Blog Post

eBay’s China Syndrome

EBay customers are upset over San Jose, Calif.-based auction giant’s decision to stop charging users in China transaction fees, mostly because of intensified competition from Taobao (Alibaba) and Tencent, at a time when they are being hit by price hikes as high as 400%.

During a recent earnings conference call, eBay CEO Meg Whitman said, ” What I can tell you is that while I think we are behind a tad in China, we have been steadily improving our performance over the last 12 months.”

The move did not go unnoticed by eBay sellers. A thread on company’s discussion forum has many “eBay store” owners complaining about paying for listings when the same services are free for eBay China. At the end of second quarter 2006, ebay had 255,000 stores on its US network, and about 541,000 stores worldwide. We will follow-up tomorrow with eBay and ask for their response to this outburst from eBay community of sellers. We will update the story accordingly.

“I didn’t know I was subsidizing China and Singapore, and I’m in a rage. I’ve been struggling to pay my fees for the past two months, and it turns out I’m being gouged on a US commerce site to give offshore competitors a free ride? I don’t think so,” posts seller going by the handle of Waterdancer.

The angry responses might be coming as a result of a price hikes for store listings that goes in effect on August 22nd. many are worried that they might be facing tough times in the near future become of the price hikes. These price hikes range from 2%-to-3% increase in the “final value” of the items sold through stores. The insertion fees have been increased sharply by the company as well. The listing fees for items below $25 will be up 150% and over 400% for items that are priced $25 or higher, estimates AuctionBytes. These and several other changes were announced by Bill Cobb, President of eBay North America in an email sent out to the seller community.

“A typical eBay Stores seller who uses Store Inventory format — making no adjustments to his or her selling strategy following these changes — will experience an overall fee increase of less than six percent, based on our analysis of all June selling activity,” he wrote.

Those familiar with ebay say that company is using price increases to keep its revenue growth intact. They say that the price increase is for their largest channel (stores) is being disguised as a balancing exercise with smaller channel, i.e. the auctions. In reality the stores part of the business is under competitive pressure from other market places and ad-driven platforms such as Google Checkout.

9 Responses to “eBay’s China Syndrome”

  1. toyranch

    Six percent… yes… six percent of NET PROFIT. It’s not a six percent increase over what it was before, it’s a decrease of six percent of eBay Stores sellers net. Imagine your local city charges an 8% sales tax, and raises it to 14%, so they can subsidize a city works project in China…

  2. this is exactly what the folks at Yahoo and Google wanna hear: “hi, can I move my store to your neighborhood? ebay jacked up my costs.” sure. no problem.

    ebay stock gets more bruising–makes a new 52 week low of 24.05, and spurred a selloff of at the money options.

    Meg Whitman is part of the new company plan?

  3. johnnychina

    eBay bought eachnet for $250M with $500k in revenues (which is about what they have today) and the only guys who made money were the founders and investors who really pulled one over Meg’s eyes. They laughed after the deal was signed. ebay won’t work in china and they can never compete against the talented people that alibaba have. there are many competitors in this space in china and even more so in regional provinces. A national play is very very difficult in China. Also, forms of payment are still cash and people will always meet to make the ‘trade’. Anyways, why would anyone in china buy something used when they can buy it new for the US “used” price?

    ebay china is now an offshore development shop for ebay US. I think they have given up trying to make money from the local market. In fact they do a lot of new development like search algorithms and so forth out of shanghai. I think they realize that their only growth is from increasing prices in the US since Asian efforts have failed and new mergers like Skype failed to drive revenues. I always wondered if someone at eBay got a kickback for that deal??

    So the consumer, now, must bear the brunt to meet stockholder expectations in short run because of poor decisions by management. So it is only a matter of time before customers switch for cheaper options.

    Whatever happened to simple business strategies like providing the best customer service at the lowest prices?

  4. Ebay India charges no insertion fees too. And its been that way for the past what, 8 years? There has never been any viable(or unviable) competition to ebay in india but evenso, ebay india is still finding it difficult to drum up business. Atleast china has a humongous internet population which is getting comfortable with commerce online. In India, the ebay population numbers between 1-1.5million and most of that is in lower end(1-5 $.) There is also no paypal in india.

    ebay cannot afford another case of ebay japan because there is no other market with china’s potential. Very interesting documentary broadcast on cnbc a while back. effect cnbc

  5. Jackson

    Please, if EBay sellers are unhappy, then maybe they should move to China.
    If anyone should be unhappy about this, it should be EBays shareholders.