March 20, 2013
As an eBay seller you have probably heard about eBay's announcement on Tuesday, March 19, 2013 regarding the Spring Seller Update. The question you now have is what does it mean to my business and what changes if any do I need to consider. I'd like to tackle that question because like you I am an eBay PowerSeller and I need to find those answers as well. Do I stay put and just let the changes roll over on May 1st or are there things I can be doing now to shift my selling strategy to take advantage of the new landscape that eBay is putting in place soon.
As I've spent the better part of a day researching this question I think this seller update is significant enough that we all need to evaluate what to do moving forward. Previous seller updates have dealt with some minor rule changes or things that were inconsequential to my core business on eBay. However, with this update eBay is making drastic changes to the fee structure and you better believe that is going to affect your bottom line. So are these changes going to help or hurt me? Well let's dive in and find out.
Let me preface this post by saying that in the summer of 2012 I aired an episode of my Scouting Hot Finds Radio show in which I talked about selling on eBay. One major focus of this show was to break down the fees. My central question was "Can you make money selling $5 items on eBay?". Rather than rehash that content I'll invite you to listen to the archive of that show. However, a relevant takeaway from that show was the very day I recorded it my own business on eBay changed forever. After crunching the numbers I decided that subscribing to an eBay Premium Store ($49.95/month) was a mistake. I had about 300 items listed in my store and that very day I pulled all of those listings down and closed the store. Mind you this was a store that I had maintained for close to a decade so this was no small tweek in my plans. Instead, I decided to move in a new direction with building a new selling platform off-eBay. In fact with the help of some other sellers I did a follow-up radio show titled "eBay Alternatives" because so many of us were fed up with eBay stores.
So as I read the first bits of the 2013 Spring Seller update my ears perked right up. Did they just say "free listings for store owners"? A major gripe that led me to close my eBay store was it seemed like you could get a better deal out of eBay by not having a store. As you may know standard sellers that don't subscribe to a store can actually get 50 free auctions/month. At the time store sellers were shut out and were charged full price for insertion fees. So my strategy became to use my 50 free listings and take advantage of eBay listing specials to live strictly in the auction world on eBay. By being patient I could avoid most listing fees and only pay when an item sold.
To me the pressure on eBay store owners did have very real consequences. I have been blogging and writing in forums about eBay since 2006. Over the last 5 years I've noticed a steep decline in the number of sellers in my main category (Collectibles/Boy Scouts) that attempted to keep open a large eBay Store. At the time of writing this post there are 15 eBay sellers in the Boy Scouts category who maintain eBay stores with 1,000+ items. My prediction is this number will increase dramatically over the next year as the new changes begin to impact how sellers act on the site. Click here to see a snapshot of the largest Boy Scout category eBay stores.
So why do I think there will be more stores and possibly more items being listed in the coming months. Well first let's take a look at the new fee structure compared to the current one that is being retired. The chart I've created is pretty self explanatory other than the column "True Cost". You won't find this on eBay's reference page but I am attemping to account for the cost of "free" which is anything but. So the equation is the cost of the store divided by the number of free listings you are getting. So in my example someone paying $19.95 for a basic store is essentially getting a discounted rate on their first 150 auctions/fixed priced listings of 13 cents as compared to the normal listing fee of 25 cents per item.
|Fees Under the New Seller Update - May 1, 2013 Implementation|
|Rate Plan||Subscription||Free Listings||True Cost||Auction||Fixed Price||FVF|
|Current Fees For eBay Sellers Prior To Spring Seller Update|
|Subscription||Free Listings||Auction||Fixed Price||Auction FVF||Fixed Price FVF|
Now I'd like to offer some big takeaways I have as a result of reading the seller update, listening to eBay radio, and crunching the numbers. If you have some additional ones I welcome you to leave them as comments to this post.
Seems to me that eBay is flattening the difference between an auction and a fixed price listing. In the past there have been wildly different listing fees for selling with these two types of formats. For example I recently sold pieces of a big collection using the fixed priced/best offer strategy. As a seller who does not subscribe to a store I was hit with a .50 cent per listing fee. As a standard seller I did qualify for 50 free auctions per month but this did not apply to fixed priced items - now it will. Notice that under that new fee structure not only does the distinction between auctions and fixed price disappear from the free listing offer but the listing fees have also been flattened to .30 cents. So to a standard seller there is essentially no difference between the two. The 10% final value fee (FVF) is a compromise between the 9% I used to pay for auctions and the 11% I used to pay for successful sales of fixed price items. I for one really like the effect of neutralizing the carrots and stick approach that led me to make selling decisions based on fees. No under the standard plan you can instead focus on what is best in the final result irregardless of the fees which are now uniform.
If you are wondering why it might now make sense for you to open an eBay Store then you can use a free tool on their website to evaluate your situation. The fee illustrator will crunch hypothetical numbers for you and let you see the results. However, for me it comes down to this. If I know about how many auctions/fixed priced listings I run per month can I save money on listing fees by subscribing to a store. If you follow the chart that I laid out above you can see that essentially you can prepay a discounted rate for listings in either format by opening a store. In fact even if you plan to only use the auction format you might still want to subscribe to a basic or premium store because the per listing fee will be discounted.
For example if I am a seller that typically runs 100 auctions per week (assume 400/month) let's crunch the numbers. If I am a standard seller I will get the first 50 for free and then pay 30 cents per listing for the rest (350 x .30 = $105). For those listings that sell I will then incur a 10% FVF. Now contrast that with using the same strategy but subscribing to a premium store. Up front I will pay $59.95 but now all 400 auctions are covered in my 500 free listings bonus. Instead of paying $105 I've saved 43% on listing fees on top of getting a better deal on the FVF which is just 9% for store owners. If by chance you also subscribe to eBay's Selling Manager Pro (I do!) then that's another $15.99 in savings because a Premium Store subscriber gets it for free. All together for me personally the difference would be $61.05 which is more than a 50% difference in my favor. Those kinda numbers get into the no brainer realm of whether this new fee structure would lead me to make a change.
As I mentioned before there are not many sellers in the Boy Scout category that I live in which have eBay stores with more than 1,000 items. However, that doesn't mean there aren't lots of sellers who could have big eBay stores but have chosen to not go that route. Let's now look at these new numbers and run the figures for a Scouting friend of mine Mark Graff (seller 2003hdman). Currently he has the largest store in the category. I'll assume that he has a premium store because under the current fee struture I don't know anybody shelling out for an anchor store. So right now he pays $49.95 per month and 5 cents per fixed priced item fee. With a store weighing in at 7,146 items my guess is he is paying right around $407 in fees every month just to keep the lights on. Under the new fee structure he could subscribe to an anchor store ($199.95) and take his 2500 free listings. Then to get the rest of his items up would cost him the same 5 cents per listing. In this scenario he will come out at around $430 in fees to accomplish the same goal. A few dollars more however if he is interested in mixing in some auctions he can now get those listings for just 10 cents each with an anchor store. If Mark decides to stick with a Premium Store at the level he's at now it will cost him. Under the new fee regime his comparable fee would be around $725. So if Mark listens to my advice (hey Mark!) he can realize a 41% savings on listing fees by upgrading his store to an anchor store on May 1. Either way he will definitely enjoy the reduction of FVF by 2% (11% down to 9%) in this new fee structure.
I think what every serious eBay seller has to do now is crunch some numbers and find their sweet spot. Again the fee illustrator can help you with that but I prefer a good old fashioned spreadsheet. The one I've created below shows the new fee structure with a range of listings. Sure we don't always know how many auctions or fixed priced listings you would run in a month but this can give you a shotgun guess as to the scenario that will best help you hold down fees. The stages highlighted in yellow show the best value for that range of listings.
It is very interesting to me to note that the sweet spot comes way before the number of free listings you can get at each level. For example wondering when is it better to jump in and get a basic store (150 free listings for $19.95). My math shows that if you run more than 117 listings in a month you should upgrade to the basic. What if you are even more active on eBay than that and are wondering whether you should move up to a premium store. The sweet spot in my calculations is if you run more than 328 items in a month it would save you on fees. I stated in my radio show last summer that nobody in the Boy Scout category should go with an anchor level store. However, that math has now changed and if you are going to do more than 1,621 listings per month the anchor will save you money versus just having a premium store.
I want to conclude by saying that every seller really needs to crunch the numbers and see what the best way for them to save on fees is when everything kicks in on May 1, 2013. I should also mention that In this post I've just strictly stuck to the effect on fees in the Spring Seller Update but there are other changes that are worth a minute for you to investigate. I also purposely avoided using the discounted prices that eBay is willing to give you for a store subscription if you sign up for a year. To me this is like getting into a cell phone contract with eBay that carries early termination fees. I've just switched to Straight Talk after being with T-Mobile for about a decade so I decided to assume that we are talking about store subscriptions that are month-to-month. You can save even more if you commit to a year long subscription but that is a very individual decision for your business.
Personally I'm going to go with the Premium Store on May 1. I'm a pretty active seller and by my estimates as long as I'm launching within 328 - 1621 listings on eBay each month this plan will offer me the best savings. So while I closed down the Santeeswapper Store in July 2012 it looks like she will rise back from the ashes thanks to this new eBay fee structure. Who knows I might even shift some of my off eBay inventory back onto the site if things go well.
I welcome comments and on my blog site but I do moderate them to limit spam. Therefore, while I welcome you to post a comment it will not appear until I am able to approve it. Having said that I would love to hear some feedback and what others have to say on this topic.
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