EBay will reduce listing fees and drop some altogether

EBay Inc. said Tuesday it will cut U.S. listing fees, even dropping them completely in some cases, as part of its ongoing effort to align its revenue with actual sales rather than listings.

The new fee structure appeared to be designed to appease the site's smaller sellers, who have grown increasingly frustrated by changes the company has made to attract larger retailers and merchants.

"They are appealing to the eBay faithful," said Piper Jaffray analyst Gene Munster. "They need to get more stuff (on the site) and this will address that problem."

But Ina Steiner, editor of online newsletter AuctionBytes.com, said the fee changes would likely prove disruptive and perhaps more costly to some small sellers on eBay.

"Wall Street loves this. They are getting what they want," Steiner said. "But it basically feels like a fee increase for small sellers."

The changes will make the auction format cheaper for small sellers and fixed-price sales less expensive for larger vendors, said Scot Wingo, Chief Executive of ChannelAdvisor Corp., which makes software that helps vendors sell goods on eBay. "They are bifurcating the seller base," he said.

The San Jose company has been struggling to recapture its dominant position in e-commerce amid stiff competition from fixed-priced rivals including Amazon.com Inc.

The Internet auction pioneer has moved to emphasize fixed-price listings and attract listings from larger, high-volume merchants.

Under the new fee structure, which takes effect March 30, an occasional seller who uses auction-style listings will get up to 100 free listings per month for items with a start price of 99 cents or under. The seller will then pay a flat 9% of the sales price, but never more than $50.

The company currently gives occasional sellers up to five auction-style listings for free every 30 days. It charges those sellers 8.75% of the final price or $20, whichever is less. Sellers who list more often will pay insertion fees as low as 3 cents a listing for 30 days, 90% below current rates, under a new eBay Stores subscription plan. EBay said a seller with 250 listings a month would save $960 a year.

But the 3 cent fee was available only to subscribers of the $300 monthly storefront subscription. Occasional sellers who typically opt for the basic $16 per month storefront subscription will now be charged 20 cents per listing.

Steiner said the changes appear designed to drive occasional sellers to auction-format sales. "Low-volume sellers will either have to kick it up a notch and go to a premium store, or go to the auction format," she said.

EBay also said it will no longer separate storefront inventory from core fixed-price listings in its search results, meaning all of the site's fixed-priced inventory will appear in eBay's main search results.

EBay said the changes are similar to those implemented by eBay in Europe, which has driven strong growth for sellers in markets including the U.K. and Germany.

Chief Executive John Donahoe, who has spearheaded the changes since taking over from Meg Whitman in 2008, said during the company's fourth-quarter conference call last week that cutting listing fees in Europe over the past 18 months has enabled the company to double the number of live listings and significantly increase the selection.

Donahoe also noted that upfront listing fees now account for about 30% of revenue derived from sellers on eBay.com, with the remaining 70% coming from back-end fees charged when items are sold. That is diametrically opposed to the 70/30 split when he took over in early 2008.

"What that really means is we have aligned our incentives with that of our sellers. If they don't succeed in selling, we don't succeed in collecting fees," he said.

EBay said last week its fourth-quarter profit nearly quadrupled, in part because strong holiday sales buoyed its efforts to turn around its struggling marketplace division. The company's bottom line was also boosted by the sale of Internet telephony unit Skype for $1.9 billion.