Control Your eBay Fees

he economy is tight, shoppers are hesitant, and sellers everywhere—not just on eBay—are feeling downward pressure. In times like these, minimizing seller fees can mean the difference between a good month and a bad one, between business viability and business collapse.

With all of the changes to eBay's fee structure and selling policies as of late, many sellers are confused and having trouble keeping their selling strategies up to date. Here are some of the things that you can do to help ensure that you're not being eaten alive by eBay fees.

Start Auction Listings at Minimum Prices

If you're selling in auction format, higher starting bids mean higher fees. At the same time, with sales numbers stumbling across the board, the potential for unsold items (and thus unrecouped fees) is greater than it has ever been before, and at the same time, there is a distinct downward pressure on the prices of many types of consumer goods.

If you can, start your auction format listings at $0.99. This will help you in two important ways:

• Lowest insertion fee category. Starting your listings below a dollar places you in the lowest insertion fee category, meaning that you'll only pay cents, not dollars, to list your item for sale.
  
• Fewer unsold items. Because you're starting an auction low, you're actually allowing the market to set the price for you in cases like these, meaning that you'll almost certainly sell your item, rather than discovering that you've received no bids by the time the listing ends. That in turn means fewer “wasted” listings and corresponding fees.

Of course, this also means that you may have to accept smaller margins or even a loss on some of your inventory, but it's better than paying for unsold items—and if it's not, you may be facing a situation in which your current business model or line of goods is unsustainable in the market right now. Be sure to use the longest auction durations possible to give ample opportunity for bids.

Switch Formats to Minimize Final Value Fees

With eBay's shifting emphasis toward fixed-price listings as it attempts to compete with other online sales channels like Amazon.com's Marketplace, eBay has attempted to make fixed-price formats more attractive to sellers in some circumstances. With fixed-price listings, you gain the following advantages:

• Low, low insertion fees. Fixed-price listings enjoy fixed insertion fees measured in cents rather than in dollars, no matter the value of the item. If you're listing auctions with high minimum bids and many of them are going unsold or are being sold with little or any increase, you'll save money by switching to fixed-price.
  
• Significantly longer durations without surcharges.In contrast to auction-format listings, in which even a move to 10-day auctions imposes a surcharge, with fixed-price listings you'll pay the same low price for durations that are almost long, selecting even 30-day or “Good 'Til Canceled” listings without penalty, meaning a better chance of ultimately selling your item if you're pricing at the limit of market value.
  
• Lower final value fees for electronics and computers. Final value fees are charged as a percentage item sale prices, but the percentage rate charged for final value fees is actuallylower for fixed-price auctions in the case of electronics and computer items of all kinds (including photography equipment, video game systems, and and telephony) than it is for auction-format listings, again meaning lower fees in the end for the same sale price.
  
• But be careful if you sell clothes, books, and media. At the same time, some types of items—most notably clothing, books, movies, and actual video games—impose a heavy final value fee penalty when you're selling fixed-price. In these cases, it may be useful to consider using auction format listings if you're not already doing so.

If you routinely list multiple items for sale with the same listing, be aware of the disparity between the two formats for multiple item listings as well: when using auction format to list multiple items, starting price-based insertion fees are multiplied by the total number of items for sale, up to a maximum of $4.00, to which your other fees (features, final value, etc.) are added. For multiple-item fixed price listings, the fee is only charged once for all items in your listing, no matter now many (no multiplication involved).

Believe it or not, there are other angles through which to examine your eBay fees as well. Read on to find out what they are.

While listing formats and listing fees are the most obvious considerations to take into account when selling on eBay, in some cases other fees and fee-related issues may come to influence your bottom line with greater force, so don't stop monitoring your numbers at the listing fees stage.

Don't Undercharge for Shipping, Handling

While it's true that "free shipping" can at times act as a sales incentive, it's also true that you pay Final Value Fees on the full sale value if your items once listings end—which means that if you're routinely undercharging for shipping in ways that don't give you marketing benefits, you're paying fees that you don't have to pay.

The simplest way to ensure that this doesn't happen is to invest in a small scale and streamline your shipping process so that you can accurately calculate shipping costs rather than guessing at them. As you do this, don't forget to also include an allowance for handling, if necessary— the cost of packing materials, printing materials, paper for receipts, etc., as well as the labor time involved in boxing and shipping. All of these are legitimate expenses that should be rolled into a listing's shipping costs so that they don't figure into Final Value Fee calculations.

Reconsider PayPal if You're Growing Fast

If you're doing a high volume and paying PayPal its percentage as well, you may find that you can increase your net revenue by switching to a direct credit card merchant account instead, perhaps leveraging an auction manager for online payment solutions.

PayPal is a great way for small sellers to begin (indeed, it's nearly the only way now that eBay has banned the acceptance of paper payments of any kind for eBay auctions) but its fees are actually high in comparison to the total cost of a merchant account and its transaction fees if you do enough volume to warrant the initial expense. If in doubt, consult with your financial institution about the plausibility of bypassing PayPal in favor of accepting your own credit card payments.

At the same time, be aware that for small purchases in particular, many eBay shoppers prefer PayPal payments for their convenience—one-click buying with no new per-seller “registration” or need to fill out forms with credit card numbers, names, and addresses. If your sales are primarily in low-value items for which there is a great deal of competition, you may find that a switch away from PayPal can actually hurt business.

For larger ticket items, on the other hand, many consumers actually prefer and will pay a premium for a direct credit card transaction with no intermediary.

Track Your Fees Using a Spreadsheet or Ledger

If all of this sounds indeterminate, a kind of “six of one, half-dozen of the other” proposition, it's probably because you don't actually know where you're paying your fees right now. If you're growing as a seller, especially if you have small online business ambitions, this is a no-no—an all too common one, unfortunately.

If this is you, your job is a simple one: begin to track your fees carefully using a spreadsheet like Microsoft Excel or OpenOffice Calc, or even using a paper ledger and a calculator, item by item. Don't just track what you are paying so that you know where your big fee expenses are, but also do calculations on what you would have paid had you used other options—for example, fixed-price listings instead of auction format, or a merchant account instead of PayPal.

To make hard calculations like this, pay close attention to eBay's official table of fees and also to PayPal's fee schedule.

Once you've actually done the calculations for a number of weeks, you should have a clearer picture of whether a series of switches makes sense in your case or not, and you'll gain both a confidence that you're keeping your expenses to a minimum and a clarity about the state of your business and your business model that will help you to maintain an edge in coping with market conditions.