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eBay cuts listing costs for larger sellers

Aug. 22, 2008

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In an effort to better compete against Amazon, eBay has designed a new fee schedule that allows larger sellers of fixed-price items to list a product for up to thirty days for only 35 cents. But the change dosen't please everyone, especially smaller retailers or merchandise.

Smaller sellers who stick to the older auction format certainly won't be helped by these changes, a development that is bound to increase the tension that has been building between eBay and this constituency for over a year now.

In the recent past, sellers had to pay up to four dollars per item per week. In the next couple of weeks, sellers able to maintain large inventories of a specific product will find it easier and less costly to offer their merchandise on eBay.

Additionally, they will find the website more competitive with Amazon.com. Increasingly (especially since CEO John Donahoe took eBay's CEO job in early spring) the online auction giant has been accelerating its evolution from an online flea market to an online retail community dominated by larger sellers offering goods at fixed prices.

Despite all the frustration these important changes are causing in the eBay community, it is clear that the company needs to do something to help improve its bottom line. Its latest (Q2) quarterly earnings report showed that revenue growth had faltered to the slowest pace in the company's history.

Justin Hamel, CEO of MastaMinds Network, a specialty retail network consisting of more than 50 niche stores and an active PowerSeller on eBay said "overall, eBay is taking a giant step in the right direction and I commend them for that, even if it dosen't please everybody."

The majority of eBay's growth in the second quarter came from Skype and PayPal, while its eBay Marketplaces business unit registered a relatively disappointing 13 percent increase in revenue.

Hamel added "eBay will actually need to cut the listing fee even more across the board to gain momentum."

eBay has been "shaking" smaller sellers in the wake of several very unpopular changes, including banning sellers from posting negative comments -- or even giving neutral feedback -- about the buyers with whom they do business.

Last year, it also implemented a new fee structure that sellers felt were very detrimental to their operations. Hamel says "a lot of smaller sellers are already moving to Amazon. It is perceived as less risky, because a seller doesn't have to pay listing fees until an item is sold.

Nancy Baughman, a PowerSeller who deals mostly in antiques said "overall, business has gotten a lot more difficult since eBay implemented its new rules. We have seen a tremendous increase in nonpaying bidders."

eBay's latest changes to its fee schedule are just another slap in the face to the small seller, some observers think.

Baughman would in fact leave eBay except for the fact that she offers items on consignment, and most of her customers like the familiarity of the site. eBay's shift is changing the eclectic range of products that was once emblematic of the online auction site.

Baughman said "they are actually favoring sellers that offer a limited range of products. eBay is so huge that I don't understand why it would want to negatively impact smaller sellers that have something unique to offer."

As eBay moves to an established online retail model, it may find that some of its larger sellers cannot keep up with the change.

The next couple of months will be interesting to watch, as smaller and larger sellers react and try to adapt to all these many changes.

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Source: eBay.

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