IN THIS CHAPTER

Knowing the costs of selling an item

Getting more punch with options

Figuring Final Value Fees

Understanding the different types of auctions

Including PayPal costs

Knowing hidden shipping and handling expenses

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.

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.

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.

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.

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.

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.

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

http://pages.ebay.com/help/sell/realestatefees.html

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

http://pages.ebay.com/help/sell/motorfees.html

Know Your Options in Auctions

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.

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.

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.

If you’re shipping many packages a month, read Book 9, which tells you how to use QuickBooks to easily and simply track your shipping costs.