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EBay exposed

Posted on 15 May 2009 at 15:13

The world's biggest auction site has alienated buyers and sellers alike. Stewart Mitchell investigates whether eBay is heading for a mighty fall.

EBay may remain the first port of call for bargain hunters, but the site's dominance doesn't mean it's popular with all buyers or sellers. Indeed, many believe it has grown too big for its cut-price boots.

EBay is to web auctions what Google is to search and Hoover is to vacuum cleaners. The website had 26 million items for sale at the time of writing, according to Power Sellers Unite's Auctionsitewatch, while its nearest competitor eBid had a mere 2.5 million. Most rival sites have fewer than 500,000 items for sale, which is hardly enough to attract shoppers, and without shoppers there are no sellers.

So eBay is definitely king, but its subjects are in an unruly mood. A trawl of the web forums and conversations with vendors show that eBay isn't short of vocal critics. Constantly changing policies, fee hikes and gagging orders on sellers are just some of the accusations made by eBay's practitioners. And not many of them like being forced to employ eBay's own payment system, PayPal.

There are also accusations that the auction site's much-valued community is being eroded by the inclusion of bigger, richer retailers in listings, with smaller vendors being pushed aside in eBay's rush to boost profits. The big stores that now populate eBay, such as Argos, are hardly the niche merchants selling unique goods.

The figures tell their own tale. According to the American Customer Satisfaction Index (ACSI), eBay's consumer satisfaction score last year slumped four points to 78%, an all-time low, while revenues fell 7% in the fourth quarter, marking eBay's first ever negative year-on-year quarter. The company's stock price lost almost 60% in 2008.

Is eBay still the best place for picking up a bargain or cashing in on those cupboards full of old kit, or is the auction giant heading for a Goliath-esque fall? We aim to find out.

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Hiking up the fees

January 2008 could well go down as a watershed for eBay; the month that the company finally appeared to alienate the very people its business depends on - the sellers. Among other unpopular changes introduced at the turn of the year, the most alarming for many merchants was the new fees for selling.

The controversial move saw the old-style listing fee reduced, but eBay's earnings supplemented by inflated Final Value Fees (FVF), which take up to 10% of the total sale. For big-ticket items this was a bitter pill to swallow, and prompted many people to forsake eBay and either seek rival sites such as Craigslist, or open their own web stores. "People are leaving in droves," auctioneer Walt Kolenda told us. "I've been on eBay ten years and recently people are moving away real quickly."

Most goods carry an insertion fee: £1 for goods listed between £30 and £100, then there's eBay's cut from the sale price - 8.75% of the first £30, plus 5.25% of the remaining balance. If you want to put a reserve on an item, add another 2%, non-refundable if the product doesn't sell, and more for fancy listing features such as bold text or to be featured near the top of listings.

Assuming you use PayPal for payment - effectively the only "safe" available method - there's another 20p per transaction, plus 3.4% commission on transactions of up to £1,500. Put simply: sell an item for £100 and you'll be lucky to clear £90. And that's without a margin for profit.