For the past two months I've been doing an experiment. I saw other buyers selling items at low low prices with high shipping costs. It was obvious that they were avoiding eBay fees and trying to scrape a profit out of a small deal. These sellers upset people since it seems they're not playing fair. I have passed them up to find sellers with reasonable shipping prices just on principle, while I wind up paying a higher sale price and lower shipping it's a wash for me in the end.
My Experiment
I decided to see what would happen if I changed things around and listed my items at $.99 with a higher shipping price. I adjusted my shipping up to $8.45 and listed a bunch of items. My conversion rate turned around literally overnight.
How can I charge $8.45 to ship a lightweight poster? Well, postage itself is roughly $2.00 per tube, plus $.65-$1.00 for the actual tube itself. I also print my own postage through PayPal on a label printer. After all is said and done, each label costs me about $.10 to print. My wife stuffs a little tissue into the end of each tube to prevent damage to the poster as it gets handled along the way, add another $.05 for that. My wife's time is worth something too. She can pack about 25 posters in an hour. If she was making $8 per hour that adds $.32 to each poster sale. That comes up to about $3.47 for each order and that's not considering any eBay fees at all. So without considering eBay I'm in the hole $3.47 just in shipping and handling. For the sake of discussion, I'm leaving my actual cost of the poster out.
The Breakdown
eBay fees on this $.99 poster are $.20 listing fee and $.35 gallery to list, $.55 total. Then if it sells for $.99 I pay $.05 final value fee. If the buyer pays by PayPal, I pay $.35 to accept the payment, and 2.9% of the total (in this case $9.44) which would be $.27, total PayPal fees $.62.
Total for $.99 poster with $8.45 shipping:
- $3.47 Shipping and Handling Costs
- $0.60 eBay Fees
- $0.62 PayPal Fees
- $4.69 Total Cost To Sell
- Profit=$4.75 for a $.99 Poster sale
What if I flipped the price / shipping back to normal? Let's do a $9.99 poster with $3.50 S & H.
Total for $9.99 poster with $3.50 shipping:
- $3.47 Shipping and Handling Costs
- $1.30 eBay Fees
- $0.74 PayPal Fees
- $5.51 Total Cost To Sell
- Profit=$6.98 for a $9.99 Poster sale
This may be off by pennies but I'm really close so stay with me here...
It may seem like $6.98 vs. $4.75 profit is a no-brainer. Well, the real difference is conversion. My conversion rate rose dramatically for the same posters because of the $.99 price. I made sure to clearly list the shipping price in the listing, and I also make sure it shows up in search results by adding it in the SYI form. No surprises.
The fact is when I figure in the cost of unsuccessful listings, I find my profit being eaten away quickly. To list a poster at $9.99 it costs me $.40 + $.35 (gallery) = $.75 each. That's whether it sells or not. If I list 20 posters and only 5 sell, that's $34.90 in profit (using the figures above.) But once I figure in the cost of the 15 that didn't sell, my profit is $23.65. Divide that by 5 and I get $4.73 per poster. See the point?
If I list the same 20 posters at $.99 with higher shipping I would likely sell 10. My cost to list them is less so the unsuccessful items eat less of my profit. If I list 20 posters and 10 sell - at the above $.99 figures, my profit is $47.50. Now once I figure in the cost of the 10 that didn't sell, my profit is $42.00.
Other Factors
Besides the fact that the final profit is higher, there are other benefits. I offer the $.99 posters as auctions. Some people bid these up and of course that raises the profit for me and eBay as well. I also get to offer Second Chance Offers which are accepted about 60% of the time.
The low prices also draw people into my eBay Store. I sell hundreds of posters, the vast majority of which are regularly priced with regular shipping. But the low-priced auctions are what really bring in the traffic and I sell more through my Store.
Is this fee avoidance?
Some folks, as I used to do, will get on a high-horse and say, "You can't charge that much for shipping! It's cheating eBay out of their fees."
Well, consider this. I put these posters up as an auction. Anyone can bid or not bid as they choose. eBay has really pushed the auction format listings over the past year. Ask anyone in power at eBay and they'd say - Yes! We stand behind our decision. Auctions are the DNA of eBay, the best way to sell!
Ok.
I'm taking them at their word. Certainly if they are that confident they will be willing to take the risk instead of a penny-ante poster seller like me. If the auctions do well as eBay people say they will, eBay makes more.
How to Get Your Listings Pulled for Fee Avoidance
During this experiment, I did find what appears to be a trigger in the fight against fee avoidance.
I listed the items as I mentioned above for a $.99 Start Price and added a Buy It Now for around $2.50. That got my listings yanked and an email from customer service. This makes sense. One conceiveable way to determine if a person is avoiding fees is to look at shipping as a percentage of the total sale price. For example, if a seller has a set price of $.99 and shipping of $8.45 the shipping is nearly 90% of the total. Sounds bad when you put it that way huh?
With an auction however, it's really impossible to make that calculation, since you never know where an auction will wind up. So if you're going to use the low sale-price, high shipping cost formula you will have to use the auction style format.
Experiment Over
The experiment is over and I intend to keep at least some of my listings at the $.99 level with shipping and handling to realistically cover my costs. If people don't want to pay they don't have to buy. And although I appreciate their sincere concern for eBay's financial well-being I have found a way to make money on eBay and still pay a hefty bill each month to keep them going.
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1 comment so far ↓
That’s EXTREMELY interesting. Thanks for posting!
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