28/08/08
eBay changing fee structure
eBay, the largest online auction in the world, announced Wednesday it was changing its fee structure to emphasize fixed prices over bidding. Most online shoppers are too busy to bother with auctions, and eBay said it is making the move to accomodate that prefference for fixed prices. eBay said they hope to compete more effectively with Amazon.com and other online retailers by implementing the new changes.
Changes include a lower upfront fee – only 35 cents to list an item for 30 days, about a 70% reduction.
Customers will no longer be able to pay by check or cash. Credit cards or Pay-Pal only transactions are expected to help curb fraud.
The announcement was timed to increase sales during the holiday shopping season. But, it is just one of the changes eBay has made recently to reduce their dependence on auctions. Auctions, once the internet rage, are still popular, but growing more slowly than the fixed-price sales. That fact alone says consumers are losing interest in auctions now that online sites are easier to use and prices are more affordable.
It’s not that eBay was doing badly. Gross merchandise volume, the sum of all transactions on the eBay marketplace, grew only 8 percent in its most recent quarter, a sharp reduction from the double-digit growth of previous quarters. While revenue was up 20 percent to $2.2 billion, the rise was fueled mostly by growth in advertising, global classifieds and PayPal.
The company’s auctions business generated 57 percent of the company’s revenue in the most recent quarter, but growth has slowed.
“Buying online has changed,” said Scot Wingo, chief executive of the market research firm ChannelAdvisor. “Retail sites no longer make customers choose between convenience and price.”
The lower upfront fees will enable sellers to offer a bigger selection. That in turn will help eBay compete with fixed price retailers. The current system, Wingo said, puts eBay at a disadvantage.
Other changes users and sellers can expect to see include:
* A new pricing plan for sellers who offer fixed-price items in eBay’s “Buy It Now” format.
* Starting in mid-September, sellers will pay only 35 cents to list an item for 30 days
John Donahoe, eBay’s chief executive, has vowed to make eBay a better place for buyers and return the company to more solid growth.
“Clearly there’s a strong buyer preference for fixed price,” Lorrie Norrington, president of eBay Marketplace, which includes the eBay site, said last month.
While the auction format may have been a novelty at the beginning, now people go online and want what they want when they want it.
The drama is just beginning to grow though. The new approach will please many of the larger sellers and anger others – particularly those who depend on auction pricing to move one-of-a-kind inventory. The idea isn’t new, but the management team that is in charge of making the decisions is and the current management eBay says, is more open to trying a fixed price scale.
Last month, the company announced a deal with the e-commerce site Buy.com. When Buy.com got a deal to sell its items on eBay without paying the same fees charged to smaller sellers that announcement prompted outrage and accusations of betrayal from many of eBay’s loyal independent sellers.
Frustrated sellers have responded by organizing boycotts and disrupting live auctions – like eBay Live, a company event for top sellers that was held in June.
While the company changes, it insists it is staying much the same, offering buyers a choice of formats. Auctions made the site unique in the first place and they don’t want to lose that – so the auction model is still viable. eBay points out that auctions are often a better approach for sellers when items are in high demand or when the seller is uncertain of an item’s value.
“We love the auction model,” Norrington said. “It’s still a great model for certain types of sales.”
Customers will no longer be able to pay by check or cash. Credit cards or Pay-Pal only transactions are expected to help curb fraud.
The announcement was timed to increase sales during the holiday shopping season. But, it is just one of the changes eBay has made recently to reduce their dependence on auctions. Auctions, once the internet rage, are still popular, but growing more slowly than the fixed-price sales. That fact alone says consumers are losing interest in auctions now that online sites are easier to use and prices are more affordable.
It’s not that eBay was doing badly. Gross merchandise volume, the sum of all transactions on the eBay marketplace, grew only 8 percent in its most recent quarter, a sharp reduction from the double-digit growth of previous quarters. While revenue was up 20 percent to $2.2 billion, the rise was fueled mostly by growth in advertising, global classifieds and PayPal.
The company’s auctions business generated 57 percent of the company’s revenue in the most recent quarter, but growth has slowed.
“Buying online has changed,” said Scot Wingo, chief executive of the market research firm ChannelAdvisor. “Retail sites no longer make customers choose between convenience and price.”
The lower upfront fees will enable sellers to offer a bigger selection. That in turn will help eBay compete with fixed price retailers. The current system, Wingo said, puts eBay at a disadvantage.
Other changes users and sellers can expect to see include:
* A new pricing plan for sellers who offer fixed-price items in eBay’s “Buy It Now” format.
* Starting in mid-September, sellers will pay only 35 cents to list an item for 30 days
John Donahoe, eBay’s chief executive, has vowed to make eBay a better place for buyers and return the company to more solid growth.
“Clearly there’s a strong buyer preference for fixed price,” Lorrie Norrington, president of eBay Marketplace, which includes the eBay site, said last month.
While the auction format may have been a novelty at the beginning, now people go online and want what they want when they want it.
The drama is just beginning to grow though. The new approach will please many of the larger sellers and anger others – particularly those who depend on auction pricing to move one-of-a-kind inventory. The idea isn’t new, but the management team that is in charge of making the decisions is and the current management eBay says, is more open to trying a fixed price scale.
Last month, the company announced a deal with the e-commerce site Buy.com. When Buy.com got a deal to sell its items on eBay without paying the same fees charged to smaller sellers that announcement prompted outrage and accusations of betrayal from many of eBay’s loyal independent sellers.
Frustrated sellers have responded by organizing boycotts and disrupting live auctions – like eBay Live, a company event for top sellers that was held in June.
While the company changes, it insists it is staying much the same, offering buyers a choice of formats. Auctions made the site unique in the first place and they don’t want to lose that – so the auction model is still viable. eBay points out that auctions are often a better approach for sellers when items are in high demand or when the seller is uncertain of an item’s value.
“We love the auction model,” Norrington said. “It’s still a great model for certain types of sales.”