EBay's Squeezing Store Owners by Claude Bourgoin

In an effort to justify the price increases by 3% and taking the eBay stores selling fees from 7% to 10%, Bill Cobbs, in an open letter to eBay entrepreneurs, attempted to calm the outrage. He says eBay is "Resetting the Balance of the eBay Marketplace". This outraged eBay Store users, who are making a business from the online auction moving inventory with the "Buy Now" feature, since their margins are slipping away as their auctions costs are climbing.

So while the increases may appear small many store owners are complaining it's going to drive some of them out of business, because on top of eBay fees you have store fees, picture storage fees, listing fees, promotional fees, and when it sells, they get hit with this new selling fee, and then finally Pay Pal fees. With all the fees many sellers operating on a tighter margin are seeing themselves being squeezed out of the stores.

According to eBay, stores represent 83% of listing, while they only represent 9% of revenues. As eBay stock prices are falling, shareholders are looking for ways to increase stock value, and the quickest and easiest way is always increasing revenues and lowering costs. So it should come as no surprise the cost of selling on eBay increases as they look to increase revenues.

According to ComScore eBay holds an overwhelming share of the market, eBay reportedly received 66 of the estimated 68 million auction visitors in Feb, 2006, alone, and while overall the market of online auction user is climbing every year by 10%. Although there overall market is being nibbled away by other auction sites like Bidz.com and uBid.com overall eBay continues to grow and as bad as some portray this price structure change on stores, it will not have much bearing on eBay's success and growth.

The sellers most affected here are the ones moving cheap article or their selling popular items that buyers expect to pay less from eBay, then if they where purchased from a retail chain and where there is a lot of competition. These retailers are faced with major decisions like start increasing prices, find more profitable products or close down their stores and move to the regular auctions and deal with a more complex administration of their business.

Although Many would argue that eBay stores still offer great value for the money, at a base price of only 16$ per month the eBay stores offers many great features including a fully customizable store front, high visibility, analytics monitoring tools, and increase visibility, so you can move products to a very targeted audience more efficiently. This is bad news for the low margin eBay store sellers taking the squeeze.

I don't see eBay being dethroned any time soon, but it will be interesting to see this market segment itself as major players like Yahoo and Google move in. As eBay gets out of some of the less profitable niches this prove to be the fuel in the fire to get this market segmentation going for other smaller online auctions to move in. So as some less profitable entrepreneurs may get squeezed out of eBay stores, many shrewd ones will be looking to get in, but we may see the little online auction, finally get a break from the auction giant.

Author Resource: Mr. Claude Bourgoin has been a contributing author for this website and can be reached here for more
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