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

4 Feb

“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:

EBay Final Value Fee Auction

Beginning March 30th, 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 30th 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 30th 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.

EBay Spring Fee Update Chart

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 30th.  An auction ending at $200 will cost $9.54 more beginning March 30th.  An auction ending at $500 will cost $26.04 more beginning March 30th, 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).

EBayInk Comment

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 30th.  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.

EBay Store Subcription Fees

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 30th, 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

EBay Store Total Fees 2010

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 30th.  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.

6 Responses to “EBay Spring 2010 Seller Update Revisited – Ebay’s Highest Fees Ever”

  1. jana 11. Feb, 2010 at 6:09 pm #

    If you like John Cusack, make sure to check out the 2012 facebook page :) http://bit.ly/kBzNs

  2. Cathrin 31. Mar, 2010 at 12:31 pm #

    I am a store owner (actually three) and listed every at a no frills 5cents. My insertion fees to ebay just quadrupled. I will now go and unsubscribe at least one store. Very disappointing especially since I have been selling heavily since 2000. Feel like I am being taken to the cleaners in a big way.

  3. Darren 05. Apr, 2010 at 12:32 pm #

    April 2, 2010

    Attention eBay policy makers,

    I am an eBay seller who has been doing business on eBay since April 2005. Every once and awhile eBay makes changes to their policies to improve the buying and selling experience. The last major change that occurred about a year and a half ago was not very much welcomed by many sellers including myself. The were many blogs and websites like YouTube where sellers were voicing their displeasure and even threatening not to do business on eBay because the changes, according to the disgruntled sellers, were not in their best interest. Despite the changes that took place then, although I didn’t like them myself, I had no choice but to comply if I wanted to continue doing business on eBay.

    Not too long ago I got an email from eBay announcing fee changes that “were the best ever offered”. I did take a quick look at it, but didn’t really feel that it would effect me. I been steadily listing my items every week on eBay, and because I increased the number of items listed, I started using Turbo Lister to make it easier.

    On March 30th when I listed my items using Turbo Lister, I did so automatically without checking how much I would be charged. I was shocked to later find out that I was charged 50 cents for each Fixed Price listing instead of my usual cost of 15 cents each. I immediately contacted eBay’s online billing customer support after hours to inquire why I was charged so much. The rep told me that there were fee changes that just took place. My immediate reaction was for him to reimburse my money and discontinue my listings. I told him that I didn’t get a prior warning from eBay about these drastic price increases. The rep was kind enough to reimburse my listing fees and sent me a link explaining the fee changes.

    After going to the webpage link that the rep sent to me and examining in detail the fee changes and how they would effect me, I soon realized that the changes wouldn’t be beneficial to me at all. It is a loose loose scenario for me. For example, I was paying 15 cents each for my DVD Fixed Price listings. Due to the new fee changes, If I choose not to subscribe to the eBay Seller Store, I will now have to pay 50 cents each for each listing. If I do give in and subscribe to an eBay’s Basic Store, I would have to pay a monthly fee for the store and a higher price to list each of my items. That is, I would pay 16 dollars a month for the store and 20 cents for each listing.

    I called eBay’s customer service due to my frustration regarding these changes and how they are negatively effecting me. I wanted to speak to a live person. Although I knew the rep I was talking to couldn’t really do anything to help me, I still wanted someone from eBay to hear my frustration and dissatisfaction regarding these changes. I explained to the rep that there is nothing in these new fee changes that would help me with the current way that I prefer selling on eBay. I told him there is no way that I am going to subscribe to a store. If I were to get a Basic Store I would have to pay a monthly fee and more list my item. I also let him know that there would be no way that I would subscribe to the next store option and pay 50 dollars a month plus 5 cent to list each of my items. Finally I told him that due to these changes, I will most likely stop selling on eBay altogether or sell very few items. It’s funny because I was just getting ready to increase my listings from 32 to about 50.

    So, as I stated earlier, the so called new fee changes are a loose loose situation. Not only will I loose, but eBay looses as well because they will no longer get monthly payments from me if I stop selling or decrease my listings. It makes me think who the geniuses are who come up with these changes? Do they REALLY think that these changes are good for the sellers? From my point of view, I don’t think so.

    Is there anyone on eBay’s board of directors who monitors what the sellers are saying on the internet about theses new fee changes or do you even care? I submitted a query to Google regarding how sellers felt about the new changes and the first site that came up was a survey on auctionbytes.com about what eBay sellers felt about the changes on. Please refer to the following link: http://www.auctionbytes.com/cab/abu/y210/m02/abu0256/s02 – There you will find some shocking statistics. Here is just the first paragraph. “Three-quarters of eBay sellers surveyed by AuctionBytes said that new fees coming at the end of March would result in increased monthly fees. Close to half (45%) of sellers said eBay’s decision to do away with Stores Inventory Format would have a negative impact on their business, and over one-third (34%) said their sell-through rate would decline as a result of the elimination of the Stores Inventory format. Only 7% said the opportunity to list up to 100 auctions a month for free for items with a starting price of under $1 would have a positive impact on their business”.

    After reading those survey results on that website, I realized that I wasn’t the only unhappy eBay seller. I’m sure that there are numerous sellers who are voicing their displeasure with these new changes all over the internet. The only question is, what are you eBay policy makers going to do about it?

    Thank you for your attention to this matter.

    Darren Briscoe
    peerlesspublishing (eBay user ID)

  4. Darren 05. Apr, 2010 at 1:27 pm #

    Dear readers,

    The letter above is what I wrote as a reaction to the new eBay seller fees. Please excuse the typos. That letter only tells part of the story regarding a small, steady, 5 star seller rating, 100% feedback, eBay seller (myself). What I didn’t know until reading this article was that eBay is increasing there final value fees as well. All I can say is “wow”. I feel sorry for the sellers who depend on their eBay sales as a major part of their income.

    Regards,

    Darren B.

  5. Tim 23. Apr, 2010 at 10:15 am #

    Thanks for this really informative article. I’ve just begun selling on eBay again after a 5 year break and was trying to decide if a store would be beneficial. i really appreciate the work you did in the charts. As most of the items I sell usually end under $50 I can see there is no benefit or savings in subscribing to a store.

    Thanks again for your hard work and clear explanations.

    Tim

  6. bttmstr 07. Dec, 2010 at 7:29 pm #

    Don’t you think ebay knows exactly what they are doing?! liars as always. They’ve become unnecessarily too corporate; they’ve turned into a giant greedy evil empire where there is no need for them to be so corporately big. I honestly hate greedy bastards that they are now. Do you guys remember how yahoo had free auctions? Man those were the good times…

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