Shopping online in India is by design more expensive than offline, with gateway charges, shipping and commissions adding to the cost. This week eBay India announced another hike in its Final Value Fees, accompanied by an increase in gateway cost:
– PaisaPay (eBay’s own payment solution for India) has increased its charges from 4.5% to 5% (for a seller that means over 5.5% with Service Tax). A seller has to mandatorily offer PaisaPay on eBay.in, so the listing would have a minimum markup of PaisaPay fees of 5.5%, apart from eBay’s commission
– Many top categories with high value products like Laptops, Point to shoot cameras and LCDs have got a bump from 1% to 2% (TV accessories goes up from 1% – 5%), whereas almost all lifestyle categories have gone from 5% to 7% (this would mean a markup of over 13% with gateway charges). There are categories that are unchanged and SLR cameras have dropped from 5% to 2%. Details here.
This marks the continuation of a reversal of policy from eBay India – a few years ago, eBay India had boldly reduced its commission charges (Final Value Fees) from 5% to 1%, and this helped vendors on the site to make their pricing competitive and get closer to the offline prices. However, this is now the second increase in charges from eBay India, after an increase in September 2010.
As you would expect the sellers community on eBay isn’t very pleased. The changes go live from 16th June 2011 (meantime sellers are protesting for a roll back).
One thing that sellers are happy about is the fact that premium shops would now be charges listing fees. Currently Premium Shop owners who pay Rs 2999 per month to eBay had to listing charges and thus you would see over 25000 listings, crowding the site. These sellers would now be charged a nominal Rs 0.25 per listing along with a Rs 1000 hike to monthly fees (now Rs 3999 instead of Rs 2399) for maintaining a shop.
Another encouraging change that eBay is making, is on the search front. Currently if you search an iPhone on eBay.in, you would be flooded with accessories for iPhone costing less than Rs 1000 and you would have to navigate and find the product. The new search algorithm would give more priority to products and not accessories. The new algorithm also takes into account sellers track record which is measured by buyer feedback.
Pressure To Sell?
Personally I have always disliked the practice of eBay India offering coupons or subsidizing products on its homepage to get sales. At the same time, having started my career as a seller on Baazee.com (eBay.in’s original avatar) in 2002, and I know that they have invested a lot in building an ecosystem and fueling entrepreneurship in the space. Given the challenges that a platform which allows small traders to buy and sell has, eBay.in has undoubtedly provided the best experience to its buyers compared with similar platforms like Rediff or Indiatimes shopping who been a heaven for sellers selling cheap goods with poor service.
But the game is changing, players like Flipkart, Infibeam and Letsbuy have a unique advantage over eBay – they directly source and sell products, which provides them economies of scale that 1000 vendors doing their own small sourcing and selling at a markup on eBay, do not have. They can’t compete on pricing with a Flipkart or a LetsBuy.
At a time where online retail seems to be taking off, and new players are launching services, this isn’t very good news for small and medium traders on eBay.in.
(Updates: some corrections, including grammatical, as well as some of the rates mentioned incorrectly earlier changed)
(c) Annkur P Agarwal. The views expressed above are those of the author, and not necessarily representative of the views of MediaNama.com
Disclosures from Mr. Agarwal: a) I have been a seller b) I still have indirect/direct interest as I have also invested in a retail entity which directly sells on eBay India.
Disclosure from MediaNama: Indiatimes, mentioned in this report, is an advertiser with MediaNama