Will Increased Postal Rates Hurt eBay?

May.18.07 | About: eBay Inc. (EBAY)

I know literally hundreds of people that earn their living, either part time or full time selling on eBay (NASDAQ:EBAY), which trades on NASDAQ. The postal increase that went into effect on May 14 has been a nightmare for eBay sellers.

These are some of the comments I am hearing:

"I've held off for a couple weeks posting any eBay items until I can get a handle on the new postal rates so I can enter them in my listings."

"I went into the post office [prior to May 14] to get a copy of their rates and they said they didn't have any to give me."

"They have raised the limit on insured mail to $200 in order to have return receipt service."

"I do a lot of mailouts, and now the postage amount can change by the size and thickness of the envelope."

"For sending boxes, they're now charging by zone. I used to be able slap on the same postage on every package of the same product, since I knew the weight, now I have to look up the zone."

Regarding my own personal experience, a couple days prior to May 14, I scoured the USPS web site for the new rates, but could not find them. But, I did find the press release which gave out a limited amount of examples of what rates would be.

Today, I went to the post office to mail a DVD and I told the clerk that I wanted to send it the least expensive way. She narrowed it down to four choices: letter rate, large envelope, package, or media mail. Media was immediately ruled out because it is so expensive. It think it is only useful for heavy books that weigh over a pound. She then said it was too large for letter rate, and too thick [slightly over a quarter inch] for the large envelope rate, so I had to send it by the more expensive option - package rate. When I got back to my office, I checked the Post Office's website, and realized that I was probably overcharged. It seems to me that it would easily qualify for the large envelope rate, and maybe even the letter rate.

However, there are some quirks. If it doesn't bend easily, like a photograph with cardboard, it is charged a "non-machinable surcharge" [sorry autograph dealers]. If it has clasps, it is also subject to a surcharge. If is has an address parallel to the shorter dimension of the letter or it contains a pen, it is subject to a surcharge. If this seems confusing and feels like a hassle to you, then you can imagine how the eBay sellers feel.

I think there will be a short term revenue drop for several reasons:

1. Sellers have been holding off on listings until they get their new postal rates entered.
2. Buyers may be temporarily scarred off by the sticker shock of the higher postage rates that they have to pay for the stuff they buy.
3. Buyers may bid slightly less because they are factoring in the postal rates on their entire purchase.
4. Sellers may hold off selling until they get the size and shape of their boxes and/or envelopes optimized for their products.

In the next couple days, I will be publishing an article about several ways of dealing with the higher postage rates.

Disclosure: The author owns EBAY.

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