EBay Overhauls Seller Fees to Lure Merchants From Amazon
EBay Inc (EBAY). is overhauling fees for sellers for the first time since 2010, seeking to reduce costs and make pricing less complicated as it competes with bigger rival Amazon.com Inc. (AMZN) for online merchants.
Fees will range from 4 percent to 10 percent, depending on the size of the seller and the type of products sold, according to Brian Hsu, EBay’s senior director of pricing. The company will also stop charging sellers to list most items, he said.
Chief Executive Officer John Donahoe is taking steps to keep individuals and small businesses from gravitating toward Amazon, which boosted the number of items sold by outside sellers by more than 40 percent last quarter. The new structure is aimed at quelling criticism that EBay’s pricing is overly complicated, and it follows steps taken last year that were designed to make it easier for consumers to shop on the site.
“What we wanted to do was give some transparency around profitability,” Hsu said in an interview. “Some sellers were not feeling like they could go all in on EBay without that kind of transparency. We want sellers to feel comfortable bringing all their inventory to EBay.”
EBay’s shares rose 2 percent to $51.10 at the close in New York, while Amazon declined less than 1 percent to $256.41.
Donahoe, eager to narrow a sales-growth gap with Amazon, spent last year simplifying online and mobile shopping experiences, updating the logo and rolling out same-day shipping.
The new structure may help EBay retain merchants who have said it’s hard to tell whether it’s cheaper to sell on EBay or Amazon, a system that has made EBay seem more expensive than it is, said Scot Wingo, chief executive officer of ChannelAdvisor Corp., an e-commerce consulting firm.
“People that are already on Amazon, this may get them to experiment with EBay,” Wingo said. “That’s the first step to win the battle. Maybe it keeps folks from experimenting with Amazon that previously would have.”
Still, the new structure has many different tiers and varying monthly fees, depending on sales volume, and it remains somewhat complicated, Wingo said. It’s also a necessary step to compete with Amazon, which charges about 12 percent per transaction on average, he said.
EBay separates its sellers into two groups: consumer, or smaller merchants who may sporadically list a few items a month, and stores, which move higher volumes of merchandise.
Previously, the company charged consumer sellers 50 cents to list a product, and tacked on another fee tied to the final price after an item sold.
The new system assigns those merchants a flat fee of 10 percent, capped at $250, and as many as 50 free listings a month -- which means no up-front cost for most, according to ChannelAdvisor.
Fees for businesses that classify themselves as EBay Stores will range from 4 percent for lower-margin electronics, such as tablet computers, to 9 percent for higher-margin items like clothing and accessories. Stores also have to pay a monthly fee of $19.95 to $199.95, and will get 150 to 2,500 free listings a month, depending on the type of store set up.
That eliminates the majority of listing fees, as most merchants don’t move more than 2,500 items a month, according to Wingo. The decision to stop charging before an item sells came after merchants asked EBay to bear some responsibility in the sale of their products, Hsu said.
Top-rated sellers, which accounted for more than 42 percent of U.S. merchandise volume in the fourth quarter, get a 20 percent discount. Those who benefit the most are merchants who sell less than 12,250 items a month, which encompasses the majority of EBay’s seller base, Wingo said.
“There is a lot of noise out there of Amazon being a competitor to merchants,” Wingo said. “For some folks, that’s as important as price.”
Still, some of EBay’s larger sellers -- including many that focus on clothing, shoes and accessories with a price tag of more than $100 -- will probably see higher costs, according to ChannelAdvisor. Fees used to fall as an item became more expensive, something that won’t happen with the flat rates.
That can be a disincentive for companies such as Walnutts Antiques LLC, whose sales volume reaches as much as $50,000 a month on EBay, according to Tom Cardaropoli, the company’s president. Charges on EBay will probably increase to $5,000 a month from about $2,200 previously, he said. Most collectibles he sells cost around $300 on average.
“For anyone who’s really successful on EBay, it’s a lot of money,” Cardaropoli said in an interview. “The more expensive the item we sell, the more we pay.”
EBay is an investor in ChannelAdvisor, according to the company’s blog.
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