Dealing With eBay's New Fee Structure
Our new eBay columnist explains why sellers shouldn't feel thrown by the auction site's recently instituted fee changes.
Opinions expressed by Entrepreneur contributors are their own.
Every entrepreneur faces bumps in the road. Sometimes they're expected; sometimes they're not. One thing's for sure, we must expect that change will happen. Woodrow Wilson, an old-school president not known for his entrepreneurial endeavors, once said, "If you want to make enemies, try to change something." Unfortunately, most of us learn that lesson the hard way. Just take eBay: Every time they change something, management has to run for cover!
This is especially true when the online auction leader makes changes to their fee structure, as they did earlier this year in February. No seller likes their bottom line meddled with (especially if they're finally settled in a comfortable business niche for their online sales).
Enough time has elapsed since the rate increase, however, and now most sellers have had the opportunity to make adjustments to their businesses. They've most likely had to raise some prices and drop some options. As a fellow online seller, I can say with some conviction that we're at a point now that we can tell if the changes we put into place have worked.
An eBay business is driven by pennies. Pennies pile up into dollars and can soon cause a profitable business to become a money-losing enterprise. Although the increases appeared to be just pennies, the percentages increased this way:
- Basic Store Subscription fee: went from $9.95 to $15.95 (a 61-percent increase)
- Gallery fee: went from $.25 to $.35 (a 40-percent increase)
- Buy It Now (BIN) fee: went from $.05 to between $.10 and $.25 (a 100-percent to 400-percent increase)
- 10-Day fee: went from $.20 to $.40 (a 100-percent increase)
- Store Final Value fees: increased as much as 100 percent
After the fee increases went into effect, I examined my business and thought through what I was spending on eBay, especially in regards to what's working for me and what's not. This is really something we should all be doing on an ongoing basis, but it's easy to get too distracted or too busy to check. And this is what I found:
Gallery fee. I got into the habit of using the Gallery option in all my listings. Gallery works great to get the eyes on the listings, but at the new price of $.35, it might not make a difference in some categories. Perhaps the title and the price can speak for the item. This is especially true when you're selling any form of media: books, VHS tapes, CDs, DVDs and the like.
In the old days when you sold used media on eBay, it was important to show an image of the actual item. But since eBay has installed the Muze database and graphics for all media, everyone's pictures are the same. So why pay for the exact same image everyone else has?
Or how about a pair of jeans? How much benefit can you get from an approximate one-inch-by-one-inch picture of jeans? Just to test this out, I ran a search for my favorite Cetine jeans in my size. Only one of the six auctions had a gallery picture. It also had the highest starting price and was the only one with no bids. Hmmm. Buyers are price conscious, so how about using that gallery picture when your item is different from the others? Or give prospective buyers more information through the subtitle option for $.50.
Buy It Now (BIN) fee. Darn! That's my favorite option. At a nickel, it was a deal; at a quarter, I had to think twice. But I didn't think twice for long. I ran some tests with a few of my more popular items by posting them as fixed-price listings. The listings ran for 10 days, and I sold nothing! One of the listings was even a category-featured auction!
Take into consideration that the acceptance of fixed-price listings varies from category to category, but in the categories I sell in, it's a dud. So I've had to bite the bullet and continue to use the BIN option in most of my listings. I honestly think it helps move items rapidly.
10-Day fee. There's not much to say about this. If your item is over your comfort threshold--maybe you paid more for it than you should have--or is a unique specialty item, the $.40 might well be worth the investment to keep it up longer. I just don't use it as often as I used to.
Store Final Value fees. My eBay business was geared so that my auctions would attract my customers into my eBay store to buy more merchandise--and it was beginning to work. Then eBay decided to take advantage of my marketing savvy and raise my monthly store fees and my final value fees!
Now? Closing a store is a foolish move. eBay is spending money with Google to draw customers to the store, so you can generate your own keywords in your "Manage Your Store" area for each category in your store, and Google will do the rest. This benefit is worth its weight in gold!
Even with the price increases, an eBay store is a great place to put merchandise that only sells from time to time. The eBay site will eat you up in insertion fees and options if you're constantly listing slow movers on the site--and slow movers can still be very profitable items. A $20 item with a 10 percent sell-through rate will cost you almost $9.50 to sell on the auction site. But you could leave that item in your store for three months, and when it sold, it would cost you less than $2, including Final Value fees.
Another important benefit of your eBay store is that eBay will give you a 75 percent credit on your store item's Final Value fees when your outside eBay marketing efforts generate sales from your store inventory. This feature is further explained online in eBay's "help" area.
In a nutshell, that's how I handled the fee increases. Whether you follow one or all of the suggestions listed, you will find it just as easy to ride out this temporary bump in the road.