Amid Customer Backlash, eBay Reduces Some Fees

The online auction giant cuts prices and steps up support in response to criticism over a previously announced fee hike.

Online auction giant eBay Inc. has reduced some of its prices and stepped up support options in response to criticism over a fee hike announced last month.

North American users will get expanded access to phone support and will see some fees drop slightly, although key price increases, such as those affecting Store subscriptions and inventory, remain untouched. eBay has increased fees annually for the past four years, but the most recent changes angered many smaller sellers, who said the fees would in some cases erase their profits.

In an open letter to users posted on Sunday morning, eBay North America president Bill Cobb wrote that the changes were a response to customer ire. Besides the change to Store Inventory Format final value fees, Cobb said customers had expressed "concerns about customer support, the amount of change we make to the site on a regular basis, and trust and safety."

One of the most significant changes will be to extend telephone support to eBay Store subscribers starting on April 1. The option is currently only available to Silver, Gold, Platinum and Titanium PowerSellers. The company will also end "most" of its automated e-mail responses to customer service inquiries—instead, users will receive a message from a real representative, except to acknowledge receipt of spam or policy violation reports. The new e-mail policy will begin in the next 90 days.

Cobb didnt specify whether eBay would be hiring new staff to deal with the greater volume of customer communication—he said the focus was on "giving our [customer service] reps the flexibility and tools they need."

He defended an unpopular increase on Store Inventory Format final value fees, saying the new fees "make sense" because insertion fees for the items are only two cents. To appease Store operators, however, eBay in May will credit the price of one months Basic Stores subscription—$15.95—to all sellers who operated a Store for the month of April. The new fee structure, which raises a Basic Store subscription 60 percent from $9.95 to $15.95, takes effect on February 18.

Other fees will be reduced. As of midnight Sunday, minimum insertion fees for Auction-Style listings, Fixed Price, Motors Non-Vehicle and B&I non-Capital Equipment categories were reduced from 30 cents to 25 cents on and, Cobb said. "eBay Germany has always used this pricing, and users there have benefited from higher conversion rates on items with lower starting bids," he wrote. Cobb said he will be hosting an online meeting to gather more user feedback later this month.

eBays profit growth is currently under pressure from the costs of expanding overseas and costs associated with its PayPal unit. Those factors, along with slow holiday sales and the weak dollar, last month helped the company miss its Wall Street targets for the first time in years.

/zimages/6/28571.gifClick here to read about eBays latest acquisition.

However, the main reason eBay is raising prices is because it can, according to industry analysts. The company has what some industry observers call a "virtual monopoly" on the online auction business because of the vast numbers of buyers it addresses, and because of that users simply put up with fee increases, analysts say.

The latest fee hikes mainly affect lower-volume sellers, and some of those vendors might now begin to head for the competition, some industry observers have said.

/zimages/6/28571.gifCheck out eWEEK.coms for the latest news, views and analysis on technologys impact on retail.