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Some eBay Sellers Are Going, Going, Gone
Feb. 05– Trisha Dixon used to swear by eBay. Now, she swears at it.For six years, she sold enough scrapbooks, children’s clothes and health products to pay bills and squirrel away cash. Last month, she all but ended her association because of higher fees.
“They can charge whatever they want. They’re a monopoly,” says Dixon, 25, of Anaconda, Mont. She estimates her monthly eBay bill will jump 50%, to $1,500.
Prices aren’t the only thing eBay (Quote: EBAY) raised when it announced changes to some online-auction services last month. It raised the ire of thousands of its small-business sellers, many of whom are threatening to ditch eBay when the price increases go into effect Feb. 18.
“We feel betrayed and abused,” says Rhonda Gorman, 46, who sells clothing and household goods out of her cramped apartment in Costa Mesa, Calif. “We’re getting stomped and need to go elsewhere.” (Related chart: How price increases will affect eBay Stores)
The budding backlash, punctuated by eBay-bashing Web sites and online message groups, underscores a rough patch for the usually Teflon Silicon Valley giant. Last month, eBay missed quarterly earnings estimates for the first time in at least two years, sending its stock tumbling more than 20% over two days. EBay shares sank 4.4% to $77.93 in trading Tuesday.
The defection of some small-business users among 135.5 million registered users won’t register a blip on eBay’s finances. But the level of resistance this time, after several price changes the past five years, appears to be more deeply rooted at a time when eBay is aggressively reaching out to small businesses with more generous credit lines and financing options.
About 430,000 individuals and small businesses make part or all of their income from listings on eBay – nearly three times the number in late 2002.
The charges themselves are small for casual sellers, but add up for small businesses that sell hundreds of items a month. “I want eBay to realize it’s the little guys that got them to where they are,” says Suzie Eads, 37, who has sold more than 10,000 books and collectibles on eBay since 1998. The price increases would increase her monthly eBay bill 40% to $700. She plans to sell fewer items on eBay, and more on rivals Overstock.com and Amazon.com.
More choices
Each time eBay has tinkered with prices, customers threatened to bolt. But few have followed through because they had limited options. That is changing. Smaller auction sites Bidville, ePier.com and iOffer.com, among others, report an increase in new users. Wagglepop.com says 2,700 sellers, most of them eBay defectors, have lined up to join when it starts later this month. “We struck a nerve at the right time,” says CEO Ray Romeo, a former eBay user.
Amazon offers digital real estate for small merchants to hawk new and used goods. And businesses increasingly are advertising on search engines such as Google and Yahoo.
Overstock will drop listing fees in half for a month when eBay’s new prices start. Its auction listings have soared 79%, to 42,600, since eBay made its announcement last month. EBay listings are up slightly to 13 million over the same period, according to http://www.dealscart.com, which monitors auction traffic.
“The beautiful thing about the Internet is sellers have a lot of choices,” says Michael Dearing, an eBay vice president and general merchandise manager.
Executives at eBay say the fee increases apply to optional features, such as photos of listings and a buy-it-now option, and are intended to stimulate more auction activity – not revenue. “It’s about managing the marketplace, not the top line,” Dearing says, adding that eBay’s take from items sold on the site has hovered near 7% since 2002.
Indeed, eBay’s fee increases won’t bring in much – about $60 million, or a little over 1% of the company’s expected $4.3 billion in 2005 sales – says analyst Mark Mahaney of American Technology Research.
Until recently, the fee-based tinkering has contributed to eBay’s explosive growth. Registered users soared 42% to 135 million last year. The value of goods sold on the site improved 44% to $34.2 billion. Meanwhile, an internal survey of sellers by eBay found that four-fifths of them consider the company a “trustworthy business partner.”
What is more, the changes apply only to eBay Stores, small businesses that buy and sell more frequently than casual users. They accounted for just 7% of eBay’s 1.4 billion listings last year. “Many sellers who think they will be affected aren’t,” Dearing says. EBay is explaining its new rules via its Web site, e-mail and phone calls, he says. It’s the first price increase for eBay Stores owners since 2001.
Deeper issues
Still, the wrenching outcry – disgruntled sellers have resorted to calling it FeeBay and GreedBay – could reflect deeper issues, says Ina Steiner, editor of AuctionBytes.com.
EBay customers are “fed up with shrinking profits, more complicated policies, the occasional fraud and inadequate customer support,” Steiner says. “To hear how well eBay is doing financially, and to see ongoing problems on the service, is discouraging.”
Many claim eBay’s “nickel-and-dime charges” are driving away sellers of inexpensive items. “It’s not worth selling anything under $10, if you factor in the costs of listing fees, shipping, packaging and gas to go to the post office,” Dixon says. She is donating Tupperware and other items to charity as a tax write-off rather than lose money on eBay.
Marilyn Baker, 42, a seller of lingerie in Streator, Ill., is particularly irked by eBay’s decision to charge 35 cents instead of a quarter for a photo with each listing. “It’s hard to sell clothing unless you have photos, but I can’t afford this,” she says. Baker is resurrecting a Web site and for the first time opening a physical store this spring. She’s also moving 1,300 items to iOffer.com and Wagglepop.com.
Despite the criticisms, eBay’s Dearing insists the company “has been, and always will be, the place for people to build small businesses.” “The small seller built this company,” he says.
Yet as business novices learn the entrepreneurial ropes on eBay, many are weaning themselves off of it and creating Web sites and storefronts, which they advertise on search engines and through eBay listings.
Bobby Beeman, 42, used to sell antique toys out of a Dallas store before he discovered eBay in the late 1990s. Now, like other eBay sellers, he is considering reopening a physical store. “EBay used to save me money,” Beeman says. “But with all these extra charges, I’m not sure anymore.”
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