Yahoo tinkers policy on auction fees

The company will impose a transaction fee depending on an item's closing price. Will members pull their listings as they have done in the past?

4 min read
Yahoo said Tuesday that it will introduce a transaction fee for its online auctions, a shift in the company's policy that it says many sellers have been clamoring for.

The fee change, which will take effect Nov. 20, comes nearly a year after Yahoo introduced charges on its auctions. In the wake of those fees, Sunnyvale, Calif.-based Yahoo saw its auction listings plunge substantially. Many Yahoo sellers advocated at the time that the company should charge transaction fees instead of listing fees.

Although Yahoo executives said they knew they would eventually have to change their fee structure, Brian Fitzgerald, director of production for Yahoo's auction and warehouse sites, said introducing listing fees was not a bad strategy.

The fees helped the company cut the clutter from its auction site and in the process helped the auction site triple the percentage of auctions that closed successfully to about 31 percent and increase its average sale price, he said.

"Instituting the listing fee worked out as expected," Fitzgerald said. "The quality of our auctions improved. Given the situation the marketplace was at then, it was the right decision to make."

The new fee structure is only the latest change Yahoo has made to its auctions area. Last month, the company announced that it would set up a new home page for its shopping areas, linking its auctions site with its storefronts, classified ads and a new area for overstocked goods. Yahoo launched the new shopping home page Tuesday.

The fee changes come as competitor eBay is facing a number of complaints from disgruntled sellers, many of whom have threatened to leave the auction giant and list elsewhere.

Similar to what eBay does, Yahoo will charge sellers a tiered transaction fee depending on the closing price of the item. The company will charge 2 percent of the purchase price on items that sell for up to $25.

For items that sell for up to $1,000, Yahoo will charge sellers 2 percent on the first $25 and 1 percent on any amount over $25. Yahoo will charge similar fees for items that sell for more than $1,000, adding a 0.5 percent fee for any amount over $1,000.

Meanwhile, Yahoo also said Tuesday that it is decreasing its listing fees. The company charges 20 cents to $1.50 per item depending on the starting price of the item. Under the new policy, Yahoo's listing fees will range from 5 cents to 75 cents per item.

In both cases, Yahoo's fees are considerably lower than online auction leader eBay. eBay's listing fees range from 30 cents to $3.30 depending on the price of the item. The San Jose, Calif.-based company also charges a closing value fee of up to 5 percent of the final price of an item.

It remains to be seen whether Yahoo's changes will draw in new sellers and buyers to its auction site. Many sellers complained about the company's initial fees, saying that while they were willing to share in their success on Yahoo by paying a transaction fee, the close rates on their auctions did not justify the company's listing fees.

Meanwhile, as Yahoo's listings plunged, reducing it from being eBay's leading competitor to an also-ran, eBay consolidated its dominance in online auctions, increasing revenue, earnings, listings and customers. The auction giant has also branched out into fixed-price storefronts and expanded sales of everything from consumer electronics equipment to automobiles.

But many sellers have been unhappy with eBay for its often heavy-handed tactics.

Last month, for instance, many eBay sellers objected to a new feature on eBay called Checkout, which is intended to simplify the close of transactions. One of the chief complaints sellers had was that while eBay said the feature was optional, sellers felt they had no way to opt out of it. eBay responded to the complaint by saying that it needed to clarify what it meant by "optional."

Many eBay sellers also complained about the company's charitable Auction for America, launched in the wake of the terrorist attacks in September, charging that the company was taking credit for their donations and using the charity effort to promote Billpoint, its proprietary online payment system. To date, Auction for America has raised about $5 million, a far cry from the company's goal of $100 million in 100 days.

After the introduction of Checkout, a number of sellers said they would leave eBay and had been in contact with sites such as Yahoo. Acknowledging the problems at eBay, Norm Hullinger, vice president and general manager of Yahoo's auctions and warehouse sites, said it was a "natural time" to reach out to sellers. But he denied that the new fee structure was made to try to attract eBay sellers.

"This has been on our agenda for a long time," Hullinger said. "Independent of the competitive environment, we were looking at our own marketplace and reacting to that."

Rosalinda Baldwin, editor of The Auction Guild, an online newsletter covering the auction industry, praised Yahoo's new fee structure and said it may help draw eBay sellers.

"I feel it is a very good thing for them to do, and the timing is also right," Baldwin said. "This may give Yahoo the kick start it needs."

Like many Internet companies, Yahoo has seen its revenue plunge during the last year. As online advertising has declined, the company has struggled to find new sources of revenue.

In addition to auction fees, Yahoo has introduced fees this year on home pages, real-time stock quotes and financial reports. The company is considering introducing its own branded high-speed Internet access service and charging for secure corporate messaging.

Yahoo expects the new fee structure on its auctions will increase the company's revenue, Hullinger said. However, he declined to say when the company expected to see a change in revenue because of the new fees.