Online Buyers Won't Pay To Shop

Most e-commerce sellers and go-betweens have but one wish this holiday season: revenue.

In a sheepish effort to fulfill that craving, many e-commerce go-betweens -- as in online marketplaces and payment service providers -- are starting to squeeze buyers for cash.

Now, that's naughty, not nice. Moreover, the timing is all wrong.

Online buyers have been pampered with Web freebies for years, with good reason: Web sellers need Web buyers more than the other way around. And with the economy diving like a sick reindeer, buyers aren't about to cough up extra fees now.

My advice to e-commerce providers: keep wishing for revenue, because you're not getting it from buyers.

Yahoo! Attempts Tap

Yahoo! (Nasdaq: YHOO) is one of the latest companies to tap buyers for much-needed funds. After December 17th, its PayDirect online payment service will no longer be free.

The new pricing for Yahoo! PayDirect will be based on 2.5 percent of the transaction amount, plus 30 cents. Granted, either the buyer or the seller can take the hit, but the mere mention of it will turn many buyers on their heels.

Indeed, a recent online forum posting reads, "Bye-bye, Yahoo! I refuse to pay a dime for any of these free services that they've now decided to charge for! That is a greedy bait-and-switch."

Don't worry, Yahoo! because PayPal and EBay (Nasdaq: EBAY) Payments -- both of which still charge the seller -- will be glad to look after your disgruntled former buyers.

Seller's Dilemma

Here's the problem. Historically, the seller's need to sell online has been greater than the buyer's needs to buy online, so e-commerce companies have aptly tapped sellers to pay for services that feed their needs.

The Web is a valuable distribution channel for most sellers, with unprecedented reach and reward. So sellers can justify paying to list items in an auction or to receive online payments. Fact is, the Web has become indispensable for many sellers.

Not so for buyers. Before the Web came along, they were happily thumbing through catalogs and strolling down aisles. The Web has brought them convenience, selection, and personalization, but it's by no means indispensable.

Shipping charges are hard enough for many buyers to stomach. Tack on arbitrary usage fees, and buyers won't shed a tear on their way to visit old friends at Walmart.

Fee-dom Will Fail

E-commerce companies can spin tales of value and experience, but for buyers, it's still about price. According to Jupiter Media Metrix, 74 percent of consumers said better prices would motivate them to buy more online.

From consumers' mouths to Orbitz's ears. Since June, the travel site has competed with powerhouses Travelocity (Nasdaq: TVLY) and Expedia (Nasdaq: EXPE) by offering basement fares. But Orbitz's bottom line has been doubly slammed by an anemic advertising market and a crumbling airline industry.

So, where does it turn for new revenue? Buyers. The company recently announced a US$5 service fee on all electronic tickets. Not enough to break you, but just enough to wipe that smile off your face.

Again, a recent online forum posting captures one popular sentiment: "Although I used to use Orbitz, I will never use it again! I will never pay a fee, and I hope this greedy, arrogant venture fails miserably!"

Changing Tunes

Never underestimate the power of habit. Online buyers simply are not used to paying extra. Adding fees to a service that has been free, without measurably improving the service, is a doomed proposition.

In that vein, Citibank's C2it service may have an edge in the online payment space. The 1 percent transaction fee for buyers was recently waived, and C2it is now free to both buyers and sellers.

Now, that's a bait-and-switch I can live with.

What do you think? Let's talk about it.