eBay reduces fees; implications for OSTK?

|
 |  Includes: EBAY, OSTK
by: David Jackson

So eBay responded to growing negative publicity about its recent price rise, and announced that it will cut two fees. Here are the details and a comment about the impact on Overstock.com:


Details

  • eBay will provide operators of "eBay Stores" a one time credit of $15.95, the cost of a one-month subscription. eBay recently announced that the monthly fee for an eBay Store would rise to $15.95 from $9.95 previously. Note, however, that the price rise is still in effect: maintaining an eBay Store for 2005 will now cost about $175 (11 x $15.95) versus about $120 (12 x $9.95) previously.
  • The minimum fee for auctions will be cut from 30 cents to 25 cents. eBay recently raised the minimum auction price from 20 cents to 40 cents, so the new 25 cent minimum is still a 20% increase compared to the original price.

Impact on OSTK?

Some analysts may argue that this is a negative for OSTK, as it will reduce defections to OSTK's recently launched auction platform. But that's probably not right. eBay's price cut (though paltry) in fact suggests:

  1. that there is price elasticity for eBay - namely, that eBay's marketplace is not so dominant that merchants have nowhere else to go if eBay raises prices;
  2. that the spectre of emerging competition dampens eBay's ability to raise prices.

Both of these factors will likely encourage eBay sellers to support the development of an effective alternative to eBay. And that's got to be good for OSTK.

EBAY chart below.
Ebay