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A typical mistake many new eBay sellers make is underestimating the impact of eBay seller fees on the profit they will make. Typically, they will calculate the 10% of eBay final value fee, their postage costs, product costs and use that to create their selling prices. This can be a dramatic error and potentially lead to tiny margins or even a loss of profits.
When I was first starting out on eBay, I made the mistake of taking these simple obvious costs, adding on a little profit for myself and publishing my price list. That was a huge mistake, because after some weeks of trading, I realised all the additional costs I hadn’t factored in as you will discover below. By then, my customers had formed a certain price expectation and were very sensitive to any price rises, leaving me in a difficult situation where I had to almost start building a customer base again from scratch.
There are many commonly overlooked eBay selling fees that lead to lower profits than expected. I’d like to cover the most common eBay fees miscalculations and since I’m a seller from the UK, some of my examples will be in pounds sterling.
Firstly it’s important to note that different countries have different rules. In the UK, all eBay fees are subject to an additional 20% VAT or a Sales Tax, which many sellers forget to add on to their selling fees and it can be a significant amount. This is especially important for small eBay businesses that cannot reclaim sales tax and can hurt the overall profit.
For other fees, you can use this free eBay profit calculator that helps you calculate your optimal selling price for items based on the additional eBay and PayPal fees you’ll be charged for. This tool will calculate your net profit and present the full breakdown of additional fees (to which you should also apply your local VAT or a Sales Tax).
UK PayPal fees are typically 2.9% plus $0.30 per transaction, which can also create a significant amount of sales margin and should always be added into the total eBay fees calculation. As we know, the vast majority of eBay sales transactions are via PayPal (being eBay customers’ preferred payment method).
PayPal will often retain payments from customers on the grounds that they want to safeguard the transaction. They can hold back funds until they get proof that an item has been delivered via a validated tracking number. In a case of not being able to provide tracking, they will often hold funds back for 21 days to give customers a chance to complain they didn’t receive their item. This practice can seriously impact cash flow as sales expand.
One very important thing that many sellers are not aware of, is if your buyers cancel orders or ask for refunds, you will not get your PayPal fees refunded so you make a net loss on these orders and again, it can be quite a significant amount.
This is of course on top of the loss of the original shipping costs, incurred to post the item in the first place. Depending on the return policy you include in your listing, there could also be the cost of your buyer returning your product to you, which costs you may also have to cover.
There are a number of reasons for your listing fees to increase. The most common ones are for the use of a subtitle, bolded title and adding the gallery plus. The general consensus amongst sellers is that these do not improve sales are really just “gimmicks”, but naturally, it is an individual choice. Nonetheless, each of those adds to the total costs of creating a listing (and selling on eBay) that needs to be factored in when calculating the total profit. You can add all these to your eBay fee calculator too and see how much they affect your total listing fee.
There are two main types of listings that eBay supports, fixed-price and auction. For sales of new products, fixed-price listings dominate and generally the only reason that new products are put into auctions is to generate interest and demand for a sellers shop and products, trying to secure a customer who will then buy from fixed-price listings in the future.
Fixed priced listings are generally set up as GTC or Good Till Cancelled, but what is easily overlooked is that this doesn’t mean your listing just lasts forever. In reality, eBay creates it for one month and then automatically relists it every month. Each time they do that, a new listing fee is charged to your account.
There are certain fees associated with auction listings that vary compared to fixed-price listings. In particular, there is a fee for scheduling the auction to start at a date and time in the future instead of immediately (10 pence).
If you want to set a minimum or reserve the sales price there is an additional fee of 4% of that reserve price added. If you want to give customers the chance to ‘Buy It Now’ from your auction for a fixed price, there is an additional 50p charge and remember, all these are plus VAT or Sales Tax of 20%.
Finally, there is another area of optional eBay seller fees that is worth exploring. eBay gives you the opportunity on fixed price listings to ‘promote your listing’. This means that eBay will show your listing to potential buyers in more places than they would if you don’t pay the extra promotion cost. Those can include eBay’s home page and/or inside other listings as ‘sponsored listing’.
Additionally, your listing will achieve a higher ranking in search results to appear closer to the top, improving your listing SEO. When you create a listing, eBay will tell you what other similar listings are paying for promotion. That will always cost an extra % of your final sale price (including postage) and it can vary typically from 1% to 20% depending on the competition you have.
If you opt to pay less than the competition, you will get less exposure than they do, if you pay more you get more. With averages being around 10%, this is a cost not to be underestimated. It can often be higher than the eBay final value fees you will also have to pay so please, consider that carefully.
If you expect a relatively low number of sales each day, the promotion can give you a chance to get a better search ranking and reach more customers. That could increase the number of sales you make allowing you to then reduce or stop promotions.
If your items are already achieving a reasonable number of sales daily (at least more than 20 transactions), then provided you are also offering good customer service, you will already be doing quite well in your search rankings. Therefore, it may well be that paying extra for promotion is a waste of your profit margin. And don’t forget again, promotion fees will also have VAT or a Sales Tax added to them.
On all listings, whether they are auction or fixed-price, your main cost is going to be the eBay final value fees that are applied once you actually sell something. Remember that eBay charges you once the purchase is made, it doesn’t require payment to be made. So if you do get orders that are not paid for, you must register them as ‘unpaid items’ or else you will still be liable for the eBay final value fees even though you received no payment.
Final value fees are set as a % of the sale and that % does vary depending on the category you are selling in, but typically is set around 7% to 10% (and don’t forget the sales tax on top).
Another thing many sellers are not aware of is that eBay final value fees and PayPal fees are not calculated according to the final selling price of your item but on the total value of your final sale. That includes postage, so you have to factor this in when doing the eBay fees calculations (which of course, 3Dsellers eBay Fee Calculator does for you).
Setting up an eBay store can be a good way to reduce listing costs, particularly if you mostly use fixed-price or 7-day auctions because the stores include a significant number of free listings within their subscriptions.
In the UK, for even the basic store you get 250 fixed price and 50 7-day auction listings for £25 per month. That means if you regularly have more than about 70 fixed-price listings posted, even without all the other benefits of having a shop, you will save money on eBay seller fees by having an eBay store.
In addition, even if you need more than 250 listings, you can either upgrade to a higher level store or you get a reduced listing fee within the basic one. Either way, it’s a win-win!
When calculating shipping fees, it’s important to include shipping materials (paper, boxes, bubble wrap, fillers, tape, labels, packing slips/invoice printing and paper as they all add up and impact margin.
If you are going to have couriers pick up parcels rather than take them to the postal drop-off location, there will also be a cost for that to be incorporated.
When calculating your overall profit, it's easy to forget that there are plenty of other costs that you will be incurring that don't make themselves easily visible, things like office space, your own transport costs (petrol/gasoline, use of car), accountant, stationary, energy/heating, storage, waste removal, supplier fees, etc. Make sure you think about all these extra costs when calculating pricing to make sure you are not working for nothing.
There is no doubt that selling on eBay means learning new things almost every day, both because the rules, fees, processes on eBay are already complex, and also because they change quite regularly.
My own experience has been one of continuous learning and refinement, always trying to squeeze an extra few % of profit out of each sale by limiting my costs in every aspect of the supply chain from sourcing through to settlement. No stone should go unturned, no fee should be ignored because the tighter you can make things, the more competitive your pricing can be while still leaving you a good profit and happy customers. I really wish I’d had someone to tell me some of the lessons in this article on my Day 1, it would have saved me lots of experimentation and lost profits, so hopefully it will be of help to you as you build your business.