Ina Steiner EcommerceBytes Blog
News and insight focusing on ecommerce.
by Ina Steiner, Editor of EcommerceBytes.com
Sun Dec 30 2012 20:19:09

eBay Nets More in Fees Thanks to Higher Shipping Costs

By: Ina Steiner

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Higher shipping costs never bode well for online merchants, but eBay actually makes more money when carriers raise rates thanks to a policy change that took effect last year: eBay now charges a commission on shipping. Previously, it had charged "final value fees" on the cost of the item alone.

eBay also requires a majority of users to accept its PayPal payment processing service, which also takes a cut on the total transaction, including shipping.

All the major carriers (USPS, UPS and FedEx) are raising shipping rates in the New Year (see Monday's EcommerceBytes Newsflash article for details), meaning eBay will earn even more in fees without having to announce a fee increase.

How does this play out? Many eBay sellers use Priority Mail flat rate boxes to ship their items. A small box is going up by 45 cents ($5.35 to $5.80), netting eBay an extra 6 cents in final value fees, assuming an 11% FVF and a 2.9% PayPal processing fee. (eBay FVFs vary by selling format and category.)

Using the same assumptions, eBay will net an extra 14 cents for every order sent using a Medium Priority Mail flat rate box where the buyer pays with PayPal.

While buyers usually pay for shipping, now that eBay charges fees for shipping costs, the price of doing business on the marketplace is going up.
 
It's worth noting that Amazon plays a similar game, but wrapped in much more complexity. In 2005, Amazon introduced a variable closing fee. To see how complicated the shipping portion of its fee structure gets, see this 2006 Newsflash article. Often it chooses not to increase shipping credits when shipping costs increase, and when it does, it also increases its variable closing fees.

The bottom line is that sellers' profit margins will be shrinking in the New Year.




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Perminate Link for eBay Nets More in Fees Thanks to Higher Shipping Costs   eBay Nets More in Fees Thanks to Higher Shipping Costs

This user has validated their user name. by: Rexford

Sun Dec 30 22:18:04 2012

They make more fees and sellers' DSRs suffer due to the fact that in general, most buyers don't have a clue as to how much it costs to ship a package.

As postal rates continue to rise, we'll see how long this "free shipping" gimmick among merchants lasts.

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by: happyharry This user has validated their user name.

Sun Dec 30 23:05:14 2012

Amazon are just as guilty of this rip-off as ebay are....there should be a law against this...but expecting Governments to do anything against these 2 giants that lobby with millions of $ and GBP is a pure fantasy

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by: Digmen1 This user has validated their user name.
Web Site

Sun Dec 30 23:18:01 2012

I'm more concerned with the continual rising of postal charges.
It makes buying and selling online that much harder.

Haven't ups and fedex etc etc heard that inflation is very low at the moment.

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by: blaumann This user has validated their user name.

Sun Dec 30 23:18:05 2012

I love the people that come on here and announce that the solution to ebay is selling on Amazon.  

Perminate Link for eBay Nets More in Fees Thanks to Higher Shipping Costs   eBay Nets More in Fees Thanks to Higher Shipping Costs

by: comet This user has validated their user name.

Sun Dec 30 23:33:46 2012

I charge pretty much what it costs me plus maybe a buck or so to cover the fees.  Now I might have to add a "transaction fee" to each sale to COVER my anticipated LOSS on every package.  

Since ebay seems incapable of SHOWING our items to potential buyers in any case this might not scare off many buyers.  

What ebay fails to realize is:  Shipping has ALWAYS been part and parcel of any sale whether you buy your widget at the widget shoppe on your corner or from some widget dealer 3000 miles away.  Somehow somewhere the shipping is bound into the price---whether broken out as a line item or as "shipping included" or just as an accepted and not mentioned part of the asking price.  

But in ebays absurd and disruptive business model they chose to make --once again!-ALL sellers suspect as lying cheating thieving devils who are attempting to get RICH on ---postage overcharges.  While it is true that SOME few ebay sellers WERE wildly overcharging to avoid the FVS the MAJORITY of sellers were charging a REASONABLE fee to cover THEIR costs while shipping widgets.  

So ebay decided to PUNISH all sellers good or evil and enrich their coffers in the process.

This accomplished several things--one is to foster MORE distrust between buyer and seller;  another is to make it seem that there really IS such a thing as "Free Shipping" and the sellers are just trying to rip the customers off;  and this also obscures the ACTUAL cost of postage from the clueless customers.  

If ebay was a REAL business it would be SHOWING our items--the ones we CONTRACTED them to show to the paying customers--and we could SELL our items and the market place would find it's natural level as far as postage costs go.  

Until ebay does this and actually makes the money they COULD be making in a LEGIT fashion via FVF's they will continue to gouge the sellers for more and more profit from the few measly sales they are able to make.

Once again ebay fails to impress.

My wish for 2013 is that some one will wake up and find that their lifes dream is to start an ONLINE AUCTION SITE.  And we FORMER ebay sellers will make that person RICH beyond their wildest dreams.  

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by: Massachusets Howler This user has validated their user name.

Mon Dec 31 01:46:22 2012

Ina UNDERSTANDS.
Mass Howler
(And DO WE EVER appreciate it).

Perminate Link for eBay Nets More in Fees Thanks to Higher Shipping Costs   eBay Nets More in Fees Thanks to Higher Shipping Costs

by: bb6 This user has validated their user name.

Mon Dec 31 02:46:09 2012

Shipping prices are always going to go up, it's how the corporate world works. These companies need to try and make more $ then the previous year. Plus gas keeps going up. Do you really expect these 3 companies to eat the cost of fuel? Trucks, planes, etc. it just means You have to adjust your prices. Buyers are always going to gripe about shipping prices. It always takes a few months after the price increases for those same buyers to realize USPS, ups and FedEx prices went up. Think about it. Most of those buyers don't sell stuff so they really have no education on how much the shipping is plus the marketplace fees. I believe that's the real problem. As long as these marketplaces leave it up to the sellers to educate the buyers about the shipping prices then there will always be that gap of missing info.  

Perminate Link for eBay Nets More in Fees Thanks to Higher Shipping Costs   eBay Nets More in Fees Thanks to Higher Shipping Costs

This user has validated their user name. by: eBankrupted

Mon Dec 31 03:40:24 2012

Buyers 'know' that 'shipping' is like $4 bucks, ?right, because that's what the USPS priority boxes cost in 2005 (everything fits in it too).

EBay knows that sellers are cutting costs and turning thermostat heat down to 55 at night so we all can PAD the manchild JD's paycheck ? Sellers are obedient cult members, and will obey with any sudden/overnight/unadvertized = disruptive innovation, regardless of whether such innovation destroys the seller financially. EBay thrives on liquidating sellers, after suckering them into the cult..

SHIPPING IS FREE FOR BILLIONAIRES!
Donahole is now enjoying your prior profits. ..PS, we can't believe you put up with this scam for this long...

Perminate Link for eBay Nets More in Fees Thanks to Higher Shipping Costs   eBay Nets More in Fees Thanks to Higher Shipping Costs

This user has validated their user name. by: bitbybit

Mon Dec 31 05:32:35 2012

bb6, And that is the problem for sellers. Since ebay won't "educate" the buyer about shipping, the buyers take it out on the sellers DSRs unless they ship for "free". The small sellers have to try and stay in the game for one year until the DSRs fall off for the shipping & handling.

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by: Bloggo This user has validated their user name.

Mon Dec 31 07:22:42 2012

By doing absolutely nothing, eBay will please Wall Street.

Perminate Link for eBay Nets More in Fees Thanks to Higher Shipping Costs   eBay Nets More in Fees Thanks to Higher Shipping Costs

by: GoodK9 This user has validated their user name.

Mon Dec 31 10:02:16 2012

Yes, well, eBay won't be getting any more fees from us!  After receiving our latest statement and reviewing what we made versus what we spent (in fees), we've decided to move on.

Took us long enough, huh?  As I explained to my hubby (and co-owner), it no longer makes financial sense for us to stay on eBay.  After taking out all of the fees from eBay and Paypal on the roughly 100 items we had on from mid-November to mid-December, we wound up netting only about $50 to $60 bucks.  Can't stay in business that way.

Perminate Link for eBay Nets More in Fees Thanks to Higher Shipping Costs   eBay Nets More in Fees Thanks to Higher Shipping Costs

by: pace306 This user has validated their user name.

Mon Dec 31 10:09:06 2012

eBay doesnt care about the costs of shipping (or anything else for that matter) going up ... thier corporate philosphy is that sellers make too much money anyway, so THEY can easily afford to eat the shipping/higher shipping costs.

It was explained to me when the ''3 wise men'' aka eBay sales/territory managers came to visit last summer.

Thier view is:

1) if you are a casual seller - then because you DONT live off the money - its just extra spending cash, you wont miss loosing a few bucks on the shipping. As well if you loose a case against a buyer - its worth it ...since eBay is buying a customer with that money. The money from selling the stuff in your basement is found money and you should be happy that eBay gives you a place to sell it!

2) if you are a business - they you ''can easily afford'' to include shipping in the price of your items. You are buying them ona deal right? You are buying wholesale right? You are getting MDF and COOP right? so dont be so greedy! Share some of that untold wealth and buy some customer good will with the free shipping.

Those are warped ideas that ebay has and continues to view sellers with.

Its the same idea as when eBay tells you (as they have told me) when you loose a INR or SNAD case ... ''so what? in business you are always going to loose money. Its not about your being right in this case, its about customer service and YOU CAN AFFORD TO EAT THE LOSS''. Ive heard that one many times from both eBay and Paypal.

YOUR money isnt thier concern!

Amazon .... Amazon isnt much better ... but what ever it is is slightly more livable then eBay.

Amazon NEVER gives you the right amount of shipping credit when you make a sale, the last 10-20% of the shipping cost is ALWAYS out of your pocket. Thats why I dont sell heavy items ... you'de go out of business FAST.

BUT, Amazon generally gives you 2 days to ship vs 1 on eBay and lets you ship Parcel post, 1rst class mail or any other ''normal'' shipping method - so that in case you CAN find a cheaper method - you can use it. eBay tries to get you to ship right away and ''fast'' (fast n free) on your dime - not caring what it cost you. Your shipping costs simply buy them a customer. Why spend money on advertising (out of your own pocket) when you can spend a sellers shipping money to buy that same customer?

Perminate Link for eBay Nets More in Fees Thanks to Higher Shipping Costs   eBay Nets More in Fees Thanks to Higher Shipping Costs

This user has validated their user name. by: Ric

Mon Dec 31 10:14:16 2012

When eBay initially started charging the penalty fee for shipping costs not included in the selling price, it was obvious that management was exerting psychological manipulation upon their sellers.

eBay's C-Level management is more concerned with upward mobility of eBay stock prices than they are with actually making eBay a better place to buy and sell.

management wanted sellers to help them artificially inflate eBay's Gross Merchandise Value by raising prices to include shipping costs as part of the selling price.

When eBay found their conversion rate to free shipping had essentially maxed out, the decision was made to impose a penalty fee on shipping costs. Sellers who refused to help eBay artificially inflate GMV would not be helping eBay in the form of increased fee revenue which is generated by the penalty fee on shipping cots.

When this penalty fee was initially announced the fact that eBay would receive an increase in fee revenue with each rate hike was not lost on sellers.

eBay management is determined to fleece sellers out of every last penny of profitability and have zero regard for the fact that fees drive sellers away from eBay on a daily basis.

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by: Patricia This user has validated their user name.

Mon Dec 31 16:01:30 2012

Ebay always makes out - not by helping us sell - but by picking our bones!

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This user has validated their user name. by: Rexford

Mon Dec 31 20:22:37 2012

Ric says: "eBay management is determined to fleece sellers out of every last penny of profitability and have zero regard for the fact that fees drive sellers away from eBay on a daily basis."

And you can bet your last dollar that the sellers who are driven away were also buyers. Think they'll spend another dime on eBay?  Likely not.  If eBay wonders where all the buyers have gone, they can look to the hordes of sellers that they have driven away.  You don't bust up a community of buyers and sellers.  Of course eBay management did not learn that in business school.

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This user has validated their user name. by: bitbybit

Mon Dec 31 20:34:55 2012

I think ebay should make another survey.

If you as a seller left ebay, would you continue to make purchases as a buyer on ebay.

A. No
B. Hell No!
C. Only if hell freezes over

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This user has validated their user name. by: permacrisis

Mon Dec 31 22:12:18 2012

While not strictly the main point, it's worth noting that this new model of theirs isn't working out so well for stuff you have to pay for, unlike the old model where folks sold quirky things that they found cheap or free, and then cleaned up for resale.

Back then, the main 'cost' was labor. If shipping went up, so what- gravy was still gravy, give or take a couple bucks.

But now that everyone is on razor thin margins and all hawking the same, commodity stuff, even small increases wipe people out.

And comet mentions that ''some one will wake up and find that their lifes dream is to start an ONLINE AUCTION SITE.''  While I do think that will happen, I don't think it will be out of love for a dream. I think it will be someone, a seller, who has been ruined, is the laughingstock of his family and friends, and who is doing the only thing he legally can to get back at  one John Donahoe. And that's line him up in his sights and just absolutely OUTDO ebay in every aspect of its horrible user experience. Auctions only- no buy it now. Full transparency of all userids. Two way feedback and no DSR's.

It will have a purity that no business endeavor that's out to make money could ever hope to match. This person will be motivated by something other than money, and that is REVENGE. The best ones always are. And what revenge it will be. An ''Auctions Fatwa'' of sorts. It will be something to see.

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This user has validated their user name. by: bitbybit

Mon Dec 31 22:46:15 2012

Everyone was hoping Google would be the new auction site but Google changed from what they were all about and GREED became their business motto.

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by: tc This user has validated their user name.

Mon Dec 31 22:53:48 2012

One thing crossed my mind during all of the "Ebay is going to go out of business because of ???" thoughts we've all interjected here and elsewhere. The thought is this... it appears that Ebay is definitely on a mission to redefine itself. Does it really matter if they are successful or not as a marketplace or even whether other divisions/acquisitions actually end up paying their bills to keep the doors open and keep a storefront and brand visible? In redefining themselves, does it really matter if they are chasing away all the small sellers who also happen to be buyers? I believe the answer to this question is... (drum roll) ... NO. From the little I've read of their other recent acquisition, they have the potential to be even more profitable than Ebay if Ebay itself flops. So, the moral of the story may just be that Ebay is trying to redefine itself and it really doesn't matter if the "auction" site stays viable as a source of revenue for the company as a whole. This may be the reason we sellers have all been getting the attitude we have from Ebay.

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This user has validated their user name. by: bitbybit

Mon Dec 31 23:44:01 2012

What sellers are ticked off about is ebay was a community of small sellers and buyers. Ebay only cares about manipulating the stock to please their masters. They brought in as CEO someone from a company known for cutting up and selling off the pieces. Many people lost their jobs. A butcher should not be allowed to run a people oriented business. If they want to have a different business model, they should have just built a business and not come onto ebay to destroy livelihoods and a great existing business model.

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