I sell books for $10, but they don't go in parcels. If they are under 2cm packed, they go as letters. I use C5 prepaid. $2.52 each in lots of 50, 500g max weight. I have had a handful go missing in 11 years, so they aren't risky. Maybe book buyers are more honest than the general run of alleged shoplifters alleged to inhabit eBay.

Are you trying to be the cheapest? Not a good idea with the UK dropshippers charging what we have to pay for postage.

I aim to be about the 3rd cheapest AUSTRALIAN seller. Works for me, and I don't end up selling at a loss.

If you are using eBay labels, that means you post in satchels, not envelopes. Small satchels are 15-25c each. You buy them from AP. MyPost Business is also cheaper than eBay labels if you send, on average, at least one parcel per week.

You also forgot to factor in Paypal (or Managed Payments) fees. Paypal charge you 56c on a $10 sale.

It doesn't matter whether or not you offer 'free' postage. The fees are charged on the total price, regardless of how it is apportioned. You have a store, so the most you will pay on a $10 sale is $1.05.