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eBay's Latest Bonehead Move

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The fee schedules at eBay (Nasdaq: EBAY  ) are shuffling around again.

The company's namesake marketplace is introducing new rates that will give infrequent sellers more chances to move their wares, but it all comes at a price that has the eBay community up in arms.

In a dramatic move, eBay will begin charging its final value fees on successful listings based on the complete transaction cost. Sellers who charge additional fees for shipping, gift wrapping, and other add-ons will now have to pay eBay a cut of everything that a buyer will be shelling out.

Yesterday's announcement claims that the shift will "reward low-cost shipping for all sellers," but I can see it going the other way, too. Since sellers know that they won't be getting back the full amount of their fulfillment costs after eBay's 9% cut (in most cases), won't they just jack up shipping charges?

The timing's lousy, too. UPS (NYSE: UPS  ) and FedEx (NYSE: FDX  ) hiked their fuel surcharges last week in response to percolating oil prices.

Some will argue that this is a good way to smoke out new sellers. eBay will be offering sellers 50 listings a month without an insertion fee starting next month. This is a welcome shift from the 100 free monthly listing it's currently offering, but only on items with initial prices of $0.99 or less and no reserve requirements. These casual sellers being targeted are the same ones who may not even be aware of the difference between scraping 9% from the winning bid and 9% on the total transaction cost.

Regular sellers, on the other hand, appear to be miffed. Most of the posters on eBay's official forum aren't impressed. Many are threatening to bolt, but eBay's been hearing that for years. eBay's decision to also retire the 5% fee discount granted to PowerSellers is adding insult to injury, though the online marketplace will continue to honor the 20% discount it offers to its top-rated sellers.

It's easy to see why eBay is getting antsy. eBay's marketplace transaction revenue climbed just 3% during the holiday quarter when pitted against the previous year's fourth quarter. The year-over-year spurt was also 3% during the third quarter.

This isn't Latin America's MercadoLibre (Nasdaq: MELI  ) with its scintillating growth rate. Outside of PayPal, eBay's a bacon-topped chocolate funnel cake in search of a defibrillator.

Raising overall rates for most sellers seems like a lousy move if it's ultimate intention is to make eBay.com the hotbed of cottage industries and spring cleaning monetization that it used to be.

What do you think of eBay's new fee schedule? Share your thoughts in the comment box below, and add eBay to your watchlist for further Foolish coverage and tracking.

The Steve Jobs Betrayal
You may already know that in the final year of his life, Jobs revealed a stunning betrayal — and told his biographer, "I will spend my last dying breath... and every penny of Apple's $40 billion in the bank to right this wrong." What was it that made Jobs so irate — and why could it make a few in-the-know investors some major profits over the coming months and years?

Enter your email address below to find out what made Jobs so enraged!

MercadoLibre is a Motley Fool Big Short short-sale recommendation. MercadoLibre is a Motley Fool Rule Breakers pick. eBay and FedEx are Motley Fool Stock Advisor recommendations. Motley Fool Alpha has opened a short position on MercadoLibre. The Fool owns shares of FedEx and United Parcel Service. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz is a satisfied eBay user with 178 positive feedbacks to show for it. He does not own shares in any of the companies in this story. He is also a member of the Rule Breakers analytical team, seeking out the next great growth stock early in its defiance. The Fool has a disclosure policy.


Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 16, 2011, at 2:13 PM, U2I2R wrote:

    Almost anything that Ebay does will not improve growth or revenue. It is difficult to manage a mature company and make it grow. They will not succeed in this. They would be better to trim internal costs and grow profits. They need to look at a method of really cutting costs to early users and to make a fair cost to long term large volume users, but most of their changes just show poor management skills, like most businesses out there.

  • Report this Comment On March 16, 2011, at 2:23 PM, JERRYINCT wrote:

    I already pay EBay 12% on my merchandise sales; + plus an additional 3% of sale & shipping cost, to their own PayPal group. Up till now my profit was in the shipping/handling charge as I kept the merchandise price low to minimize commission. They will be earning 15% total on my transaction under the new plan.

  • Report this Comment On March 16, 2011, at 8:26 PM, PhilipCohen wrote:

    “Your upfront cost of selling on eBay is about to be dramatically reduced once again!”—eBay, 15 March.

    Hey, guys (and gals), another “reduction” in fees! Surely, you weren’t expecting anything but another load of “lowest fees ever” disingenuous nonsense, were you? Actually, this latest load of nonsense is no more than another desperate attempt to arrest the hemorrhaging of Marketplace revenue via the application of the FVF onto the merchant’s shipping charge. Frankly, this announcement would have been more appropriately made on 1 April.

    And, they can’t even announce it right: the FVF will apparently apply only to the default shipping charge (if any), not to any (additional) premium postage or international shipping charge—so they say ...

    But it does seem that Donahoe has decided that all those little auction sellers of collectibles that he has for the last three years been trampling upon, do now have some value to him, hence the fifty free, any-start-price, auction listings with an optional BIN.

    What does this mean? Has the big boys’ “retail mall” been doing so poorly (less than 10% STR?) that eBay is now forced to be nice to that great horde of unwashed “flea marketers” that actually made eBay what it was before this fool Donahoe started dismantling it. That must have been a bitter pill for the “eBafia Don” to swallow—undoubtedly a large swig of Kool-Aid would have been required.

    In the meantime, don’t look for any logic in anything these headless turkeys at eBay do, otherwise you will finish up as confused and incompetent as they so obviously are. These are Bain & Co men. They have no experience in anything but dismantling (ie, destroying) businesses. They obviously have no experience in marketing, no experience in auctions, no experience in IT, no experience in database management, no experience in web site design, no experience in, well, anything of any use in the competent running of any business, particularly not this one. Though, John Donahoe apparently does know how to play with his “smart phone”.

    eBay’s many Donahoe-introduced problems are hardly worth discussing any more. Clearly, headless turkeys have taken over the eBay Executive Suite and, in particular, since the sociopath (psychopath?) John Queeg-Donahoe has been given a key to the larger “disabled” cubicle in the executive wash room, the eBay Marketplace has every quarter—relatively speaking—gone backwards.

    What would I not give to be a fly on the wall in the executive suite in the eBay San Jose “bunker”: to watch the “eBafia Don” and his gaggle of other headless turkeys, every morning, running around in circles, bumping into each other, trying to decide what to do tomorrow, to get those page views, or whatever, up; to find some new devious way to try to keep the bilge pumps working to keep the rusting old scow, otherwise known as the eBay Marketplace, from going submarine?

    Why is it that Deutsche Bank’s Jeetil Patel is still the only market analyst that has consistently had this criminal fraud facilitating organization’s card correctly marked? Where are all the other analysts getting their eBay analyses from? Directly from the eBay Dept of Spin? Regardless, relative to e-commerce in general and the “big river” in particular, the eBay Marketplace GMV is continuing its journey down the toilet—and that really is a shame—for everyone concerned.

    Enron / eBay / PayPal / Donahoe: Dead Men Walking.

  • Report this Comment On March 16, 2011, at 10:08 PM, judykudz2 wrote:

    I'm a Top Rated Power Seller on eBay...for now. As such I have access to a special phone number where you actually get to talk to a live person. I called today. I had many things to discuss re the new fees, but this was the tops: Ebay is suggesting that we add our shipping cost into the price of the item and then offer "free" shipping. I told her that I often ship large packages and since I'm on the East Coast, it's much cheaper to ship to New York than to California. So which shipping cost do I add to my price. Her answer was amazing. She said I should use the California shipping price. When I told her that my New York customers would object.....her response was "they won't know the difference". This woman at eBay actually told me that I should deceive my customers.

    There's a movement starting on Facebook to Boycott eBay for the month of April. I hope everyone joins.

  • Report this Comment On March 17, 2011, at 1:07 AM, mrsoup wrote:

    E-Bay is so far removed from the original concept it should no longer be allowed to use the name.

    The majority of the sales are 'But it Now' with few auctions available.

    BOYCOTT in April- We all need to send a message, how many will actually follow through though?

    There is a market for a good online auction venue now that it has been abandoned- where can we find one?

  • Report this Comment On March 17, 2011, at 12:33 PM, amandadmiller wrote:

    Ebay's New Rule is hurtful; as if their latest moves weren't enough. I have been an Ebay seller for 11 years. (even before there was PayPal) I have 18,000 feedback, whith 99.9% positive ratings. I am also a single mom, who relies on my sales as my only source of income. Now, Ebay has decided to take another 4% from my shipping costs? Is this even legal? This is the amount that the Postal Service charges me to ship the item! So basically, they are making me lose my cost in shipping! And, I have read that sellers will up their cost, instead of lowering it. But, what is the gain? Ebay will just take more! They suggest offering Free Shipping. How in the world can sellers offer free shipping? I can see if you sell; stamps, stickers or the like, but not vases, etc... I would not be in business if I offered free shipping. It would eat my profit. I do not think this is ethical at all. It's not enough that they take the huge amount from the final sale and the huge amount through the PayPal transaction, now they have to take from the shipping costs? This needs to stop. Honestly, I think this might be a law suit waiting to happen. Let me know, and I will jump on board! Normally, I would never say that, but they have gotten TOO GREEDY. Like they aren't making enough. Greed/Money is the source of all Evil. (and I surely didn't make that one up!) Thanks for listening. Amanda

  • Report this Comment On March 17, 2011, at 4:46 PM, debbiesdream wrote:

    I already closed my account. They have finally succeeded in breaking me. Please join us on Ebay Boycott on Facebook.

  • Report this Comment On March 17, 2011, at 7:55 PM, itzelc wrote:
  • Report this Comment On March 19, 2011, at 7:38 PM, chatterkat wrote:

    If everyone moved their listings to Bonanza (it takes one click to move them all) on April 1st it would be a great way to make a statement to Ebay and still have our items listed for free. The final value fees are half of Ebays fees.They only charge final value fees on shipping amounts over 10.00. It would make sense for Ebay to do the same as 90% of Ebay items are at 10.00 shipping or less. If Ebay was actually doing this to stop “Ship Rip” they would have adopted such a policy instead of the bone-headed one.

    http://www.bonanza.com/

  • Report this Comment On March 20, 2011, at 9:42 PM, RichKnobSales wrote:

    Please don't everyone try to move to Bonanza on one day and expect the system not to crash! There are now almost 500,000 registered Bonanza users, or "ranchers". I was one of the first 3000. Just a tiny seller, but I took my eBay business and left a long time ago. It takes a while for your items to process through, so plan to start moving now & terminate your eBay listings on April 1st.

    I did something else about it all. I showed up at the eBay on Location in Atlanta last year wearing my Bonanzle t-shirt. (Waves at Griff & everyone -you remember me I know!)

  • Report this Comment On March 22, 2011, at 4:23 PM, chatterkat wrote:

    Say RichKnobSales, are you the same lady that sold the Bonanza T shirts on Ebay with the pic of you wearing it at the Ebay convention? Now that was gutsy! Until the listing was pulled by an irate Ebay.

  • Report this Comment On March 22, 2011, at 10:08 PM, agtw31 wrote:

    i sell on ebay,and i love what ebay is doing.

    this will eliminate a lot of the sellers who should not have been allowed on ebay in the first place.

    if you boycott ebay,why don't you just make the boycott permanent,and make sure to take at least 100 sellers with you.

  • Report this Comment On March 24, 2011, at 8:47 PM, tgrit wrote:

    eBay has pushed too far this time and many sellers are moving to other sites that don't charge the fees eBay has. The market is changing and eBay is helping the competition pick up market share. The other sites still aren't as well known, but that too is changing and their buyer traffic is increasing. eBid, Webstore, Bonanza are all seeing growth. A follow-up article on the competition and how they are threatening to change the marketplace would be interesting.

  • Report this Comment On April 01, 2011, at 12:32 PM, duckandcover53 wrote:

    This is insanity. Ebay has attacked us sellers, robbed us, abused us. This is another example. I spend easily 400 hours a year packing and shipping which I not only don't make money, I LOSE IT- and now they want to take 12% out of what I charge, never mind the cost of bubblewrap and tape. OUTRAGEOUS!!! Yet they think we are so stupid we'll fall for "to encourage lower shipping fees"... THAT IS AN INSULT. Yet they can penalize us for ratings from buyers knee jerk uninformed reactions to what they pay so we can lose money... ebay your judgment day is coming.

  • Report this Comment On April 07, 2011, at 1:26 AM, bownutdotcom wrote:

    I'm a Top Seller on eBay. eBay claims that their new "reduced" fees will save "most" sellers money. This is absolutely not true for me. I only charge the USPS online shipping rates to my customers plus a $.50 handling fee per order. I don't make money on shipping. So how does this encourage me? With the new "reduced" fees, my eBay fees will go up at the very least 50%. It is more like 62%. How is that reduced? I will then be responsible for 11% (because my top seller discount doesn't apply to shipping fees) to eBay for shipping and 2.2% to Paypal. Not a great deal for me. I'm already looking for a new home.

  • Report this Comment On May 19, 2011, at 11:54 PM, olauser wrote:

    I too was a power seller on Ebay, Imagine this, an auction site for $8 a month, no listing fees, seller fees, no fees on top of fees. Fantasy? Nope. Try onlineauctions or OLA. Only $8 a month with no fees whatsoever. List it how you want, when you want for whatever you want. Pay the $8 and you are on for the month. Really, check it out for yourself. Unhappy with Ebay as I am, breathe some fresh air into your auction with out the BS. Nope this is not a scam and I am for real. I have nothing to gain or lose by letting you know this. I'm mad at Greedbay for the changes and was searching for something better when I found OLA. Thought it was BS but the site is for real and I am a member/seller. Takes people to make an auction grow so join in and show Ebay we don't need them. Again this is onlineauctions or OLA, after all you deserve better than what Ebay has given. You make them money and they treat you like dirt. OLA $8 a month all you can list with no fees at all. Please check it out if you are tired of Ebay hating you, their policies and fees. Sell on there and make them money or change over to OLA and make the money for yourself. BIG and I mean BIG Difference.

  • Report this Comment On May 19, 2011, at 11:56 PM, olauser wrote:

    Oh yea, tell your freinds, co-workers and any Ebayers you know about OLA, they will be happy.

  • Report this Comment On June 16, 2011, at 10:12 PM, CmdrDick wrote:

    eBay falls as auction site source code goes public!

    Here is how it works, some enterprising coders write a public domain software package for an auction site. Each site can ONLY have one product category and is watched over by specialists in that field.

    There is a common top site where a buyer can enter search words. The result is links to the member auction sites that have those items in their current listings. Only minimal fees may be collected as agreed to by the members, to cover only the expenses. Payments are handled directly between the selling and buying parties. Feedback is a simple 1-5 rating with no verbiage from either side. Total score divided by total transactions is your individual rating. This way, there can be thousands of individual sites, each focusing on one simple theme, and offering the most of what the search words can provide. The sites would all work identically and have a common look and feel.

    Each site would be rated based upon it's own score, and poorly scoring sites would loose their membership. The work load on individual servers would be reduced and the responses would be fast. It's time that we had an internet that served the people, rather than the bloated, greedy, corporate types.

    Come on Guys and Ladies, we can do this.

    Will someone create a forum for starters?

    Thanks for looking, CmdrDick

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