They're ripping out gavels and replacing them with cash registers.
Leading online marketplace eBay (NASDAQ:EBAY) is dramatically shifting its fee structure on fixed-price listings, lowering initial listing fees by more than 70%, extending those submissions to a month instead of a week, and then slightly bumping up the final value fees on successful transactions. The new rates kick in come Sept. 16.
The timing of the move is intentional. Charging sellers a flat $0.35 insertion fee on longer listings will stock eBay's virtual marketplace with a ton of fixed-priced goodies in time for the holidays, when shoppers need a little more certainty than the adrenaline-pumping fervor of its flagship auction format.
Priced to move, over
The new pricing also means that the traditional bidding wars will be harder to find on the site, robbing eBay of the excitement that it has invested so heavily to promote. Wasn't it just a few months ago that eBay's "shop victoriously" televised ads were promising that "it's better when you win"? Windorphins, anyone?
For better or worse, eBay will become more like a haggle-free flea market than a competitive bidding floor. In short, it's going to start looking a lot like mainstream online retailers like Amazon.com (NASDAQ:AMZN) and Overstock.com (NASDAQ:OSTK). The unfortunate difference? eBay's only real mysteries lie in the quality of the merchandise and the authenticity of its seller.
eBay has cleaned up on that front in recent years, but it certainly doesn't help to have Tiffany (NYSE:TIF) hollering about counterfeit jewelry being sold through eBay, or PayPal having to promote its ramped-up buyer protections. The new pricing strategy may be a fresh paint job over the high school with a notoriously violent reputation, but the metal detectors at the entrance tell a different story.
The reinvention revolution
It's never too late for eBay to reinvent itself. priceline.com (NASDAQ:PCLN) is an encouraging example. The company was doing fine with its "name your own price" model, where aspiring travelers bid on how much they were willing to pay for a certain airfare, overnight stay, or car rental. However, priceline is doing even better these days, now that it is offering a more conventional booking engine alongside its "name your own price" system, giving travelers the option to book a trip without the head games.
The key is mastering the delicate balance. If eBay becomes better known as a fixed-price haven than a place to bid on garage-sale Picassos, it will have a hard time distinguishing itself from sites like Amazon and Yahoo! (NASDAQ:YHOO), which have set up merchant storefronts for years.
eBay has spent more than a decade establishing its identity. How many companies have the honor of being verbs? The last thing it would want is to open up the playing field for a niche auctioneer like Bidz.com (NASDAQ:BIDZ) to become the new standard.
Perhaps the bigger potential pitfall in dropping its listing fees on fixed prices will be out-of-whack price tags. If listing costs just $0.35 for a month of visibility, how many people will put up items at ridiculously high prices? There may be the occasional great deals, but too many sellers will aim for the moon. That would kill eBay, wouldn't it? If strolling through the site's virtual categories becomes a fruitless exercise of skimming past overpriced junk -- because all of the good deals get snapped up quickly, while the rest collect cobwebs -- it will dent eBay's already roughed-up brand.
Yes, eBay has to do something. Consumer listings have been running stagnant on the site in recent quarters. However, just because something must be done, doesn't mean that just anything should be done.
I don't mind going out on a limb in predicting that eBay will regret this move. If I can ruffle through my pocket lint until I find $0.35 in spare change, I may very well pay to list that prediction on the eBay site for a month.
More items in the eBay playbook:
