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.