There's No "Free" Lunch!

There are about 300 people on the planet that have never sold or purchased goods on ebay. I'm one of them.

One of my advertisers was offering ads to a guide about how to make a lot of money on ebay. I went to the ebay site, and with my usual "how much is it going to cost me to make a lot of money using this service" attitude, the first things I looked at were the fees for buying and selling goods, since this is how ebay is going to make it's money, and more importantly to me, since I'm going to be the one paying them.

For any item you want to list on ebay, you're charged a scaled "insertion fee". This fee is what ebay charges you to list your item for sale. You are also charged a "final value fee" when and if the item is sold. You can find a chart with basic information for both fees here: http://pages.ebay.com/help/sell/fees.html.

For the purposes of this discussion, I'm going to say I'm selling a classic widget in excellent condition, and I want no less than $100 for it. Let's even say I can see into the future that it will sell for exactly $100 (not including any shipping and handling fees).

The insertion fee for a classic widget is a flat $2 according to the above referenced page. $2 for ebay, and $98 for me.

Because I want to make no less than $100, I'm also willing to pay a reserve fee, which is another $2 since the final price will be less that $200. 4$ for ebay, and $96 for me.

Once the item has sold, I have to pay the final value fee. For the first $25, the fee is 8.75%, or $2.19. $6.19 for ebay, $93.81 for me.

For the remainder of the price up to $1000, the fee is another 3.5%, or in my case, another $2.66 ($75 * 3.5% = $2.66). $8.85 for ebay, $91.15 for me.

Had I wanted to include a picture of the widget for sale, the first one is free, I'm charged a nominal fee for each additional picture. If I wanted to have a "Buy it Now" price, that would have cost another $0.25.

I've also asked for a shipping and handling fee of $10 for the widget, but I couldn't find any information regarding whether ebay gets a cut of that (if anyone has experience and knows, please comment and share with the rest of us).

At this point, I'm not too disappointed, because $91.15 is still a pretty good sum of money. And don't forget, I've got that $10 for shipping and handling (I'll probably make one or two dollars there as well), so I'm really talking about $101.15!

Oh, wait, I just remembered, I'm using Paypal to collect my fees. Because I don't have a large sum of sales through Paypal each month, I'm going to have to pay 2.9% of the $101.15, plus another $0.20 to Paypal, which will amount to $3.13 (2.9% of $101.15 is $2.93, plus the $0.20 equals the $3.13). That leaves me with $98.02.

What originally looked like $100 for the widget plus $10 for the shipping and handling, has now become $98.02, a difference of $11.98. Once I pay for the shipping, I've got about $90 in my pocket.

Doh! I just remembered something else! Guess who owns Paypal? That's right, ebay does! So, at the end of the day, ebay, in the form of one company or another, has pocketed $8.85 from the $100 the widget sold for, and another $3.13 for processing the transaction for me. The final tally is $11.98 for ebay, and $98.02 for me (but I still haven't deducted what shipping will cost me).

I wouldn't say that ebay comes out a big winner here, but they've made $11.98 for letting me sell my product on their site, and processing the transaction for me, and I've done all the work up to this point, and still have to ship the widget!

There are folks that make a lot of money selling on ebay. My sister in law is one of them. Like most other services, the more you sell with ebay, the lower the fees become for you. And, you're not bound to use ebay to sell goods online. There are other auction sites if you do a search for them.

You could also calculate what all of your fees would cost, and either add it to the price of the item, or the shipping and handling fee, and let the buyer pay it for you.

I guess the way I look at this, neither ebay nor any other company has set up their site out of the goodness of their hearts so that you and I can make some money. They did it so they can make some money. Doesn't it make you wish that you had come up with the idea first?