Calculating the Hidden Costs of Selling on eBay
…Or not so hidden, sometimes. I’m not going to go making assumptions about what you expected and what was hidden to you – because you know what happens when we assume things… you get kicked out of Freshman English for writing it on the white board.
At first, it might seem like a quick cash-in, but if you don’t plan it right and properly ascertain (gosh, look at me all using big words today) all the little costs that will add up and cut into your profits, you could be owing more money than you’re making. Part of it depends on your inventory (is it something you can actually charge more for than you bought it for?) and part of it depends on how you’re listing it (are you adding in too many features? Are you starting the price off too high?). But this is another matter for another day. Let’s start with the basics – what it costs.
Be a good little pupil and there might even be a surprise video at the end.
Well, to start off with, you sort of need something to sell. Well, you have to buy those things first.
The first step, provided you’re not just selling junk you picked up off your floor, research prices on eBay – that is to subtract the amount you’ll have to pay for the item from the amount you’ve deduced you can probably get for it. While the vast majority of items can be sold retail (on eBay) for more than you purchased them for (wholesale), there are many things that only come so cheap. If these are catchy items, losing pennies on the sale of these items might be worth it to draw buyers to your other, more lucrative merchandise.
Getting the inventory to you – here’s really the first of the “hidden” charges because… who thinks of this stuff?
But the inventory first has to get to you before you can get it back out to your customers.
I don’t recommend drop-shipping. This usually ends bad. Drop-shippers don’t care if the item gets to your buyer 3 months after they’ve ordered it. They don’t care if it came in another color. Basically, using a drop-shipper takes all the control out of your hands. Whatever method you have of getting inventory to you, it’s cheaper than being kicked off eBay for poor buyer satisfaction and no longer being able to sell.
If you have a local wholesaler you get the items from – awesome, otherwise, add shipping (to you) to the list of expenses you need to subtract from your sale price.
Ooooh, eBay fees. The very phrase is like hearing nails on a chalk board. It is essentially a “Pay to Play” scenario. Here we go.
To start off with, there’s the insertion fee. More often than not, it’s under 35 cents – which is neat because if it doesn’t sell, you’re out 35 cents, which, if you really need it, you can just lift up your couch cushion and bam, there’s gotta be at least 56 cents under there. But, it’s not even that bad! If it doesn’t sell the first time, hit the relist button, and the 35 cents is credited to the second listing.
For auction-style listings starting under 99 cents, the listing fee for the first 100 are waved entirely.
From there, there are a number of listing upgrades you can (carefully) choose from with various fees tacked on. Listing upgrades are often worth it for more expensive items (say $50+), but not so great for cheaper items as the sale price can’t support all the fees.
Watch how many pictures you’re adding (or simply use a separate free image-hosting service to reduce costs), or the picture fees could sneak up on you.
Final value fees! I could list out all the different rates for final value fees and jack up my word count, but I feel this would be boring, so, three things:
- Know that they’re there
- Know that they go for the rate of 9.0% of sale price (maximum charge of $50.00) for auctions and that they start at an 8.0% rate of the sale price for fixed price listings
- Research eBay to find the various final value fee rates for fixed price listings
Your proverbial ears hurt? Mine do.
Now here comes a question you’ll have to make a business decision on: do you want to charge the shipping costs to your buyers or offer them free, or at least reduced, shipping?
If you go the route of charging your buyers the shipping costs, you’ll save yourself some money, but your ads might not show up as high as someone else’s and your Detailed Seller Ratings could get dinged.
Conversely, you could take the hit on shipping and have your listings go to the top of searches and get better ratings, but you’ll have to pull this cost out of the rest of your revenue.
The choice is yours young earthling, every business has a unique way of handling this.
Free Packing Supplies
You’ll also need to pay tons for boxes, envelopes and bubble wrap to ship your items in – unless you’re cool like me and know that you can register an account on UPS and get them for free. It’s a crazy long process to register your account, but it’s worth it. …but otherwise, you’ll need to go buy your supplies. Costco and Walmart sometimes offer decent prices for bulk packaging.
Gas and Time Wasted on a Trip to the Post Office
Depending on the distance between you and the post office, this can either translate to a lot of gas money and a ridiculously increased carbon footprint, or it may be minimal and not even worth calculating. Try setting your odometer before making any trip to the post office and taking down the number when you get back to your house and times (or divide, it’s late for me, who knows anymore) that by your gas mileage. Now subtract that from the final going price of your merchandise again – but just once per day. The more items you ship per day, the lesser the dent in your profit margins you’ll see.
Or, you could be could be cool like me and have UPS pick-up your packages – because you’re getting cooler and cooler every minute you listen to me.
Taxes on Your eBay Sales
There are only two guarantees in life: death and taxes… and occasionally a bowel movement (see our special report on, “How to Save Money on Toilet Paper“).
I’m sure I butchered that quote in more than one way. This is the internet, I could just look the quote up, but we’re not talking about quotes here! We’re talking about taxes.
If you’re selling any amount of merchandise that fetches you a net profit – that is, you made more money off it than you paid for it (so your old snakeskin shoes you bought for $200 years ago and got $13.85 on yesterday because they were worn out don’t count) – then you need to report it on your tax returns.
Sorry. Though – if you’re making enough on eBay to have it bump up the taxes you owe at all, likely you’re turning a significant profit.
Those are your hidden costs of selling on eBay! I feel we all learned a little something today. You learned how to calculate whether or not you’re going to actually be able to make money selling on eBay after all the hidden costs and everything, and I learned not to set my laptop on top of my bladder. All in all, an educational day.
eBay is not the only answer, is it Clark?