January 6, 2004
We should have seen it coming. For the third time in four years -- just as they're recovering from New Year's hangovers -- eBay (Nasdaq: EBAY ) sellers are being hit with a change in the pricing structure. Some fees are going up, some are going down, but the end result is more cash in the company's coffers.
The Feb. 2 fee increases range from 17% for some lower-priced items to as much as 45% for auctions starting at $500 or more. While that means a difference of just $1.50 per auction in the latter case, that certainly adds up for frequent sellers. Meanwhile, it will cost twice as much in some cases to conduct a reserve auction. On the flip side, fees for those listing items in their personal "eBay Store" are being cut by more than half.
As a casual seller on eBay, I'm not exactly looking forward to the increases. As an investor, however, I expect nothing less from management. As the site draws more and more buyers -- there were 37 million active users at the end of the third quarter, a 55% year-over-year increase -- it becomes more valuable to sellers.
Pricing power can be subtle. For example, Anheuser-Busch (Nasdaq: BUD ) has been able to implement consistent price increases because of the power of its brands. Still, its management must be careful lest Budweiser drinkers decide enough is enough and pick up a six-pack of Coors (Nasdaq: RKY ) instead.
eBay's power is more obvious. While there is competition out there -- Amazon (Nasdaq: AMZN ) and Yahoo! (Nasdaq: YHOO ) also run auctions sites -- none has more than a small sliver of market share and offer far less value to sellers.
In the words of ShelbyBoy, a more active seller and long-time contributor to the Fool discussion boards: "Based on the increase in overall number of users, and specifically in the number of bids and winning bid amounts I am experiencing, eBay's increase is not even noticeable."
What are your thoughts on the price increase? Share them with us on theeBaydiscussion board.