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The purpose of this guide is to inform new ebayers about the various costs that they might incur in setting up a shop and also those features which they will need to be aware of in the pursuit of that ellusive profit. The guide should also be a reminder to those ebayers who, slowly yet surely, unknowingly are driving themselves out of business.

Most ebayers with a shop hope to earn a fair profit for all the effort that goes into setting up and running an ebay shop. However, as soon as a few retailers start undercutting, this leads to a tit-for-tat price war which benefits no one. More and more ebayers selling that item are forced to sell at those ridiculous prices, irrespective of the quality of the item or the service. Recommended Retail Price is not only ignored but has almost become a thing of the past. The selling price is almost as low as the wholesale/ trade price!!

Surely this is not beneficial. The customer ends up with less than ideal service, the retailer is not compensated, the high street shops are penalised unfairly, the wholesalers lose confidence in ebayers and hence potential income. In fact, this is reflected when an ebayer approaches a potential supplier and is turned down because of this ridiculous approach to price-cutting on ebay. The high street shops with the burden of rates and rents continues to struggle as they cannot match these low prices.

Okay, let's take a look at an example of an item selling for say £14.99 excl. postage of £2.00. So far so good.... sounds great, esp. if the item had a RRP of £27.99 and costed only £7.99 (if only)!! I bet you are thinking ... wow, that's a great margin and I definitely want to sell this item.

However, before you do that, let's take a closer look at the costs involved.....

COST OF ITEM:                                                  £7.99

ebay fees (excl. reserve fee)                                   £1.30  (incl. final fee of 5.25%, subtitle, gallery)

Reserve fee                                                            £1.00 (gone up now!!)

Paypal fee - fixed element                                       £0.20

Paypal fee- variable element of 3.4%                      £0.60 approx

Actual postage cost (excl. cost of petrol)                £1.52 - item sent by 1st class recorded / weighs 150g (costs more now!!)

Packaging material costs                                        £0.39

TOTAL COSTS (before labour)                          £13.00   

You spend 1 hour overall                                       £5.50 -  at minimum wage

(listing, dealing with supplier/ customers, p&p, banking, accounts, etc)

TOTAL COSTS (after lab. before tax)                £18.50

Question to sellers on Ebay - Would a price tag of £16.99 have compensated you? Of course not.... a price tag of £24.99 would have though. I am sure you would be more eager and helpful to your customers, existing as well as potential, especially if you knew your hard work will be compensated. 

Question to Customers - Would you not prefer a speedy reply to your questions, quick delivery and items that exceed your expectations? Of course you would!! Buying on ebay implies great savings for you already.. in this case you saved more than 10%!! Please appreciate the honest hard-work of ebay sellers, majority of whom are honest, decent and hard-working - often giving up their weekends and staying up late just to provide you a great service!!

Let us all as ebayers remember and cherish the concept of interdependence and be fair to each other.

I would also like to remind individuals, who may be new to ebay, about the importance of leaving Feedbacks promptly - it is courteous to do so and is in the best traditions of online trading. No one likes to receive neutral or negative feedbacks - if something has gone wrong with either delivery or product, please get in touch with the seller first and give him/ her the opportunity to correct it if it is in their control. Then after much consideration, if the seller has despite his/her best efforts, not satisfied you fully, consider leaving a neutral feedback; reserve the negative feedback for persistent failure on the part of the seller to respond to your repeated requests or for misrepresentation of items sold. Use follow-up feedback to highlight kind gestures by the seller too, acknowledging good selling practices.

Take advantage of Second-Chance Offers as sellers as well as bidders. Make sure you have this feature activated. Regularly check 'My Messages' to ensure you havn't missed out on an offer for the product, even if you lost the auction! This will benefit the seller too!!

As a seller, I realised too late the benefits of listing items in multiple quantities - if you have say 10 pumpkins to sell, when you sell 1 of them, it will automatically show new quantity as 9 without you incurring relisting costs - this should save you on listing costs and help you with stock take!! Use the postage as a form of incentive for your buyers to buy the item in more quantity.

New one to watch out for is the Picture Fee... each additional Picture costs about 36p... whilst a new listing insertion fee for shops is just 20p... if you have say an item in 2 colours, it would be worthwhile to have 2 seperate listing rather than a picture of both on 1 listing!!

We started this discussion with costs and so we shall end it with it...  here are some other costs to be aware of that should be reflected in your overall costs

- fixed costs of having a shop - basic is £6 per month, Featured £30 per month and Anchor £300 per month.

-cost of depreciation on the computer, printer & vehicle used, printing ink, electricity

-storage costs - what would your storage cost be if you couldn't use your spare room... after all a paying guest in London pay upto £90 per room per week just for accomodation!!

-costs associated with items that DID NOT SELL when auctioned - these have to be borne by the items that sell and have to be recouped from trading... this is a significant hidden cost of trading on ebay or any such similar sites!! Ideally ebay should move to a flat rate system without micro-managing each listing/ feature. 

-cost of 'dead stock' - items that wouldn't sell or have to be sold at below buying cost

-the interest that could have been earned from the capital invested in your shop ... for instance, you invested £10000 - the interest you would have earned from leaving the amount in a savings account was 5% or £500  ... economists would suggest that even this should be treated as a cost!! Same is true for the time spent here on ebay instead of in full-time work or working overtime which would have earned you some dosh (and much needed cashflow)

-whilst implication of International shipping, V.A.T & Import duty on cashflow & profits is beyond the scope of this guide, you need to take them into considerations when calculating your break-even cost... add another £1.50 (15%-20% of £7.99) to make your total cost £20.00 in our example!!

Ebay is still the most powerful market place around and ignore it at your cost.... of course these days there are more and more options available. However, I hope that reading the above guide keeps your feet firmly on the ground and helps you to plan better for a more profitable start to your venture and a sustainable business for the longer term on ebay.

Let's make ebay a much nicer, friendlier and profitable market place... and remember that the RRP is not there to exploit loyal customers but there for reasons mentioned above!!

With kind regards...

Hansrajh (toy-mall)

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