Previous Fee Structure ($9.99 sale in core at 33% conversion)
- Listing Fee 40 cents x 3 listings before it is sold = Total Listing Fees = $1.20
- FVF @ 5.25% = Total FVF = 52 cents
- Total fees to sell a $9.99 DVD were: $1.72
New Fee Structure ($9.99 sale in core at 33% conversion)
- Listing Fee of 35 cents x 3 listings before its sold = Total Listing Fees = $1.05
- FVF @ 8.75% = Total FVF = 87 cents
- Total fees to sell one $9.99 DVD are: $1.92
How is that for a decrease in fees?
Now lets look at what will really happen. Media sellers have traditionally lowered prices on their items to be advantaged in search (lowest price gets the sale) while raising S&H fees to make up the difference. This strategy will no longer work because they will be disadvantaged in search (No more high S&H), so sellers will need to raise their item price and lower their S&H, so that they will show up in search. Let's look at one example:
- Item currently sells for $9.99 with $5.95 for S&H for a total price of $15.94. Total listing fees (33% conversion) $1.20 and FVF is $0.52 cents for a total fee of $1.73. The buyer pays $15.94 for their item including S&H
Under the New fee structure:
- Item price is raised to $12.99 with $2.95 for S&H (to make sure the item shows in search) for a total price of $15.94. Total listing fees (33% conversion) are now $1.65 (55 cents x 3 listings)because the item is now listed in the higher ASP tranche and the new FVF is $1.14 for a total fee of $2.79. The buyer still pays $15.94 for their item including S&H
With the new restrictions based on DSR rating and S&H forcing their hand to change their strategy, the media seller will now pay $2.79 to generate $15.94 in revenue, while at the old rates they paid $1.73.
If a seller decided to keep pricing and S&H where it is today, they will be now disadvantaged in search for the high S&H and won't sell the item because of lack of exposure. Remember, in both scenarios the buyer pays the exact same total price for the item, but they feel better about not having to pay excessive S&H in the new approach.
Media sellers, also traditionally have lower DSR ratings and a high volume of transactions, so if they are currently close to the new 4.5 limit for DSRs (to be disadvantaged in search) they will never be able to raise that rating, it will only go down.
In essence, with these changes, eBay media sellers will have to work harder then they do now, to generate the same sales as before and pay eBay more money for the privilege.
Compare this to Amazon or even Half.com, where this same seller sells an identical item for $12.99 plus Amazon's $2.98 S&H and pays 15% FVF for a total fee of $1.94. 100% of this fee is on the back end (after the sale) while on eBay, the seller is still risking money on the front end (listing fees). If he/she only sells 1 item for every 4 times they list (25% conversion) then their fees increase even more.
This is just one example of the effect these changes will have on Media sellers. I chose this group because they are near and dear to my heart. This is not a good day for many of my friends.
eBay would be better off just making Half.com the default listing tool for media on eBay.
Update: Blogger is having some problems today so I'm having trouble posting and answering comments.
I know my example above, is an example of fee avoidance, and the new rules put in place will stop this strategy. I agree with Cliff (in the comments below) that this is better for the buyer experienence. Many buyers prefer the approach where S&H is reasonable and the item price is priced properly but please realize that in both case the buyer pays the same total price.
So the deal he/she thought they were getting before is still the same as the new deal, but eBay gets more money. The strategy is certainly gaming the system, but it is more as a nessisty for survival then anything else. Media sellers can barely survive, with their current margins on eBay and now will most likely stop listing in CORE all-together.
Media prices on eBay will go up, S&H will go down and eBay will make more money. Sellers will need to raise prices substantially to make the same money as they are today.
Update on the Update: I'm still having trouble with blogger so forgive me if i use the post to respond to comments. Cliff, you are correct. This will be a short-term negative for media just like the Store fee increase of 2006. I am certainly not very objective when it comes to media issues.
I think these changes are good for those sellers who previously used Gallery as they their listing fees just went down but for media sellers who never used Gallery before this is a fee increase. eBay needs to adopt category specific pricing for Media and other low ASP commodity items. The simple approach would be to adopt Amazon's fee structure for media items.
Just my 5 cents!