Buying & Selling Bullion on eBay
Stay away says one eBay guide, whose author blames lazy consumers, and he gives the argument that many items of gold and silver bullion are overpriced on eBay.
He has a fair point, but there are a few things we could add.
Most of the larger bullion dealers, and we include ourselves, work on quite small margins. In a volatile market, it can be quite easy to lose money. Bullion dealers need to carry large stocks, and the value of this inventory increases and decreases with every market fluctuation. Hopefully it averages our over the long term, but all successful bullion dealers work on spot or replacement prices, and need to "cover" each deal to convert a notional or paper profit into a real profit. It is frighteningly common for the market to fluctuate considerably before you can cover a position and "square" your book, particularly when we are talking about physical bullion rather than "paper" transactions on a futures market.
Profit margins on bullion deals typically vary from a high of about 5% on small items, down to about 1/2% (0.5%) on larger trades, and can be lower!
eBay Selling Fees
Although many eBay members seem to consider that eBay's selling fees are low, in practice they mount up, rather like Gordon Brown's stealth taxation in the UK.
There is a basic listing fee which starts as low as 15 pence (or cents), however this is limited to items with a starting price of up to £0.99 (or $0.99). Above this figure, and the listing fees increase to about £2 for an item starting at £100, and £3 for multiple item listings.
Add a gallery image, bold, subtitle, featured listing, coloured strip, featured plus, multiple hosted images, reserve price price, second category, and the listing fees can double, treble, quadruple, or more. In fact, we just experimented with one of existing items for which we currently pay 30 pence listing fee, and added all the features we could find, and the total listing fee came to £103.66! eBay make it easy for you to spend too much, and the extra money foes straight into their pocket.
The next expense is the final value fee, this starts at 5.25%, and goes down to 1.75 %, but slightly higher fees apply to shop inventory items,
eBay Shop Fees
These start at only £6 per month, but go up to £300 per month. This is in addition to all other eBay fees.
Shop inventory items final value fees start at 10% and go down to 2%.
Credit Card Fees
Some card and charge card companies still charge over 5% for smaller traders, and rate some down to below 2% for large traders. In addition there are monthly rental costs for terminals, and extra commission charges for online (internet) payment processing. These can double the normal card fees. There is also the cost of fraud and chargebacks to take into account.
It takes time to answer eBayers questions. As our staff expect to be paid, this costs money. Our company tries to avoid the necessity for buyers to ask questions by putting all necessary information on every one of our listings, and extra information in our "About Me" page, but every day we get numerous questions asking things which are already stated in the listings. Most of our replies start "As it states in our item listing..."
It also takes time to check that winning bidders pay, so that we are not paying eBay fees for nothing, and it takes time and money to run our entire admin system, recording payments received, checking and tracking items sent.
It takes time and money to work out shipping and insurance costs, especially when we sell items with extreme variations in weight and value to almost anywhere in the world. Postage and shipping prices change, so we have to keep up to date.
It costs time and money to take good quality photographs, and write accurate and complete listings.
We estimate each eBay transaction takes twice the administrative and handling time , and therefore cost, of a normal direct transaction.
Similar considerations apply to PayPal fees, but are usually higher. We have heard some sellers tell us that PayPal fees can reach as high as 20% on certain transactions, and we believe them.
Foreign Exchange Costs and Charges
We have already written a guide about foreign exchange costs, and costs of handling foreign cheques (checks). Many banks and credit card companies charge around 5% for foreign exchange transactions. Handling foreign cheques can cost £10 per time.
Total Costs Too High
If you tried to add up all the possible costs, you would probably conclude that any bullion dealer would have to be insane to sell bullion on eBay, and you would not be far wrong. This is why few of the major bullion dealers sell on eBay, and most of the bullion vendors on eBay ask high prices. There are exceptions, but whenever we see bullion times selling for below melt price, we strongly suspect that the vendor is either selling stolen goods, otherwise why wouldn't he simply sell them direct to a major bullion dealer for more, or the vendor is offering non-existent goods, and is a fraudster.
Add to the above the fact that gold and silver bullion prices are quite volatile, and you can understand why many sellers add a few percent or more to cover the likely market fluctuations during the course of the auction. There is also the possibility of further fluctuations after the auction has finished, and a surprising number of buyers fail to pay, try to back out, or delay payment when bullion prices drop after the end of an auction.
It can also go the other way. When bullion prices drop during an auction, the item is likely to remain unsold, leaving the vendor to pay the listing fees, but being left with the item on stock.
A private seller offering just one or two items is unlikely to be too badly affected, but a dealer with a few hundred items listed might have to spend a whole day just trying to adjust his starting prices up or down to keep in line with the bullion market.
We started selling on eBay because we found a growing number of our customers were buying increasing quantities from us, and reselling them on eBay. Although we were happy for this to happen, we realised this meant that many eBay buyers were paying too much for their bullion coins (and bars). We also noticed we were selling say a VF grade sovereign to a small dealer then seeing him resell it on eBay as EF (XF) a few days later. By joining eBay, we could bring some lower prices, and more honest and accurate descriptions.
At first, we did not think we would be able to successfully sell krugerrands, for example, on eBay. We were surprised to find that we could, but it was not quite that simple.
Often a buyer would notice that he could buy the item cheaper by coming direct to us, and therefore refused to complete his eBay purchase. In this case, we had to decide whether to stick out for the contract to be honoured, in which case we might make the sale but lose the customer, or whether to try to keep the customer happy even when he was in the wrong. This would also mean using the eBay mutually agreed cancellation of the sale, and reclaim of fees procedure. This takes time and therefore costs money, On a typical krugerrand sale, to make £5 profit, we would need to get £15 to £20 over cost to cover the eBay fees of between £10 and £15. Sometimes one sold for only £5 over cost, and then we would lose maybe £10 after eBay selling costs.
Eventually we stopped offering straightforward single bullion items on eBay, and offering "added-value" items instead, for example particular dates, selected grades, proof coins and sets.
In some ways, we are not too bothered if our many eBay items do not sell, as we now consider it a form of advertising.
We noticed numerous eBay sellers offering to sell knowledge of where to buy sovereigns and krugerrands at lower prices then eBay, and this knowledge often consisted of a link to our website. For this some vendors expected to get paid £30 to £40. We now offer our own "Advice" package (for £0.99), but do provide some extra advice in addition to the URL of our own website. We include a money back guarantee in case anybody is not happy paying 99 pence for our valuable advice.
Selling Bullion on eBay
If you are thinking of selling gold or silver bullion on eBay, don't let us stop you, but you hopefully will have found the above interesting and informative.
You may find that if you have only recently joined eBay, or have a low feedback, that potential buyers will not be confident to bid on your items, as they will automatically knock off a percentage of the amount the would be prepared to bid, for the risk they are taking in sending money to a relatively unknown person. It is quite likely that you would get more selling direct to any major bullion dealer. We have notice a few auctions recently where newbie, and some not so new, vendors could have got more from us, and saved time and money on eBay fees.
While we cannot advise you not to buy or sell bullion on eBay (and this would probably be against eBay's rules, so getting this guide removed), we have to agree with the previous guide author, that there are often better deals to be found elsewhere, if buyers (and sellers) are prepared to take a little more effort in checking out the market, either locally or by telephone, mail or internet. Search engines are useful, although eBay discourage naming or linking them in listings and guides.
About the Author
Lawrence Chard is a director of Chard Coins of Blackpool, England, and has over 42 years experience in numismatic and bullion coins.
Chard have maintained a dealing service for both collectors and investors in bullion and numismatic coins. During the period from 1965 to 1971, we were one of only a small number of dealers who were granted a dealers licence.
All our images and text are copyright.
Actually, we also notice that Investors in Time are using our world famous and much copied photograph of a 1974 krugerrand on their website, without our copyright permission.
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7 September 2006
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