First Was the Battle for the Buyers and Now Comes the Fight for the Sellers

Posted on September 27, 2009. Filed under: eBay | Tags: , , , |

 As an eBay Education Specialist, I helped many small sellers learn how to sell on eBay and how to improve their selling efforts on the eBay platform.  One thing I consistently noted was that eBay sellers struggled with understanding how much they were actually paying to sell on eBay. 

There are many reasons why I think it is difficult for ecommerce merchants to manage a successful business selling on eBay and one of the main problems sellers face is the uncertainty of just how much fees they will actually have to pay when things are all said and done.  There are so many variables — the type of listing format a seller chooses, whether the buyer turns out to be an international customer which means higher PayPal fees, and whether the seller earns any kind of Powerseller discount after the fact, etc.

eBay Selling Fees

Assume an eBay seller makes a $100 sale on eBay.  The selling fees paid to eBay are dependent on two main factors: (a) the listing format chosen and (b) the type of item that sold.  For this example, we’ll assume that the seller is offering an electronic item.

If the eBay seller used a “free” listing auction format then the total fees paid to eBay would be $8.75 ($0 insertion fee + $8.75% of the final value).

If the eBay seller used the fixed price auction format then the total fees paid to eBay would be $6.60 ($0.35 insertion fe plus 8% of the first $50 and 4.5% of th enext $50)

On a $100 sale of an electronic item the seller could end up paying $6.60 or $8.75 in eBay selling fees and that is from the above example which assumes just two different listing format choices.  However, a seller has the choice of listing an item as a fixed price listing, a store inventory listing, or an auction listing with or without a Buy-Now option (costs extra) and the auction listing could be free insertion (higher final value fees) or not.  Additionally, the final value fee for fixed price items vary based on the category in which the item is sold.  eBay’s fee structure is pretty complicated.

PayPal Payment Processing Fees

eBay sellers are required to offer an electronic payment method to their buyers and most sellers’ default payment option is PayPal so I will use PayPal fees for this example.  PayPal is owned by eBay Inc.

Whereas eBay selling fees are charged based only on the price of the item, the PayPal fees are charged on the total amount received which also includes the cost of shipping.

If we assume in our example that the seller charges only the postal fee they incur to ship the item and charges no fees for packing materials and does not include any handling fee and, further, we assume that the item is a 5 pound package, we can see another wide variation in the PayPal fees that a seller could incur.  My calculations below assume the standard PayPal rate.

If the seller ships the 5 pound package to Australia, the postal shipping cost would be $43.61 via international priority mail which is the least expensive shipping method for a 5 pound package.  Therefore, the total PayPal fees would be $5.90 which is $0.30 plus 3.9% of the total $143.61. 

If the seller ships the 5 pound package to a U.S. destination in the same zip code as the sender, the postal shipping cost would be $6.33 via priority mail which is the least expensive shipping method available for a non-media item.  Therefore, the total PayPal fees would be $3.38 which is $0.30 plus 2.9% of the total $106.33. 

TOTAL = eBay + PayPal Fees

To summarize, if an eBay seller offered a $100 item in two different listing formats and sold one item to a buyer in Australia and one item to a buyer living in the same local area, the total fees paid to eBay and PayPal could vary by as much as 47% ($9.98 vs $14.65)

International buyer of an electronic item purchased where the seller used the free auction listing format: $8.75 eBay fees + $5.90 PayPal fees = $14.65 total fees

U.S. buyer with same zip code as seller of an electronic item purchased where the seller used the fixed price listing format: $6.60 eBay fees + $3.38 PayPal fees = $9.98 total fees

 
Selling on eBay – Skill and Strategy versus Luck

It is true that eBay sellers have the choice of which listing format they want to use.  While eBay claims that eBay Inc. is “format agnostic”, sellers cannot afford to view all listing formats as being the same.  There is some cost – benefit analysis that sellers have to employ when deciding on a format because auctions will be given a boost in Best Match visibility as the auction nears the end but unless the seller starts out the auction at the highest price they want for the item, it is entirely possible that the item could be sold at a hefty discount, further eroding the seller’s margin.  Or the seller could pay an insertion fee and end up not selling the item.

The more selling experience an eBay seller has on the platform, the better strategic decision that seller can make about which listing format to choose.  Therefore, the eBay portion of the total fees is within the control of the seller.

However, the PayPal portion of the fees are completely “luck of the draw”.  eBay sellers have to pay higher PayPal fees when an international buyer purchases their item for two main reasons: (1) the PayPal fee structure is set up to charge sellers 1% more for international transactions and (2) sellers have to pay fees on the postal portion of the payment and it is always more expensive to ship internationally and thus whatever PayPal fees are assessed on the high international shipping charges erode an eBay seller’s margin.  Even the difference between shipping a 5 pound package to a zip code close to the seller versus a zip code across the country leads to differences in PayPal fees due only to the location of the buyer.

eBay specifically tells sellers that they can NOT charge buyers for the difference in fees:

Selling Practices Policy (click HERE)

In the section about Shipping and Handling charges, eBay includes a list of things a seller cannot charge the buyer for.

Related fees: Things like gas, mileage, time spent at a carrier, employee wages, or eBay and PayPal fees should not be added.

So, an eBay seller who sells a $100 electronics item on eBay would pay $3.38 in PayPal fees if the buyer were in the U.S. but would pay 57% more in PayPal fees simply because the buyer were international.  And the eBay seller is directly told not to increase the international shipping fee by $2.52 so that the international buyer is asked to pay for the difference.

So, basically an eBay seller has three choices: voluntarily take a 2.5% reduction in margin when selling internationally, violate eBay policy and increase international shipping fees by approximately $2.50 per item to reflect the true costs, or discontinue offering items internationally on eBay.  None of these sound appealing to me.

The Underlying Problem

My examples above are given in support what I am claiming is the underlying problem.  Those in charge of making eBay policy are not making good policy decisions either because they do not understand the system or because they do not care.

The eBay selling fee structure is confusing for sellers but perhaps that is eBay’s intent.  Many small sellers don’t really know the total fee percentages they are paying to eBay and I honestly think eBay likes it that way.  But those of us running a business need more of a stable fee structure that doesn’t vary quite so much.  If eBay is really “format agnostic” as they keep saying, then make the insertion fees free (like Amazon and Bonanzle) and charge one flat percentage across the board no matter what format the seller chooses.

And the fact that eBay has to micromanage sellers to the degree that they specifically order us not to charge international buyers the additional PayPal fees we incur is a testament to the fact that eBay policy makers don’t really have a clue about what we do.  It is really insulting.  And while it seems that every other marketplace out there is focused on helping sellers succeed, eBay is determined to stifle sellers and force them into submission.  eBay is right when they keep claiming they are not a retailer.  It is painfully obvious to those of us who are retailers.

Amazon recently announced they area creating a new Seller Forum (reported on AuctionBytes).   

Bonanzle just last week issued a video titled Set Your Google Base Items to Condition “New” (click HERE)

Buy.com recently put out a post on their Blog making sure sellers had a list of email addresses where they could contact the appropriate people at Buy.com if they need assistance.

And how about eBay?  Well, they do offer Free Workshops but as I have pointed out many times, those workshops are put on by eBay Certified Solution Providers who are doing so in order to sell their services.  eBay sellers don’t need to be told how to spend more money. 

And what type of helpful advice does eBay give out themselves?  I recently read where the eBay Seller Advocate recommended to sellers that they should include a chocolate bar with a nice thank you note in each package if they wanted to raise their anonymous DSR ratings.  That is just so wrong on so many levels.  Not only is the recommendation one that is asking sellers to spend more money — spend money on purchasing the chocolate bars and then more money on paying more shipping costs to incude the bar in the package — but many buyers would be upset if they received something extra like that in their package.  They would feel that they could have gotten a better deal or paid less shipping if the seller had not included something “extra”.  And what about folks who are allergic to chocolate or who are on a diet?  Not to mention, a chocolate bar could melt and make a mess all over the product that the buyer actually did purchase.

eBay is years behind on their battle to fight to keep buyers.  They are just now entering the battle when others have been wooing online customers for years.  And, now, eBay is all but ignoring their long-time sellers who are finding other venues where they are receiving the help and encouragement they so desire.  In just a few years eBay will realize that they should have been providing so much more to their sellers. 

In a recent video posted on the AuctionBytes site, John Donahoe stated that eBay needs to be more customer focused and that eBay knows that small sellers have different needs from large sellers.  But everything eBay is doing, such as providing financial incentives to Diamond Powersellers and providing a special customer service phone numbers to only 1% of sellers, is designed to meet the needs of large sellers.  

In its transition to go from a community-based marketplace to a consumer-based marketplace, eBay needs to recognize that the transition requires eBay to now provide services for the needs of the small seller.  In the community-based marketplace of the past, eBay counted on community members to help other community members learn to buy and sell on eBay.  And if eBay doesn’t step up and get some true understanding of their small sellers’ needs and address those needs, I am sure that the other marketplaces out there like Amazon and Bonanzle and Buy.com are ready to fill that void.

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18 Responses to “First Was the Battle for the Buyers and Now Comes the Fight for the Sellers”

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I’m not clear on the “not include paypal fees” in shipping part at all.

We ship, worldwide.
We calculate flat rate shipping for world.
let’s take US as example.
We ship canada post.
It costs us:
$11.52 base prices Canada post for expedited parcel to anywhere in US.
(some states more, some less, evens out).
fuel surtax applies at $0.48
To pack and handle costs $1.50 (bubblewrap,etc)
We apply a coverage of about 4% for over/under charges to ensure we even out on all shipments.
We apply a 3% payment fee.
the total comes to about $14.50 or so..

This is our flat rate shipping fee for this item.
Have we done something un-ebay like?

Oh, and you forgot to put the TAXES into your paypal fees calc — when applicable taxes exist, they too are part of your payment, so you’re being charged abut 3% to collect sales taxes for the government.

Don’t forget the taxes — the gov’t won’t. (in our case its 3% of 13% or about 0.4%. When I figure out a simple way to apply to canadians only, i’ll be putting that into our calcs as well.
cheers.

Yes, Vince, your method for calculating and charging shipping & handling violates eBay policy. Feeling a little bad today?

To comply with current eBay policy your listing should state:
Shipping within USA $11.52
Handling $2.98

You may only charge “Actual shipping cost: This is the amount for shipping the item. It should be what you paid the carrier.”

I was talking to an eBay seller the other day and she told me that before she opens her package she slaps it on the scales to see if she has been overcharged. I shuddered.

well, I’m back from my trip to ebay, checking their docs.

I sell on ebay.ca… so no idea of .com docs.
page at
http://pages.ebay.ca/help/sellerguide/shipping/specifycosts.html

direct from ebay page I read
“* Shipping rates quoted are derived by adding postage fees and fuel charges (obtained from advertised Canada Post consumer, non-discounted retail rates, along with applicable taxes on postage), plus handling charges. Quoted rates assume the accuracy of information provided by the user. Canada Post advertised quotes are estimates and subject to adjustment by Canada Post. Actual shipping rates may vary. ”

i’ll be darned if I can’t see “handling charges” as also including any charges for accepting sale of item.

And they allow for flat rate as taking worst case scenario to allow for coverage of most shipping cases (like we ship from Ontario to California for our shipping calc).

Nope, not in violation.

Whether somebody at eBay one day says it is, is hard to tell…. we certainly wouldn’t waste time fighting ebay.

but as it stands, our calc shown above is in full compliance. Paypal fees may be included in reasonable “handling charges”, even if not explicitly stated.

It’s like the credit card thing.
You are in violation of Visa contract if you surcharge for items paid with credit card, but NOT in violation if you provide a cash discount.
(all smiles)
cheers.

Sorry, Vince, but according to eBay you are wrong. Ebay defines handling charges as follows:

Handling cost: This can include the cost of packaging materials and insurance cost (if any).

That definition can be found on the following eBay Help Page:

http://pages.ebay.com/help/policies/selling-practices.html

So, eBay has explicitly stated you can charge for packing materials and insurance (defined above as handling fees) and they have explictly stated you can NOT charge for PayPal fees (see my URL above in the blog post that takes you to that eBay Help Page).

My point in writing the blog post is that most sellers calculate shipping AND HANDLING costs as you do and in doing so, eBay says you are in violation of their policies.

What I was pointing out is that there is a significant difference in PayPal fees when selling internationally and eBay has given specific directions to sellers that they are not allowed to charge the international customer for those higher costs.

My point: eBay doesn’t have a clue about seller’s businesses or they just don’t give a darn whether we cannot succeed if we choose to follow the eBay rules. Ebay makes a bunch of silly rules and then, of course, doesn’t enforce them anyway.

Henrietta, that is why I believe that some of the worst eBay buyers are also sellers. Very sad… and only on eBay.

[…] See the original post here: First Was the Battle for the Buyers and Now Comes the Fight for … […]

On the Canadian eBay website:

Charges not allowed in shipping & handling:

Tax: Only actual applicable federal, provincial, country, city, VAT, and equivalent taxes may be charged.

“Self insurance” protection: No additional amount such as “self insurance” may be added. Sellers who do not use a licensed 3rd party insurance company may not require buyers to purchase insurance.

Tariffs and duties: For cross border transactions, sellers may not collect tariffs and duties. However, buyer may be responsible for actual tariffs and duties as required by country laws.

Fees related to shipping & handling: Gasoline, mileage, time spent at a carrier, time spent packaging the item, eBay and PayPal fees may not be added.

*****
the above information was copied exactly from eBay.ca at the following URL:

http://pages.ebay.ca/help/policies/listing-shipping.html

there’s the rub. we do not ADD fees, we include them. The selling contract indicates flat fee shipping, take it or leave it. We just had an email about item, asking us to lower shipping so they can buy… we refused. Shipping is shipping, no exceptions.

Just like in my B&M store, i’ve already included my overhead payment related fees in my pricing of any product.
In my ebay store, i’ve already included same in my “shipping and handling” fees, and these are included in my “shipping” ebay fee. Standard biz procedure to include overhead portion of service related costs in price of service. We isolate ebay fees into cost of item, and paypal related fees into additional cost of shipping.

If/when ebay decides they get to dictate “handling fees” well.. we’ll just move the percentage into cost of item. (we don’t do auctions). I can’t imagine them dictating price of item 🙂 , ever.

Vince, this is why I love ya man:

“we do not ADD fees, we include them”

And, with that comment…. well, you just made my day 🙂

Ok, I think I finally get it.

My bubble wrap, purchased at local office supply store, in small squares, costs $2.92 for an item, and the used boxes I use,, they cost 60 cents each from the local yokel who provides just in time delivery for us.

Will eBay allow that?

Vince, you have just had an “aha!” eBay moment. How does it feel now that you are no longer violating eBay policy?

I feel free as a bird now.

A little dumb for purchasing supplies in that manner, though. But it’s my story, and I’m sticking to it 🙂

ebay is on it’s way to hell in a handbasket. In another year [if it takes that long, God forbid!] they will just cease to exist.

“eBay needs to be more customer focused and that eBay knows that small sellers have different needs from large sellers.”

This is very true, however “knowing” that small sellers have different needs is not the same as making a commitment to address those needs in any meaningful way.

It is a time-honored BaySpeak moment – “We hear you”

Part of the title of this blog post is, “Now Comes the Fight for the Sellers”. Frankly, I don’t see it. eBay is not trying to compete for any seller other than a “Diamond” seller. In their ignorance or arrogance they think they can just bring in a few big sellers and call it a day. No need to understand our business, or how the morass of fees negatively impacts our business… just bring in another diamond!

Tim, I agree with you. I think it is the OTHER platforms, however, that are fighting for the sellers. eBay is too busy trying to make up for not previously fighting for the buyers that they are ignoring the needs of the non-Diamond sellers. Frankly, it would require some innovation and creativity to meet the needs of small sellers and eBay just doesn’t seem to be interested in working hard to keep small sellers. As a result, there are plenty of other venues like Amazon and Bonanzle and Buy.com who seem to be turning their attention to the sellers.

Just like that “aha” moment, it’s impossible for a buyer or ebay to know the exact cost of shipping.

If I take the risk to purchase shipping products in bulk to reduce my marginal costs, I’m the only one that knows I’ve taken this risk and hopefully benefitted from it.

I then use a flat rate for international and domestic. I make sure my costs are covered, although at times I’ve lost money on shipping by not doing my due dilligence up front. Like it was said here, I do not add fees, I just include them.

This is how business works – costs are passed on to the consumer, in one way or another.

But in the digital world where it’s easy to buy from another venue, eBay really made their bed when they made some of the choices and decisions that they did.


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