EBay plan to add fees for buyers - hurts businesses even further

[vintagefunk01]

From the sky news article here which is obviously a press release https://news.sky.com/story/ebay-selling-fees-are-scrapped-to-boost-to-reselling-13225638

It seems clear ebay is following in the footsteps of other selling marketplaces by adding fees for buyers in the early new year,  but since fees remain in place for business sellers adding another fee on top of this is another hit to our bottom line.

We will now be expected to absorb the buyers fee and our own business selling fee (and shop fees etc).

This seems crazy to me - although eBay say it'll be 'small' , if it's 8% like elsewhere that's a massive hit for us to take.  Yes it's for the buyers but we all know prices will drop because of it - for example a 350 item will now cost 379 to the buyer with an 8% fee that is currently used by another platform, so ofc sellers will drop the initial price so that the item actually sells and to offset this.

Fine for private sellers who have no fees to compensate, but insane for business sellers with hefty fvf and shop fees already 

[valueaddedresource]

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@johnwash1 wrote:

There's been a slight dip in the ebay share price over the past month, but over the past year it's been steadily climbing.  I can't figure out why it's so at odds with what we can all see.

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@johnwash1  yeah, it is kind of crazy. Near as I can tell, Wall Street loves the buy backs and are/were mostly happy with modestly increasing revenue even if it was increasingly coming from eBay taking more from sellers (ad fees etc.) than actually growing sales (GMV) and bringing in more active buyers.

A significant amount of that dip in the last month or so came after the Q3 report and was largely driven by the fact that eBay provided weaker revenue guidance for Q4 than they had previously indicated - primarily due to the C2C (fee-free selling) initiatives in the UK.

That and private conversations I've had with a few analysts are what leads me to conclude at least some investors may not be as confident about the "remonitization" plans for the UK as Jamie seems to be, but I agree in general it's a real head scratcher why the stock price seems so at odds with average user experiences.

[ett1954]

The share price remains fairly stable because rather than use any profits to improve the platform eBay uses the majority of this revenue for share buybacks, which maintains or increases share value, together with payment of dividends.  This action keeps investors on board and happy.

This action has been prevelant in the quarterly financial result reports over the last couple of years.  Investors will stick with the shares as long as they retain their value and the dividends continue.  Senior executives will no doubt also have their bonuses linked in some way to the share value.

Buybacks can, and often do, starve the business of money needed in other areas and over time this practice can erode the competitive position of the business.  Share buybacks can be good for a well run company if used in a disciplined way by a competent management.  If not used wisely and the bubble bursts it will be spectacular.

[theelench]

More a question than a reply.

What happens to the shares that ebay buys back?

Does ebay become the owner of the shares, thereby increasing its percentage of the total and increasing its own share of the dividends?

Or.

Are the shares "absorbed" into the overall value of ebay so ceasing to exist?  

Either way, isn't there a bit of smoke and mirrors going-on?

The EPS appears to grow although the 'pot' remains the same, but is distributed between fewer shares?

The share price goes up for the same reason, because there are fewer shares, fewer shares having a share in the assets.

It might look good but isn't backed up by any real growth, it's just re-arranging 'on paper' the same numbers?

[dch2112011]

When a company buys back shares they are cancelled, this increases the value of the remaining shares by reducing the amount available and increasing the percentage owned by the shareholders. This demonstrates a strength in the business by demonstrating it is cash rich and can cover any eventuality and is a low risk investment - might be to gain confidence for the changes being implemented ?

.

The other reason could be to block a major shareholder from making a take over bid or to offer the shares to employees and management instead of cancelling them .

The cynical can claim that a buyback is used to over inflate share prices to artificially increase director bonuses  and dividends.

The risk is that if share prices drop after a buy back it is usually construed that the company is in financial difficulty !

[ett1954]

Generally shares repurchased by the company can be cancelled resulting in a diminished number of shares available thus providing the shareholders remaining shares a higher share value as the company's value remains the same - each remaining share equating to a higher proportion of the company.  Also as shares trade in part on a system of supply and demand this 'shortage' can also create an increase in value.

A company  can alternatively decide to hold onto the repurchased shares as treasury shares; this means that these shares remain and, therefore, the company's share capital has not changed.  Whilst these treasury shares are devalued they can have uses especially in preventing a hostile take over, or they can be used in employee share schemes.

As I mentioned it can have both postive and negative benefits to a company.  If a company is borrowing to repurchase shares it can create an imbalance of debt; not that eBay is using debt to repurchase according to their financial reports, but by revenue generated.  This can be beneficial unless that revenue could be better spent in keeping the business competitive; obviously an arguable point, but the CEO's call.

It appears to be clear that eBay is loosing ground to competition and if revenue falters significantly then this strategy will have to stop unless money can be found from other means; selling assets (subsidiary companies), redundancies, borrowing (debt), or other cost-cutting measures - any, or a combination of these can result in a downward spiral.  It is the CEO's job to maintain the balance between keeping the investors happy whilst maintaining a growing, profitable, and competitive business.

[ett1954]

Thanks, beat me to it. - crossed posts.

[theelench]

@ett1954 

@dch2112011 

Thank you both for your replies and their lucidity.

Let's hope the CEO has it right this time.

[vintage-emporium-jedburgh]

Ho hum

here we go then

free shipping, free returns, were going to have  to work out how to offer. buying fee as a marketing hook to all the other things that are not free

[exponential_developments]

Also anyone investing in an index ETF will by default have some of that money buying ebay stock.

[leon9503]

As a buyer, I'll never pay a buying fee to EB no matter how it's marketed and I'm sure I'm not alone.

[vintique*violet]

I absolutely agree. 

[the-layer-laboratory]

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@leon9503 wrote:

As a buyer, I'll never pay a buying fee to EB no matter how it's marketed and I'm sure I'm not alone.

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If it's implemented with any degree of intelligence, you wouldn't even know you're paying it.

[signs_and_vintage]

Thing is, if it was to be implemented transparently, it might as well still be a post sale fee...

[vinylscot]

If it's implemented with such a degree of intelligence that buyers don't know they are paying it, then it is a seller's fee.

[the-layer-laboratory]

It reaches a point where it’s all just semantics – if there’s a fee to be paid, it comes out of the buyer’s pocket one way or another.

[johnwash1]

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@the-layer-laboratory wrote:

It reaches a point where it’s all just semantics – if there’s a fee to be paid, it comes out of the buyer’s pocket one way or another.

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Like "free" postage.

[leon9503]

If I stop using EB I won't. it's not hard to know when it all kicks off as they'll have to announce something, sometime, it's not hard and the word EB and intelligence don't go hand in hand.

When I buy something, I know what I want and what it is worth to me in real life and not some EB or sellers fantasies and any increase in prices I'll know and just won't buy.

[play.cd.dvd]

It’s not worth worrying about til you know what they are going to do. One thing is clear  Ebay  are total robbing, I’ve been a large volume seller for 15 years and I’m too deep to leave but if they raise the prices again and price me out I think I’ll be grateful for the rest. It’s been a hell of a ride with all the changes ebay have done over the years, none of which has helped sales. It has caused me so much grief and mental anguish, I’ll be happy to say good bye. 

[johnwash1]

I'm relieved that you removed the two beeeps from your post, it's so offensive to see beeeeeep in the middle of a sentence and spend ages trying to imagine what it might have been originally.

Personally I'm not going to conjecture what the changes in 2025 will be.  They'll be whatever they'll be and screams from users won't affect them.  I shall need to look at sites such as freegle, freecycle and so on.

[yellowfairdog]

"which isn't exactly a denial of the existence of such a program or plans to develope it into something bigger in the future"

It's what my mother used to call 'handling the truth a little awkwardly"