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eBay Promotion? Or Hidden Price Hike?

|Includes: eBay Inc. (EBAY)

On June 16, 2009 eBay will implement a new listing fee structure. They are promoting this new fee schedule as a good deal to sellers in which eBay is allowing each seller to list five auction-style listings per month for free but charges a Final Value Fee of 8.75% on the sale price or a flat fee of $20, whichever is lower. All additional items sold will have the current fee structure applied to them. 

eBay has been encouraging high-volume sellers and simultaneously been pushing the fixed-price format, which makes up about half of eBay’s volume. In the first quarter of 2009, Fixed Price grew 12 percent while Auction format items declined 20 percent. With the new promotion, eBay is trying to attract unique items listed in the auction format.

Let’s do the simple math on this new promotion and see if it actually does save sellers money. Assuming the items do not sell, it will save the seller up to $20 a month assuming they list items over $500. Currently, if you sell an item for $50, you pay $1 for the listing fee and $3.07 for the final value fee, totaling $4.07. With the promotion, the $1 is waived but you are now charged $4.38. Let’s take a $400 dollar item; you are charged $3 for listing it and then $15.32 in final value fees with the current fee structure. With the new promotion, you will be charged $20 because 8.75% on $400 is $35. The only way to take advantage of this promotion is to have items sell under $25 or over $485. If your item falls in between those numbers, I would recommend to work around this new fee structure. Users who use an eBay tool or a third-party listing tool will not be eligible for this offer. Maybe it is now time to look into tools? Or maybe just list 5 low value items first every month.

Their fee structure does not compare to any of the eBay alternatives [Wigix/Bonanzle/iOffer] out there as those sites are clearly lower in fees. Does this mean that sellers are willing to pay a premium to get their items sold?

Link to announcement: