EBay shakeup brings $0 listing fee

By Catherine Clifford, staff reporter


NEW YORK (CNNMoney.com) -- EBay is about to shake up its pricing structure again, introducing an option that allows sellers to list up to 100 items for free each month if bidding starts under a buck. If the goods don't sell, eBay collects no fee.

The changes, which will take effect March 30, will affect nearly every transaction on eBay's marketplace.

"Insertion fees" -- the price users pay to put an item up for auction on eBay -- will drop as low as zero, while the "final value fee" assessed on successfully sold goods will rise to a flat 9% for all transactions, with a new per-item cap of $50. Currently, final fees vary by selling price, maxing out at 8.75% for items that sell for less than $25 but without any cap on the back end.

EBay (EBAY, Fortune 500) is also adjusting fees for fixed-price item sales, a category that has grown rapidly in the past two years. Listing costs will plunge to as low as 3 cents per item for the most active, high-volume sellers, but rise slightly for merchants who sell sporadically. Fixed-price listings will also become more visible on the site, showing up in eBay's main search instead of being divided out into a separate set of results, as they are now.

EBay fee changes often set off firestorms within its seller community. This time, reaction was relatively upbeat.

"A lot of merchants on a lot of different levels are already calculating their savings and are liking the changes," said Joseph Cortese, founder of the Professional eBay Sellers Alliance, an industry trade group. "I would say eBay struck an overall positive note today."

At AuctionBytes.com, a gathering spot for online merchants, hundreds of eBay sellers quickly weighed in on the changes.

"I can't believe I am saying this, but at first glance, I like the store changes," one respondent wrote.

But others were annoyed at how smaller sellers could see their costs rise. "Why doesn't eBay just say that they are not interested in small business sellers and be done with it?" another seller griped.

"This is why I have left eBay," one merchant posted. "The pricing structure keeps changing like lines in the sand because eBay can't figure out what kind of venue they want to be."

EBay's new fee structure mimics one it has already adopted internationally. In a conference call last week to discuss the company's quarterly financial results, CEO John Donahoe telegraphed the upcoming changes.

"In Europe, we have successfully transformed our seller value proposition and business model over the past 18 months," Donahoe said. "By offering lower insertion fees to our sellers, we have almost doubled the number of live listings, a significant increase in selection. We plan to adopt similar best practices in the U.S. in early 2010."

JPMorgan Chase analyst Imran Khan expects the changes to boost eBay's sales volume, as it did overseas. "For large PowerSellers who list hundreds or thousands of items monthly, the new scheme could bring significant savings on upfront costs," he wrote in a research note. "We think the new structure could put some pressure on the middle of the curve: sellers who sell regularly but not in enough volume for the discounts to kick in."

For example, a $200 electronics sale with a 99-cent starting price would currently rack up fees of $8.47. Under the new model, fees would rise to $18. But if the item didn't sell, eBay would collect nothing. To top of page

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