Red Ink Diary

Ina Steiner at Auctionbytes had a blog post last week in which she showed screen-shots of an eBay seller survey. There are links to each of nine different potential fee structure scenarios in the blog, they will open in a new window or tab. Ina wrote

“The survey asked respondents a series of questions about insertion and final value fees, asking them to choose which format they would choose - auction or fixed price - under various scenarios.”

The smart seller does not choose a selling format based only on the fees, if we did we would all use Craigslist. You pick the format to maximize the profit potential of your item; what the item is, fee calculations, exposure and risk are all factors. A question which says:

“Imagine that you have an item worth approximately $500 that you would like to sell. Please carefully review the eBay selling fees shown below. Now, based on the information above indicate if you would [choose] fixed price, auction , not list on eBay”

is really a question about seller perception of the benefits of compared packages.

I would not be surprised to learn that John Donahoe’s controversial “net promoter scores” are being used to weight the survey results. This means that any middle of the road respondents who log 7 or 8 are deemed “passively satisfied” and aren’t calculated in the final score or statistical analysis.

I assure you teams of accountants and statisticians have run every possible combination of charges and potential usage change factors to ensure that eBay benefits from fee changes. The choice has already been made.

Why does eBay have such a complicated fee structure?

• Because it is more profitable! eBay knows the more complex the fee structure the more money they will make because sellers make mistakes. Listing an auction at $25 instead of $24.99 is the classic example, this basic error nets eBay an additional 1.2% costing the seller an additional 30c in eBay fees alone.
• Working out exactly what percentage of your sales price goes to eBay is complicated. Most smaller sellers have no clue. Adding in PayPal, which for most smaller sellers is the least costly payment option now, doubles the complexity of the calculations.
• Complex fee structures make it more difficult to assess and compare overhead on other venues.

It took me close to an hour with my trusty spreadsheet to arrive at a format which would allow me to compare the nine separate fee scenarios. Any seller who was filling out the survey without checking each option on a spreadsheet would just be be guessing. I use spreadsheets because they yield facts which often surprise me.

The spreadsheets

I have made spreadsheets for each of the four price points with the nine scenarios eBay offered in the survey. Each separate image has two spreadsheets, one for Fixed Price (FP) and one for auctions (A).

The first line, highlighted in green, shows the current fee structure. You will note that scenario #2 is the current fee structure. Next, in the left column are the scenario numbers in blue. In auctions, scenarios #5 & #8 are identical.

Note also that scenarios #4, #6 & #7 in FP are all seven day listings, not 30 day. I am not sure what the benefit of a seven day FP listing as opposed to 30 days is to a seller, especially one with multiple quantities. The benefit to eBay is increased revenue by about 433%, add the 12.5% Insertion Fee (IF) increase from 35c to 40c and it is getting very scary.

“12/6/2 - 50/1000/+” translates to the Final Value format; 12% on the first $50, 6% from $50.01 to $1000, and 2% above $1000.

The last column shows what percentage of the sale price eBay gets from each scenario. I have not included PayPal calculations in this set. Click on each image to enlarge.

The sole I think eBay hopI think eBay a hopes aI think eBay hopes a perceived decrease in fees for auction listings might encourage sellers to list more. Given the current lack of traffic and visibility to the many auctions I am not sure how receptive sellers would be to a token decrease, or the more likely overall increase.

The sole purpose of the survey is to enable eBay to say “Our sellers asked us to do this”. Sound familiar?

In line with the current Amazonization of eBay I am inclined to bet on scenarios #5 & #8 for auctions and possibly #3 for FP which will be touted as a reduction because of the drop from 6% to 4% in the middle tranche from $50 to $1000. What do you think?

Y’all come back!