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eBay Introduces New Listing Type

by: Scot Wingo August 20, 2008 | about stocks: EBAY    

Scot Wingo

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Wednesday eBay (EBAY) announced (microsite and ebayink) another package of changes (fingers crossed this is the last of them for 2008!).  The bulk of these changes roll mid-Sept so there's some time to ponder them and change strategies (more on that after the summary of changes).

There are some minor/expected/well predicted changes such as:

  1. Electronic payment policy - eBay is eliminating non-electronic payment methods such as cash and money order.  The argument is that these are the least safe methods out there.  Merchant credit-card accounts and paypal (of course) are now the only valid payment options.  There will be lots of conspiracy theories around this effectively being a step towards a paypal-only world for eBay and what-not, but for business-oriented sellers this won't be a surprise or a big deal.
  2. Shipping limits - eBay tested these in DE and must feel they worked well as they are coming to the USA. Basically certain categories have S+H 'ceilings'.  You are not allowed to list anything that has S+H above the ceiling.  However,  if you have multiple S+H options, only one has to be below the ceiling, others can be above (e.g. if you have standard+expedited shipping, the standard has to be below the ceiling, but expedited can be above).
  3. FVF discount for free shipping - There's going to be some pretty compelling discounts for offering free shipping. I'm guessing these will DSR based so my concern here is that it's generally well known by sellers that DSRs are broken (UPI and international) and thus I worry that eBay continues to build on this 'less than perfect' foundation.

The meat and potatoes - Welcome the new FP30 listing!
Prior to today's announcement, sellers effectively had two listing types (and associated 'rate cards' for each): core and store.  eBay has now introduced a new, third, listing type that is kind of positioned in the middle.  It's a 30-day, multi-quantity fixed-price listing (I call it FP30 for short).  I say it's in the middle because it has the lower listing-fee and duration of a store-listing, but it has a lower fvf (by category) and it gets core exposure.   Sellers that wanted FP on core had to kind of wedge their item into the auction pricing (which is expensive because the listing tiers up based on price) and live with a shorter duration (7 days on avg).

Taken individually this is not something that I think would be a big change, BUT when you marry this new listing type with the changes that eBay has made to BestMatch and Finding (de-dupe and 10-limit), eBay's strategy has become much clearer.

With this new listing type instead of fixed-price seller wedging their listings into the auction marketplace, there is essentially a bifurcation of the marketplace.  You'll have the old auction world with it's rate-card  and search algorithm (BM that consideres ending-time)

And now we have a new fixed-price world with it's own listing type, search engine (BM that ignores ending time) and fee structure

The new FP30 fee structure
Here's how I've been thinking about the FP30's fee structure.

First it has a .35 listing fee - regardless of start point.  You can list an item for $1 or $1m and it's still .35.  Also remember this is multi-quantity so you can list quant=1 or quant=1m and it's still .35.

FP30 has different 'tranches' than auction-style listings (auction dips at $25, fp30 at $50).  I call them T1, T2 and T3.

T1: $0-50
T2: $50-$1000
T3:$1,000+

And finally FP30 has FVFs for these tranches that vary per category.  Here's a quick summary of top categories:

Computers: (this is the lowest and very aggressive IMO):

T1: 6%

T2: 3.75%

T3: 1%

 

CE+photo:

T1: 8%

T2: 4.5%

T3: 1%

 

Media:

T1: 15%

T2: 5%

T3: 2%

Motors parts+accessories and apparel:

T1: 12%

T2: 9%

T3: 2%


All other categories:

T1: 12%

T2: 6%

T3: 2%

Example of FP30 economics

To make sure everyone understands FP30, here's an example.
SellerX lists 20 pairs of shoes for $50 (each of course) and sells 10 of them over 30 days.

Listing fee: $.35 (note this is not *10 as it is multi-quantity for one price)
FVF: 12% * 50 = $6 * 10 = $60
Effective take rate: $60.35 for $500 in GMV for an effective take rate of: 8.28%

Comparing this to the auction rate card is a little apples to oranges because there are lots of variables, but let's do an exercise that gives the decent auction economics to see which comes out better.

SellerX lists 10 items for $50 (well that would be dumb so they list it for 49.99) and they all sell (100% conversion rate).

Listing fees:
10 * 1 = $10

FVFs: 10 * (2.19+3.5*25) = $30.65

total fees: $40.65.  Effective Take rate: 8.13%

So in this scenario, auction-style wins. However if you drop the conversion rate to 33%, you get to where the listing fees are 30*1=30 and the total fees go over the $60 FP30 range.

The other variable is ASP and I encourage everyone to experiment with this math for your items using your conversion rates and ASP to see what's right for you.

Impact on seller's strategy
In the economic example above, 33% conversion rate was a tipping point where the FP30 listing's lower listing and higher FVF makes it less expensive from an effective take rate perspective.  So one strategy would be to consider auction+fp30 as essentially three 'buckets' driven by conversion rates (look at it per sku):

  • If CRs > 50 - you should probably continue with the auction-style listings, use BIN if you need true fixed-price.
  • If CRs between 10-50, you whould consider fp30
  • If CRs < 10 you should look at eBay stores or not list the items on eBay.

The pitfall with this approach is my sense is eBay is going to really favor fp30 within BestMatch so most likely SKUs will behave differently under each and you'll have to experiment.  For an extreme example, you could have a boat load of an item that in auction format is basically hidden by bestmatch+dedupe and you get a 5% CR.  You'd be ready to move that puppy off eBay in a heartbeat.  However if you put it in FP where it's not de-duped and hopefully not going over your 10/page, you could bump up to 40/50% CRs which would indicate put it in auction-style, but that wouldn't be right in this case.

Another way to think about this is the fp30 gives you the chance to stuff as much product (opportunity GMV) into your 10 listings/page as possible for great economics.  So there's a 'store shelf' play here too to consider if you are having dedupe/10-limit issues.

ChannelAdvisor + FP30
Realizing the strategic importance of FP30, we've made sure that both our MarketplaceAdvisor standard and premium offerings will launch with support when FP30 hits the streets in mid-Sept (we're ready now).  We're also holding a free webinar for customers and other interested parties to discuss the new format and some other strategy ideas we have. This should be a great foundation heading into the holiday selling season and you can sign up here.

Disclosure: I am long Google and eBay.

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This article has 10 comments:

  •  
    Aug 20 08:38 PM
    Scott -- This is all well and good for the seller who lists many of the same item at once, but it's a mess for those of us who list one of a kind and fairly expensive collectors items. As background, I do around $7-$10K in sales per month with an average price of about $100 per item.

    1) The fee structure goes up for us dramatically on the back end. This may make fixed price a poor option. So while my listing fee on average goes from $2 to 15 cents, my final value fee goes up to $10 from about $5 - a net increase of $3 per item sold. (Granted, if items don't sell the first time around, it's now cheaper to relist - but as a rule, I only list items once, and then save them until ebay has a listing sale before reposting)
    2) In my category (16mm film), I'm going to be crushed by the $6 shipping limit- most of my items are in the 12+ lb range and generally cost 2-3 times that much to ship and insure.
    3) Many collectors out there are older people with disposable income -- and many of them are leary of using online payment systems. I get 30% of my orders paid with check or money order. I expect those sales will just be lost.
    Reply
  •  
    Aug 21 08:02 AM
    I bet Amazon never spent more than a nano second worrying about competition from eBay because they were smart enough to know Donahoe would destroy eBay for them!

    Dinah
    Reply
  •  
    Aug 21 12:02 PM
    As a stockholder I would truly love to see this stock double within the next twelve months.

    This latest move by eBay I feel is positive and they just might pull it off!

    There will be millions of new sellers attracted and old sellers coming back!
    People will pay 35 cents to list their item/ or multi/ same items/ for 35 cents for a 30 day duration. That means a 30 day exposure for 35 cents on eBay and the internet!

    A traditional auction charges nothing up front. When item sells they receive a 20 percent commission or seller fee plus a 5 percent auction premium. Total paid out is 25 percent for each item sold.

    With new eBay fees my friend can list 10 identical Duvet covers for 35 cents. A 3.5 cent listing fee for 30 days of exposure! When sold she will pay about 8 percent in commission on each item sold.

    Compared to a regular auction eBay is now a steal!

    I can see it now! Millions of Liquidators with same items / listing like crazy! Imagine listing 100 or 1000 Teddy bears for just 35 cents! Getting a 30 day exposure on eBay and the internet! And paying just 8 percent commission. What a deal!

    Makes me wish I had a million Teddy bears to sell.lol.
    Makes me wish I had a million shares of eBay right now!




    Reply
  •  
    Aug 22 05:01 AM
    Hey Tippie with the million teddy bears, has it occurred to you that with all the mass-produced stuff flooding into the new fixed price listings, sell through rates are going to fall through the floor? Ebay has done nothing to increase buyer demand on the site, its ad campaigns are lame, it plays cat-and-mouse with Google, and it has no plans to lauch a serious campaign. Demand has been drying up for years and this will only make it worse.
    Reply
  •  
    Aug 22 10:36 AM
    "Makes me wish I had a million Teddy bears to sell."

    And they're going to sink ebay!
    Reply
  •  
    Aug 22 11:13 AM
    I dont get where you get the 8% ... they raised all the final value fee's for this new fixed price 30 day option ... was 8.5% now its 12% for items that are sold between $1.00 - $50.00 and if its over $50.00 the price was 3.5% but goes way up to 9%!!!!!!!!! ... you think this is a good deal? are you serious? this is just plain robbery for people that auctually sell items, its great for a person that wants to list a bunch of non-selling items and clog up Ebay with no sell through and thats what will happen, Ebay will lose money here, they will get a bunch of listings that dont sell, people will put stuff on with such high prices that if they do sell they wont care because they will be able to afford the fee's, this will take the bargain out of Ebay and make it super expensive to buy from, as soon as these new 30 day fixed priced items come online its going to be sad sad sad ... I mean if you look at all Ebays models on this they assume you would have to relist your fixed price auction 3 times before you sell it, then its cheaper ... who wants to list items for 3 times before they are sold? ... most likely if its taking you almost a month to sell your items you are either pricing it too high or its not an item in demand and most likely not worth selling, plus Ebay sell through has gone way way down since the new Best Match came into effect, that was a major boon for them and whoever thought that was a good idea to lead customers around by the nose and only show them what Ebay thinks they should want is just a moron.
    Reply
  •  
    Aug 22 11:28 AM
    This is all Ebay spin to make shareholders think this is going to be great, just like when they raised all the seller rates several months back ... their 3rd quarter on Ebay is going to be a disaster ... they were giving fee shipping coupons to everyone and Ebay Bucks for purchases, remember all that comes due this quarter coming up and comes right out of Ebay's pocket, so the money they made by raising sellers fee's last quarter is all going to be gone, gone, gone this quarter, low sell through because of Best Match, so thus not as much final value fee's (thats where the real money comes from) ... tons of non-paying bidders thus no sell through and refunds on final value fee's back to the sellers, mark my word 3rd quarter will look like a fire sale ... how cant it??? ... All Ebay knows how to do it raise fee's, then sellers have to raise their prices causing "no sales" ... Ebay doesnt realize when you have a wide selection and low prices you dont have to do much because people will find you ... now Ebay with high prices and a ton of high priced junk that people cant sell in a week will clog and kill Ebay ... quick turnover helps Ebay and helps sellers because they can sell cheaper because they know its going to sell and they can get another item on quick and sell that, Ebay has to get their minds around this, the new management are just so unbelievabley stupid its almost shocking they dont know this basic stategy.
    Reply
  •  
    Aug 22 02:33 PM
    Ebay has become the most despised company on the internet.

    The second jewel in their crown is going to be known as the company of most morons!

    How many policy changes since the beginning of 2008? Over 60? Over 70?!

    Can anybody keep up?!
    Reply
  •  
    Aug 24 12:55 AM
    To Dinah Balk:

    Great comment! I would LOVE to hear what Jeff Bezos comments are regarding ebay NOW!

    If he would even lower himself for the bother! :~)
    Reply
  •  
    Aug 24 11:05 PM
    Embarrassing math error in your article, Scot:

    $60.35 for $500 in GMV is 12.07% - not 8.28%.
    Reply
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