eBay Sets Bargain Basement Fees for Larger Sellers

eBay (Nasdaq: EBAY) has instituted a fee schedule that allows sellers of fixed-price items to list a product for 30 days -- in many cases, multiple quantities of that product -- for just 35 US cents.

In the past, sellers had to pay up to $4 per item per week. As of mid-September, sellers able to maintain large inventories of a product will find it easier and cheaper to offer their wares at eBay. They will also find the site more competitive with Amazon (Nasdaq: AMZN).

Smaller retailers who stick to the auction format will not be aided by these changes, a development that is bound to heighten the tension that has been building between eBay and this constituency.

Increasingly -- and especially since CEO John Donahoe took the helm in March -- eBay has been accelerating its evolution from an online flea market to an online retail community dominated by larger sellers offering goods at fixed prices.

eBay could not accommodate the E-Commerce Times' request for comments on Wednesday, said spokesperson Melissa Chanslor.

Need to Change

Despite all the angst this shift is causing in the eBay community, it is clear that the company needs to do something to bolster its bottom line. Its latest (Q2) quarterly earnings report showed that revenue growth had faltered to the slowest pace in the company's history

Furthermore, the majority of its growth in the second quarter came from Skype and PayPal, while its eBay Marketplaces business unit registered a relatively disappointing 13 percent increase in revenue.

"eBay is taking a step in the right direction," said Justin Hamel, CEO and president of MastaMinds Network, a specialty retail network consisting of more than 50 niche stores -- and an active PowerSeller on eBay.

In fact, "eBay will need to lower the listing fee even more across the board to gain momentum," Hamel told the E-Commerce Times.

"A lot of sellers are moving to Amazon," he noted. It's perceived as less risky, because a seller does not have to pay listing fees until an item is sold.

Sellers Revolt

Indeed, eBay has been hemorrhaging smaller sellers in the wake of several very unpopular changes, including banning sellers from posting negative comments -- or even giving neutral feedback -- about the buyers with whom they do business. It also implemented a new fee schedule that sellers felt were detrimental to their operations.

eBay's latest changes are just another slap in the face to the small seller, said Nancy Baughman, a PowerSeller who deals mostly in antiques, as well as the co-author of Buy It, Sell It, Make Money, a guidebook to doing business on eBay.

"Business has gotten much harder since it implemented its rules," Baughman told the E-Commerce Times. "We have seen a tremendous increase in nonpaying bidders."

The shift is changing the eclectic range of products that was once emblematic of the online auction site. "They are favoring sellers that offer a limited range of products," said Baughman. "eBay is so huge ... I don't understand why it would want to squash smaller sellers that have something unique to offer."

Baughman would leave eBay except for the fact that she offers items on consignment, and most of her customers like the familiarity of the site.

Inventory Management

As eBay moves to an established online retail model, it may find that some of its larger sellers cannot keep up with the change.

"The shift will definitely complicate inventory management and inventory allocation for some sellers," Jon Jessup, a technical evangelist with Infopia, a Software as a Service provider, told the E-Commerce Times. "No one wants to maintain 500 sunglasses in a warehouse somewhere because they have been committed to eBay."