Selling Fees

[surfsunrise]

Just wondering if sellers use a general mark up on products to cover ebay/paypal fees. All seems a bit confusing to me?

[i-love-my-sheep]

Most sellers that understand the fee structure add the amount, or at least part of the amount into their sale price. Same with postage. Some buyers get miffed if postage costs any more than what's on the label, so sellers add it into either their buy it now price or their starting amount for auctions. I charge $8 for small parcel rate parcels, which covers the fees on postage.

We sometimes see new sellers in here that follow the ridiculous eBay recommendation and start their auctions at 99c, then have $7.20 for postage. Their item sells for 99c and then they are hit with the FVF's on postage as well, so they are actually losing money by listing. It worries me how many DON'T come into the forums and don't realise they are losing money until they get their eBay bill.

[chameleon54]

There is a range of factors you need to acount for when setting the price of items. In my case ebay and paypal combined take close enough to 18 % of my total gross income (total sales price ). I add the FVF on postage to my postage cost and also add a bit extra to postage to cover items lost in the mail etc. On top of this you need to think about holding costs if the item will sit as a BIN for awhile. If you have substantial stock holdings you need to cover interest on the money invested, stock loss or devaluation for slow selling items that eventually need to be discounted to move and factor in that some items may never sell etc. You then need to decide how much profit you need to cover your time spent listing, packing etc.

        There are plenty of ebayers who are probably working for a few dollars an hour if they have not done their maths properly. Personally I need to sell items with a mark up of 200 -300% to make the job pay. You may be able to accept lower profit margins if you are selling higher value items.

example- If you sell an item that costs you $50 for $100 ( 100% mark up ) you will pay around $20 in costs leaving $30 profit  ( or 60% )

                If you buy an item for $5 and sell for $15  ( 200% mark up ) you will pay around $3 in fees for a profit of $7 ( 140 % profit )  but  it will probably take just as long to list, pack, answer questions etc. as the higher value item. You need to sell around 4.5 cheaper $15 items to make the same profit as one $100 item. Clearly you can accept lower profit margins and still make more money per hour, selling higher value items.

[queenslander-one]

Just checked last months invoice Fees are costing sellers too much.

Total monthly fees
19.17%

[van_werkhoven]

Yup. My listing price is definitely not my profit. Now I am very fortunate, my stock costs me very little. I'm not sure I could do this if it cost me a considerable percentage to buy the items in the first place.

I'm bored so lets do some math here.

My most frequent sale would be women's blouses, which average $10, plus $2.50 postage. So lets use that. That item, to photograph and list, then package later, takes me about 10 minutes per item. 

For an item which I charge $10, plus $2.50 postage for, lets look at the breakdown

50c - Item cost

20c - Envelope and return sticker, this is a guess. There's also paper and ink to consider as marginal costs.

$2.10 - Actual stamp cost

60c - Paypal Fee

95c - Ebay FVF

24c - Ebay Postage FVF

25c - Store fee (I sell approximately 80 items a month, so each item accounts for about 25c of my subscription) 

So of that $12.50 I received, with the listing price of $10, I pocket $7.66. Not too bad a profit. And yes, I build that in. When I list an item I know my profit will be around $2-$3 less than listing price. (also, for the record, if I send something as a 500g satchel I charge $8, not $7.20, which covers the FVF on the postage). I sell some items at a lower margin, like baby clothes for $5, but in those cases generally the stock has only cost me about 10c and the percentage fees are of course lower, so while the dollar amount is small there is still a profit. I also frequently sell $16 items and occasionally sell $20-$30 items which balances it out.

--------------------------------

Now lets go a little deeper into it. I list about 200 items a month, and generally sell about 80 per month (both old and new stock thanks to free relistings). So for every 5 items I list each month, I sell two. My time for each sold item is about 10 minutes, and for each unsold item (so no packaging time etc) is about 6 minutes. That means 5 items, two of which sell, take me about 40 minutes including a little extra time. I am guessing here, but I would say my average profit across all my items is somewhere around $8. $16 for 40 minutes work, which equates to $24 an hour. That is pure profit after stock purchases etc. For me, this is quite worthwhile, I am a stay at home mum who works on ebay around 8-10 hours a week, making right around $200-$250 a week in actual profit. 

But, it would definitely be a very different story if my stock costs wern't so low. If I needed to take another $4 an item out of that to purchase the stock the model wouldn't be sustrainable (having said that, if you're buying new stock your salethrough rate might be better than 2 of every 5 listings, and your per-item time spent is much less since you are not doing unique listings for every individual piece but rather might be able to sell 100s of items from one listing, so it's an entirely different ballgame and one I have no math for.)

[surfsunrise]

Thanks, useful info.

[surfsunrise]

Thanks for reply, gives me more insight.

[surfsunrise]

yep me similar although first month selling seriously so will be learning and trying to better that.

[surfsunrise]

Thanks. Pretty detailed reply and I appreciate it. Great info.

[surfsunrise]

Also, if someone is looking at doing this as a legit business when you take into account all the fees then having to pay tax etc it seems like a hard way to make a buck. The markets sounds good to me.