongest and sexiest Australian I know as my personal bodyguard I was not the least bit worried.  About an hour later I baited our closet killer into replying through eBay with a profanity laced message so I knew I could forward the message to eBay and they would likely suspend the user.  I diligently filled out a report including the usual header information along with the body of text and expected the user to be suspended within 24 hours as usually happens.  I waited.  And waited.  Four days later I contacted Trust and Safety again with a follow-up email.  Still nothing.  I waited another three days and sent a third email and followed up through eBay Live Chat inquiring as to whether or not my email had been received.  They assured me it had and I would receive a response within 72 hours.  I received no response and gave up.  One might assume that eBay would be concerned about removing users threatening murder, but as we all know things change.  After all, there’s always secret fees to create or bogus promotions to start.

Today, after 15 days, I received the following apology email from rswebhelp@ebay.com.  Luckily I’m still alive to read it:

“Hello,

eBay Customer Support”

I agree that being murdered would have been inconvenient, but then again I wouldn’t have had to do anything but sleep, so inconvenient might not be the best word.  Told you these emails are never personal.  I copied and pasted my original email into the “ask” box, but couldn’t locate the “death threat” issue so I settled on “Report a User.”

Did it really take eBay two plus weeks to figure out they were having problems with their email system?  Did they fire whoever is supposed to be updating the system announcement board?  Maybe they thought, “Wow, we haven’t received a single complaint in over two weeks!!!!  Everyone gets a raise and let’s fire the rest of the U.S. customer service staff because we obviously have no need for them!”  It’s hard for me to guess.

I actually caught someone with an eBay IP address snooping around the site today.  They ran a variety of DNS and WHOIS lookups on me and my precious site as well.  Hopefully they aren’t onto us.  If anyone wants to know, my real name is Mike and I sell used pants, Affliction T-shirts, and comic books.

I’ll let you know if I get a response and our prospective serial killer gets the boot.

What is the Promotion and Why is it Terrible?

The eBay fee promotion announced today is one of the most bizarre I have ever seen.  There have been plenty of bad promotions in the past, but this one takes the cake.  Starting June 16, 2009, EBay is offering sellers 5 free insertion fees every 30 days when they use the regular Sell Your Item form on eBay.com.  If you use a third-party listing solution like Auctiva, then you will not be able to participate in this promotion unless you list your first 5 items via the eBay site.  We know eBay doesn’t give anything away for free, so what’s the catch?  Oh, it’s a doozy.

The final value fee on these “free” listings is 8.75% regardless of what the item sells for.  Normally, eBay collects 8.75% of the first $25, 3.5% of the amount between $25.01-$1,000, and 1.5% of the amount above $1,000.  Let’s say you started a listing today at 99 cents and it sold for $100.  The insertion fee is 15 cents.  The final value fee breakdown would be $2.19 for the first $25 ($25 x .0875) + $2.63 for the remaining $75 ($75 x .035) + .15 insertion fee for a total of $4.97 or 4.97% of the selling price in total fees.  With this “promotion,” the final value fee of your “free” listing on June 16 would be $8.75 ($100 x .0875) or 8.75% of the selling price in total fees.  To save the 15 cent insertion fee, you pay eBay almost $4 more in final value fees.  Even if you started the listing at $100 and the insertion fee jumped to $2, you would still be paying eBay an additional $2 in total fees.  It’s like McDonald’s running a promotion for free hamburgers and then sending a bill for $10 a week later.  Like always, eBay is trying to trick sellers into thinking they’re doing them a favor, when in reality they’re trying to gouge unsuspecting people into paying more in fees.

How Do I Make This Whacky Promotion Work for Me?

It’s going to be hard for most sellers.  The final value fee you pay eBay on these “free” listings is 8.75% of the winning bid, or $20, whichever is lower.  The only way you could come out on top of this promotion is if you sold items where the insertion and final value fee would exceed $20 under normal conditions.  If you start your listings at 99 cents, the selling price of the item would have to exceed $530 (15 cent insertion fee + $19.87 final value fee = $20.02) in order to save money on fees.  If you started the listing at $200, your item would have to sell for $450 to save money on fees ($3 insertion fee+ $17.07 final value fee = $20.07).  This is going to be difficult for a lot of sellers who don’t have a lot of $1000 items laying around that they’re willing to risk selling on eBay.  The regular final value fee is 8.75% up to $25 which is the same as the promotional rate.  My suggestion would be to find 5 items that you think won’t sell for more than $25 and list those as your 5 “free” listings.  This way, you’ll end up paying the same amount in final value fees and you’ll save a whopping 15 or so cents per listing. Remember though, if the item sells for more than $25 you’re actually losing money in fees!  Otherwise, items that don’t sell still count towards the 5 free listings.  You could find 5 items that you know won’t sell for the price you list them at and do it that way. Bidders might think you’re crazy trying to sell a blank DVD-R for $1,000 though.  Not really worth the hassle is it?

This is another example of eBay using “promotions” and supposed “fee discounts” in an attempt to confuse sellers into paying higher fees.  The headline sounds great, but the catch always costs unsuspecting sellers a great deal of money.  Do your research and calculate what your fees would be with a fee calculator like eBay and Paypal Fee Calculator.  Be careful with this promotion.