eBay: going, going, gone? 

Online auction giant eBay helped spawn an online nation of shopkeepers. But despite the current online retail boom, the company faces a fight to retain high-volume sellers, the lifeblood of its business.

Seller concerns

This week, the struggling company, seeking to reverse slowing revenue growth in its marketplaces business, which is roughly half the level of three years ago, will introduce fee cuts and stricter sales standards in a bid to improve the buyer experience and retain some of its most prolific merchants. Yet the amendments may not assuage seller concerns:

• eBay has lowered the insertion fees for books, music, movies and video games -- which often have low selling prices -- by as much as 50%, but increased the percentage of the final selling price it takes.
• Sellers will not qualify for these fee discounts unless they have an average 4.6 rating (on a five-point scale) in the shipping cost category, an area where it is notoriously difficult to obtain high ratings from buyers.
• A rule no longer allows sellers to leave negative feedback against buyers who try to take advantage of them.

Bloggers have written that the changes will negatively affect small sellers and business owners across the world, 1.3 million of whom depend upon eBay's global marketplace for income. Nearly 99% of sellers who responded to a recent AuctionBytes survey said that feedback changes would have a negative impact upon their business, and 86% said the same of the fee changes. YouTube videos and online petitions are urging sellers to boycott the site this week.   

Pessimism overstated

Despite the sound and fury, sellers may be overly pessimistic. When AuctionBytes pointed respondents to a fee calculator to help them determine the effect of the fee changes on their business, 69% said that under the new fee structure, their monthly eBay fees would go up; 13% said their fees would go down; 6% said their monthly fees would stay the same; and 12% said they did not know.

Getting the fee balance right -- and not just in the media category, which accounts for 10% of the company's core listings -- is extremely important to eBay's livelihood. The company needs to encourage sellers to list more items and use more pictures to illustrate listings in order to encourage shopping. eBay has recently seen turgid growth in listings and the number of active users, and is haemorrhaging market share to competitors, some of whom do not charge listing fees.

• Amazon.com, MSN Shopping and Yahoo! Shopping have person-to-person stores that are very similar to the eBay 'Buy It Now' feature. eBay transactions that use 'Buy It Now' are fundamentally the same as those that occur in online stores.
• The dominance of eBay's PayPal division, an e-commerce business allowing payments and money transfers to be made through the Internet, is also being challenged by the likes of Google Checkout.
• The security of eBay transactions has always been a source of concern: scam artists on both sides of a transaction continue to upset the fine balance of trust between buyers and sellers.