Taking a Look at Recent Fee Hikes

Fee increases will go into effect on eBay.com and eBayMotors.com at the end of this month for both fixed price and core-auction style listings.  The following fee changes will occur on January 30, 2007:

    >  Insertion Fees for $1.00-$9.99 will increase from .35 to .40 cents

    >  Final Value Fees on goods sold between $25.01 to $1,000 will increase from 3% to 3.25%

    >  Transaction Services Fee for Motorcycles, Powersports, Cars & Trucks and all Other Vehicles &     Trailers will increase by $10.

    >  Motors Reserve Fee is changing from a flat rate to a percentage (.1%) of the reserve price,         however, there will be a $5 minimum upheld, with the maximum percentage not exceeding $10.

While eBay executive Bill Cobb has labeled these increases to be "modest", for an eBay Motors seller they are anything but modest.  A $10 increase in listing fees for a seller who may have previously spent $50 on listing fees on average means that same seller will now be spending $60 per listing, a 20 percent increase in costs.  A 20 percent increase in costs is anything but modest and goes to show how out of touch eBay is with their members.  So why is eBay trying to put a rosy spin on what can only be considered a significant hike?

Since peaking in mid-2003, eBay's stock has been fighting a wild battle to maintain their original high rates of growth.  With stock prices once again sagging, executives need to again find a fix to show that their profitability is continuing to climb.  Fee increases are a short-term solution to raise profit potential and appeal to stockholders and investors who want to once again see the rising numbers they were previously accustomed to viewing.  However, in pandering to the crowd and attempting to receive the instant gratification of not being downgraded again, eBay executives are setting themselves and investors up for further problems down the line. 

ReliaBid CEO, Jon Rosen feels that eBay is "missing the big picture" by simply increasing fees without addressing the underlying issues that plague the marketplace.  In order to create sustainable growth, eBay should be spending their time focusing on ways to increase customer retention, while not forgetting about the importance of sellers on the platform.  One of the reoccurring complaints from both buyers and sellers is that eBay lacks satisfactory customer service.  Sellers who have had bad experiences receiving direct support from eBay are also beginning to look to other channel opportunities to sell their goods.

What has made eBay so strong in the past is their large and reliable customer base, however, if they do not begin to craft strategies to retain these customers, they will lose begin to lose their corner on the market to a platform that will provide support.  And as we all know, where the customers go, the sellers are soon to follow.