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Collectible Magazine Back Issue Newsletter Sept. 2006

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Page 1 - Feature Story: Ebay's Days Numbered by Yahoo's Gains

Page 2 - Top Selling Magazines for September

Page 3 - Site Updates - Protective Sleeves - Vogue, Saturday Evening Post and TV Guide - 2 Buck Trading Post

Page 4 - Special Feature - premiere of Magazine of the Week

eBay's Days May be Numbered by Yahoo's Gains

With never-ending fee increases on eBay, are sellers switching to Yahoo, where auctions are free? by Rick Gagliano - 9/21/06.

Last July, Yahoo! Auctions quietly announced that they were eliminating all fees to sellers in the United States. The announcement elicited little response from the mainstream press, and mostly yawns from analysts. However, the move was somewhat of a stunning departure from the usual paid model which made eBay, in particular, so stunningly successful.

While most of the world paid little attention to what was happening on Yahoo's auction site - with good reason; it had been pretty much a dead zone for the previous four years - some sellers and merchants took note and began the process of transitioning from the world of eBay back into the Yahoo fold.

Now, a little more than a year later, there are indications that Yahoo's maneuver has actually begun to bear fruit. The number of auctions running on the site has increased dramatically, as have the number of items sold (or, in the parlance of online auctioneering, successfully completed auctions). In the same period, eBay listings in the U.S. have stalled, holding roughly at 2005 levels.

A Little History

In 1995, when Pierre Omidyar was tinkering with his fledgling auction site, then known as AuctionWeb, Yahoo was establishing itself as a primary destination and portal for all manner of activity. Yahoo was flourishing in the early days of the internet, as adoption rates and new users flocked to the web. It was de rigeur to search via Yahoo, have a Yahoo ID, post on their message boards and, of course, get one's site listed in its massive index.

By 1997, Omidyar and co-founder Jeff Skoll had moved operations from Omidyar's apartment to more spacious digs, changed the name of the company to eBay and were entertaining offers from prospective suitors, one of them Yahoo. There never was a meeting of the minds between the two future internet giants, as Yahoo executives thought Omidyar's price of $400 million was too high for something (online auctions) they considered nothing more than a passing fad.

Companies parted, but bad blood remained. Yahoo, among others, notably Amazon.com, launched their own auctions sites, and for a while, there was a healthy competition, though, truth be told, eBay was the clear leader with more than double the number of auctions than Yahoo at any given time and a much greater success rate (completely auctions).

By the time Amazon, Yahoo and others got ramped up, it was already too late. eBay was the runaway leader, the clear choice among both buyers and sellers. eBay's might would soon be felt worldwide, when in the summer of 1998, the company executed one of the most successful IPOs in history, with their new Wall Street savvy CEO, Meg Whitman, leading the charge.

As the dotcom boom and bust cratered many smaller operations, eBay continued to grow and amaze investors, sellers and buyers. They had indeed created a heretofore unknown entrepreneur - the eBay seller. The name eBay became synonymous with online auctions, cheap deals and online fun and profit.

Yahoo struggled to keep up. Amazon's auction site barely registered on the auction radar. Then in early 2001, despite the best advice from a hoard of active, ardent buyers and sellers, Yahoo committed one of the greatest strategic blunders of all time.

They began to charge fees.

It was not so much that Yahoo was going to make their formerly free-to-list, free-to-sell auction site fee-based, it was the type of fees they planned to impose that sunk their ship. Instead of charging an insertion fee of 10 to 25 cents per auction, they opted instead - against the advice of the many sellers who said they preferred that option - to charge final value fees based on the closing sale price.

Sellers fled, and by Spring of 2001, the number of auctions listed on Yahoo had fallen from more than 2 million daily to less than 200,000. With the sellers and listings went the buyers and the traffic and all of the goodwill and loyalty Yahoo had built up over the few short years.

And that's the way it remained... until last summer.

Yahoo's revenge

As earlier stated, the number of listings and completed transactions on Yahoo auctions has improved dramatically since last summer. The site is stable, everything works and sellers who have gradually migrated over certainly enjoy the price and ease of use.

Though the actual numbers are being held rather tightly by Yahoo, things are looking good. Further, since 2001, eBay's fees have become somewhat of an encumbrance, especially to sellers of low-priced items, and last month (August 2006), eBay managed to commit a monstrous blunder of their own by raising fees and changing the structure of eBay Stores. Click here for charts of eBay auction counts.

As opposed to auctions, eBay stores was a viable alternative for many sellers - some estimates place the number at over 400,000 individual stores - who wished to showcase their inventory at fixed prices. What eBay did in August was to increase the basic monthly subscription store charge to $15.95 per month (from $14.95) with other options for $49.95 and $499.95 per month and to raise the insertion fees from 2 cents per item to 5 cents for items under $24.99 and 10 cents for items listed at $25 and up.

Even more onerous was the time factor. Those insertion fees were now for 30 days only, when in the past, one could list for up to 120 days. There's still an option to list an item as "good 'til canceled" though the insertion fee is applied every thirty days. There were also minor changes made to additional features, such as bold, gallery and various other add ons.

But the worst, and not surprisingly, insensitive price increase was in the final value fee, which was raised from an already-high 8% to a profit-killing 10%. Hiking this fee by two percentage points is actually a 25% increase in the cost of doing business. In other words, the FVF for a $10 item used to be 80 cents. Now it's a solid dollar.

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The Price of eBay Success

If one would dare to compare the differences and benefits of listing an item on Yahoo (free) to keeping and selling inventory in an eBay store, the magnitude becomes magnified the more items one wishes to not only list for sale, but actually sell.

Take a simple $10 item. If this happens to be an item for which the seller paid $5, the profit would be $5 on Yahoo. In an eBay store, the cost to complete the sale would be $1.05, and the profit cut to $3.95.

When you start to multiply the eBay costs out to real world numbers of say, 200 items a month, that $1.05 becomes $210.00, plus the $15.95 store subscription fee for a grand total of $225.95. The Yahoo seller, selling the same number of items at the same price, is that far ahead. Furthermore, Yahoo affords the seller both an auction style format and a fixed price option with Buy It Now. The same mix on eBay means additional fees for auctions, though the FVF on auctions is lower, starting at $5.95.

Yahoo also offers advantages beyond price to auction sellers. Auctions can be listed anywhere from 2 to 10 days (as opposed to eBay's fixed 2, 3, 7, and 10-day routine - and there's an additional fee for running 10-day auctions) and auctions can be set to automatically relist up to 5 times. At the maximum, a Yahoo auction that doesn't sell can be on display for a full 60 days without any maintenance needed by the seller.

In the case of listing 200 items as auctions with Buy it Now at an even price of $9.99 per, the cost on eBay would be $80.00 (200 x .35 + .05 BIN fee). Five relists or replacing sold items (all free and automatic on Yahoo) is another $400.00. That's a total of $480.00 over 2 months, a hefty difference, which has caused some sellers to leave eBay for a less expensive alternative.

Those still in the eBay camp - and there are plenty of them - can take heart that there's more traffic on eBay, and thus a better chance of selling an item. While this may be true for auctions (my recent personal experience is that Yahoo auctions are seen nearly as often as those on eBay), store items get less traffic and views even though eBay auctions often show up in Google and Froogle searches, where Yahoo's do not, or at least not with as much frequency.

The cost of doing business on eBay - and while this article may sound a little eBay-negative, it should be pointed out that eBay still works for many, many sellers - creeps into selling practices and prices in ways which may not be immediately distinguished. Some sellers compensate by charging incrementally higher shipping costs. Still others will offer an item at a ridiculously low price with an exorbitantly high shipping price in an effort to avoid eBay fees.

For instance, a seller may sell a magazine that would normally fetch $5 for $2 and charge $6.00 shipping to make up the difference. In reality, the seller, if this is a store item, will pay only 20 cents in final value fees, as eBay doesn't charge any fee on shipping. The seller is probably paying less than $3 to ship the magazine, so the profit is made up by the excessive shipping price. Of course, another seller offering the magazine at $5 with the normal $3 (media mail) shipping, would get the same total - $8.00 - and the price to the buyer would be the same.

But it's when sellers try to get fair value for goods with excessive shipping added on that this strategy falls flat on its face. The straightforward approach of reasonable price and shipping usually wins out every time.

In the long run, both eBay and Yahoo Auctions will likely survive and sellers will go where the selling is most robust. But, if the indications from the past few years of history, and the one year since Yahoo Auctions became fee-free are correct, Yahoo Auctions will continue to grow as more and more sellers move more and more inventory over there. Also, any more fee increases by eBay will only exacerbate the movement of goods - and buyers - to Yahoo.


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