After my first layoff in 1999, I signed up with eBay and helped get my family and me through a very scary time by unloading quite a few valuable items. I’ve been active ever since, either to just downsize or to convert things I had that I didn’t want to keep so much anymore into things other people didn’t want to keep so much anymore but which I had a good use for. In the last few months, I’ve been both accelerating those processes and in addition, I’ve been listing items from my late mother’s estate with the intent that those proceeds will go back into the estate. For occasional private sellers like me, a PayPal account that is connected to your eBay account is required (note that PayPal had been owned by eBay but has recently been spun off as its own publicly-traded company).
Unlike back in 1999, eBay/PayPal integration and integration with shippers such as the US Postal Service, UPS, and FedEx makes the eBay selling process fairly painless; back in the day, there were constant trips to the bank to deposit checks and to the post office to stand in line to buy postage whereas now, I print out barcoded postage stickers automatically straight out of eBay, slap them on the boxes, and then drop the boxes in the parcel receptacle at any nearby post office, which I can do 24/7.
Ebay charges casual sellers like me 10% of the buyers’ total payment (shipping charge included) and does not charge an insertion fee (unless you do certain things I’m not concerned about here). Sellers buy postage (same amount as the buyer paid) out of their PayPal accounts. Then, for each transaction where money comes to you as seller of an item, PayPal takes 2.9% of that amount plus $0.30. Every month, eBay invoices you for their 10% fee on the items you’ve sold that month and then that amount comes out of your PayPal account.
Lately I started becoming concerned that my monthly eBay fee invoice was barely going to be covered by what I had in PayPal and it seemed like I was having to do an awful lot of selling to stay out in front. So yesterday I Googled
ebay fee ripoff
...and boy, did I find some folks who were already pretty irate. And so I figured it was time for some math, which I implemented in LibreOffice Calc (you can do it in Microsoft Excel or more compactly in R, Matlab, or Octave).
What I found was pretty disturbing. It turns out that your effective fee for the items you sell can be much, much higher than 13 percent — so much higher that there is a point beyond which eBay takes all of the buyer’s money...and some of yours too.
At the heart of the issue is that if you sell an item for which the shipping cost is $10, the buyer pays that $10 plus the winning bid amount but you are left with only $8.70 to pay for the shipping with — the seller has to make up the remaining $1.30. So the relationship between winning bid amount and shipping cost determines how much higher than 13% your effective fee becomes. I’ve gridded this out in Calc as follows, with an index row for winning bid amount in C2:AZ2, an index column for shipping cost in B3:B63 and a matrix formula of
{=((ROUND((C2:AZ2+B3:B63)*10)/100)+(ROUND((((C2:AZ2+B3:B63)*0.029)+0.3)*100)/100))/C2:AZ2}By all means feel free to check my math; I derived this formula from the formulas I’d previously used in a tabulation-style sheet to check the effective fee percentage for a given item and ran the same numbers through both ways to make sure I didn’t make a mistake in the derivation.
It’s very easy to wind up auctioning an item on eBay such that you, the seller, wind up with less than half of the winning bid amount and if you’re not careful, you can wind up with none of the winning bid amount. Or worse, you can wind up owing more than you’ll get for the item you auction. I know there are a great many people who are relying or hoping to rely on eBay to get them through tough times and I am writing this diary to keep this from happening to you.
If you don’t want to go to the trouble of working up your own spreadsheet or don’t know how, that’s okay — I’ve developed some rules of thumb for you that you can use to determine what your minimum starting bid amount based on the calculated shipping cost; consider these numbers to be approximate and they should be applicable for the vast majority of items you’re likely to sell, i.e., with winning bid amounts less than $100 and shipping costs less than $30.50. To use this rule of thumb, first decide in your own mind what is the maximum effective selling fee percentage you are willing to pay — it might be 20%, 30%, 50%, or 75% (in no case can you improve on 13%). Then use eBay’s postage calculator to find the shipping cost for your item (minimize as much as you can; definitely select USPS Media Mail if your item qualifies, as many of mine do) and using the table below, find the factor by which you should multiply your calculated shipping amount to obtain the minimum starting bid amount you should use. NOTE: because the formula is not linear, separate multiplication factors are shown for shipping amounts less than $5 and more than $5, separated by a semicolon. Also remember that in the table below, low MESF percentages are good; high ones are bad.
| 20% | 4 ; 2.4 | |
| 30% | 1.5 ; 0.9 | |
| 50% | 0.6 ; 0.4 | |
| 75% | 0.4 ; 0.2 |
By way of perspective, estate liquidators typically charge 35-50% of the amount they raise in an estate sale so if you’re considering eBaying off someone’s estate versus using a liquidator, from my info here you can determine what kind of price performance you need to achieve in order to be better off. I should also point out that anything you pay in the way of shipping supplies — even if it’s just the cost of a manila or padded envelope, a cardboard box, bubble wrap, or even a single shipping sticker — adds more to that effective fee percentage than you’d think. For example, if I auction a book for $3.00 and the media mail shipping is $2.26, the 50-cent cost of a padded envelope takes my effective fee percentage from 32.7% to 49.3%.
The regime you definitely never want to be in is the one where your item’s winning bid amount is so low compared to the buyer-paid shipping cost that you wind up only breaking even or getting upside-down on the auction. For a shipping cost of $4.50, that amount is $1.01 or lower. For a shipping cost of $18.00, that amount is $3.01 or lower.
The items that I sell tend to be those that would have high demand but only over a very limited buyer pool, so I depend on the vastness of the overall buyer pool to bring me even just one buyer who is interested in what I have to sell. Going forward, I need to understand that if for a given item I can’t get a single bid at the opening bid amount for the effective fee percentage I don’t want to exceed — irrespective of what the item is — then it doesn’t belong on eBay at all. If that sharply curtails my eBay selling, then so be it!