Selling price matters on eBay, and not just for your buyers….

03 Mar 2007

Corey Kossack

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.

One of the simplest, most costly mistakes you can make with your eBay business is choosing the wrong price to list your item at. eBay’s fee structure will charge you an insertion fee to list your item for a duration of time (3 to 10 days) based on the starting bid or fixed price of your item. And not only that… but if your item doesn’t sell right away you will be charged for each time the item is listed on the site for that 3 to 10 day duration, with one small exception. If your item sells during the 2nd time listed on the site, eBay will credit back the 2nd insertion fee you paid so you won’t have any extra insertion fee for listing twice. Beyond the second time, you’re on your own, and you’ll continue to lose money in extra eBay fees. Here is the breakdown of eBay’s fees if you are not already familiar:

Starting price———Insertion fee

$0.01 – $0.99————-$0.20

$1.00 – $9.99————-$0.40

$10.00 – $24.99———–$0.60

$25.00 – $49.99———–$1.20

$50.00 – $199.99———-$2.40

$200.00 – $499.99———$3.60

$500.00 or more———–$4.80

So the other day I was researching the competition for a particular item I was looking to sell, and I came across a seller who had listed this item at a fixed price of $50.06! I saw this and screamed (in my mind) “What are they thinking!”. As an eBay guru who specializes in profitability for eBay businesses, this was shocking to me.

Why was I so taken back by their pricing strategy? I’ll explain….

Let’s pretend for the sake of argument that if they sold that item during the first listing at $50.06 they would have made $8.00 on the sale. Since their starting price is above $49.99, their insertion fee is $2.40. If they were to sell the item at $49.99, their insertion fee would be $1.20. That means that if they listed the item for 7 cents less, they would have saved $1.20 in insertion fees, leaving them with $1.13 in extra profit and selling at a lower price, raising their profit margin to $9.13! That is because they paid $1.20 less in insertion fees at $49.99 and received 7 cents less from the buyer ($1.20 – .07 = $1.13).

And I’m not done there… the other issue with this is that they will be charged the $2.40 each time they list the item, instead of $1.20 each time they list. That means that if the item takes 3 weeks to sell, they would have lost $2.40 on each of their first two listings instead of $1.20 on each.

So, if the item took 3 weeks to sell, that $8.00 profit margin would reduce to:

– $2.40

Whereas if they sold at $49.99, their profit would have been:

– $1.20

In that scenario, they made more than twice as much money selling at the lower price.

Moral of the story….? Pricing MATTERS!

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.

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