Local retailers say hike makes it harder to stay in business
You can open an online store for a few dollars. But keeping it open might come down to a few cents.
That's what some veteran eBay sellers in Delaware are saying after the online auction giant said it would increase the fees it collects from every sale made at eBay "stores" starting Tuesday.
Penny by penny, item by item, sellers say, those fees make it less profitable to do business as a store, where individual sellers offer many goods at fixed prices rather than put them up for auction.
"I'm considering closing the store altogether," said Mark Erskine of Georgetown, who runs a vintage collectibles store on eBay with his wife Shelly. "I've taken 200 things off-line in the past two weeks because of this."
For eBay buyers, the result could be higher prices as sellers attempt to pass on rising costs.
For eBay itself, the move is seen as a crucial step in shoring up its business during a time of increasing competition -- but it's one that might come at a cost to its reputation.
"I think people may not have warm-fuzzy feelings about eBay as they used to," said Darren Hussey, a Newark-based seller of statuaries who has operated an eBay store for about five years.
Sellers based in the United Kingdom boycotted eBay this week, and petitions of protest are circulating worldwide. Amid the furor, staunch eBay supporters are questioning protesters' logic, and reminding them how eBay gives them unprecedented access to a worldwide market for a relatively low investment.
"I do talk to a lot of people who are bitter," said Mike Ferriola, a Hockessin-based seller of baseball memorabilia and other items. "But I'm not one of them."
A small price to pay
After all, eBay supporters point out, the fees amount to just a fraction of the sales price. Before Tuesday, eBay charged store operators 2 cents to have an item listed, and took 3 percent to 8 percent of the sales price. The new fees are 5 to 10 cents for a listing, and 3 percent to 10 percent of the sale.
The fee increases do not apply to items sold through the auction process. Items listed on stores account for about 83 percent of the listings on the site, eBay said.
Sellers contend with other fees, such as the payment service PayPal, an eBay subsidiary that charges sellers nearly 3 percent of the transaction.
An item expected to sell for $200, for example, now costs the seller about $10.75 in eBay fees and about $6 in PayPal fees. Under the new fee structure, eBay's cut would rise to $12.75, or about 6.4 percent of the price plus the PayPal fee.
All those percentages and pennies add up, sellers say, and can trim an already-thin profit margin.
Calls to San Jose, Calif.-based eBay were not returned. But in a statement posted on the Web site, the company said it's increasing fees because "it's vitally important ... [to] maintain a healthy balance between listing formats on the eBay marketplace."
In response, some store owners said they might increase their prices or reduce their store inventory.
"If something's inexpensive, I don't even bother selling it on eBay because the listing fees are so high," Hussey said.
Market cornered
Sellers who cherish eBay's global market say good luck to people who are ready to give up on the site.
"There's nowhere else to go," said Rich Kos, a Prices Corner-area seller of antiques and collectibles, He gives about 11 percent of every sale to eBay and PayPal, he said.
Indeed, eBay is the undisputed leader when it comes to online auction sites. Its U.S. and international sales accounted for $3.5 billion of the company's $4.5 billion in revenues last year. PayPal accounted for another $1 billion.
"There's nowhere I can go to get to [100 million] people this cheap," he said.
Providing the infrastructure for the system takes money, something detractors say eBay seems to have plenty of -- at the end of June, eBay reported that quarterly revenue grew 30 percent over last year, to $1.41 billion, though profits fell 14 percent. Its president and CEO, Margaret C. Whitman, made $2.7 million in 2005.
Seller Jason Dye of Wilmington thinks he has found a way to accommodate fees without alienating customers -- he'll simply shift more of the transaction's value to "shipping and handling"costs, denying eBay the chance to levy higher fees against the item's value.
"That counteracts it," he said. "The customer pays the same price."
Eventually, eBay's business will suffer along with its sellers, said David Cushworth, an eBay storekeeper near Newark. But he's under no illusion that seller discontent or threats of defections will make much of a difference.
"EBay's like Wal-Mart," Cushworth said. "If you want to go into retail, you gotta sell through Wal-Mart, and if you're going to sell online, you have to go through eBay. They dominate the market and do what they want knowing no one's going to leave them."
Source: Delawareonline