Selling on eBay is a good idea for anyone. You clean out your garage, sell things you might have thrown away anyway, and make a profit. What a wonderful marketplace! You can make money in your spare time and enhance your lifestyle with just a few clicks on your keyboard and mouse.
When you decide to sell on eBay in earnest, however, you can run into business problems like tight profit margins. Few eBay sellers have a background in retailing or marketing, and eBay is all about retailing and marketing. In this chapter, I give you tips on pricing strategies. The first item on the agenda is to understand all the fees involved with running an ecommerce business on eBay.
Keeping an Eye on Where the Pennies Go
It doesn’t seem so much to list an item, plus pay a small Final Value Fee. Of course, a few cents (maybe dollars) go to PayPal. One by one, these minute amounts tend to breeze by even the most experienced seller. You don’t really see your eBay fees, because they’re not directly deducted from your sales. eBay bills you at the end of the month. It’s easy to lose track of your costs unless you are keeping very good books (more about tracking costs in Book 9, Chapter 3).
All those nickels, dimes, and quarters add up. The hundreds (thousands?) of people who are selling items on the site for $1 can’t be making much of a profit — not even enough for a pack of gum! To avoid this low-profit trap, you must be keenly aware of every penny you spend on listing fees, Final Value Fees, listing options, and PayPal fees. Keep in mind that if you have slim profit margins on an item but are constantly selling it, you may be making up for the low margin in sheer volume.
Becoming complacent ignoring your eBay costs as you list items for sale can be easy to do. As a person in business for yourself, you must take into account outgoing expenses as well as incoming revenues. The cost of your initial listing (does your time to write and photograph not have a cost?) is just the beginning of your advertising budget for that item. You have to factor in the cost of all the listing options and features you use as well. After all that, you also pay a Final Value Fee to eBay after the item sells. (For the fees that are relevant to your eBay Store, check out Book 8, Chapter 4.)
In this section, I review the costs for listing an item to sell on eBay. But if you use a credit card payment service, those folks also charge a fee. Later in this chapter, I examine the costs of some popular credit card payment services.
Insertion (listing) fees
If you don’t have an eBay Store, you are entitled to 50 free listings per calendar month (beginning at 12:00:00 a.m. Pacific Time on the first day of each month and ending at 11:59:59 p.m. Pacific Time on the last day of the month). That means the listings are free of insertion fees. After that, the fee is a straightforward: $.30 per listing, whether it’s a fixed-price listing or an auction in most categories. Adding extra listing features adds more to the listing fee. For example, when you place a reserve on an auction, you’re charged an insertion listing upgrade fee based on the amount of the reserve price.
Free listings are not available in the Real Estate, Motors: Boats, Cars & Trucks, Motorcycles, Other Vehicles & Trailers, Powersports, and some Business & Industrial categories.
What listings count toward your free limit? See the following:
New listings (whether auction or fixed price)
Relisted items when eligible (that is, when you relist an item that didn’t sell the first time)
Listings ended early, or those that eBay ends early due to an eBay policy violation
Duplicate identical auction listings (even if eBay removes one or more of those listings for policy violation)
If your item doesn’t sell, you do have the option of relisting your unsuccessful item. Your relisted item will count as an additional listing for the month. Writing a better title, starting with a lower opening bid, or adding a snappier description and better pictures may help in selling the item.
Reserve-price auction fees
In a reserve-price auction, you’re able to set an undisclosed minimum price for which your item will sell, thereby giving yourself a safety net. Using a reserve-price auction protects the investment you have in an item. If, at the end of the auction, no bidder has met your undisclosed reserve price, you aren’t obligated to sell the item and the high bidder isn’t required to purchase the item. For example, if you have a rare coin to sell, you can start the bidding at a low price to attract bidders to click your auction and read your description. If you start your bidding at too high a price, you might dissuade prospective bidders from even looking at your auction, and you won’t tempt them even to bid. They may feel that the final selling price will be too high for their budgets. You want to get the auction fever going with lots of bidders!
Everyone on eBay is looking for a deal or a truly rare item. If you can combine the mystical force of both of these needs in one auction, you have something special. The reserve-price auction enables you to attempt — and perhaps achieve — this feat.
Although the reserve-price auction is a safety net for the seller, it’s often an uncomfortable guessing game for the prospective bidder. To alleviate buyer anxiety, many sellers put reserve prices in the item description, allowing bidders to decide whether the item will fit into their bidding budgets.
Should you have a change of heart, you can lower or even remove your reserve price after you receive a bid on the item.
Placing a reserve price on one of your auctions means that the item will not sell until the bidding reaches the reserve price. When your reserve-price item does sell, you’ve sold your item at a profit (let’s hear it for optimism!). The reserve fee is based on the reserve price you set, as outlined in Table 1-1, so be sure to set the reserve high enough to cover the fee and still give you a profit.
* Reserve fee for eBay Motors is $40.00 for items selling up to $75,000.
If your item doesn’t sell the first time with a low starting price and a reserve, you can always relist it at a slightly higher starting price without a reserve.
eBay’s Optional Listing Features
eBay listings have many options and upgrades. Figure 1-1 shows how even a random search on eBay listings can yield examples of some very popular listing options.
FIGURE 1-1: A search showing eBay option upgrades.
When the process of listing your item brings you to eBay’s optional listing features, you see the headline, “Get more bids with these optional features! Make your item stand out from the crowd!” Sounds pretty good, doesn’t it? But getting carried away with these options is easy — and can lead to spending all your expected profits before you earn them.
When I was teaching eBay University’s Advanced Selling class, I quoted statistical success rates for the different features, but in the real life of your business, success varies from item to item and category to category.
If you take the boldface option and then your listing appears in a category full of boldface titles, the bold just doesn’t have the potential to boost your return on investment. In fact, your listing might stand out more without the bold option.
I recap the cost of the various eBay listing options in Table 1-2. Weigh the pros and cons in terms of how these options affect your eBay business. Will spending a little extra money enhance your item enough to justify the extra cost? Will you be able to make the money back in profits? You must have a good understanding of what the options are — and when and how you can use them to fullest advantage.
Buy It Now or Starting Price UNDER $150
1-, 3-, 5-, 7-, and 10-day
Buy It Now or Starting Price UNDER $150 30-day and Good ’Til Cancelled (GTC)
Buy It Now or Starting Price OVER $150 1-, 3-, 5-, 7-, and 10-day
Buy It Now or Starting Price OVER $150 30-day and Good ’Til Cancelled (GTC)
Subtitle
$0.50
$1.50
$1.00
$3.00
Boldface title
$2.00
$4.00
$3.00
$6.00
Listing Designer
$0.10
$0.30
$0.20
$0.60
Gallery Plus
$0.35
$1.00
$0.70
$2.00
International site visibility
Auctions (Starting price – all durations)
$0.01–$9.99: $0.10; $10.–$49.99: $0.20; $50. and up: $0.40
Buy It Now (all durations) $0.50
List in two categories
Double insertion and listing upgrade fees
Value Pack (Gallery Plus, Listing Designer, and subtitle)
$0.65
$2.00
$1.30
$4.00
When doing business on eBay, you may have to pay a store fee, an insertion fee, and a Final Value Fee. If you accept credit card payments, you must pay an additional fee to the payment service. Estimate your expenses from these basics before you consider spending money for advertising.
Subtitle
You may use a maximum of 80 characters for your item’s title. Title search is the de-facto search standard on eBay. From the statistics I’ve seen during years on the site, more than 98 percent of searches were made for title only, versus title and description. So how can you make your item stand out when it shows up with hundreds of other items that look the same? Use the subtitle option!
Notice the subtitle under one of the listings in Figure 1-2. This is your opportunity to add just enough tantalizing text to your listing — text that is readable by prospective buyers as they quickly scan search results or browse category offerings. Subtitles work very well if you are one of several sellers selling the same item at a similar price — it sets your listing apart from the others. A caveat: This additional text will be picked up in a search only if the person chooses to search both titles and descriptions, but will be visible on any page where your item shows up. The fee for this option is $.50 to $3.00.
FIGURE 1-2: Set your items apart from the competition by using subtitles.
When your item has something special about it or could use some extra description, the subtitle option allows you more space to give the browsing shopper vital information.
Listing Designer
eBay comes up with options to fill the needs (or wants, in this case) of users. Some sellers enjoy putting colorful graphics around their descriptions. Listing Designer will include pretty graphics and help you design your description, placing pictures in different locations on the page. But if you have a good description (creatively done with HTML color and emphasis), plus a good picture (inserted creatively with the HTML code I give you in Book 5), your item will draw bids just the same as if you spent up to $.60 extra (per listing) for the Listing Designer option.
Using a graphics template to brand your listings on eBay — giving them a uniform look — is a great idea. If you want to use a template, decide on one and make it your signature look.
Boldface
The Boldface option is a favorite and probably the most-used option in the eBay stable. A listing title in boldface type stands out in a crowd, unless … you got it, unless it’s in a category loaded with boldface titles. If the $2 to $6 that eBay charges for this benefit is in your budget, odds are it might get you a good deal more views (depending on your item) than if you didn’t use it.
Applying boldface to your item title pulls it off the page right into the reader’s eye. Unfortunately, bold type tacks additional money onto your listing cost — so you’d better be in a position to make a good profit from the item. Also make sure your research shows that the item can sell for your target price.
Buy It Now
The Buy It Now feature for auctions, shown in Figure 1-3, has a few significant benefits. If you have a target price for the item you’re listing, make that your Buy It Now price. You can also use this option during frenzied holiday shopping times or with hot items. Be sure to stay within the rules and post a Buy It Now price of at least 30 percent above your opening bid and perhaps you’ll get a bite, er, sale.
FIGURE 1-3: See the Buy It Now button just below the Place Bid button?
The Buy It Now feature disappears when someone bids on the item or, if you’ve placed a reserve on the auction, when a bidder meets your reserve price.
Adding the Final Value Fees
eBay’s version of the Hollywood back-end deal is the Final Value Fee. Big stars get a bonus when their movies do well at the box office; eBay gets a cut when your item sells. When the revenue is posted, eBay charges the Final Value Fee to your account in a matter of seconds. Then, if you don’t have an eBay Store, you generally pay a flat 10 percent of your final selling price including any shipping you charge the buyer.
If you have an eBay Store, the fee varies by category. You can find the Final Value Fee structure for eBay Stores in Book 8, Chapter 4.
A classified ad in the Real Estate category is not charged a Final Value Fee, and eBay doesn’t charge a percentage Final Value Fee on an auction in the Real Estate category (as it does in other categories). You pay a flat FVF of $35 for Timeshares, Manufactured Homes, and Land and no FVF for Commercial or Residential. See this page for any late updates
But in the Automotive category, you pay a flat Successful Listing Fee of up to $125 for vehicles if your auction ends with a winning bidder (and the reserve has been met). For current fees for eBay Motors, visit
An auction is an auction is an auction, right? Wrong! eBay has four types of auctions for your selling pleasure. Most of the time you’ll run traditional auctions, but other auctions have their special uses, too. After you’ve been selling on eBay for a while, you may find that one of the other types of auctions better suits your needs. In this section, I review these auctions so you fully understand what they are and when to use them.
Traditional auctions
Traditional auctions are what made eBay famous. You can run a traditional auction for 1, 3, 5, 7, or 10 days, and when the auction closes, the highest bidder wins. I’m sure you’ve bid on several and won at least a few. I bet you’ve also made money running some of your own.
You begin the auction with an opening bid, and bidders will bid up your opening price into a healthy profit for you (I hope).
Best Offer
If you’ve got a fixed-price listing, you can opt to insert a button under your sales price that encourages buyers to make you an offer on your item. This is probably one of the oldest sales methods around. (In some countries, it’s an insult to buy something at the posted price; haggling is part of their retail culture.)
So, if you love the thrill of haggling (I don’t, really), you can insert the Make Offer button into your listings at no extra charge. See Figure 1-4 for an example. When someone makes an offer on one of your items, eBay sends you an email asking that you reply to indicate whether the proposed price is acceptable to you.
eBay won’t allow certain items to be sold in nonrestricted categories, so you must list them in the Adult Only category of eBay. eBay makes it easy for the user to find or avoid these types of items by making this area accessible only after the user agrees to the terms and conditions. Items in the Adult Only category are not openly accessible through the regular eBay title search, nor are they listed in Newly Listed Items. Anyone who participates in auctions for items in the Adult Only category on eBay, whether as a bidder or a seller, must have a credit card on file on eBay for verification.
Do not attempt to slip an adults-only auction into a nonrestricted category. eBay doesn’t have a sense of humor when it comes to this violation of policy, and may relocate or end your auction. eBay might even suspend you from its site.
Private listings
The eBay Advanced Search page features an area where you can conduct a bidder search. You can find a list of the items that you’ve bid on in the past 30 days. Anyone not signing in on your eBay account sees a list of only the items you’ve won — but that’s no real help. One December, my daughter told me that she didn’t want a particular item — something that I had just bid on — for Christmas. My creative daughter had been regularly perusing my bidding action on eBay to see what I was buying for the holidays! A private listing would have kept my shopping secret.
Private sales also work well for the buyers who avail themselves of the services of the psychics, card readers, and fortunetellers on eBay and don’t want their friends to think they are … well, you know. Sometimes it’s just best to keep things quiet. No one needs to know just how much you choose to pay for something. As a seller, you have the option (at no extra charge) of listing your item as private.
The private auction is a useful tool for sellers who are selling bulk lots to other sellers. It maintains the privacy of the bidders, and customers can’t do a bidder search to find out what sellers are paying for the loot they plan to resell on eBay.
The private auction can save you the potential embarrassment associated with buying a girdle or the tie that flips over to reveal a racy half-nude on the back.
Although the private auction is a useful tool, it may intimidate a novice user. If your customer base comes from experienced eBay users and you’re selling an item that may benefit from being auctioned in secret, you might want to try this option.
PayPal Gets Its Cut
When you’ve sold your item, do you think that’s the end of the fees? Nope! If your customer pays using PayPal, you’re faced with additional fees. However, having a PayPal Premier or Business account is important for building your commerce for these reasons:
eBay buyers look for the PayPal option because it offers them a high level of protection against fraud.
Most customers prefer to pay with a credit card, either to delay the expense or to have complete records of their purchases.
From a seller’s point of view, using PayPal can be cheaper than having a direct-merchant credit card account.
PayPal helps with your paperwork by offering downloadable logs of your sales that include all PayPal fees. eBay fees are not included; you’re on your own for the recordkeeping on those.
A PayPal Business account requires the account to be registered in a business name. A Premier account allows you to do business under your own name.
Check out Book 2, Chapter 4, which covers the PayPal services and fees in depth.
Setting Sensible Shipping Costs
Buyers who visit the eBay site are bargain shoppers. They want to get their items at the lowest possible prices. They’re also more cognizant about the “hidden” expense buried in the item’s shipping and handling fees. When you set these fees, you must take into account every expense involved in your packing and shipping. You can’t make your shipping area a losing proposition.
However, many eBay sellers have increased their shipping prices to outrageous amounts. But when the shipping fee equals a third of the item’s cost, a prospective bidder may think twice about placing a bid. Of course, if the item is big or the buyer wants it fast, he or she may feel better about paying higher shipping costs.
eBay penalizes sellers who charge high shipping fees and rewards sellers who offer Free Shipping by giving the free shippers better visibility in the Best Match search results. Try listing your item by including the shipping amount in your selling price and offer Free Shipping. Then offer buyers a second shipping option for Priority Mail (faster shipping) at a charge. Your item will still get the benefit of eBay’s Free Shipping search preference.
Business is business, and when you’re on eBay to make a profit, every penny counts. In this section, I tell you how to evaluate all the costs involved with packing and shipping the items you sell. I also show you how to use the tools at your disposal — such as eBay’s shipping calculator — to make the best decisions about how much to charge your buyers for shipping costs.
For information on organizing your shipping area, be sure to read Book 7.
When calculating shipping costs, don’t assume that all you have to worry about is just the cost of your postage. You also have per-item costs for boxes, padded mailers, shipping tape, labels, and pickup or service fees from your carriers. Now and again, you may even pay the college kid across the street five bucks to schlep your boxes for you. Expenses show up in the strangest places.
In addition to adding up the packing and shipping supplies, you need to amortize the monthly fees from any online postage shipping services. Should you occasionally pay for a pickup from the carrier, you need to add that expense to the shipping charges, too. The following list runs down some of the expenses involved:
Padded bubble or vinyl mailers: Select an average-size padded mailer that works for several types of items you sell. Selecting a few average sizes for all your products works well because it’s cheaper to buy in quantity. Even if a few of your items could fit in the next-size-down mailers, buying the bigger size by the case gives you a considerable discount. Why keep five sizes of mailers in stock in quantities of 100 if you don’t have to? If you don’t use all the bigger ones, you can always sell them. And besides, envelopes don’t go bad.
Don’t be misled by packaging suppliers’ claims of low-cost mailers. They usually don’t include the shipping costs in these price estimates.
When you price your cost-per-piece, be sure to include (as part of your cost) what you have to pay to get the item shipped to you. For example, if you purchase your mailers — say #4s (9½ x 14½) — by the hundred, they may cost you $.39 each. If you buy a case of 500, they may cost only $.29 each. By buying in quantity, you save $.10 per mailing envelope! The more business you do, the more significant the savings.
Packing peanuts: I must admit that storing all those packing peanuts is a real drag. But here’s where buying in bulk equates to huge cost savings. I just checked one of my favorite vendors, www.bubblefast.com, and found a free-shipping offer. From BubbleFAST, you can purchase antistatic packing peanuts in lots of various sizes:
3.25 cubic feet for $11.50 = $3.54 per cubic foot
7 cubic feet for $22.00 = $3.14 per cubic foot
14 cubic feet for $42.00 = $3.00 per cubic foot
It’s no surprise that the 14-cubic-foot deal turns out to be the most economical. eBay sellers such as BubbleFAST sell packing peanuts for almost half what they cost when purchased from a brick-and-mortar retailer. (That’s because a store you can walk into has to use up square footage to store these babies, which means a higher cost.)
Here, in a nutshell (sorry, I couldn’t resist), is my solution to peanut storage: Fill a drawstring-type trash bag with packing peanuts, and then tie the drawstring. Screw some cup hooks into the rafters of your garage and hang the bags from the rafters. You can store a bunch of peanuts there! Be sure to recycle!
Packing tape: You need a stock of clear packing tape. The common size for a roll is 2 inches wide by 110 feet long. Shipping tape comes in two thicknesses, 1.6 mil and 2 mil; the heavier tape makes a better seal in larger packages and costs pennies more. I searched eBay and found these deals on 2-mil tape, and the following prices include shipping:
6 rolls = $14.98 = $ 2.50 per roll
12 rolls = $21.45 = $ 1.79 per roll
18 rolls = $26.45 = $1.47 per roll
Again, compare prices before buying.
Boxes: I won’t take you through the various costs of boxes because hundreds of sizes are available. Shop eBay (but often the shipping prices are too high), and also check out www.uline.com for boxes at reasonable prices. For the example, let’s just say a typical box will cost $.55 each.
G&A (general and administrative) costs: For the uninitiated (translation: you never had to do budgets at a large corporation), G&A represents the costs incurred in running a company. But the principle is familiar: Time is money. For example, the time it takes you to research the costs of mailers, tapes, and boxes on eBay is costing you money. The time it takes you to drive to the post office costs you money. You won’t actually put a figure on this just now, but it’s something you need to think about — especially if you spend half an hour at the post office every other day. In effect, that’s time wasted. You could be finding new sources of merchandise instead.
Online postage service: If you’re paying around $10 a month for the convenience of buying at a discount and printing online postage, that’s an expense too. If you ship 100 packages a month, that amortizes to $.10 per package.
If you’re questioning whether you need an online postage service, here’s my two cents: Being able to hand your packages to the postal carrier beats standing in line at the post office, and having records of all your shipments on your own computer is worth the monthly fee.
Table 1-3 shows you the cost for mailing a tiny padded envelope cushioned with packing peanuts. Before you even put postage on the package, you could possibly be spending $.52 — not including your time or postage.
Knowing the costs of selling an item
All those nickels, dimes, and quarters add up. The hundreds (thousands?) of people who are selling items on the site for $1 can’t be making much of a profit — not even enough for a pack of gum! To avoid this low-profit trap, you must be keenly aware of every penny you spend on listing fees, Final Value Fees, listing options, and PayPal fees. Keep in mind that if you have slim profit margins on an item but are constantly selling it, you may be making up for the low margin in sheer volume.
In this section, I review the costs for listing an item to sell on eBay. But if you use a credit card payment service, those folks also charge a fee. Later in this chapter, I examine the costs of some popular credit card payment services.
Do not attempt to slip an adults-only auction into a nonrestricted category. eBay doesn’t have a sense of humor when it comes to this violation of policy, and may relocate or end your auction. eBay might even suspend you from its site.