What Will Be the Impact of eBay's Rate Changes?

Moving toward traditional retail

As anticipated, eBay (EBAY) announced a new fixed priced listing format with significantly lower upfront fees ($0.35 for a month listing) that is better suited for retailers looking to use eBay as a channel for new goods, plus other changes to payments and shipping requirements. In the US the new format will be in addition to the auction and stores format and will replace auction/buy-in-now hybrid. We think these change reflect a more discerning eCommerce consumer, weak auction format GMV growth (just 2% in 2Q) and opportunity to increase PayPal adoption.

Take-rate (revenue) impact likely negative, PayPal offsets

The take rate impact will depend upon product category, ASP, and conversion rate. In many cases, however, the take-rate is lower for items using the new format, and since sellers will choose other formats when the new format is more expensive, we believe overall take-rates will be lower. This will be offset by greater PayPal penetration. We estimate a negative $125-150mn impact on ’09 revenues assuming about 30% of items move to new format and 10% lower avg. take rates, which should be offset by a $100-150mn PayPal penetration boost.

Marginal impact on buyer experience, maintain Neutral

While an increase in listings in September following fee decrease could be a catalyst, the new listing format alone is unlikely to significantly alter the buying experience, in our view, as inventory availability is not the core issue for eBay. Search improvements remain a wild card, and more uniform shipping fees and fraud prevention should help, but we believe the buying experience will still fall short of other fixed price retailers. At 13x 2009E EPS, we think stock will remain range bound into 2009 guidance (expected in January), which could be below street if changes don’t stabilize GMV growth, in our view.

Comments

[Et tu, Brute!:]

Enunciating clearly here:

The auction format is not weakened! Ebay is grinding it into oblivion beneath it's lunatic heel! They figure if they expound that enough, all will fall into line and believe it.

"The auction format is weakened."

No, it's not. There is still a distinct place for it.

"Greater Paypal penetration". Oh dear, I'm not touching that one... but it IS apt! As ebay stock continues STILL to plummet (reminder: The Street now says "SELL!") and the ebay machine continues to snarl

"believe the buying experience will still fall short of other fixed price retailers". No, they'll never touch Amazon!

2008 Sep 03 12:48 AM

[Phlago:]

FEEbay signed their death warrant long ago with their continual rate hikes, poor customer service, and corporate greed. There are a large number of alternative auction sites out that have carved our their own niche markets, and you'll find you can do just as well with them than anywhere. I use alsoshop.com and have not looked back at the feebay beast. They abandoned me, and I have abandoned them. Death to feebay!

2008 Sep 03 01:37 AM

[leapingcat:]

I agree with your analysis, but I would question whether Ebay are actually moving to a traditional retail model, let alone do it successfully. Retailers own their stock and provide customer service, Ebay do neither.
Ebay's fees have only gone down for large sellers of mass-market commodity products, fees have gone up for the small sellers of individual and difficult to find items. Ebay are in danger of losing what has made them distinctive without any compensating gains.
I think that you're right, Paypal should continue to flourish; it has an established customer base and is convenient for buyers. Your article seems to support the case for breaking up Ebay, and letting Paypal realise its true value.

2008 Sep 03 04:42 AM

[patty-bog:]

"Opportunity" to increase Pay Pal adoption - what a joke. Sellers are being intimidated and threatened mafia style into mandatory Pay Pal payment.
Oh yes the wonderful ebay "family" experience; where ebay continually throws phrases and terms such as "violation of ebay policy" and "prohibited" to force it's customers (the sellers) to use Pay Pal.

Wonderful highly moralistic company !!

2008 Sep 03 12:32 PM

[Et tu, Brute!:]

Ranks right up there with ebay tucking tail over the Australia fiascoe. ACCC told them "NO!" in no uncertain terms to ebay's Paypal only mandatory edict. Against their Fair Trade Acts. Ebay then said they backed down to "remove any confusion".

The Aussie's weren't confused! The Australian Government has a backbone and isn't afraid to use it!

2008 Sep 03 05:00 PM

[hobo:]

ebay? oh yes,I remember them!

2008 Sep 03 08:07 PM

[hobo:]

ebay? oh yes,I remember them!

2008 Sep 03 08:08 PM

[scallywag:]

I used to love selling on ebay. I'm disabled and can't go out to work. What started as trying to make a little money built itself up unto a nice little business to my delight. I'm now a powerseller with over 7600 feedback and sinking quickly. I can no longer afford the fees and it's actually costing me in the end so I shall have to leave as many others already have. A shame as it used to be really friendly place and I made some good friends, I'm stuck at home and can't go out to work, I desperately need to make some money. I live in the UK sell mostly Clarins beauty products which I buy from the US, does anybody know of anywhere else in the UK where I can sell ? Or even buy clarins. It's sad watching the slow death of what used to fill my days.

2008 Sep 04 07:00 PM

[nadine:]

scallywage, have you tried uk.ebid.net ? It's a lowcost auction site, like ebay used to be.

2008 Sep 05 01:59 AM

[scallywag:]

Thanks Nadine will go and have a look. Anything is got to be better than ebay at the moment.
Much appreciated.


On Sep 05 01:59 AM nadine wrote:

> scallywage, have you tried uk.ebid.net ? It's a lowcost auction
> site, like ebay used to be.

2008 Sep 05 08:19 AM