Some people claim that eBay and PayPal rips sellers off. Is this true? Maybe. It can be argued. Is it just matter of perspective (as everything else)?. The fact is that eBay and PayPal are making a huge profit. eBay manages to attract both buyers and sellers, while PayPal provides a reliable service where people can pay, send money and accept payments. Thousands of sellers are happy to use their services because there is a monopoli and no better alternative. Until everyone makes money, everyone seems happy? Right? Maybe. Maybe not.
Is eBay Good for Everyone?
Let’s look at the facts. Now I am not considering high end seller, but small private sellers. High end sellers can manage pay subscriptions, sponsored product and they have other advantages so they can usually afford to pay all the fees easier than small sellers. Yet, some of them might also feel that it is unfair that they are ripped off thousands of pounds every month.
Small Sellers on eBay
I would consider my own situation as a small eBay seller. I have usually about 50-100 products. I do not have a basic shop, having a turnover of £1000-1500 every month (and only a very tiny profit). Over the last two years I made many calculations including eBay and PayPal fees, postage cost, turnover, profit and so on. In average eBay charges you about 10% (depending on the product category) for every product you sell (not considering insertion fees), while PayPal charges 3% + 30p. It does not seem too bad. Right? At the first glance it seems that if you calculate roughly 15%. WRONG!!!
eBay Fees are Often Calculated Wrong
Calculations can be made in a different ways. One of the fact is often ignored that first of all, eBay charges the same 10% fee for the postage paid by the seller as well (Final Value Fee on Shipping). So do not sell cheap items that are expensive to post. It can happen that you sold something for £2 and you charged £3 postage with the seller. From the £5 received, you need to pay 50p to eBay, 37p to PayPal. Leaving you with only £1.13p (if you paid out £3 for the postage). Not mentioning that you had to buy the product, cover the price of the packing material and also you need a plenty of time making the listings, dealing with the customers, printing out the invoices, label printing, dispatch, etc. For example, in this particular case more than 43% went on fees and it can go even higher if you sell a £1 product with high postage. EBay calculates the fees from the total and does not care how much you paid for postage. Of course, eBay cannot stop charging 10% on P&P, because sellers would drastically reduce the product prices and increase postage prices in order to reduce eBay fee. Use eBay and PayPal Calculator to calculate your fees. It is very useful if you are an eBay seller.
What is my Average eBay and PayPal Fee?
Also, somehow, in my last year’s calculation in average, I paid 11% to eBay. While this year average is surprisingly 13%. And I could not find any mistakes in the calculation. For PayPal often you need to pay much more than 3%+30p. If your eBay order is cancelled and the money is refunded to you, PayPal still keeps some of the fees. Also, for international transaction PayPal charges 4.4% transaction fee plus a fixed fee based on currency received. Last year I was selling cheap items, therefore my average PayPal fee for the last year was 7%. This year I sold more expensive items, so I managed to reduce my PayPal fee to 5%. Although I had several international orders that sometimes remain unnoticed if you are in the Global Shipping Program (GSP) – where actually buyers often pay a very hefty prices to eBay for delivery.
Is Your eBay Business Profitable?
Therefore my conclusion is that you need to be very careful with you calculations. When I used to buy products I calculated 15% eBay and PayPal expanses. Now a calculate 20% plus postage, which is actually quite a big difference. With this calculation some of my previously sold products are not profitable at all, while on other products I have a very small profit. In addition, I have not even mentioned different taxes (duty, import tax, income tax) that some sellers need to pay. Also, it need to be considered that some parcels get lost or the product gets broken and they might need to be returned or resent, which is extra cost for the sellers.
From all my calculations from the last two years I concluded, that I need to consider 30% of the product price goes to fees (eBay and PayPal) and postage. In addition, of course, everyone is selling to make money. So I still want to have at least 10-20% profit. This means that all my products should be bought about 50% (30% + 20%) cheaper than the ‘Lowest Price + P&P’ on eBay in order to be able to sell my products. This is quite challenging even if I try to import from China when import tax should be also paid.
Is there an alternative to eBay?
Many people try different alternatives, such as selling on Facebook or Gumtree. Another option is to build your own webshop. However, it has a big downside that in this case you need to invest a lot of time and money to advertise your shop in order to get customers. Making a webshop is a considerable amount as well. And you may still need to use PayPal if you cannot find a better payment gateway.
So my final conclusion is that according to my opinion small sellers are beyond doubt ripped off by eBay and PayPal, but there are often no better alternatives for them.
Some quotes from an eBay community that are related to this subject:
"Big monopolist like ebay is making extreme amount of money from charging lower or middle class people extreme amount of money for listing and final value fees. Because people are desperate to sell, and ebay became a monopolist ( we can't find much more services like this.... they have been killed off by ebay_)It's very unfair to charge us so much! Yes I'm sure you going to say I agree by clicking submit... it still doesn't justify you...."
"Don't mind paying for services, but what great me is, the charge which includes the cost of sold article and postage, why do they take a commission on postage charges?"
"It is about 15% now its ludicrous it hard to make any money now, you end up having to charge more than high street shops to make anything, they are just a greedy monopoly"
" Ebay fees combined with Paypal fees are now to high, what is the point of selling an item here when I get more in my pocket from Gumtree? This is ridiculous!"
" Re: yet another ebay rip off !! [ New ] only good for buying?? "
"Not always, as sellers have to pay high fees, they have to increase the prices.
Sometimes the easiest and the cheapest way is to shop on eFiver.uk :)