Over the next few weeks there will be many articles describing in detail or fantasy what these updates will mean to sellers. Our recommendation to anyone who sells on eBay: First go over the updates, make your own cost determinations, and ask questions that require hard number answers.
What we plan to do here is go over the mythology of free shipping, as it relates to the spring updates.
From a MBA bean counter point of view everything has a cost. Work at an office and freely use the Post-it®Notes, telephone, chair and desk, etc., the company paid something for them. Work for yourself and those were your 'out of pocket' expenses.
Let's suppose one U.S. seller sells reasonably sized 13 ounce widgets, and has only two shipping options.
$3.26 USPS 1st Class Mail $5.95 USPS Priority Mail
From a very very simplistic cost point of view, each shipped product will have a line item expense of either $3.26 or $5.95. Typically a customer sees advertised a $1 Widget, but ends up paying $4.26 ($1 Widget + $3.26 1st Class) or $6.95 ($1 Widget + $5.95 Priority).
From a very very simplistic sales point of view, a free shipping product will have the shipping cost bundled into the price. Where a $1 Widget is sold to the customer at $4.26 or $6.95.
The less very simplistic method involves re-apportioning total shipping expenses amongst the total sold widgets. That is charge less for some product, and more for others. Or other legal creative bookkeeping.
A customer may receive free shipping, but regardless there is a line item expense to the business somewhere.
Free shipping as it relates to the eBay 2011 Spring Seller Update.
Using the 13 ounce widget with either $3.26 or $5.95 shipping, here are the numbers.
Let's throw in free shipping, and compare before and after fees.
The numbers indicate eBay sellers who ship for free (but see "The bottom line cost of free shipping") will have a fee reduction (numbers in red). While eBay sellers who charge shipping will have mixed results.
As you might suspect from the chart, the higher the shipping charge, the less fee reduction to the seller. But at the higher $200+ range, sellers with shipping charges below $22.23 will not incur a fee increase.
We find it extremely curious that the numbers, at least for those running 50 auctions or less, points to an ACTUAL fee decrease. Consider what happens to eBay's bottom line, when millions of sellers running billions of auctions with "reasonable" shipping charges pay less fees to eBay.
Well, like free shipping, eBay will make up the revenue somewhere.
As it turns out, assuming our sums are correct, here are the fees after 50 auctions:
The astute reader will notice that after the first 50 auctions there is a fee increase for sellers who charge shipping.
The 50 auctions a month or less sellers will profit greatly from the new fee structure. Depending on the (selling price) tier, sellers running 51-300 auctions a month may also profit from the fee change.
If you run more auctions, expect to see a fee increase.
Of course an eBay seller could always run free shipping auctions. There's no charge to a seller's bottom line, right?
eBay 2011 Spring Seller Update and Free Shipping
eBay 2011 Spring Seller Update and Free Shipping
15 March 2011
Ides of March Edition
EventHorizon1984
eBay announced it's 2011 Spring Seller Update today. The good, bad, and the ugly spring news has made it's way to eBay seller sites AuctionBytes and TameBay. With the spin from eBay being presented in Bloomberg's EBay Cuts Fees to Attract Merchants, Boost Turnaround Effort article.
End Google Search Link Elevation.
Over the next few weeks there will be many articles describing in detail or fantasy what these updates will mean to sellers. Our recommendation to anyone who sells on eBay: First go over the updates, make your own cost determinations, and ask questions that require hard number answers.
What we plan to do here is go over the mythology of free shipping, as it relates to the spring updates.
The bottom line cost of free shipping.
From a MBA bean counter point of view everything has a cost. Work at an office and freely use the Post-it® Notes, telephone, chair and desk, etc., the company paid something for them. Work for yourself and those were your 'out of pocket' expenses.
When a U.S. seller ships a product there are costs. Those pesky Part II Expenses on Schedule C.
Let's suppose one U.S. seller sells reasonably sized 13 ounce widgets, and has only two shipping options.
$3.26 USPS 1st Class Mail
$5.95 USPS Priority Mail
From a very very simplistic cost point of view, each shipped product will have a line item expense of either $3.26 or $5.95. Typically a customer sees advertised a $1 Widget, but ends up paying $4.26 ($1 Widget + $3.26 1st Class) or $6.95 ($1 Widget + $5.95 Priority).
From a very very simplistic sales point of view, a free shipping product will have the shipping cost bundled into the price. Where a $1 Widget is sold to the customer at $4.26 or $6.95.
The less very simplistic method involves re-apportioning total shipping expenses amongst the total sold widgets. That is charge less for some product, and more for others. Or other legal creative bookkeeping.
A customer may receive free shipping, but regardless there is a line item expense to the business somewhere.
Free shipping as it relates to the eBay 2011 Spring Seller Update.
Let's take a look at eBay auctions.
Here is the current eBay auction fee structure:
Let's say the product sells for a tier ($10.00 - $24.99) amount. Here are the fees:
This is the eBay auction fee structure for the first 50 listings beginning 19 April 2011:
Using the 13 ounce widget with either $3.26 or $5.95 shipping, here are the numbers.
Let's throw in free shipping, and compare before and after fees.
The numbers indicate eBay sellers who ship for free (but see "The bottom line cost of free shipping") will have a fee reduction (numbers in red). While eBay sellers who charge shipping will have mixed results.
As you might suspect from the chart, the higher the shipping charge, the less fee reduction to the seller. But at the higher $200+ range, sellers with shipping charges below $22.23 will not incur a fee increase.
We find it extremely curious that the numbers, at least for those running 50 auctions or less, points to an ACTUAL fee decrease. Consider what happens to eBay's bottom line, when millions of sellers running billions of auctions with "reasonable" shipping charges pay less fees to eBay.
Well, like free shipping, eBay will make up the revenue somewhere.
As it turns out, assuming our sums are correct, here are the fees after 50 auctions:
The astute reader will notice that after the first 50 auctions there is a fee increase for sellers who charge shipping.
The 50 auctions a month or less sellers will profit greatly from the new fee structure. Depending on the (selling price) tier, sellers running 51-300 auctions a month may also profit from the fee change.
If you run more auctions, expect to see a fee increase.
Of course an eBay seller could always run free shipping auctions. There's no charge to a seller's bottom line, right?
/*
"it really seems like they are trying to force sellers into an all free shipping eBay. Forget for a moment that this would raise their bottom line since they will earn more end of auction fees"
The Whine Seller, 22 May 2008
/*
Technorati Profile
EventHorizon1984 Log
//
Posted at 21:30 in Commentary, eBay | Permalink | Comments (0) | TrackBack (0)
Tags: 2011 Spring Seller Update, auction, AuctionBytes, Bloomberg, eBay, EBay Cuts Fees, free shipping, Spring Seller Update, TameBay, The While Seller
| Reblog (0)