Followers of secondary ticket markets got a glimpse into StubHub’s strategic positioning in a Wall Street Journal story that outlines how their new price transparency policy, intended to help them compete, is actually hurting overall sales. Reason: The new pricing system has not been adequately explained to consumers.
StubHub recently adopted an “all in” pricing strategy to list their tickets inclusive of delivery and service charges. This makes ticket prices appear more expensive to the average consumer, when in reality the fees are simply included on the front end, not the back.
Before, the reseller charged fees in addition to the listed price. Fees such as electronic delivery and service charges were traditionally omitted from the quoted ticket price only to be charged at checkout.
Ticket brokers who list on StubHub have seen sales fall by 15 percent to 50 percent since StubHub switched to its “all-in” pricing. Professional brokers account for only 35 percent of sales on StubHub, and the remaining 65 percent are fans re-selling tickets.
StubHub admitted sales dropped but declined to be more specific with the Wall Street Journal.
StubHub—the largest secondary ticket marketplace—was purchased by eBay in 2007 for $310 million. eBay does not separate StubHub’s financials from its own, but it is estimated that StubHub contributes less than 5 percent of eBay’s $16 billion in revenue.
A Marketing Problem
StubHub advertises its new positioning on its Twitter account, declaring “No surprise fees at checkout, the way ticket buying should be,” but has not explicitly marketed this position enough to educate the public on the switch.
As a result, fans are none the wiser and are seeking out what they assume are less expensive alternatives like Ticketmater’s TM+ and TickPicks.
StubHub spokesman Glenn Lehrman says the company is planning to roll out an advertising campaign regarding the “all in” price. Until then, consumers might not know the difference even after using StubHub’s website or making a transaction through the platform.
Market Share Through Volume
StubHub recently reduced buyers’ fees from 10 percent to almost 2 percent and sellers’ overall fees in an attempt to stem the slide in sales. Reductions like these eat into margins and reduce profitability on a per ticket basis, but StubHub doesn’t seem to mind (for now). As Lehrman put it, “(StubHub is) definitely making money by going after volume in place of margin.”
The danger in adopting this sort of strategy is the race to the bottom. Pretty soon other re-sellers will follow suit to stay competitive, and before you know it, margins are razor-thin and no one in the industry is making money.
Charge me now or charge me later is, in itself, a differentiator, so StubHub’s reductions in margins might simply be temporary in order to justify the new front-loaded pricing model and give it a chance to succeed.
If it doesn’t, then competing strictly on price and nothing else might be the game StubHub plays—a game it most likely will lose to the larger, more integrated TM+ monster from Ticketmaster.