EBay Plans Lower Fees, Tighter Seller Standards

EBay unveiled changes to its online marketplace Tuesday that the company characterizes as sweeping and historic and that are aimed at boosting sales by making the shopping experience simpler and safer.

The changes, which include lowering some fees and raising merchant standards, were announced at the company's eCommerce Forum by John Donahoe, who will succeed Meg Whitman as president and CEO in March.

The changes, which will be implemented at different points in the coming weeks and months, come at a time when eBay is struggling to boost growth of transaction volume and revenue amidst increased competition from the likes of Amazon.com, which in recent years has attracted many merchants away from eBay.

Donahoe said last week during a conference call to discuss eBay's fourth-quarter financials that the eBay marketplace business hasn't been growing as fast as he would like and that changes would be coming to make the shopping experience easier and safer.

EBay's fourth-quarter earnings and revenue exceeded Wall Street's expectations, but its outlook for this year was considered generally disappointing. For example, the conservative 2008 forecast, coupled with slowing growth in the marketplace business, led Citigroup to downgrade the stock to "hold."

While eBay's marketplace "playbook" has served it well for the past 10 years, the e-commerce game has changed significantly so the company must now try bold, new plays, Donahoe said during Tuesday's presentation, which was webcast.

Specifically, buyers have much higher expectations about online shopping than 10 years ago, so eBay must adapt and make their experience on the marketplace a better one, he told more than 200 of the company's largest merchants at the Washington, D.C. event. Likewise, eBay has to do a better job of helping its best merchants be more successful, he said.

"The Web has evolved around us, and what sellers and buyers have come to expect has evolved right along with it. Today, buyers want a very high level of value, selection and convenience. They want to shop on their own terms in a safe, easy-to-use environment. Sellers want a platform that meets the reality of doing business online today and that scales to their needs," Donahoe said.

In short, eBay finds itself at a crossroads where it can't afford to make just incremental changes if it wants to remain a leader and meet its customers' expectations, said Donahoe, president of eBay Marketplaces. "We need to redo our playbook, we need to redo it fast and we need to take bold actions," he said.

Donahoe announced that eBay will introduce an insertion fee reduction in the U.S. Feb. 20 by cutting the cost of listing items by 25 percent to 50 percent. By reducing the impact of items that don't sell, eBay hopes merchants will list more products. In turn, eBay is increasing the so-called "final value" fees it charges merchants when items are sold. The insertion fee cuts apply to auction and fixed-price items.

For example, the insertion fee for a $25 auction or fixed-priced item will drop from $1.20 to $1.00, while the final value fee will increase from 5.25 percent to 8.75 percent. A full rundown of new fees can be found here.

EBay will also do away with fees it charges U.S. merchants for its "gallery" option, in order to encourage merchants to include more photos with their listings. Fee changes will vary by country.

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