are eBay insertion fees getting out of control?
Corey Kossack is a Managing Partner at Game Change Ventures, focusing on partnering and consulting with startups in the areas of social media, consumer Internet and e-commerce. Corey is also an Operating Partner at Game Change Ventures' first Internet startup, Addoway, a social marketplace that helps you buy and sell with your friends and the people they know. Formerly Corey was one of the world's largest retailers on eBay, built a $1M company from scratch at age 23, has led multiple startups and received numerous awards for his entrepreneurial achievements.
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Last night I started thinking about my overall pricing strategy. Do I want to focus on cheaper items or more expensive items? What are the positives and negatives of each?
I want to grow sales dollars to continue getting increased incentives from my suppliers, but selling expensive items is so challenging on eBay because of the risk of losing a large insertion fee week after week.
On an item under $10, I’ll only be charged $0.40 per listing to put the item up in a fixed price format. Let’s say my net profit margin would be $2.00 on the item (after all of my fees, labor costs, postage etc.) if I sold it during the first listing… If it took me 4 weeks to sell the item, I would net $0.80 after losing 3 additional insertion fees at $0.40 each.
But, let’s say I was trying to sell an item that was over $50. I would be charged $2.40 for each time I list the item in a fixed price format. Let’s see my margin is $6.00 on this item if I sell it during the first week. Even though the margin is 3 times as much as the cheap item we just discussed, if it takes me 4 weeks to sell the item, my profit margin would be -$1.20!
This hardly seems like a good idea. With items that have high insertion fees, you have to make sure they move quickly, change something about your listing to make them move faster, or move them to store inventory.
But is this really the way to go for eBay? I have no gripes about eBay fees most of the time as I understand that they provide tremendous value for sellers by delivering a lot of traffic to our listings… but why do the insertion fees have to increase so much as we move up in price?
After all… eBay generates a good amount of revenue from final value fee credits on expensive items… so why discourage us from listing expensive items in fixed or auction because of the risk of loss on large eBay insertion fees?
What do you all think?
Corey Kossack is one of eBay’s “top sellers” through his eBay store, Koss DVD. He is also author of eBay Millionaire or Bust and creator of ProfitBuilder software that maximizes profits for eBay sellers.