Trade Me cites cost of mobile apps as auction fee hiked 5.3%

Trade Me head of marketplace Craig Jordan
Trade Me NZX performance since Dec 11 IPO (S&P Capital IQ; click to zoom)

Trade Me [NZX:TME] is raising the “success fee” on its actions by 5.3% from Monday.

Forsyth Barr analyst Rob Mercer told NBR the auction fee rise, which follows a lift in fees for classified sections like motoring and property, was slightly higher than expected.

However, the sums involved were not large enough to move ForBarr’s current projection of a 7-8% increase in Trade Me revenue for its 2013 year.

The impact of incremental success fee increases would be limited.

It was also nearing a psychological ceiling.

Monday’s increase will lift the success fee on a $100 item from $7.50 to $7.90.

Mr Mercer saw most people balking if asked to pay $10 or more on a $100 sale.

“The real game changer won’t be a change in fees but a move to bigger ticket sales.”

ForBarr sees people becoming comfortable buying more expensive items on Trade Me.

It also sees the site’s move to sell more new goods and expand retail partners as positive.

However, anticipated growth is already built into Trade Me’s share price, and Forsyth Barr has a hold rating on the company.

More traffic, cost of mobile expansion
Trade Me head of marketplace Craig Jordon told NBR the fee rise was necessary because of an 18% rise in visits to the site of the past year, and the cost of expanding the service to new mobile platforms.

Mobiles now account for 25% of Trade Me visits.

Trade Me's mobile expansion has included an iPhone app, and Android app, a generic Touch app for tablets and a Trade Me Property iPad app (which features Westpac signage and Westpac mortgage calculator links).

The site last lifted auction fees in February 2011.

Fees will be raised as follows:

  • On a sale price between $0.50-$199.99: fee rises from 7.5% to 7.9%
  • On a sale price between $200-$1500: fee rises from 4.5% to 4.9%

ckeall@nbr.co.nz

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25 Comments & Questions

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Disgusting abuse of a market position. All strength to the competitors.

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And that's the point. It is a free market with limited barriers to entry. The moment ebay decides to open a NZ site Trademe disappears.

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EBay has already tried and was a roaring failure - have you ever used EBay??? TradeMe far superior - by all means use a competitor with less users, less competition and a longer buy time at a lower price.

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Fine, lets go back to print advertising shall we? It was really cheap and effective.

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Is that the iphone app that won't let me choose a category when browsing or listing an item? Yeah, that one.

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Agreed...What a rubbish justification for hiking fees. Android app is similarly poor. Crashes about every 2nd time you try to open it, and has about half the features you actually need to use it properly. TM should be embarrassed that they actually released it - let alone charging for it (in-directly).

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Didn't Westpac spend $1million with them co-building the property app?

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Trade Me's Craig Jordan cited commercial sensitivity re: what Westpac paid (or not) for its mortgage calculator links and logo on the Trade Me Property iPad app.

On a parallel note, Jordan said "no money changed hands" with Homeclub.co.nz, a househunting website developed by Westpac that showcases Trade Me Property listings.

Homeclub launched last month around the same time as the Trade Me Property app.

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Trade Me cites monopoly position as auction fee hiked 5.3 percent - fixed the headline for you

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They're raising fees due to increases traffic? So because you have more customers you're increasing fees? What?

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normal TM spin. Insanely high-margin biz citing normal operating expenses to justify sending more NZ money to AU.

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Fairfax, Packer and other shareholders will naturally want ever-rising profit, and increasing dividends.

Against that, I think the Trade Me guys have their heads screwed on. They think beyond the next quarter, and know the long-term benefits of not alienating users. Still, there will be constant tension across the board room table.

Kerfuffle caused by fee rises is just the encore, however. The real community relations challenge Trade Me will come once its traditional users realise the scope of its ambition for ramping up the sale of new goods (due to really kick in around Xmas next year - see http://www.nbr.co.nz/article/trade-mes-ck-p-126439)

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I've never doubted the intelligence of the Trade Me team, nor the fact they have their heads screwed on (they're nice guys to boot). However justifying a fee increase by citing increased traffic from their mobile platform is disingenuous at best, and should probably be reported as such. They get away with it because of their monopoly position (Trade Me fees only ever go one way - up), and the motivation is profit.

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so, diseconomies of scale?

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Unfortunately the opposition is limited
It really is virtually a pure monolopy

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True. And of course if you believe it will continue to hold and exploit that position, you can always buy some shares ...

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50% of the stuff for sale on TradeMe comes from www.aliexpress.com or can be had on eBay for just as cheap.

Why pay 200%-300% markup on things ?

Want to hurt TradeMe ? hurt them in the pocket by buying your goods on places like AliExpress, Ebay, DHgate etc.

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you do that champ, fire away

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I told you so when it went to public ownership! It will be the same scenario with the power companies, just you wait and see. Some piddly excuse every time.

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Yes because the 300% price increases over the past decade are an excellent advertisement for the virtues of government ownership...

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Ultimately they are doing it because they can. It will be interesting to see if the new model adds value to users both vendors and buyers. As Chris said, you can always buy shares and gain some value that way. I don't see them going away in a hurry, as the saying goes if you can't beat them join them.

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TM's customer service is appalling: trying to get malicious comments, etc removed is a nightmare due to their lazy staff.

Vs Ebay, TM is very primative. Also they are not following best practice in showing the bidders listing.

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Calm down guys your are living in NZ where consumers are getting ripped off all the time - by both private and public providers. Supermarkets fat margins, Local Rates increases much faster than inflation, artificially high mobile charges, high airport taxes, rip-off passport fees, expensive take-out foods etc. Get over it and vote with your wallet. You don't need to buy/sell on Trade Me.

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this sort of comment makes me shake my head - Kiwi consumers never want to pay much at all - but then everyone tells everyone not to use a trading platform that supplies cheap goods???

I think we all need to be realistic around the fact companies need to make some money, otherwise they won't bother and we lose out.
All small economies payer higher prices for their utilities and general items and we have no buying power to bring the price down

4 million here Vs 24 million is Oz - do you REALLY think things will be cheaper here????

Mind you, NZ doesn't have the rapes, murders,shootings or violent crimes and you're not smelling the f*rts of 24 million people every day

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