This post is little more than the musings of a past eBay Platinum Powerseller with some commentary about the state of the auction world.  It is just one opinion and I am certainly not certified to give any financial or stock advice, so take from it what you will.

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

EBay Wants You Back (For The Second It Takes You To Pay Them, Anyway)

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.

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.