eBay's Rate Hike for U.K. Sellers Risks Alienating Customer Base

Though eBay's CEO said recently that the e-commerce site plans to focus on value shoppers, it's sending a conflicting message by raising seller fees in the U.K.
By Rebecca Borison ,

NEW YORK (TheStreet) -- eBay (EBAY) - Get Report needs the cash, but hiking fees on users of its U.K. web site risks alienating a nation of customers.

The San Jose-based e-commerce platform said this week that U.K.-based sellers will be hit with higher transaction costs. The announcement would appear to somewhat contradict CEO John J. Donahoe's declaration earlier this year that eBay wants to focus on its core customers, people looking for lower prices on name-brand products.  

According to Donahoe, the so-called thrifty customer looking for deals accounts for a majority of eBay's customer base, as opposed to those who simply want the convenience of buying full-priced products online.

Yet on April 2, or eBay's commissions on U.K. sales will increase in many categories, while discounts available to premium sellers will decrease.

"One side of the house is saying, 'We're looking for value shoppers,' the other is [saying] 'We're raising fees,'" said ChannelAdvisor CEO Scot Wingo, who follows the e-commerce industry. "To have lower prices for buyers, sellers need to pay lower fees, so when fees go up, prices to buyers go up. It seems to be off-message."

Starting in the summer, sellers will also have to pay an additional fee if an item isn't sold within 18 months and the seller wants to keep auctioning it. In addition, sellers who subscribe to the Anchor Shop, which used to offer unlimited listings, will now only get 50,000 listings per month.

For its part, eBay claims that the new fee structure is actually simpler.

"We keep our fees under continual review and believe that overall our new fee structure introduced in the U.K. is simpler and remains very competitive," said Ryan Moore, senior manager of global corporate affairs and communications, in an email. "eBay's business is growing and we are investing to help our sellers grow their businesses further. This investment comes at a cost, which is one of the factors in our decision to make small changes to our fee structure."

eBay is already struggling to grow sales, trailing behind the e-commerce industry with only 6.8% year-over-year growth in January same-store sales, per ChannelAdvisor. The e-commerce industry as a whole, on the other hand, is growing at a rate of 15%, reports comScore.

Raising seller fees, according to Wingo, is just rubbing salt in the wound.

"Here's a company that already faces some headwinds, and they're having some self-inflicted headwinds here," he said.

While the fee hike will only be implemented in the U.K., which isn't one of eBay's major regions, according to Wingo, eBay frequently tests ideas in the U.K. before rolling them out worldwide. But he also says it's possible that after eBay examines the results of the U.K. test, it may refrain from expanding fee hikes to other regions.

"Hopefully, they test it and realize, 'Oops it's a bad idea,'" Wingo said. "If it did roll out globally, I think it would actually cause a further slowdown, because i think prices are going to go up on eBay, and that's not good for anybody."

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