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eBay Slashes Commission To 3.5%

...when an item is sold. Michael Mosser, general manager of Musical Instruments & Gear at eBay, says that the lowered commission structure, combined with eBay’s reach—the site boasts 169 million active buyers and over 1.6 million musical instrument listings—is designed to make the site a more attractive venue for buyers and sellers of music products.

“Our end goal is that it will benefit both buyers and sellers with the opportunity for music enthusiasts to find and sell what they want at competitive prices,” he explains. “There are over 250,000 guitar-related searches on eBay every day. With this level of demand, we’re continually looking at ways to build our selection for music buyers – whether it’s through direct relationships with musical instrument retailers or iconic guitar brands like Fender, or by making it easier for sellers of any size to sell with lower fees.”

eBay has long incentivized excellent customer service, offering “Top Rated Sellers,” an additional discount from the standard commission rate. Mosser explains that those discounts will still be applicable, giving better performing retailers a commission rate even lower than the standard 3.5%.

The previous 7% commission structure continues to apply to non-fretted musical products and pro-audio gear. Mosser said, “We’re always looking at the competitive landscape to provide the best value to our sellers. A number of factors go into determining what changes we make to our fee structure. This can include competitor pricing, margins in the category, inventory considerations and eBay business requirements. The Guitars and Basses category was a natural choice for this reduction.”

eBay pioneered the concept of a digital marketplace, and since 2001 has had a management team focused exclusively on musical instruments and pro audio products. By 2005, over 50% of the industry’s largest m.i. retailers were actively listing products on the eBay site. More recently though, the platform has faced intensified competition from newer marketplaces, like Amazon.com and Reverb.com, a site devoted exclusively to m.i. products. eBay’s new 3.5% commission rate appears to be a direct push back against Reverb, which also charges a 3.5% all-inclusive commission.

Mosser states that eBay is augmenting the lower commission rates with additional “value-added” programs designed to facilitate buying and selling m.i. gear. With the “Valet” program, sellers can now ship a guitar to eBay, and eBay will create the listing and manage the transaction from start to finish. A new “Guaranteed” program reimburses sellers with a coupon if an item sells for less than eBay’s “trending price.” According to Mosser, “Guaranteed” reflects confidence in the accuracy of the posted pricing information. “We have the data to predict selling prices on a wide range of products,” he says.

Matt Gibney, proprietor of the Stratosphere, a guitar parts retailer that has been a long time user of the eBay platform commented, “A fee reduction of this scale is further testament to how eBay is now in better touch with its customer’s needs and market conditions. The eBay DSR ratings system, feedback policy and customer service have also improved. We were outspoken on our past criticism so it is only fair that we now say thank you on the record to eBay for tuning in again to the small businesses that helped scale the category. We should also be thankful to Dave Kalt of Reverb in a huge way for creating such positive change to the way musicians purchase gear online. Assuming sustainability of 3.5%, selling on both Reverb and eBay offers a multi-channel sales opportunity that is tough to pass up. Will Amazon follow?”

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