Costs of doing business

I was answering a question on the Virtual Stamp Club about shipping fees, and it got me to thinking. How much does it cost to sell a single item? So, lets look at the costs:

1. E-Bay insertion fee - the cost to list an item on E-Bay, it is not a fixed cost, but depends on the start price. The lowest cost option is to list an item for $0.99 or less, which costs $0.15.
2. E-Bay Final Value Fee - the cut that E-Bay takes of the sale. Again, it is a sliding scale, but for items that sell for less than $25, it is 8.75%
3. PayPal Fees - the cost of accepting a payment via PayPal. Of course, E-bay now requires you accept PayPal, and the majority of buyers pay via PayPal, so this fee is incurred the majority of the time. $0.30 + 2.9% (for all sales under $3000).

So, for an item that sells for $0.99, I would need to pay $0.57 in fees. So, unless I paid less than $0.42 for the item, I am better off tossing it in the trash than trying to sell it on E-Bay.

Of course, that doesn't include shipping costs, which include not only postage, but the packaging material and envelope to send the item in. Most of the time, I get my shipping charges figured out correctly, and the buyer actually pays enough to cover the cost of shipping the item to them. However, in a few cases, I have been surprised at the post office when the postage comes out higher than I would expect. Whether this is because of a non-machinable surcharge, or an envelope being too large to qualify as a letter and going out as a parcel instead, I can never quite figure out. Some countries, like the Netherlands, are just insanely expensive to ship to for some reason as well.

Looking at the fees, it is easier to understand why E-Bay shipping fees often seem quite high. Rather than start an item at $3 with a $0.42 shipping cost, I can start it at $0.99 with a $2.50 shipping cost. Both cost the buyer about the same, but I can save $0.20 on insertion fees by starting the item at $0.99 rather than $3. Also, since the E-bay final value fee is on the final sale price, before shipping costs are added in, I can save an additional $0.175 in fees if the item goes for the minimum bid. I know it is not much, but on a percentage basis, it is huge.

I also know that a lot of dealers have discount postage around. If they sell US stamps, they can use the scrap from there US inventory to pay for postage. If you are willing to play some math games, you can also find large amounts of lower value US stamps for sale below face (left over $0.41 or $0.39 stamps, for example).