Drastic Changes in eBay Listing Fees

[steve]

eBay Inc. announced drastic changes in seller’s insertion fees and final-value fees. The changes come immediately following John Donahoe succeeding Meg Whitman as chief executive, which took place last week.

While insertion fees were cut, final-value fees are on the rise. Details of the changes were made known during the annual eCommerce Forum in Washington D.C. on Tuesday.

All changes in fees will take place starting February 20.

Here are the details.

Insertion Fees




Upgrade Fees



Remember, you can use HammerTap to discover which upgrades work for your listing, and which ones are just increasing your eBay fees. But heck, since Gallery Picture is free, use it!


eBay Store Fees

This only applies if you have an eBay store.




Everything you have seen so far is a decrease in insertion and upgrade fees. However, final-value fees were hiked in the other direction. Take a look.

[JoshNJamie]

Thanks for posting that here. Thats an easy way to reference the changes.  Will HammerTap be revising their Fee Finder application?  That is a great tool that I use often...

Thanks,
Josh

[steve]

Yes, we will be changing the fees in Fee Finder in the near future. Glad to hear you are using it.

I also just wanted to put in my two cents about the listing fees.

First off, the free gallery picture is an excellent touch! I am very excited about this because soon HammerTap will show thumbnails of the pictures of the listings you are researching, to help ensure you have accurate results.

Overall, the decrease in insertion fees will help several sellers increase their profit margins, especially those with low ticket items.

However, on the flip side you have a drastic increase in final value fees, which also greatly affects low-ticket-item sellers. The good news is that if you don't sell, you haven't lost as much money because of the decreased insertion fees.

The bad news, is that when you sell, you make up the difference.

For example, if I list my product for $9.99 with a gallery picture and 5 additional pictures, I save $0.65. However, if I sell it for $20.00, then my final-value fee raises from $1.05 to $1.75, and increase of $0.60. In the end, I only saved $0.05.

If I did the same thing and sold the product for $25.00, then I wouldn't save, but loose $0.23.


In the end, eBay CEO John Donahoe announced that overall, eBay would be making less money in the long-run from eBay sellers.


What are your thoughts on the changes in insertion and final-value fees? If you're reading this and have an opinion, let me know.

[brian]

I would like to take a few minutes to comment on my thoughts on these changes that eBay is making.

I had a unique opportunity to learn about these changes firsthand.  As a Certified Provider, HammerTap was invited to eBay's annual ecommerce forum, an invitation only event for eBay's top 200 or so sellers.  eBay announced these changes at this event.  So I had the opportunity to learn about them directly from eBay's new CEO John Donahoe & Bill Cobb as they initially announced the changes.

I seem to be in the minority on my viewpoint, but I strongly believe that all of the changes eBay is making are very good changes.  I'm  writing this in hopes of convincing some of you that these changes are in fact good - or at least to pull you closer to neutral ground.

First of all, eBay's primary focus is clearly to make the buying experience the best it can be.  This is the smartest thing they can do!  The best way to improve the seller experience is to improve the buying experience.  Because the more buyers and the more happy buyers eBay has, then the more money eBay sellers will make.

Every single change eBay is making is made for the express purpose of improving the buying experience.

Let's look at the 3 most controversial changes that eBay is making and think of them with this new viewpoint:

1. Getting rid of sellers giving negative or neutral feedback to buyers.

I think I may be the only eBay seller in the world who thinks this is a good thing!  (Based on the sellers I have spoken to so far.) 

Here's why:

First, I believe there is a major problem with buyers trusting feedback scores of sellers, and thus trusting to buy something on eBay.  Here's a personal example: A couple of years ago I purchased a movie on eBay and I never received it.  Guess what?  I didn't leave a negative feedback for that seller.  Why? Well because I knew that if I left a negative feedback the seller might leave me a negative feedback.  I couldn't afford a negative feedback on my fledgling account.  It would have hardly hurt their account because their score was so high, but it would have completely ruined my account to receive a negative.  So there I was, stuck not being able to leave a negative feedback even though I had a horrible buying experience.  Several months later, I had another bad buying experience and I again didn't leave a negative feedback for fear of ruining my account. 

So now I have minimal trust in the feedback rating of a seller, and I buy a lot less on eBay because of it. How much does a good feedback score mean if everyone is scared to leave bad feedback? - not much!

This is exactly what eBay is seeing happening.  The dynamic of eBay has changed so that what they call retaliatory feedback (a seller giving bad feedback because a buyer gives bad feedback) has increased something like 8 times in the last 2 years.  It has become an out of control problem that needs to be fixed.

Second - I know this is going to be hard for eBay sellers to swallow - but it's a very strange thing for a buyer to be publicly ridiculed by a seller.  The buyer is the customers and the seller is well - the seller.  And there is a difference in those roles. On eBay we are used to being able to give buyers negative feedback.  But if you take a step back, you start to realize this is rather odd.   I can think of lots of places on the web where sellers and products are reviewed.  But can you think of any other place anywhere other than eBay where you can give a buyer a negative rating?  I can't.  eBay sellers seem to feel that they need feedback to control their buyers - well it doesn't exist anywhere else so I have a hard time believing it is needed to control buyers.  Sure you are going to get some wacky and unreasonable buyers - but the whack jobs are probably the ones leaving you negative feedback already.

eBay has surveyed buyers who used to buy on eBay and now don't anymore to find out what was driving them away.  They were very surprised by the results. The number one reason buyers leave eBay is receiving a negative feedback.  (Usually in the case of retaliatory feedback where they had a legitimate bad buying experience, left a negative feedback and received an negative feedback in return.)  If you are a company and you find the number one reason people aren't buying from you - you fix it! And that is exactly what eBay is doing.

I do believe the average feedback rating on eBay is going to go down.  But I also believe this is a good thing for sellers!  This helps you as a good seller differentiate yourself from the bad sellers who artificially have a higher rating than they deserve.  It also makes eBay a safer place to buy (safer because the seller feedback rating becomes more meaningful and safer because you don't have to be scared that you will be publicly humiliated).  And a safer place to buy means more buyers.  As a seller, more buyers is a very good thing!

There will be some challenges here. eBay is going to need to provide additional controls to deal with bad buyers.   They are already launching an number of things that will help a lot - like removing feedback for suspended buyers and removing any negatives/neutrals where the buyer doesn't respond to an unpaid item claim. They have also committed to having better support in place to handle issues like feedback extortion where a buyer does something like tell you they will leave bad feedback unless you lower your price after the auction has ended.

I do agree that there are some definite cons to getting rid of negative feedback for buyers.  It is a nice mechanism for sellers to warn other sellers of bad buyers - this will be lost.  It does encourage buyers to try to find a resolution with the seller before leaving a negative feedback.  But these cons don't outweigh the pros of the change.

Personally, I believe eBay getting rid of negative feedback for buyers is a master stroke!  I understand change is hard, but I expect we will all be looking back in a couple years thinking - why did we all think negative buyer feedback was so important?

2. Change in fees

Let's look at the change in listing fees.  Here's a simple example.  Let's say I sell my item for $20.00 on eBay, I use a gallery picture, a starting price of $9.99, and my item has a sell through rate of 50% (so it would take listing my item 2 times on average before it sells.)  Now let's look at how much it would cost me to sell my item with the new fee structure and with the old fee structure.

With the old fee structure I would pay:
Insertion fee = $0.40 x 2 = $0.80 (because on average I would need to list it twice to sell it)
Gallery picture fee = $0.35 x 2 = $0.70
Final value fee = $20.00 * 5.25% = $1.05
Total eBay fees = $2.55

With the new fee structure I would pay:
Insertion fee = $0.35 x 2 = $0.70 (because on average I would need to list it twice to sell it)
Gallery picture fee = Free
Final value fee = $20.00 * 8.75% = $1.75
Total eBay fees = $2.45

So in this example I would save $0.10.  eBay has stated, and I believe them, that their overall cut per auction is lower.  So this is the first time ever that that I know of where eBay has lowered their fees!  In addition, they are realigning their fees so that they make more of their money for a successful sale and less money when their sellers don't sell.  This reduces the risk of listing an item on eBay.  I really like the idea of eBay only making money when I do.

Granted there are some cases where you would make less money with the new fee structure.  If you were selling an item with a very high success rate and not using a gallery picture already (and if a gallery picture truly had a minimal effect on the success of your auction) then you would end up paying more with the new fee structure.  But for the majority of sellers this change represents a reduction of eBay fees.

Another positive of this is that it makes it makes for a better overall buying experience on eBay in two ways:
  1) It encourages more listings because it costs less to list - this gives buyers more selection.
  2) It means that a gallery picture will be included on virtually every listing on eBay.  It is intuitively quite obvious that a picture on every auction creates a better buying experience (eBay has also done the analysis to prove it.)  And a better buying experience ultimately means more buyers on eBay.

There is a non-obvious downside to the fee changes for sellers.  Since this makes it less expensive to list items on eBay, it is likely that more items like those you sell will be listed on eBay (increased supply).  More items like yours listed could mean that the average sales price and sell through rate will drop. 

3. Using Detailed Seller Ratings (DSRs) for search placement and Power Seller Eligibility & Final Value Fee Discounts.

The biggest complaint I have heard here is that sellers don't want the question: "Are the shipping costs reasonable?" to be included in this criteria.

First let me state that of all of the changes made, this is the one I am the least convinced is the right solution.

With that said, here's why I think eBay is headed in the right direction with this, but haven’t found the perfect solution.

eBay's customer survey data has shown that high shipping cost is one of the top buyer complaints.  So it is important to address this concern.  But how?  Well one answer would be for eBay to police all auctions and watch for overpriced shipping - but that is pretty much an impossible task.  I suppose they could try to come up with some algorithm to determine if shipping was overpriced, but there are so many factors and variables that it would never be accurate.

Even if they did come up with something accurate, the important thing is actually the buyers' perception.  If a buyer thinks the shipping is too high then, in a sense, the shipping is too high.  And if the buyer thinks the shipping is not too high, then, in a sense, it is not too high.

So how do you solve this?  How do you make sure that sellers charge reasonable shipping amount that buyers will find acceptable and how do you work on buyers perceptions to feel that shipping is reasonable.  Well this is a very, very hard problem to solve.

eBay has come up with the idea to incentivize sellers to figure out how to figure out the optimal shipping price for their particular items.  If the buyers are happy with the seller’s shipping costs, then eBay rewards the seller with discounts and improved search placement.  If buyer's are not happy with the seller's shipping costs, then eBay penalizes the seller with reduced search placement and ineligibility for PowerSeller status.  As someone with management experience, this makes a lot of sense.  Nearly every manager knows that they best way to improve performance is to accurately track for the performance you want and provide incentive for performing well against that criteria.  This is exactly the approach eBay is taken - a method that is proven to be very effective.

This solution does two things:
1) It makes it more likely that sellers will make their buyers happier about shipping by lowering shipping and/or communicating shipping in a way that will make buyers feel better about the shipping that they are paying.
2) It makes it so that sellers who don't do this will sell less often on eBay, essentially hiding these sellers and increasing the likelihood that buyers will have a positive experience.

But I think there are some inherit problems with this approach:
1) It seems kind of strange for a buyer to rate a seller on something that was disclosed up front before the purchase.  If the buyer doesn't like the total cost of purchasing, including shipping, it seems kind of strange for them to buy and then give a bad rating after the fact.  This isn't a strong argument in my mind, but it is something to consider.
2) eBay has disclosed that out of all of the DSRs, this question has the lowest average rating.  This effectively weighs this question as more important than the other DSR questions because it is the one most likely to disqualify the seller from meeting a breakpoint.
3) With breakpoints of 4.5, 4.6, and 4.8 for PowerSeller eligibility and discount eligibility, a score of a 4 out of 5 hurts you.  Arguably 4 out of 5 represents a happy customer.  Although this is statistically below average, I don't buy that a score of a 4 represents an unhappy customer by any stretch.  I asked around among quite a few eBay employees and could not find any evidence that eBay has considered whether a score of a 5 vs. a 4 impacts a buyer's likelihood to repeat buy on eBay. 
4) Due to the extra costs such as tariffs on overseas shipments, eBay disclosed that the shipping cost DSR tends to be about .5 lower for international transactions.  So anyone selling overseas gets an automatic penalty.  This is especially problematic because eBay's larger sellers that provide a backbone of good buyer experiences are unduly penalized. (Because smaller, less sophisticated sellers are less likely to sell overseas.)

Note: I think sellers may be overly worried about this DSR.  I suspect that if sellers start educating their satisfied buyers that scoring a 5 in all DSRs puts money in the seller's pocket instead of eBay's pocket (thus helping them keep their prices down), that the vast majority of happy buyers will start giving 5s.  I suspect that we will see an increase in DSR ratings simply because buyers will want to help sellers out and would rather see money go into their sellers' pockets instead of eBay's.  And eBay should be fine to see this happen, because it means they are getting the improved buyer experience they are after.

So my assessment of this is that eBay has taken a good stab at solving a really difficult problem.  It doesn't seem like they have completely resolved it yet, but I can't think of a better way to solve the problem.  I do believe this change is a major step forward, but I hope that eBay will keep this issue on the drawing board to look for an even better solution.

I do have a few ideas of what eBay could maybe do to make this work better:
1) Reword the shipping costs DSR question to illicit a more positive response.  For example, they could change the question to say something like: "Shipping costs were reasonable and as described."  I believe that stating it this way would help to improve the average response score putting it more in line with the other DSRs.  An alternative would be to give this DSR some kind of bonus in the scoring average.

2) Figure out some way to adjust appropriately for international shipping.  This gets problematic because making it more complicated to calculate DSR averages has many drawbacks.

3) I wonder if DSR point average is not the most accurate way to calculate customer satisfaction.  Perhaps the formula should be updated somehow to take into account whether the buyer gave a negative or positive response.
For example let's say that seller A has 10 DSR ratings of 1, 2, 5, 5, 5, 5, 5, 5, 5, 5 =  4.3 average
while seller B has 10 DSR ratings of 4, 4, 4, 4, 4, 4, 4 ,5, 5, 5 = 4.3 average

I would submit that seller A had 2 buyers with a bad experience and 8 buyers with a good experience while seller B had 0 buyers with a bad experience and 10 buyers with a good experience.  (I would also propose that someone like me would be likely to give a 4 even if I was very happy with the transaction - I just tend to not do extreme ratings.) However, based on eBay's current criteria both of these sellers are equal and neither would qualify for PowerSeller status.  Perhaps the formula for assessing eligibility should take this into account.

In summary, I would like to state that eBay has thought things through very, very carefully and has done some extremely smart things to improve the buyer experience.  Granted change is scary and many of these changes do have some drawbacks.  But the  advantages outweigh the drawbacks and every single change is calculated to improve the buyer experience in a big way.  And a better buyer experience means only one thing for sellers in the long run - greater profits.

Of course I highly recommend that you use HammerTap research to readjust your eBay business to the changes this will create in the eBay market 

[litehouse43]

I feel this could lead to great new opportunity in the eBay community for sellers and buyers.  More items may be posted due to the less significant listing fees; this will lead to more items to search though and less chances of your item being bid on.  It currently seems like there is a significant amount more sellers than buyers and these changes look to increase those odds in an unfavorable direction for sellers.  Though chats on the eBay boards the overall condenses to the new fees does not look positive.  Many people seem rightfully concerned how this will affect their livelihoods.   

A spike in auction listings may also occur due to the more flexible listing fees.  This could go either way for the eBay community and will certainly be a big change to get acclimated to.  As always I am sure we will pull through as a community and find new ways to work around the changing economy.

A different more positive perspective on the situation could be eBay prepping the community for things to come, reducing the costs of original selling advertising perks (such as gallery pictures) to make their original costs open for new things such as voice and video descriptions to have a fair price breakdown.  The whole process could work to our advantage in the time to come. 

[myhammer]

Thank you Brian for the detailed analysis on the subject.

I have a question regarding listing strategy, with the new eBay changes to "Best Match" default search.
Before the change, I would use HammerTap to identify the best hour and best date to end my listings.  After the change, is ending time still a factor considered in the "Best Match" equation?  Also, is "duration" a factor in the equation?  For example with two identical items from the same seller, one ending in 3 days, other one ending in 6 days, does the 3-day item get listed higher than the 6-day?

With "Ending time" search method, I can schedule my listings to end at the best LSR time.  I can use shorter listing duration to make it list higher in the search result.  I can even have multiple staggered listings going so I have listings ending everyday.  Does this strategy still apply?  Do I only need 1 listing with maximum duration and multiple quantities listed now?  Assuming of course that I have good DSR and have good title keywords already.

Any insight is much appreciated.  Thanks.

[Inder]

1) As a brand new lister - how do I gain buyer seller confidence besides offering a reasonable price for my product. Do I have to be creative in " About me" section.
2)For accepting payment --what is my best option -just paypal ? What is required in setting up other kinds of payment options.
3) I have read on certain listings - shipping to Michigan is charged extra 6%? Is this something standard that we have to put in our policies?

Thanks
Inder.

[steve]

This is in response to MyHammer, reply #5.

I hope you're okay with me, Steve, answering your question instead of Brian.

As far as "Best Match" goes, I cannot find anything written about ending time factoring into the search results.

In fact, this is the best explanation of Best Match that I have found so far, from Jamie Iannone, VP of Buyer Experience on eBay.

I quote: (Click Here for the full article. )

How Best Match works
Best Match sorts the listings you see based on a concept called "relevance." A particular listing's relevance is based, in part, on past successful buyer behavior for similar items. Essentially, buyers 'vote' on relevance every time they search and buy an item, because these activities provide valuable input into the relevance system.

In other words, if buyers running a particular search often end up viewing, bidding on, or buying a certain type of item more often, this will be factored into our relevance calculations. These types of items might then display higher on the page in subsequent searches.

Customizing your default sort order
Please note that if you prefer to use a different sort order (such as "Time: Ending Soonest"), you are welcome to change it by using the Sort By drop-down menu at the top of the search results, or by using the "Customize Display" to create a new permanent default.

If you have customized your sort order previously using the "Customize Display" link (found to the right of the Sort By drop-down), you will need to reset your preferences after this change goes into effect. We apologize for this inconvenience.

Adding Seller Performance factors to Best Match
In addition to sorting based on relevance, Best Match will also sort based on sellers who provide great buying experiences and the small percentage of sellers that don't. Making greater use of Detailed Seller Ratings and sellers' overall rate of buyer dissatisfaction enables us to reward great sellers on the site with increased listing exposure, and reduce negative buying experiences from sellers with high rates of buyer dissatisfaction.

End Quote.


But, that doesn't answer your question. So I did some digging and researched a bunch of products on eBay.

To me, it looks like time still plays a factor in the search results. Everything I tested had a group of listings at the top of the results, supposedly with the "Best Match" and best DSR's, but those listing where then listed according to time left. Some had hours, and then a day, and then days, and then it would start with the next group of "Best Match" and DSR ratings.

So, to me, it looks like Best Match trumps, followed by DSR, followed by Ending Soonest.

However, don't forget that people can still change the filter to Ending Soonest, if that is what they are used to looking at.

How does this affect your strategy?

Your listing strategy will change slightly, and since Best Match trumps, then your Listing Title needs to contain the best keywords possible. If eBay is saying that Best Match will increase conversion rates, then you will see this in your HammerTap results. The "Best Match" auctions will have a higher LSR and ASP, which will also increase the LSR and ASP for the keywords used in those titles.

Secondly, make sure your DSR's are through the roof.

Thirdly, ending day will still play a huge factor, because it all boils down to buyer preferences. When is your buyer actually going to purchase the product? They may log on on Wednesday, but not have time until Friday evening to get back on and buy the product. Buyer behavior is still going to play a factor, so ending day will continue to be a very valuable piece of information.

Finally, your listing duration is important, but not as important as the previous three items I discussed. In fact, I just finished a video on Listing Duration that will probably explain it better than I can here in writing. Click Here to view that video.


I hope this helps, and at least starts to give us all some insight. But overall, keep an eye on the research as the eBay changes cause changes to take place in shopping behavior. The research will pick up on the changes no matter what, and you can stay on the leading edge of the changes with the research.

[steve]

This is in response to Inder, reply #6.


1. Increasing Buyer-Seller Confidence

As a new eBayer, the fastest way to increase the confidence buyers have in your listings is to increase your feedback ratings. I always advise newbies to build their feedback first by buying. Yes, buy things on eBay. But, now that sellers will soon not be able to leave feedback for buyers, that strategy will need to change, but at least buying still shows that you have experience on eBay.

To build feedback as a seller, start by selling low-ticket items. If your plan is to sell $200 products, I would advise to sell 10 to 20 products under $25 first to build your feedback, which in turn builds your buyer confidence. Buyers look at low-ticket items as less risky when they are buying from a seller will little or no feedback.

Also look into buyer protection programs like BuySafe.

However, the biggest thing that can make a buyer feel all warm and fuzzy is a no-hassle return policy. As long as you've got a little feedback, and a good return policy, then buyers really won't have a problem buying from you. As a buyer, I always look for a good return policy, and will even pay a little more to get it.


Accepting Payment

PayPal is by far the most popular and commonly used payment service out there. I think you will have the most success with PayPal, and here is why I think this way:

1 - You can accept credit cards yourself but you need to create your own merchant account, which has transaction fees similar to PayPal's, but which also have a monthly service fee. Think about a local retailer. In order for them to accept American Express, they pay AMEX a transaction fee every time they accept payment via AMEX. They also pay a monthly service fee to a merchant gateway provider, or the person who the retailer got the credit card swipe machine from.

The other thing I have against credit cards is that people will be very weary to give you, someone they have never met, their credit card information. With PayPal, they don't have to worry, because they know there credit card information is kept safe.

You can accept money orders and cashiers checks, but don't ship the product until the CHECK CLEARS! Not just when you get the check, but when the bank deposits the money into your account after the check clears. The problem with this is that it takes time for 1) the check to arrive and 2) the check to clear. This means it may be two weeks or more before the buyer gets the product. By then they may be un-happy (even though it's really not your fault) and leave you negative feedback.

So, that's why I say you are safest going with PayPal.


Shipping to Michigan

I have never heard that before, and can't find any information online.

If you are seeing this in listings, it is most likely a 6% sales tax. Look and see if the seller is located in Michigan. If they are, then they are saying that if they are shipping inside Michigan, then they will charge a 6% increase for Sales Tax for the item, not a 6% increase in shipping charges.

Check with your local state guidelines for information on charging sales tax for in-state selling.

Click Here to read eBay's guidelines about charging sales tax.

[Inder]

Thank you so much for the advice. Makes a lot of sense.

Thanks!

[Inder]

I have done some extensive research for products that I want to move forward with and I have a login for Worldwidebrands/onesource for wholeseller access but the biggest problem is to find the price which makes it viable for us to sell it on EBAY. I mean the prices offered are pretty close or same for what the same product has been sold on EBAY.

Is there any better way to search for wholesellers ?

Any help is appreciated.

Thanks

Inder.

[steve]

Hi Inder,

Great question.

I do have to say though, that Worldwide Brands is probably one of the best places to find wholesalers for your products. However, you need to realize that the prizes you are finding on their websites ARE NOT the wholesale price. In order to get the wholesale price you need to contact them (phone is best) and negotiate a price. This price is determined by 1) how many items you order and 2) how often you make an order.

In fact, I've got a great article by Chris Malta and Rob Cowie of Worldwide Brands that will help you get started on the right path to effectively working with wholesale suppliers.

Click Here to Read "6 Common Product Sourcing Questions Answered"

Another word of advice is that often you need to look through multiple products before you find the real golden nugget, the real money maker. This is especially true with drop shippers.

[woolf]

Yes, we will be changing the fees in Fee Finder in the near future. Glad to hear you are using it.

It has been some time since this comment was made.  Has Hammertap FeeFinder been updated yet to include the new eBay fee system?  If so, I cannot find a link to the update anywhere.  If not, any idea when the update might be ready?

Thanks.

[amy]

Hi woolf-

Sorry it took us a little while to get back to you--we're all trying to get back into our normal routine after being at eBay Live! last week.

The fees in the Fee Finder were updated in February. When you launch HammerTap it should automatically prompt you to load any updates--if you're not being prompted, your program should be completely updated. If there are any fees in the program you think are wrong, please let us know and we'll be glad to check them out.

[dekadent30]

thanks for good info, i like it