Do you believe in magic?
Meg Whitman, eBay's CEO, believes in the eBay magic. She wants to restore it. Well, she said it better. She said the SIF (Store Inventory Format) listings growth have "diluted the magic of eBay," and that, "We are trying to get back to the essence of eBay."
Magic shmagic! That was investors' reaction today as the stock resumed its selloff after such positive after hour gains yesterday. The stock declined a whopping 4.9% or $1.27 to close at $24.66. Why? I can only assume that growth concerns still exist, a flat Q3 guidance and the fact that the announced fees increases could upset eBay sellers further at the time they are already upset because of the Google Checkout ban.
- Credit Suisse: "With the stock trading at 25 times our 2007 earning-per-share estimate, we believe that valuation has gone well below reasonable and see considerable upside." Maintain "outperform", cutting price target to $45 from $60 because of China and Skype.
- Global Crown Capital: "It's about as in line as you can imagine [...] I certainly don't see a cause for raising estimates (earnings per share or revenue) for the full year."
- Stifel Nicolaus: the analyst believes the negative sentiment prior to Q2 was due to concerns about the shift to SIF, but raising fees could create higher commission and faster turnover. He thinks growth might actually accelerate later in the year.
- Goldman Sachs: Agrees with above: "The fee change could make this quarter mark the bottom in decline of revenue per listing." Left earnings estimate unchanged and $54 target price.
- Deutsche Bank: Lowered 2006 EPS estimate to 97 cents from 98 cents and 2007 EPS projection to $1.15 from $1.18. Price target was lowered to $26 from $30. "We feel that higher ad spending is clearly necessary for eBay to boost demand and to grow its top and bottom line."
- Piper Jaffray: "We believe that this is the right strategy but we are concerned that this may further upset sellers and decrease listings without a notable increase in conversions." Cut EPS estimates for 2006 and 2007 and lowered price target to $30 from $31.
Reader Comments (Page 1 of 2)
7-20-2006 @ 5:56PM
steve said...
Ebay sellers are really mad! Check out the message boards on the ebay site! Some of the largest sellers are saying they can't hold on anymore and this fee increase was the last straw. The only viable way to make any profit on ebay is to run some auctions to drive traffic to your store and then sell items from your store. Now ebay has removed that option from us. Listing auctions are just not profitable since the sell thru rate is only around 10-15%. We are shooting star ebay powersellers with 20,000 transactions on ebay and we are no longer going to be selling on a regular basis. We agree with the others and are moving our sales to our off ebay websites.
7-20-2006 @ 6:52PM
JOHN STURM said...
Granted, the added fees will reach into the sellers pocket a bit but you have to remember that they have one heck of a nation wide audiance to show thier wares, advertizing in A NATIONAL MAG OR NEWSPAPER COST MUCH MORE THAN eBAYS WEB fees.
I say pass the added fees on to the buyers as that seems to be the norm, and quit gripeing.
7-20-2006 @ 7:42PM
Ann Lambert said...
Good luck Steve, seller comes to EBay, simple: THAT WHERE THE BUYERS ARE. Would you tell your phone company their fees are too high? I did, 10 years later, same service. EBay views are to sell more items on a bidding platform that is their core enterprise; they are not a retail e-store.
Look at their Q2, they are back with Cash to what they do best, auctions + additional growth in revenues from Pay pal, and $kype which is a powerful overseas platform and an underrated $$ bank by R&D metrics standard. Analysts seem not to incorporate skype, which will keep growing in Europe and Asia. Google would love to own Skype for that international arena, if so,I bet they (analysts) would reverse their position.
EBay’s Meg has a few trump cards yet to deliver, with partner/Yahoo delay of their new web search upgrade, while keeping Google in the docks.
7-20-2006 @ 8:25PM
Mr. noitall said...
Just like Starbucks, Ebay is (or should I say was) a "fad". Ebay's popularity peaked out over a year ago. Don't buy the stock, and go to a garage sale if you want to buy someone else's junk.
7-20-2006 @ 9:35PM
Susan said...
Has it occurred to anyone that, if Whitman is stating that ebay is raising the Store listing fees in order to 'bring back the magic' by pushing sellers to use auctions, then wouldn't it stand to reason that they would concurrently LOWER AUCTION FEES TO help 'bring back the magic'-BUT EBAY ISN'T DOING THAT, AND WHY? What a fantastic, grand excuse for ebay to be able to raise fees drastically again in a short timeframe with a red herring for doing so.
We've been Powersellers for over 6 years and are the only seller we're aware to have been featured in so much Press coverage with ebay-one of the 5 featured in Newsweek and two major books, newspapers, ebay Showhouse Design, etc and we'd like to voice our opinion that WE'VE HAD IT-in response to the oh-so-intelligent remarks and opinion of Mr. Sturm, you obviously don't have a background in this area or in business because THERE IS A LIMIT TO WHAT THE MARKET WILL BEAR and you can't continually be offsetting costs by passing them on to the consumer; that works when the raises are incremental over a period of time, but not when they're this slammed together and such high fee increases. Our specialty is in a luxury area and market and I'll tell you right now, if we can't pass the fees onto consumers partially when our items range in the hundreds to thousands where they can be absorbed to a degree, then there's no way the average or medium seller can survive with these drastic changes. This is going to be the end for a lot of sellers and companies selling on ebay-we predicted it nearly a year ago, and the landslide is starting to occur. Ebay is causing its own demise.
7-20-2006 @ 10:00PM
Susan said...
Has anyone noticed the discrepancy in the statement made by Meg Whitman regarding 'bringing back the magic' to ebay by forcing sellers to pay so much that (ebay hopes) they'll move back to using auctions? It would only stand to reason that, if the solution for ebay is to RAISE STORE FEES to encourage sellers to use auctions, then AUCTION FEES SHOULD BE REDUCED TO SOME DEGREE-BUT THAT'S NOT HAPPENING IS IT? What a fantastic red herring-ebay wants to raise fees again tremendously, and not hear about what a power-hungry, greedy company it is, so they'll just tell the world that it's to 'bring back the magic' and that they want sellers to use a DIFFERENT method.
Mr. Sturm, you obviously have absolutely no background in this area to be speaking, and apparently a lacking in the business arena as well. You're speaking about a subject that is not only 'sensitive' to many people but also their LIVELIHOOD.
In terms of your references to 'garage sale' and that sellers should quit 'griping' Mr. Sturm, you apparently should keep your day job and not be giing advice in an arena where you have even less-than-average knowledge. In case you hadn't noticed, ebay isn't a garage sale-in fact, that's been a big complaint of many original and smaller sellers, that it is moving toward LARGER COMPANIES-THAT'S RIGHT, MR. STRUM, COMPANIES, NOT INDIVIDUALS. LAST I CHECKED, I HADN'T SEEN A LOT OF COMPANIES PARTICIPATING IN 'GARAGE SALES, HAVE YOU? There are specialty items on ebay that you can't get ANYWHERE ELSE. The luxury merchandise simply wouldn't be available to the U.S. through alternate avenues, which is far from a 'garage sale.' And there are many similar sellers in that regard, each specializing in different and specific areas. You apparently have no knowledge whatsoever of what you speak.
As Powersellers on the site for over six years, we're the only seller we know of to have been featured in so many avenues of the Press and to such an extent related to ebay, including Newsweek, two books, national newspapers, the New York Design Show and related tv coverage, etc. Our items range in the $500 plus range into the thousands and, I'll tell you, if we can't incorporate the costs on to consumers, then you can be sure that small to medium-sized businesses for sure can't do so. This is the second, very recent, and significant rate increase of late-and, Mr. Sturm, there is only so much the market can bear in terms of passing costs on to consumers. Are you willing to pay an additional $20-$30 per item? I doubt it. Better not drop that Econ course next time, Mr. Strum-or at least don't display your lack of knowledge to the rest of the world.
This is going to be the end for many sellers AND small to medium sized BUSINESSES on ebay and, Mr. Strum, that's not something to be flippant about. It's also going to be the end of many specialized and rare products being available to consumers from specialty companies, products that aren't available from any other channel. And that is a sad, sad scenario that takes choice and color out of life.
7-20-2006 @ 11:18PM
Karen said...
Having been a trader on ebay for 2 years things have been slow and steady and profits at an all time low. The Price increase has just reduced me to close my store and look for alternative outlets for my registered business. A Mass Worldwide Strike is being arranged as thousands of shop owners close their store and move invantory out. FEEBAY has done it again, killed the small time Mum and dad Seller. On ya!
7-21-2006 @ 6:36AM
dimes said...
Magic?
Someone should break it to Meg that she didn't actually GET that Disney job.
7-21-2006 @ 9:11AM
Alan said...
Understandably, eBay needs to turn a profit, satisfy the shareholder, and provide adequate service to its customers (the resellers).
However, to what 'knee-jerk' extent?
Implosion and mass exodus of small-to-medium sized customers (eBay's core niche of sellers) seems inevitable within eBay's business restructuring. No advertising, deficient/minimal customer service, minimal safety nets to protect buyers and sellers from worldwide fraudsters, no fees to certain countries who use greater bandwidth than the US and Australia combined (e.g., China), etc.
Overall, eBay's management of the business is quite disturbing. The consistent 'knee-jerk' decision making by eBay management is definitely not how businesses survive. Not testing pilots simply equates to failure.
7-21-2006 @ 12:40PM
Soon-To-Be-Xbayer said...
Currently I only sell through my ebay store, and I do pretty well. BUT, I'm already paying close to $1,000 PER month to ebay for fees. Jacking up the store prices will add at least $400 more per month onto that. I started looking for alternatives before this week, but havent been "pushed" until yesterday. The $1,400 a month is huge motivation for me to go elsewhere... the money can very easily get me some excellent exposure on google where my max was $600 in a month. Sad but not surprised, given Ebays recent track record. There is always opportunity in a crisis.
7-21-2006 @ 1:29PM
John Huffman said...
As a seller on ebay for over 8 years I have seen my share of price increases, some increases are understandable and reasonable, but the last couple of price increases are un-called for, if the best thing thy can do to fix a problem is to cause a new one by increasing fee’s, and destroying the business that people have built up it’s time for a lawsuit or it’s time for Meg and all her clowns to go
7-21-2006 @ 3:21PM
Doug Luthringer said...
I am an eBay education specialist, trading assistant and powerseller. I absolutely love using eBay, but I pulled an entire line of merchandise out of my eBay store to avoid the fee increase. While eBay is increasing their fees, I am drastically lowering my usage. I can't be the only business selling on eBay who is realizing that there are many other e-commerce solutions that work very well and in some cases better than eBay. Everytime eBay raises their fees there is this huge outrage from the eBay community. This time, because of all the other viable options, I think it is for real.
7-21-2006 @ 7:08PM
DD said...
Just in reading through the discussion boards at eBay, specifically, seller central, it would almost seem that this company has (for the past 6-months) purposefully causing the devaluation of their own stock, only to buy it back undervalued from the multitudes taking a huge beating, leaving the shareholders high-and-dry like the customers they serve (the sellers). Very interesting.
7-21-2006 @ 10:55PM
Ann Lambert said...
Some of this response just doesn’t get it. EBay is JUST NOT A RETAIL ENTERPRISE. Inventory do not sell, it uses up so much space, which is why EBay is upping the fees on INVENTORY. The format is simple; give the buyers what the WANT on an AUCTION FORMAT. Nothing is wrong with SIF, EBay extended the site as an OPTION TO THE BUYERS, never intended to be Mall like. This move is KEEN to the success of EBay- QUALITY vs. quanty at an Auction PRICE.
So, to the true power- sellers of auction, this will be rewarded in (Sotheby’s format).
7-21-2006 @ 11:01PM
mike said...
i have a small collectibles store on ebay and i buy and sell on ebay.Something to keep in mind is bother sellers and you are bothering a high percentage of the buyers as well. core listing is to expensive and to risky meaning items may not sell at what you want and you have to pay an arm and a leg to have that security we once had with the stores. one of the things that really bothers me is the basically one month notice of a 150 percent fee rate increase. that to me is in itself suspicious and dirty. i have been searching for a new place i can put a store and i have found several that seem good and i have a feeling will become more popular soon. raise fees sellers will try to make that up in there prices which can drive buyers elsewhere. ebay is turning into an online retail store which was what it stood against to get many different things much cheaper. they ignore everything we say why should we bid and sell on ebay on any format anymore. i say start looking for others stores and other payment methods other than paypal which is also going to take a big hit. buyers and sellers are the hands that feed ebay and its community but they just bit us harder than ever.
thanks
7-22-2006 @ 1:04PM
Alan said...
Auctions are so 90's. 83% of eBay's customer base (sellers) surely cannot be wrong with increased sales/revenues. 17% live auctions are the trickling done mostly for liquidating dead stock in the stores to make room for fresh merchandise. Stores are the way to go until someone decides to turn off the general search for stores...out go the lights as do sales/revenue. It just makes more business sense with today's expectations of customer convenience to have a store with 80/20: 80+% in-store fresh and 20 or less % auctioned dead stock. Monetization does not happen with one or the other, but a good mixture.
7-23-2006 @ 3:53AM
TwinTriode said...
I have been a seller on ebay for 6.5 years. Well this week is the beginning of the end of my time with eBay. Say goodbye to my $1000 in fees a month, which you were hoping to make into more like $2000. The fees were already high (but manageable), customer service was bad, double standards between countries was insulting at best. eBay seems to be gearing up to be nothing more than a mover of mass produced consumer products. I say that it will be then the magic of eBay will be gone. No more rare and unique collectibles for example, no more choice, but just thousands and thousands of digital cameras and USB sticks for $0.99 with a $50 shipping fee! These attempts to bleed more money from your once loyal sellers will be your doom. You can only push people so far, especially when you dont listen to a word they say. And it seems that eBay underestimated the power of the people on this one. As this topic has already featured on several Australian current affairs and news articles / shows as an outrage.
7-23-2006 @ 6:41AM
Robbie said...
I have been selling on ebay almost from the beginning. I'm not a powerseller, nore do I sell for a living. My love of antique and collectible items attracted me to ebay and from there to being a seller/collector. Over the years I have watched as ebay became more and more like a wearhouse Mall. Antiques I have sold render complaints of "scratches" or "not in new condition" and demands for money being returned or a discount for "damage". Ebay is not a place where people go to look for that favorite toy of their youth, or a rare collectible not found in their area anymore. It's one huge discount $1 store. I don't sell on ebay any longer, the venue isn't antiques and collectibles any longer.
7-30-2006 @ 10:48PM
Logan said...
Well lets start this way. Ebay wants to increase their fee structure except they would make more money if the stopped sellers from selling an item for $9.95 and charging $300.00 for shipping. Since they dont charge for the shipping fee they lose a lot of money. When you turn in someone for over pricing on shipping they dont do anything about it, so they are making the sellers that abide by their rules pay for the ones that dont, and Ebay is to lazy to confront and take action with. What gets me are the ones that think that Ebay was meant for only people that sell antiques and collectables. It is a yard sale and contains many things that you will not find anywhere at an affordable price. I use Ebay to look for things that would normally cost twice as much when getting them locally. Ebay has also allowed many small companies complete with the big boys. Thanks for that but the fees are getting to high to deal with.
7-31-2006 @ 8:46PM
ken said...
If E-Bay would a better job on security it might do more business their security department SUCKS I'll never use them again and half my freinds have been taken to the cleaners also