I won't claim to be an expert and I've never seen their balance sheet (although I'd like to), but my guess is this was a smart move on the part of eBay executives. When you have no competition, it is a good strategic business move to experiment with the price to see what the market will bear. After all, the first allegiance of a corporate head is to maximize shareholder wealth, not to the people who are hoping to sell you pantyhose via auction. If traffic declines precipitately, watch for them to back off the monthly fee increase.
EBay to Increase Fees, Angering Sellers
By RACHEL KONRAD AP Technology Writer
SAN JOSE, Calif. (AP) -- Some small business owners who reach most of their customers via eBay Inc. expressed anger Thursday at the online auction giant's plan to boost the monthly fee it charges sellers by 60 percent. Its shares lost nearly 4 percent.
EBay outlined the increase in a terse e-mail on Wednesday to all buyers and sellers, including small business owners who hawk clothing, electronics and other low-margin commodities.
"It seems as though the larger eBay becomes, the more greedy they become," said Lynette McDonald of Alton, Ill., who has sold Barbie and baby clothes on eBay since 2001. She says she may close her eBay store entirely because of the fee hikes or raise prices she changes buyers.
Starting Feb. 18, eBay said the monthly subscription fee for people who operate "Basic eBay Stores" will increase from $9.95 to $15.95.
The fee for a standard listing of 10 days will double, from 20 cents to 40 cents.
"This site used to be a place where one could get a good deal," McDonald said. "Now that the starting prices on goods are higher to accommodate the growing fees incurred, there are no more deals to be had."
Such reactions underscore the popularity eBay has achieved with small business owners who can't create their own Web sites or operate a traditional bricks-and-mortar establishments. Peddling vintage china, handmade sweaters, classic cars and other collectibles on eBay generates supplemental income for senior citizens, rural Americans and others who live far from commercial hubs.
EBay spokesman Hani Durzy declined to discuss how the price hikes would affect revenue at the San Jose, Calif.-based company, which reported sales of $805.88 million in the first three quarters of 2004. The company will report fourth-quarter earnings on Wednesday. (link)
I make about two purchases a year through eBay these days so I wasn't on the floor sobbing when they announced their fee increase. But for those of you who depend on eBay for your livelihood, well, it looks like it's back to the old flea market.