Understanding eBay/PayPal fees

Selling things on eBay used to be a pretty simple and straightforward affair. The costs were fairly easy to understand and people, generally speaking, were happy. Then eBay bought PayPal which should have made things even easier for all concerned, but strangely (or not so strangely) has resulted in a multitude of costs, fees and other considerations that directly impact your bottom line. I wouldn't exactly call these "hidden" costs, but nor would I describe them as "well advertised" and could certainly catch the unwary seller off-guard. Here is a brief guide on what to watch out for.

Insertion fees 

eBay charges you to list your items. This is not new, and can be done relatively cheaply - from as little as 40 pence, in fact - and you can chose to add additional features to your listing, such as extra pictures, for an extra charge. However, given eBay's design, if you don't want your listing to become buried and therefore unnoticed by potential customers, those "additional" listing options quickly become mandatory. You can try this for yourself: list an item with the most basic options you can and then try searching for your listing and count how many clicks it takes you to find it. Now imagine that you're a customer who doesn't know that you have an item listed. What are the chances of them finding it?

It's difficult to judge exactly which additional options you need as it is dependent on what you're trying to sell. From experience, though, £3.50 seems like the sweet spot.

PayPal fees

If you chose to allow customers to pay via PayPal - and it's often easier to do so - be aware that PayPal charge you, the seller, for the privilege. Currently the fee is 3.4% of the total money sent to you plus £0.20.

Final sale price fee

eBay also charges you on the final sale price of your listing. Again this is not new, but could catch you out. Currently eBay charge you 10% of the final selling price (not including postage). Crucially, this is not deducted from your profit at the point of sale, but instead eBay will invoice you at the end of the month with all the insertion fees and sales price fees. Note, however, that you won't pay a final sale price fee if the item doesn't sell. 

Postage

eBay lets you specify how much postage you want to charge. Once-upon-a-time this facility was abused by sellers who would list an item cheaply and then charge additional postage to make up the difference. This practice seems to have mostly fallen by the wayside, probably because customers became more aware of the practice. That said, you'll almost certainly need to charge some postage - here are some tips:

1) Make sure you know how much an item is going to cost to post before listing.

2) Get adequate postage insurance. This is for your protection.

3) Factor in packaging - if you've got some old boxes you can reuse, great, but otherwise you'll need to buy something suitable.

4) Be aware that the PayPal fee will be calculated on top of postage.

5) Buyers will know if you're trying to overcharge on the postage. Resist the temptation! 

The bottom line

So, given all that, what's the impact on your bottom line? For an example, lets take an imaginary final sale price of £50 with £10 P&P:

Final sale price: £50

P&P:                £10

PayPal fee:       £2.24

Listing fee:        £3.50

Final sale fee:    £5.00

Total fees:         £10.74

Assuming you priced the P&P sensibly and it broke even, the assorted fees account for a whopping 21% of your profit. Even if you went for the super-cheap £0.40 listing option, you'd still be paying a massive 15% of your profits direct to eBay.

Conclusion

eBay have a near monopoly in the online auction business. It can be a very good place to sell your stuff, but you must be aware of all the fees. Also, before deciding on eBay as your sales platform of choice, consider other alternatives such as Amazon which might provide a better fit for what you are trying to sell and might be cheaper.