eBay Flexes Pricing Muscle

For the fourth straight year, the e-commerce superstore has increased listing fees in some categories. Can the latest price hikes stick?

For the fourth successive year, online auction giant eBay Inc. has flexed its pricing muscle and jacked up listing fees in some key categories.

The new fee structure takes effect Feb. 18 and affects sellers on the eBay.com and eBay Motors sites in the United States, Canada, Australia and the United Kingdom.

In some cases, the San Jose, Calif., company is maintaining or even lowering fees. But for the majority of store owners, the changes represent a 60 percent jump in subscription fees.

The basic monthly eBay Store subscription is now $15.95, up from $9.95, while the fee for the popular 10-day listings has been doubled from 20 cents to 40 cents per listing.

The fee structure for "Buy It Now" listings also has been restructured. Instead of paying a flat rate, "Buy It Now" sellers now will pay fees based on the price of the item for sale.

eBay spokesman Hani Durji said the changes were necessary to react to the "dynamics of the marketplace."

"We carefully evaluate the pricing structure and, from time to time, well change prices when its the right thing to do to ensure the vibrancy of the marketplace," Durji told eWEEK.com.

"For some users, yes, theres a significant overall increase in fees, but other users are seeing a decrease. We implement these changes to spur the market in certain categories," he added.

eBay has seen a dramatic increase in the "Buy It Now" stores during the past year, and the fee hike in that category is seen as an attempt by eBay to beef up revenues in a growth area.

Of the 125 million registered buyers and sellers, eBay counts about 224,000 "Buy It Now" stores worldwide. A year ago, that figure was at 145,000, and Durji said that segment represents a "strong growth area."

"We expect that stores will continue to be a driver of growth of eBay. We will continue to put resources and develop new technology to make selling more profitable for store owners. Were investing heavily there," Durji said.

/zimages/2/28571.gifClick here to read about a new industry group formed by eBay to tackle e-waste.

American Technology Research analyst Mark Mahaney said the move was a bit of a surprise. "This company has been consistent about adjusting prices. Generally, the impact is a price increase, but sometimes theyll lower prices to spur certain slow categories."

"Theyll use pricing as a lever to influence behavior, and the increases stick because of the network effect element to the eBay model. No one else has the mass of buyers and sellers so, even at the higher listing price, sellers still get more value on eBay because the buyer base is so huge," Mahaney said.

David Steiner, president of AuctionBytes.com, a site that covers the online auction world, said the eBay price adjustments have become a "first-quarter ritual."

"eBay has pricing power, and they use it every year, so this is no surprise to anyone," Steiner said. "They have the ability because theyre such a force in the market. They saw a significant number of sellers move from auction listings to fixed-price stores, and they reacted to that by changing the pricing there."

"eBay is very shrewd about monetizing all aspects of the business. In this case, the smaller sellers will feel the squeeze because its clear eBay is moving more toward the high-volume seller," he said.

"The high-volume sellers can tolerate these changes. Theyll suck it up and continue to list, but I think well see a migration from the smaller guys. This is an opportunity for some of the smaller competitors," Steiner said.

/zimages/2/28571.gifeBay is sold on grid technology. Click here to find out more.

Jupiter Research analyst Niki Scevak said eBays pricing changes traditionally stick because of the companys "virtual monopoly" of the online auction market. "When you have that market power, the ability to raise prices is there. Its quite unique that eBays price hikes have no material effect on usage."

/zimages/2/28571.gifCheck out eWEEK.coms for the latest news, views and analysis on technologys impact on retail.