Inflatable Madness - Buyback Madness

Therein Lies The Rub

eBay usually has 2 reasons to change pricing on the site.

1) To make more money

2) To guide seller behavior

According to John Donohoe, eBay's recent fee changes will result in a lower take rate for eBay - a graph he slapped up while he was presenting showed eBay taking a smigde lower rate after this change.

As everyone has seen by now,  the fee changes really clobber low ASP sellers and tend to favor higher ASP sellers.  In effect, it's a take from the poor and give to the rich plan, and poor eBay doesn't get their nut either.

Or do they?

Here's where the "influence seller behavior" part comes in.

eBay also announced a slew of new benefits central to the new Power Seller program, which raises the bar so high to be a Power Seller that 40% of all Power Sellers will no longer be one in a few months.  A Power Seller will now be someone who achieves a 4.5 or better on all four Detailed Seller Rankings.  Most current Power Sellers are above that level in 2 or 3 out of the 4 rankings.  The DSR that gives the most people trouble is the Shipping Cost DSR.  The Shipping DSR is the most ridiculous DSR for many reasons, but I'll save that analysis for another post.   So the perception for most sellers is that in order to raise up that DSR, they must lower shipping fees or even offer Free Shipping (for a large seller, free shipping gets you a 4.8 DSR - no, I'm not kidding).

So, Mr. Large Seller goes from 5.99 shipping to Free and raises his price.  2 things will happen.

1) Their sellthru rate will fall, meaning they pay ebay more fees vs. what sold, and

2)  they are now paying 8.75% on the shipping fee that they transferred to the price.

So if they used to sell an .01 auction for $22.00 with $5.99 shipping, under the old plan,  they would pay  .20 insertion fee and 5.25% of 22.00, or $1.16, for a total of $1.36, plus  a paypal fee of 27.99 * 2.2% + .30 cents, or $1.77 - over 6%.  ebays total take is $3.13, or  11%

So, with the new behavior ebay is promoting - free shipping,  this same auction would be  .15 insertion (a 25% decrease) and 8.75% of $27.99, or $2.45 - a 60%+ increase (yes, I know the fee slips slightly at $25.00 - I'm trying to keep it simple here people this is hard enough!)  The Paypal fee would remain the same at 6%, or $1.77.  Total cost is now $4.37, or 15.5%

This all assumes a 100% sellthru rate - anything less than that will increase fees further.  The average sellthru rate in my media categories is probably around 25%.

So don't cry for eBay come next quarters reports - their take rate is going up, or I'll be a monkeys uncle.

-K

Just Please Don't Call It Microhoo!

Microsoft and Yahoo, together at last.   I think the most stunning thing about the entire affair is the fact that Microsoft revealed today that they've been in serious talks with Yahoo for 18 months - that's an unbelievable job of keeping something this massive from the average investor.

The secondary speculation was about how Google would respond - Yasoft was a direct defensive play against the search wizards.   Would they buy AOL?

Why in the name of Gore's Green Earth would Google do that?  AOL, sorry to say, has nothing to offer.

After their earnings miss yesterday, I'm sure what most Google employees did today was stare wierdly into their mirrors, as if for the first time, as they all realized they are human.

Kevin <---- AAAAAAHHHhhhhhh!

Why oh why can't eBay just make things easy on me for once?

Lots more to say about the conference - as soon as I run numbers for 18 hours on just how bad my fees went up.

(sigh)

Oliver Stone is Everywhere!

Here I am at the eBay ecommerce forum, and in the last 4 hours I have heard enough theories as to what changes eBay will make tomorrow that even Oliver Stone would be proud.

Here are the leading theories:

1.  eBay will lower insertion fees sitewide for all formats and raise FVF's.  Variation 1:  eBay will lower fees for Store and Fixed price, and leave auctions alone.   

2.  DSRS -  eBay will favor sellers in search with good DSR's.  Variation 1:  eBay will offer volume discounts to sellers who list in volume and maintain a certain DSR rating (my guess: in shipping).

3.  eBay will adjust fees by category -  Media sellers get lower fees, etc.

eBay treated all of us to a nice italian family style meal this evening, which was very nice.  There must have been 300 sellers in the room, and lots of 3rd party as well - it all points to tomorrows big announcements and how big they may be.

Meg Whitman spoke and gave a short farewell speach, then introduced JD.  She got a big standing O.

In 8 1/2 hours, all will be known.

-Kevin

Awaiting the eBay surgery

When I was 7 years old, I developed these little bumps on one of my eyelids.  The doctors call them stys.  It required them to numb me up and scrape them out while I was still awake.

So the procedure was as horrible as it sounds - a shot in the eyelid, a cold clamp pulling my eyelid down to the floor, and the sound of scraping...

6 months later,  I developed another one.

Let me tell you, the second time was far worse than the first time.  Why?

Because I knew what was coming.

Tomorrow begins the 2008 eBay Top Seller Summit -  a gathering of ebays largest sellers.  eBay will usually announce changes at these summits which will cause me to seriously retool my business model on eBay.  This year may be the biggest one of all for announcements.  Am I excited?

Um, no.

Why?

Because I know what is coming.

Hello World!

Hello world!  It's my first post!

Awesome!