ebay: How do they “triple dip”, keep increasing charges, and still attract sellers?

In my inbox today, I had a nice little letter from Bill Cobb, President of eBay NA. In it, they listed another pricing increase (they did one about this time last year).

Fee Type Item Price New Fee Current Fee
Insertion Fee Starting Price:
$1.00 – $9.99
$0.40 $0.35
Final Value Fee Selling Price:
$25.01 – $1000.00
3.25% 3%

As you can see, the listing price increased by $0.05 for the lowest priced items. Percentage-wise, that’s huge: 5% for a $1 item. The kicker, however, is the final value fee increase of .25%. That $25 – $1000 range is their big money maker.. that’s the equivalent of increasing taxes on the middle class.

When I first started selling stuff on eBay back in 1999, I was surprised that such a horribly designed sight could have that much exposure. I was successful at selling off a lot of the older computer related equipment that I had collected over the years (due to my profession), but continually marveled at the problems with the site (poor support for non-IE browsers, frequent page-loading problems, etc) and their lack of impact on the site’s growth.

What really got under my skin was the fact that they “double-dipped” in the whole on-line auction business. And, for those unfamiliar with the selling side, I mean that they charge you once to list the item (this charge is based upon the starting price of the item) and then they charge you once the listing has sold (a percentage based upon the selling price of the item).

With that alone, they were raking in the money.

I specifically used Paypal from early on because it was not eBay’s Billpoint (or whatever it was called). What I mean is that it was another company.

Then eBay bought Paypal. eBay then invented the “triple dip”. They now not only charge you for the (1) listing of the item and (2) the sale of the item, but they now charge a percentage when you accept payment for the item. As a side note, eBay doesn’t really like other on-line method payment methods, either. For example, Google Checkout is not an approved payment method with ebay.

Anyhow, I am sure that you would think that it is totally insane, but they do it and people put up with it. Plainly, if you want to sell used items on the web, the place to do it is on eBay. That is where you get the most exposure.

eBay has a history of increasing their prices and really giving back absolutely nothing. I believe, in this case, that this is the 2nd year in a row that they have increased their pricing. The main result is that it prevents a lot of the small sellers from selling on eBay and it increases the fees paid by most of their selling community. What has also happened is that a lot of the small sellers have turned around and adjusted their listing pricing and shipping/handling pricing to compensate for the cut that eBay is taking.

You’ve seen it. You see an item listed for $4.99, which is an outright bargain, but when you look at the $15.95 shipping/handling costs, you think to your self “What a rip! That should only cost $4.95 to ship. They are definitely not reputable.”

Well, on the eBay forums, you find that there are a lot of complaints about this practice. In fact, they have a policy where, if they (ebay) feel that the shipping/handling is too high, they will cancel the listing and issue the seller a warning. Enough warnings, and the ban the seller entirely.

If you really look at the situation, it is entirely of eBay’s making. As they raise the prices.. as they nickel-n-dime the seller.. the more this situation will happen.

And it isn’t like the seller.. or anyone, for that matter.. is getting anything back for the increases in prices. Nothing.

The best thing for everyone would be some good competition. But, like the Ma Bell (AT&T) of the past, there just isn’t anyone else in the same ballpark. Like the cable companies, we’ll just be forced to continue to pay the pig. Man, and I haven’t even mentioned anything about the Paypal transaction fee increases…

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