For those who thought eBay was kidding about its transition from auction engine to retail integrator, yesterday’s announcement of 30-day fixed-price listings should tell them it’s really happening.
The 7-day duration of a listing was a vestige of eBay’s auction days. An auction has to last for a limited time because only the bids placed in the last hour mean anything (and for many eBay auctions, just the last 30 seconds). But how many stores are open for only 7 days? Extending the duration of fixed-price listings from 7 to 30 days makes a lot of sense.
But this change is more than it appears on the surface. Most 7-day eBay listings go unsold. With 7-day listings, a typical item might be listed 5 to 10 times before it sells — giving eBay the biggest chunk of its fees, but creating lots of meaningless work for sellers. With 30-day listings, the same item is likely to sell the first or second time it is listed — fewer fees for eBay, but a lot less work for the seller.
To simplify things still more, eBay will no longer charge extra listing fees for high-value or multiple items in a listing. This will also greatly reduce the number of listings.
With eBay’s current fee structure, a seller offering 1,000 rolls of masking tape has an incentive to list each roll separately. Some sellers use programs to automatically create 10 or 20 nearly identical listings every day. With the new listing fees, a seller can save a fortune in listing fees by creating just one listing every 30 days. A specialized seller selling a moderate volume of a few items (this was the core eBay seller until eBay started to push them out two years ago) will save several thousand dollars a year.
This is not just a nice, long overdue price cut for sellers on eBay, who have been hit with fee increases year after year for the past ten years. It also means that auction sellers can no longer compete with fixed-price sellers. With lower costs, fixed-price sellers can sell at lower prices and squeeze out auction sellers of the same items. The auction format is still available but now makes sense only for unusual items whose market value cannot easily be determined.
It is the buyers who ultimately pay to keep eBay going, and eBay is looking out for the buyers in making this change. The inconvenience of the auction format is one reason so many buyers have left eBay. Getting to bid on perfectly ordinary items was a novelty in 1998, but customers are no longer entertained just by bidding. A bidder goes through all of the motions required to buy an item, perhaps several times, usually without actually getting to buy anything. The time and effort goes to waste, and the losing bidders can get the impression that they are being used, especially if, as so often happens, the winning bid is placed within the last five seconds of the auction or if (before the eBay rule change of two years ago) the seller cancels the auction in the final minute. Most items sold on eBay have well-known market values, so it is simpler for everyone if the seller sets the price and waits for someone to buy.
To the people who manage the money at eBay, this fee change might seem crazy. The listing fees were the easy part of its marketplace revenue, money eBay collected for doing nothing, and nearly all that revenue will be going away. But eBay has little choice. Sellers will not keep paying listing fees over and over again for items that are slow to sell. To speed up its marketplace, eBay needs to bring buyers back. Buyers will come back only when there is something to buy, so eBay needs to drum up better listings from sellers, and it needs to do it now. Many of the people who tried to do their Christmas shopping on eBay last year were so disappointed by the spotty selection and difficult purchasing process that they swore never to go back. They will be back again this year, of course, but if the eBay marketplace does not make a better impression this time, they may go away again and never come back.
To get more listings, of course, eBay will have to bring sellers back, and cutting fees may not be enough. EBay policies still prevent or discourage its “Main Street” members from setting prices for items. Small and medium-sized sellers still pay higher fees than the largest sellers, making it hard for them to compete. At the same time it is cutting its listing fees, eBay is introducing big increases in its transaction fees, based on the value of items sold, and this increase has led more than a few sellers today to say they are pulling out. Then there is the issue of the estimated 200,000 former eBay sellers, the heart of the old eBay auction marketplace, who eBay has banned for reasons that remain a mystery. Even if eBay were to apologize and waive startup fees, an action that would run completely against its corporate culture, it it hard to imagine that the old eBay sellers would come running back.
EBay does not seem to mind shedding its many small sellers, but will surely have to cut deals with more big companies to get new merchandise on its site. That, of course, is what retail integrators traditionally do, and if eBay is determined to succeed as a retail integrator, it will have to prove it can succeed at cutting deals with billion-dollar sellers.
