Thursday, May 17, 2007

Increased Postage Fees May Hurt eBay Short Term

I know literally hundreds of people that earn their living, either part time or full time selling on eBay (EBAY), which trades on NASDAQ. The postal increase that went into effect on May 14 has been a nightmare for eBay sellers. These are some of the comments I am hearing:

"I've held off for a couple weeks posting any eBay items until I can get a handle on the new postal rates so I can enter them in my listings."

"I went into the post office [prior to May 14] to get a copy of their rates and they said they didn't have any to give me."

"They have raised the limit on insured mail to $200 in order to have return receipt service."

"I do a lot of mailouts, and now the postage amount can change by the size and thickness of the envelope."

"For sending boxes, they're now charging by zone. I used to be able slap on the same postage on every package of the same product, since I knew the weight, now I have to look up the zone."

In regards to my own personal experience, a couple days prior to May 14, I scoured the web site for the new rates, but could not find them. I did find the press release which gave out a limited amount of examples of what rates would be. Today, I went to the post office to mail a DVD. I told the clerk that I wanted to send it the least expensive way. She narrowed it down to four choices: letter rate, large envelope, package, and media mail. Media was immediately ruled out because it is so expensive; I now think it is only useful for heavy books that weigh over a pound. She then said it was too large for letter rate, and too thick [slightly over a quarter inch] for large envelope rate, so I had to send it by the more expensive package rate. When I got back to my office, I checked the PO website, and realized that I was probably overcharged. It seems to me that it would easily qualify for the large envelope rate, and maybe even the letter rate.

However, there are some quirks. If it doesn't bend easily, like a photograph with cardboard, it is charged a "nonmachinable surcharge" [sorry autograph dealers]. If it has clasps, it is also subject to a surcharge. If is has an address parallel to the shorter dimension of the letter or it contains a pen, it is subject to a surcharge. If this seems confusing and a hassle to you, then you can imagine how the eBay sellers feel.

I think there will be a short term revenue drop for several reasons:
1. Sellers have been holding off on listings until they get their new postal rates entered.
2. Buyers may be temporarily scarred off by the sticker shock of the higher postage rates that they have to pay for the stuff they buy.
3. Buyers may bid slightly less because they are factoring in the postal rates on their entire purchase.
4. Sellers may hold off selling until they get the size and shape of their boxes and/or envelopes optimized for their products.

In the next couple days, I will be publishing an article about several ways of dealing with the higher postage rates.

Author owns EBAY.


Geoff Smyth said...

Most eBay sales 'professionals' grossly overcharge for shipping anyway. It may be necessary for the Seller to absorb cost... or it may benefit UPS

Jean said...

The comment by geoff illustrates one of the major flaws of the ebay system. It is the misconception that sellers "make money" on shipping.
In the business world, buyers and sellers know that no one can succeed if they give away their time for free. Shipping and handling charges are an expected and accepted part of doing business.
In the rarified world of ebay, however, heaven help the seller who tries to cover his handling cost. He will be burned at the stake. And ebay has done nothing to educate the buyers about the reality of shipping and handling costs. Instead, they have encouraged an unrealistic attitude of absorbing handling fees and postage costs.
It has always been to ebay's advantage to perpetuate the myth that a seller who charges handling fees is a thief. That way, the sellers are scared into adding the handling cost to the item price, which increases ebay's fees for listing and commissions.
However, with the postal hike, this philosophy may hurt ebay. Since the buyers already resent the shipping costs, they may punish the sellers for the post office increase by not spending on ebay. And the sellers may find it's just not worth the time and effort as their revenues dwindle. In addition, the introduction of the new Detailed Seller Rating system has demoralized the sales force, (the sellers), especially the really conscientious sellers who take their feedback very personally. They have knocked themselves for years to maintain a high rating, and now feel betrayed.
So that's how it looks to me as I navigate as a buyer and seller through the ebay galaxy. Maybe ebay is a giant supernova ready to collapse into itself and form a big black hole.