Is The eBay Fee Increase Actually Good For Business?

Fee Increase Leaves Some Sellers Angry, Others Thrilled

Much of my email from readers this month concerned the recent announcement from eBay that it will increase many seller fees on February 18, 2005. Since many business people use eBay's online store system as their primary ecommerce point of sale, it's no surprise that most of the emails I received were of the angry variety.

One email in particular caught my attention because it urged me to visit a website to sign an online petition protesting the fee hike. The email directed me to http://www.petitiononline.com/ebayfee/petition.html and upon further investigation I found that 22,548 digital signatures had already been collected (as of this writing).

Thank goodness not all of them had my email address.

This will be the fifth rate hike in as many years for the auction giant and should really come as no surprise. Price hikes are a normal course of business. It was the size of the hike that has many sellers upset.

The rate hike involved the following fees:

ˇ A basic eBay Store will now cost sellers $15.95 a month, a 60% increase from the current $9.95 a month.

ˇ Closing commissions on most items sold through eBay Stores will increase by 50 percent.

ˇ Gallery photo fees will increase from 25 to 35 cents.

ˇ The Buy It Now fee will jump from a flat fee of 5 cents to 10 cents for items priced over $10 and 25 cents for items over $50.

ˇ Final value fees will rise from 5.25% to 8%.

Many of the emails I received pointed out that small sellers are making very little profit as it is so the increase in fees will only serve to drive these sellers completely out of the eBay business. Some sellers accuse eBay of purposefully trying to run them off, but I doubt that's the case. eBay has no reason to drive away the small sellers, but that realization never occurs to those who feel they are being priced out of the market.

Not everyone is too concerned over the fee increase. Jim Cockrum, eBay Powerseller, publisher of "Creative eBay Selling News," the world's largest newsletter on creative eBay selling, and author of one of the best selling eBay books of all time "The Silent Sales Machines Hiding On eBay" has other opinions.

"I don't see the eBay fee increase as a bad thing," Cockrum said in a phone interview. "I actually see it as just the opposite - it's a good thing because eBay is eliminating my competition for me. Who leaves eBay when eBay increases seller fees? It's not the customers (or shoppers). They don't go anywhere since they aren't affected. Only a handful of the weaker sellers leave eBay when fees go up."

Cockrum recommends that sellers use eBay in non-traditional ways to build their online businesses so that future fee hikes will not have an affect on their e-business.

"Selling on eBay continues to be one of the more popular ways to make money online, though very few people are getting rich with an eBay business alone," Cockrum said. "Many Powersellers don't make enough profit to cover their costs. The key to really making money with eBay is not in selling items at auction, but to use eBay to drive customers to your other online ventures. If you do that, the rate hikes do not affect your bottomline nearly as much."

Not everyone shares Cockrum's enthusiasm. Many small sellers think the government or a regulatory board of some kind should get involved to help keep eBay fees in line. This probably won't come to pass anytime soon, but who knows. I can remember when a little company called Microsoft had free rein before they killed off all comers and came to monopolize their market. eBay seems to be headed in the same direction.

The threat of regulation may be the reason eBay is now attempting to smooth the ruffled feathers of the miffed masses. eBay announced this week that they would give a one-time $15.95 credit to eBay store owners and reduce minimum listing fees for inexpensive items from 30 cents to 25 cents, effective immediately.

Too little, too late? Could be. Many sellers believe that eBay may be writing its own obituary with such stringent price increases and such little thought for the smaller merchant. The online petition predicted the long term effects of the fee increase to be:

ˇ Smaller sellers will stop selling on eBay and try to sell somewhere else online. They will never have the chance to expand themselves on eBay.

ˇ Larger sellers may consider starting their own online store or sell elsewhere.

ˇ Prices of auctions will increase. Buyers will turn back to retail stores. The idea of eBay is that you can find things cheaper there, even when adding shipping and handling together.

ˇ Discourage new sellers, decreasing competition (which is what the eBay market thrives on for pricing).

Only time will tell if the predictions come true, but for the short term many smaller sellers are closing down their eBay stores and moving up the street to Yahoo.com.

Here's to your success!

Tim Knox

Small Business Q&A is written by veteran entrepreneurand syndicated columnist, Tim Knox.Tim's latest books include "Small Business Success Secrets"and "The 30 Day Blueprint For Success!"Related Links:http://www.smallbusinessqa.comhttp://www.dropshipwholesale.net