If you are selling products on eBay, be aware of what your total costs are for the items that you sell. Many eBay sellers do not take into account all of their selling costs and are surprised to find out how much eBay takes out of their pocket.
We use eBay ourselves and find it to be a good place to sell products. It works well as a primary or alternate sales channel for products that you sell as part of a business or as a “garage sale” for offloading used personal items that you no longer need.
If the plan is to sell products on eBay as a business, it is imperative that you know the total costs. These costs come directly out of your profits. The profits are what you get paid for your efforts and are critical if you wish to maintain a healthy business. Revenue does not drive a business. Only profit can drive a business.
For new sellers, eBay does have a Seller Information Center that contains tips and best practices to get you started in the right direction. The page that a new seller really should pay attention to is the one called Fees for Selling on eBay. This will list most of the selling costs.
It would be a good idea to set up a spreadsheet with columns for the products, each cost, estimated selling price and worst case profit for auction style listings. We also do post sale analysis for each sale that includes the actual costs. From that data we make price adjustments for future auctions.
Here is a summary of the costs that need to be considered.
- Product Cost – This should be the landed cost for an individual product. Landed costs include all costs paid to get that product to you. If you ordered 100 widgets at $2 each and the shipping cost was $10, the landed cost per product is $2.10 ($210/100). If you are using a drop shipping service, it is your total cost for the product, including drop shipping fees.
- Insertion Fee – This is the fee for inserting an auction. eBay frequently waives this fee for promotions. A typical promotion is where the fee is waived for the first 25 to 50 auction-style listings that you set up each month. Promotions can be come and go at any time, so always watch for changes in eBay promotions and take advantage of them to minimize your selling costs.
- Optional Feature Fees – Optional Features are additional listing fees that you pay for turning on certain features when auctions are listed. Gallery listings, reserve prices, Buy it Now pricing, subtitles, additional images hosted by eBay, using bolded titles, and other options are listing upgrades that each add a fee. Be aware that these are not free and can have a significant impact on the total selling cost.
- Final Value Fee – The Final Value Fee is the commission charged based upon the final selling price. This fee is now charged on your shipping fee as well as the final price paid for an item.
- Packaging Costs – Do not forget the costs for packaging. Packaging cost is not only the cost for boxes or bags, but also the cost for Styrofoam peanuts, bubble wrap and other packaging materials. You can roughly estimate the cost for packaging materials that you buy in bulk. Once again, this is a landed cost. Include any shipping costs and taxes that you paid.
- Shipping Costs – This is not the shipping cost that you charge, but rather are the actual shipping costs incurred. eBay will charge a Final Selling Fee on any shipping charges that are paid by the buyer. Also, some shipping costs are discounted when you use the PayPal shipping label service, so keep this in mind.
- PayPal Transaction Fees – Don’t forget the PayPal fees. PayPal is owned by eBay, so those fees ultimately flow back to eBay. There are two fees associated with PayPal. There is a transaction fee and percentage that make up the total fee charged by PayPal.
eBay is almost continually running seller promotions and specials that you should take advantage of whenever possible. In many cases, the Insertion Fee is waived, but the caveat is that they sometimes raise the Final Value Fee when they do that.
Being continually aware of all of your costs helps to assure that products are priced so that you can make a profit and can stay in business. If you are not covering your costs and maintaining a healthy profit on every item that you sell, you will not be in business very long.