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EBay exposed

Posted on 15 May 2009 at 15:13

High fees led designer dress reseller Sally Hilton to set up her own business (www.thedesignerdressagencyshop.co.uk), after she got fed up of paying up to 12% of her earnings to eBay in various fees. "I do still trade on eBay, because I don't yet have the volume on my site to go completely independent," she said. "The bulk of my work is selling for other people, and generally I put the higher value products on my site - that way, I don't have to pay the 8-9% plus PayPal.

"My eBay fees last year cost me £30,000 and I'd really rather that was in my bank account."

Not only does Hilton conduct her own sales but she also invites others to sell too, with fees that are in stark contrast to eBay's. "There's a 3% Final Value Fee, but no listing fee - so nothing to lose if it doesn't sell," she adds.

EBay's hidden costs can also be a drain on sellers. "The fee structure is basically high and other factors inevitably add costs," said Scot Wingo, CEO of e-commerce consultant ChannelAdvisor. "EBay isn't so well trusted so there are more questions, more emails to answer, and there are unpaid item policies that create a real drag on costs."

High fees inevitably push up the price for buyers, meaning that going to eBay is no longer such an attractive option. "With this economy, people who were used to seeing bargains on eBay are plainly not seeing the same value as before," said Larry Freed, CEO of ForeSee Results, which interprets the "e-business" component of the ACSI. "When the mall stores are doing deep discounting of 50-70%, why would you want to buy used goods from eBay?"

EBay claims fees for selling on its site are "significantly cheaper than selling on Amazon" and that it has "always encouraged direct communication between the sellers and buyers".

While vocal sellers slam the new fee structure, some merchants believe the charges aren't unreasonable - as long as you can change your listings structure to match eBay's model. "When eBay makes changes, some people benefit and some people are at a disadvantage," said Chris Dawson, founder of eBay watcher website TameBay, and a Power Seller of computer components at his Mount Road Computers eBay store. "Some get up in arms about it, but if you can work with it you can turn it into an advantage. I have higher FVF fees now, but I'm paying less overall."

Nevertheless, eBay has clearly been stung by the criticism, and recently introduced a new charging structure for private sellers aimed at getting them back into the eBay fold, which is increasingly populated by big business. "From 12 March, it will be free for consumers to list an item on eBay, and there's now a flat Final Value Fee that's also capped at a maximum of £40," said an eBay spokesperson. "We'd also like to point out that our pricing is more competitive than Amazon."

That might be true, but eBay's attempts to compete with Amazon can have undesirable side effects. The site has, for example, been trying to persuade sellers to provide Amazon-style free shipping. Low shipping prices result in a higher score in the Detailed Seller Ratings surveys, but buyers may now be unwittingly paying more for the same products. "Whereas you previously had something for sale at £20, plus £10 for package and postage, you paid fees on only the £20 through eBay. But eBay has really pushed people to go for a free delivery option, and obviously they cover costs by including postage in the main price," said Wingo. "So now you pay the fees on the entire £30, which actually pushes price up." And eBay takes a little extra profit from the FVF on the whole deal.