eBay, Paypal...sellers hands are tied?
(Updated from the original article posted on ICBBS.com 10-23-2006)
 

If eBay is "run for members by members", why is it that so many Power sellers want out?

When I first wrote this article nearly three years ago, the signs of the impending mass exodus from eBay were already starting to show. eBay has made it clear that they want to become more like an Amazon where they get a percentage of every sold item and they might even abandon the auction business model at some point. By pushing the small sellers off the site and focusing on the Power Sellers, which are the core of its merchant army, they will effectively cross over into an entirely redirected business model. This is why they raised store inventory listing fees 400% and sold items base fee's to over 10%.  This was strictly designed to send small sellers packing and to hang onto those who could weather this finacial storm. (added 05-31-2009)

First, a Little About Me so that you know where I'm coming from with this article: I am the founding partner of IC Online Services. I am also quite busy with our XXXXXXX.com jewelry site (I don't want eBay to know who I am), www.seome.com marketing and website development, www.shopsmarter.org shopping directory and WebProfitsPro, well you get the idea that I'm pretty swamped. And if this isn't enough, I also happen to be a Power seller on eBay and a Trusted Merchant on Overstock Auctions.

Situational awareness: Please don't get me wrong, eBay was (and I emphasize WAS) once a great place for people to buy and sell their pez dispensers, used items and garage junk.  As it happens, eBay being started to trade PEZ dispensers is just an urban myth. Then as time went on it progressed to professional merchants augmenting their business by selling items at auction for a discount and then finally to Power sellers basing their entire livelihoods around their auctions and eBay store sales This is when something snapped! EBay in all of it's wisdom and greed decided that they could push charges slowly up until to the point that they make more of a profit than the people doing the selling. (Taking eBay motors and real estate sales out of this equation)

Please read this eBay fact page: http://investor.ebay.com/ReleaseDetail.cfm?ReleaseID=170073&FYear

How in good conscience can eBay boast numbers like this when in fact they profit more each day than the sellers they cater to as a whole? The reality is that they are selling a dream that doesn't exist on their site anymore, if ever. No more than steam will get the world off oil.

Even seasoned sellers can't escape the overhead: I sell more than 45% of my listed items and have good store sales, yet I still run somewhere in the 18-22% overhead range from eBay and Paypal fees. How many businesses would kill for a 22% profit margin? We have to sell at a 45% profit margin just to make what we pay eBay. Let's not forget all the charge backs from fraudulent buyers that Paypal actually back up for simplicities sake, deadbeat bidders who tie our fees and stock up for weeks and a rule book the size of a bible...etc I sell on 4 accounts and have two eBay stores by the way.

Look at the numbers: After figuring out the net profits from the last 12 months I was stunned. I found that between eBay and Paypal fees on just one of my accounts they made a little over $11,000.00 from my sales. On this same account I profited just $14,000.00. Now tell me if that isn't usury? I know, I know... Don't sell there if you don't like the fees! That's exactly my point; nobody should be selling there because nobody likes his or her fees. They should once again be a place to sell pez dispensers, used items and trash. The problem is that there just isn't anywhere else for sellers to go at this time and eBay knows it. This will change I guarantee it.

EBay's competition? The competition is (at best) fighting a wildfire with water pistols!

Overstock is the best viable option at this point but they have also gone public and are cash poor. Because they are now a public company they will be forced to start doing the same thing. Their management software and auctions are also at least 5 year's behind eBays as a whole in terms of functionality and automation. I don't regard them as a long term solution but more a bandage to a bleeding artery.

Bidville is the closest in theory to the ultimate free listing site at this point. Even after 6 years they only have about 500,000 registered members. This means that they have less than .007% (1/140th) the membership that eBay enjoys. They also only pull 1/800th the traffic that eBay does. This makes the fact clear that they may have 1/2 million members but less than 1 in 1000 visit their site daily.

Site stats via Alexa
eBay = 35,000 per Million daily http://www.alexa.com/data/details/traffic_details?q=&url=ebay.com
Overstock = 2,000 per Million daily http://www.alexa.com/data/details/traffic_details?q=&url=overstock.com
BidZ = 400 per Million per day http://www.alexa.com/data/details/traffic_details?q=&url=bidz.com
Bidville = 40 per Million per day http://www.alexa.com/data/details/traffic_details?q=&url=bidville.com

ICO's Netshoppers shopping site actually had more traffic in 2004 then Bidville (Netshoppers was sold in 2009)

With their 2005 jump attributed to yet another eBay fee increase in January, 05... Bidville has since sputtered and is losing momentum. I will not be holding my breath for Bidville to do what we all hoped it would. And again... they too were sold to a public company who then launched the Bidville, Inc IPO which is now trading for a whopping 5 cents on the OTC. They have just secured a 2.5 million dollar loan, which will do wonders for the free listing aspect of the business. Do you see where this is going? Bidville has actually been taken over. uBid Holdings formed a new subsidiary, DIBU Trading Corp., which purchased assets of the online auction company Bidville Inc. I am guessing that this was probably a bail-out.

Pondering the situation: I was working on one of my numerous projects and in my thoughts wondered how/why eBay could have such a rock solid following that even though sellers hate it, they stay there? Perplexing to say the least. Then it dawned on me that all of these sellers "have to stay there".  I ran a small investigation and my hunch was correct. In just the last few years more than 3 million sellers have either quit their jobs to jump in full time or use eBay as a second income that they now can't live without. So I asked myself (in the inward context of such questioning), how could it be possible to use the same strengths that eBay exploits to gain even a small foothold in the auction arena, to start?

A light went on in my head: Ebay enjoys their popularity because of sellers being slaves to them, almost like an addict is to drugs. Once you make it your primary basis for income you can no longer get away from them. That's exactly how all of these sellers including myself were rustled into the eBay illusion. Just when things were getting good the fees went up. Just when we overcame and adjusted to those raises by using the eBay stores, again the fees went up...and so on.

(update) eBay has now had three major and two minor fee raises since this article was first published.
Note:
PRO: They just gave a tidbit back to us this last year by lowering 99cent listings by .05 (a nickel).
CON: At the same time they hammered several categories of auction listings with massive increases in listing and FV fees. They just give till it hurts...us that is!  And now eBay has the nerve to implement what amounts to be their largest fee increase. This almost 400% increase is targeting the very sellers that they courted to open up stores as a way to help offset high auction fees! Tisk Tisk...

I now know how to overcome this "hands tied" syndrome: It is widely agreed that the Power sellers are the main reason eBay has vaulted to the stars. It seems to me that if the Power sellers did it once then they could do it again as a group. There are, to my understanding, over 600,000 of us. I have yet to chat with one power seller that is happy with his/her situation at eBay. The widespread feeling is that fees are driving us all into the ground. I would suggest that we unite together and get the word out about an alternative auction/store site or sites that will boost the little guy and serve as a message to the deep pockets at feeBay.

Very Basic Traffic Numbers: 2000 power sellers bringing just 50 of their buyers into the site will translate into 100,000 accounts and if just 2000 associate sellers can bring 10 or more of their clients into the fold then that will be somewhere in the neighborhood of 120,000 or more active accounts out of the gate. This will provide a supercharged boost to momentum from the beginning, which is where most start-ups fail.

Do you think that my numbers are a bit simplistic and rather pie in the sky?  My personal customer list is well over 1000 strong. 2000 similar sellers getting just 25% (1/4th) of their buyers to become members on the new site would translate into a whopping 1 million members. I wanted to write a somewhat detailed post that showed how this can be done and even using the most conservative estimates of cost and possible traffic flow that this can be a very good solution to the problems we as sellers face. Allowing you to get a good idea of the message I have and of my line of thinking. I will be adding and modifying this post as I move forward.

At this point the best alternatives to feeBay that I can find are wigglepop and bid-alot (bid-alot has now been sold and seems to be floundering). So there simply isn't a venue that, to this point, will fill the void by itself.

For this reason IC Online Services is considering the value of starting our own auction indentity. The URL will not be made public until we get our beta seller team installed and up. If you would be interested in grabbing a piece of this action please message us at This e-mail address is being protected from spambots. You need JavaScript enabled to view it .

About the Author
Founding partner of IC Online Services which started as an ISP in 1994. Current projects include www.seome.com Search Engine Optimization Made Easy, WebProfitsPro (making money online) and also the ShopSmarter.org shopping directory, local business search and publishing website  I am also the moderator of the engineseeker.com member forums among others.