eBay expect average selling prices to drop

CATEGORY: News

Last night eBay held their quarterly conference call where they give investors a forecast of future business and the opportunity to ask questions on the state of the eBay business. It was no surprise that profits took a hit from writing off $900m from Skype a few weeks back. To balance that the StubHub business eBay acquired at the begining of the year is booming.

As ever PayPal is the engine behind eBay’s financial success in recent years with revenues up 35% on this time last year. PayPal is the most astute investment eBay have ever made both to enable transactions on eBay and as a burgeoning off eBay business.

What is surprising is that for the last two conference calls there has been no mention of eBay Express! Meg Whitman last mentioned it in January stating “eBay Express continues to experience increased adoption and growing success”. That growing success now appears either to have stalled or simply not worth mentioning. It’s certainly not the focus for investors as a vibrant part of the eBay business portfolio.

What may not please sellers on eBay.com is an expected drop in average selling prices over the next few weeks, however welcome that may be to buyers. Talking about the three week 33% reduction in selling fees Meg said “we expect listings to increase; we except successful items to increase; we anticipate perhaps ASPs will go down”.

It’s an interesting experiment and one that eBay have never tried before, will a significant decrease in listing fees trigger an increase in listings to balance eBay’s finances? Will sellers list in greater volumes and will that drive down prices, but in turn if that increase sell through rates could sellers overall profits increase even if at lower margin per sale? Will it cause a significant shift from Shop Inventory Format to auction and BIN listing formats? eBay themselves are unsure of the impact but “were very much in favor of saying let’s see what happens when we take a pretty significant sustained decrease in insertion fee in our largest market.”

There’s may be something for UK sellers to look forward to. Meg did say “You’ll also see many of our markets around the world launch similar tests this quarter” so massive price decreases just might appear in the UK before Christmas 😀

11 Responses

  1. I made my thoughts known on my latest post on my website, but ebay has bigger issues than their ever increasing, cable-company-like fee increases. As an 8 year eBay seller, I feel like they are treating me like the dog under the kings table. Now that I have walked away from under the table, the king tosses me a chicken bon in the form of a 2 week seller fee cut. I hope eBay doesn;t expect every seller to come running back.

  2. Swings and roundabouts on whether this was a good quarter or not…. Deutsche Bank downgraded eBay to Sell from Hold whilst Soleil upgraded shares of eBay (NASDAQ: EBAY) to Hold from Sell.

    Only time will tell whether it’s right for investors and more importantly if it’s right for users of the site.

  3. Every time they do some kind of a fee sale ASP’s seem to go down because every giant catalog sku seller dumps loads of listings on the site, along with everyone else who has something in their garage.

    Simple supply vs demand… a ton a listings, high supplies, same number of buyers, lower prices. If they would just lower fees permanently and look at doing something else besides opening social networking sites maybe ASP’s will go up 🙂

  4. sell thru price is the king that govens my world

    dont care how much the fees are as long as my listings sell for a profit

  5. Rather than reducing insertion fees and therefore flooding the site with crap, wouldn’t it make more sense to keep listing fees as they are or even raise them a bit, and instead reduce Final Value fees.

  6. It would make a lot more sense for us sellers to discount the back end instead of insertion fee. Keep the quality of listing up, and encourage sellers to use some sense in thinking about their listing strategy.

    But Ebay doesn’t care about the competition between sellers within its site. Ebay’s war is with Amazon and other sales channels. If us sellers fall over each other lowering prices to get the sale from increased listings, its good for “Ebay” when the buyer compares ebay to other sales channels “I got it for almost nothing on ebay!”.

    As long as ebay doesn’t squeeze sellers right off the site, it doesn’t mater to them that seller margins fall if that results in increased sales volume on the site. Unfortunately there appears to be a large percentage of sellers who are quite happy to ell at very low margin 🙁

  7. profit is the only criteria we run our business on

    if ebay is profitable we use them, if it is not we dont

  8. It comes a point where opportunity cost plays a part. Sure making a profit is the only reason for having a business but if the amount of time spent increases disproportionately to the amount of profit made then it is time to look elsewhere.

  9. I contend it is a deliberate ploy to skew the return of trans-Atlantic visibility tests – seperating the categories receiving lowered fees on opposite sides of the pond, at the same time as reintroducing limited visibilities will result in migrant sellers hopping from site to site in order to get the best deals on fees week-by-week.

    The 33% offered by the US is insignificant compared to the UK deal in Toys and Games, but the 33% is available in the returned visibility categories if listing on the US.

    Be ready for some short term swamping therefore, and for an outcry from sellers in each country that their listings cannot be found (within the country of listing) allowing eBay to say “we told you so” regarding the reason visibility was cut back in February.

    Watch also for a surging return of non-Atlantic sellers, jumping onto the sites offering the lowest fees, category-by-category, and week-by-week. Remember also that for the next 6-7 weeks, core-auctions will perform less well than BIN & SIF, but it’s going to be a lot harder to raise the profile of SIF by just using core listings. Ancilliary marketing will be needed.

    ….. oh – and what happened to the tradition of not fiddling with the market place in the pre-Christmas season?

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