Intermediary Fees
JMoo100
Posts: 112 ✭✭
Did you know that Ebay operates on a 75% gross margin. That means that after they have taken their ~12.5% from your transaction that they only have to pay out 25% of those dollars to actually operate the platform (i.e., before sales and marketing, product development, and G&A). That seems like an eggregiously fat gross margin when the actual core services that EBay provides (e.g., marketplace, payments, trust) are essentially commodities within today's technology landscape. Which is all to say that the real product that they are selling is us - our eyeballs. And something about that really grinds my gears.
And honestly, its part of a broader, general gripe of someone who has recently re-engaged with the hobby.... how can intermediaries take such a large cut of each deal. My brokerage account takes fees in basis points, not full points. When I bought my house, the agents split 5% of the total deal. Compare this to auction houses who regularly take more than 20% and 10%+ at the very, very low end. Don't get me wrong, I love this hobby and I am willing to pay for entertainment, just like I do at the casino a couple times per year, but I don't get a hobbyist community (that prides itself on its good judgement, shrewdness, and common sense) can possibly tolerate this?
Help me get over the hump here, folks, because quite frankly I don't know how you all can stand it.
Comments
As soon as you stop gambling. I'll take this complaint seriously.
If you think you can do better, start your own enterprise. There's a reason no one has challenged ebay. And ebay is way cheaper than Amazon, for example.
I love Heritage, GC, Stack's, and eBay. I don't mind paying them for the services they provide and the pleasure I receive.
Go pay $1000 for a fine dining b experience. The restaurant prickly only had a 10% gross margin. You'll feel much better about it as your purchase literally turns to cr@p
By the way, I don't know what would lead you to think that any hobbyist is shrewd with good judgment and common sense. The pay huge multiples for pretty tarnish and grading points they can't even see.
Also, why are you looking at gross margin? Any financial entity has high gross margins. I pay them for the marketing more than the infrastructure.
Where else can you get 10% of the volume of viewers than ebay. There is always a cost of doing business and rewards for doing it well. They do it well. Just compare their percentage to the other auction houses and tell me how greedy they are.
If you have graded merch, I would highly recommend Ian's Great Collections.
Jim
When a man who is honestly mistaken hears the truth, he will either quit being mistaken or cease to be honest....Abraham Lincoln
Patriotism is supporting your country all the time, and your government when it deserves it.....Mark Twain
If there's that much money in it for eBay and the auction houses, why isn't somebody undercutting them and taking away their business?
And look at their net:
https://ycharts.com/companies/EBAY/profit_margin
You might want to donate money to them this quarter.
Look at their net. They spend that money, they don't pocket it. This has to be the silliest ebay complaint yet.
Don't use eBay or any of the auction houses to sell your coins and you can cut out that expense. Just market the coins direct to collectors and take that money to the bank.
You're welcome.
Exactly. As I said, "If there's that much money in it..."
Spoiler alert- there's not.
There is that much money in it. That's exactly why they are spending 21% and 13% of their revenues, respectively on sales and marketing and product development. @jmlanzaf no one would evaluate a company investing at that level based on net income. Donate money to them, lol.
And I appreciate the efficient markets reference to... if it were that easy, someone would be doing it already, @MasonG but no one every made a dollar that way.
Not enough to attract lower cost alternatives, apparently.
All that said, @jmlanzaf I don't disagree with your point re: common sense. There's a certain amount of collective lunacy that we all engage with here (e.g., collecting shiny or tarnished hunks of metal). I guess that's just life for you.
Also, I would encourage you to give us gamblers a chance. Last time I was in Vegas I spent two hours at a craps table, bet the table mininum and lost $50. It wasn't the end of the world and I'm sure far our fellow forum readers have engaged in speculations far larger than that. I would be hard pressed to believe that all of your numismatic investments were sure things either, especially after factoring in the 20% fee to Heritage.
@MasonG just because it has not been done yet, doesn't mean that it won't be, right?
@MasonG and honestly that's a big part of why I'm asking that question here. Is why hasn't it been done yet? And I don't think that 'it hasn't been done and so therefore it can't be done' is an intellectually responsible argument.
You could start by listing PEZ dispensers.
Anything's (well... lots of things are, anyway) possible. Are you waiting for it to be done? I'm not.
I didn't say it couldn't be done. I said it wasn't being done. You understand the difference, right?
Certainly not holding by breath @MasonG. Perhaps a better question is... what material would you elect to list on the buy sell trade forum (vs selling on Ebay or GC)? Obviously there are cases where folks feel like BST is the better option or else no one would list anything there.
What does the difference mean to you @MasonG?
Nothing. I sell world coins and there is virtually no chance there are enough people interested in these coins on this website to make the effort practical. I tried selling statehood quarters on the BST here back when they were popular (GS bid for the states I had were $20 to $40) and the best I could get were offers that netted me less than face after accounting for shipping costs.
You didn't answer my question.
I think embedded in your question is the idea of whether it would be profitable to do it. Yes, anyone could set up a low fee marketplace, but could they do it sustainably and profitably? And if folks felt like the answer to that question was 'no, that it couldn't be done profitably' then it would not be done. That's my understanding of your question.
If it can't be done, it can't be done.
If it isn't being done, it can either be possible to do it or not.
@MasonG totally agree with you. I would have thought that my 5:16PM MT response would have clarified that I understood that distinction
The cost of entry is exactly the cost you are ignoring in focusing on gross margin. ANYONE could set up an ebay. In fact, just shoot every hobby has some kind on internet marketplace. But what is the cost of eyeball generation?
Ebay spends a lot of money on eyeball generation and things like buyer/seller protection.
You can sell anything with no fees. But with no fees, you get no services and you are left meeting strangers in parking lots with cash.
What is the gross margin of your credit card company? Are you going to cut those up also?
I was in the process of responding to your post three minutes earlier and didn't see that comment.
Visa had a gross margin of 96.7%
Better cut up them cards...
You get what you pay for.
On BST you get no advertising, limited eyeballs, no payment processing, no buyer/seller protection, no discounted shipping, etc.
If a potentially biased party may answer, as well…
Off the top of my head, it seems that sellers would or should be more likely to offer items on the BST (rather than through an auction venue) in instances in which: 1) The material is generic and/or ordinary and highly unlikely to benefit from bidding competition or 2) The seller can accurately estimate the approximate maximum value the item would bring in auction and price it accordingly. That’s the really hard part. And even taking commissions into account, it frequently costs sellers loads of money, because they guess far too low.
I’ve been on both sides of auction consignor/consignee transactions. And even though I currently work for an auction house, it’s not unusual for me to tell would-be consignors that they’re likely to net more via direct sale.
Mark Feld* of Heritage Auctions*Unless otherwise noted, my posts here represent my personal opinions.
... and one might argue that is exactly why so much money is being spent today to improve our payments infrastructure @jmlanzaf. Not going to cut up my Visa though, or advocate for anyone to do that. And if my post came across as saying that people should tear down eBay or anything that wasn't my intention. I just wanted to get a better understanding of what folks were getting in return for their 12.5%.
I've got an eBay store so my fees are 2/3 of that, but anyway- what I've gotten is the opportunity to retire much earlier than I would have if I wasn't selling on eBay. I paid off my mortgage early with my eBay profits making retirement possible without dipping into my investment accounts. eBay has provided an audience for the coins I have to sell that I could never have afforded to even attempt to attract on my own.
I have a store and top rated seller status. I pay 7.9% on coins. For that 7.9% i get payment processing (worth 2.5%).
For the remaining 5.4%, i get:
Again, the real problem is looking at gross margins. For VISA, for example, that removes their biggest expenses: fraud and bankruptcy losses.
Service providers will always have high gross margins, often even if they are losing money like eBay in the 1st quarter.
@jmlanzaf thank you for sharing that. Do you mind sharing what you sell?
I'm less worried about ebay's margins than I am about the time I spent reading all this.
Coins and stamps mostly. Generally $100 and under but I've sold in the $5000+ range on occasion.
I also sell other things like comic books and jewelry, but the fees are higher in those categories.
Interesting thread. I am not a seller (well, occasionally) or a dealer. I certainly see value in ebay, the BST and, of course, private deals. I really enjoyed ebay in the early years, and still occasionally buy things there. As far as gross margins, I spent many years in business (high tech aerospace electronics the last twenty years), and understand the financial side very well. I am in favor of successful enterprises. Cheers, RickO
Such "fees" are based on what the market will bear. They will be as high as they can get away with.
If only more people would vote with their wallets!
What makes you think they aren't?
BTW, I notice you have a link to your eBay store at the bottom of your post. Does that count as a vote?
OP sure sounds a lot like Coinstartled ....
Naw, I'm good. Figured PCGS wouldn't mind the Ebay criticism anyways now that they've got competing Vault products.
I miss him. We could make fun of him now for his prediction that ebay would be bankrupt by now
There are many ways to approach ebay with your wallet. For instance before they gave all the free listings like they do now. When they raised the listing fees I reduced the number of listings I had from 2-3,000 down to the store subscription level of 500. I finally went along with the 1% promotion fee which they just doubled so now I am not promoting my listings. I stopped getting the top rated discount when they started requiring the ridiculous 30 day free returns requirement. If that's not voting with my wallet I don't know what is.
Sure my sales dropped but so did ebay's revenue. I've paid over 10K in ebay fees so far this year, I bet I end up with 70 or more % less for the remainder of the year. I'm a turnip that likes to keep a little blood in me! Fortunately my life doesn't depend on what I sell on ebay!
You implied other people weren't voting with their wallets:
"If only more people would vote with their wallets!"
You have confirmed that you are, what makes you think they're not?
Are you the brother of @jmlanzaf ?
No. And you didn't answer my question.
I'm not sure why you're dragging me into this. But, since you called...
Let's see, you are intentionally doing less business on ebay in order to punish them for enabling your business on ebay. And you would like others to vote with their wallets so you do even less business on ebay. Is that about right?
I'm personally hoping in the second half of the year to pay ebay double what I paid them in the first half. I'd happily pay them triple or quadruple, but I can only pack so many items in a day.
I don't see the need!
Margins are close enough as it is in this business. I have other outlets other than ebay! In fact, if ebay reduced their fees not so much instead of raising them I bet their volume in sales would go up quite a bit. Maybe not for other categories but IMHO for sure in the coin categories.
Of course not. Because you don't, in fact, know that other people are not doing the same as you and it's easier to not answer than to say that your original claim was just made up.