Initial seller reaction to eBay changes

January 29, 2008

Ok we were just on a 30 min break and the buzz was definitely very positive around the paypal seller protection improvements.  The elimination of limits, confirmed addresses and intl expansion are a big win for sellers.

The negative buzz is around the fee changes.  Many feel calling it a decrease isn’t really the case. Let’s dig into this.

In my first post, I talked about three general buckets of eBay sellers.  Here they are again for reference:

  • The media seller – Typically sells in core+store, high conversion items with < $25 ASP in core, low conversions in stores.
  • The auction traditionalist – These folks are 100%
    auction, with low starting prices and high conversions.  They have near 100% conversion rates and tend to have higher ASPs because they sell collectibles.  Exceptions would be jayandmarie who auction CDs
  • The fixed-price seller – These sellers sit
    in-between the media (low ASP, low conversion) and auction
    traditionalist (high ASP, high conversion) and have average ASP and
    conversion ( $50+, 50% conversion rate).

Media seller reaction:

  • To most this feels like a fee increase.  Some have quantified it as a 10% and I’ve seen math that shows as high as 25%.
  • The challenge media sellers have is they already tend to have low DSRs on S+H so they don’t get the PS benefit.
  • These sellers typically put that extra fee into S+H, or item cost, but now they feel boxed in by DSRs so aren’t seeing a way to adjust to the fee change.
  • It’s important to note that most of these sellers don’t factor gallery into their equations (you could argue if that’s correct or not, but they would argue they don’t by it now, so by having it free, it does not save them $).  The reason these sellers don’t have gallery is they have found that gallery historically doesn’t help increase conversions on these low ASP items.  Now that they get it free, if it does help conversions, it will help mitigate this fee increase.
  • Editorial note: I did notice that in the UK eBay announced media category pricing, this maybe a way eBay could address this should it be a widespread problem.

Auction traditionalist

  • The auction traditionalist seem to be falling into two buckets:
    • The people that love auction and want to stay with it are facing a fee increase no matter how you slice it.  The high-conversion (associated with a low starting price) kills you in a lower insertion, higher FVF world.
    • The people that are going to switch to fixed-price from auction because the fees are pushing them in that direction.

Fixed price seller:

  • The fixed price seller is going to get the bulk of the benefit in these changes.  The lower insertion fees help them with their lower (50%ish) conversion and they tend to pay for gallery so they are getting somewhat of a double whammy.  Many of these sellers also can pretty easily get their DSRs to the 5% discount level and maybe with some work get to 15%.
  • The biggest concern here is around DSRs, especially international buyers.  There’s a trend where large sellers with material 15%+ international buyers tend to take a .2-.5 DSR hit.  Those sellers are going to have to figure out how to balance the value of intl buyers ($$) vs. the downside (DSR hit and thus risk on the powerseller programs). We’ve actually seen sellers start to split their seller IDs into two IDs – one US only (high DSR) and one international only (low DSR).

The next topic of concern is definitely the changes to feedback. The doomsday scenario I’ve heard is that buyers will now have all the power on the site and hold sellers hostage for positive feedbacks/DSRs.  More on this later as eBay expands on the changes and it settles in.