Tag Archives: free shipping

How Ebay eats your vendor’s lunch

Okay, it doesn’t have much to do with editing. It does have to do with buying stuff someone has already edited, because it’s nice to learn about hidden costs. In the past, I have posted about the myth/dodge of free shipping. There is no such thing, of course; the only question is whether it’s buried in the item cost (and will therefore be charged to you for multiple items) or made visible (and therefore can be combined for multiple items).

Want to know what Ebay costs your seller? All right. Let’s imagine selling a book, since I both sell and love books. Fees have gone up recently, for no better reason than Ebay’s basic greed. The basic fees are:

  • $0.35 (listing fee; usually avoided as sellers get some fee-free listings each month, and pays to list the item for roughly thirty days)
  • $0.30 (basic selling fee)
  • 14.55% final value fee; that is, of the final selling price plus any sales tax plus shipping charges (rate varies by category; books are high).

So, here we go. Assume you sold a book with 5% sales tax (which Ebay collects and remits as required; as seller, you learn of it but don’t have to mess with it). You sold it for $6.97 and charged $3.87 for media mail shipping. Begin then with $10.84:

Add 5% for the sales tax; it’s now $11.38, of which $7.32 reflects the item and $4.06 the shipping (this distinction will come into play later). Of course, you will not receive that tax money; we just had to do this for an accurate dissection, so begin by deducting $0.54 for the sales tax. Deduct $0.65 for the listing fee and basic selling fee. Then multiply $11.38 by the final value fee, 14.55%, to get $1.66. Ebay charged me $2.31 in fees on $10.84 in sales revenue.

We have to pay to ship it, naturally. While the media mail rate in Notice 123 (postal rates) says that’ll be $2.89, most shippers use a reseller (often Ebay itself). I use one called PirateShip. It doesn’t drop my rate below the $2.89, so I assume they get a very thin discount and just charge me the Notice 123 rate. Maybe other shippers get it a little cheaper; don’t know. Most shippers try to cheat and use media mail for non-qualifying stuff; I don’t.

We also have to pack it. This is a normal paperback book and can fit in a standard plastic bubble mailer, but I had better put it in a zip-lock bag in case someone spills their coffee or beer on it after someone else stabs a hole in the packing. The bag and mailer cost me $0.24, and only because I buy the mailers in bulk. I also calculate that the label sticker costs $0.04, so supplies total $0.28.

I walk away with $5.36: $10.84, minus $0.65 for listing and basic selling fees, $1.66 for final value fees, $2.89 for shipping and $0.28 for shipping supplies. Not so bad? Not so great. Ebay ate over 20% of my gross. Ah, but looking back, did you observe the disparity between my freight charges and the actual postage? Caught me! Or not. I charged $3.87 for freight. Shipping cost me $2.89; supplies $0.28 on the cheap; Ebay stuck me for 14.55% of $4.06 (remember, they tacked on sales tax, calculated my fee, then remitted the tax–they so suck), so that’s $0.59 of the final value fees related to shipping. My math gives me a net profit on shipping of $0.11. And that’s only by attributing the listing fee and basic selling fee purely to the basic item, not the shipping. Start prorating those, and shipping just became a money-loser.

If the five minutes it takes me to pack the book and buy the postage aren’t worth eleven goddamn cents, then I must really, really suck at both. Hope I didn’t pay more than $5.25 for the book, or I sold at a loss.

You may think it’s incredibly petty to worry about all these “small costs.” No, no, no, no. That’s what everyone who collects those fees hopes you will do. All fees and all costs matter, down to the least one. I am not sure whether my packing tape adds up to a penny per parcel, but I probably should be considering that. The path to unprofitable business is paved with little bits of disregarded cost evidence. Believe me, the people to whom you pay those costs do not disregard their resulting revenues. Try it sometime. “Dear Ebay. Since your final value fees on my shipping are not even enough to buy a can of Coke from a machine, how about you just not charge me them?” Write and let me know what they say.

But what if the customer buys two books? Of course, if I were playing the free shipping shell game, I’d start making good money. Can’t combine shipping if it’s free, right? Such a deal! Ya. The more you buy with “free shipping,” the more you’re screwed. But since I don’t play that crappy little game, in most cases I can combine shipping provided it all qualifies to ship in the same way. Two books with nothing else meet that qualification.

Many buyers think they can both ride for the same price, but that’s not very common. With two small books, it’ll usually be the next pound up, so let’s say it’s just under two pounds. $3.45 according to Notice 123. It’ll also require a slightly larger mailer. So I might charge $4.57, which will put me about in the same place (just covering costs). Instead of paying $7.74, the buyer pays over $3 less. And some of them still think they’re getting hosed.

Not only that, some will even complain: “Dont know why ur not givin free shiping ur charges r a ripoff i no there not chargin u that much 2 ship my cozin works at the postal office”. Or think they are making me a fantastic offer: “Throw in free shipping and you’ve got a deal.”

Now you see why people sell the book for $0.99 (far as I’m aware, lowest price allowed) and jack the shipping way up. That’s the other form of shell game. And it’s true there are ways to trim little costs. Basic selling comes with 250 no-listing-fee listings per month; so as long as you do not get too big, you can avoid those. Ebay probably offers small savings on postage and supplies, and just as all costs are valid, so are all savings.

Anyway, you also now understand what’s really going on when you buy a book from someone. Whether it’s fair or not…you be the judge.

Free shipping: why it sucks for you

I’m not kidding.

In the modern-day online economy, free shipping has almost become a baseline expectation. I am told that if I’m selling online, and I don’t offer free shipping, I might as well write off every customer under forty. That is tantamount to telling me that every customer under forty is innumerate.

I don’t believe that. But I do believe that some customers, at all ages, refuse to do the simplest arithmetic.

To be fair, free shipping is an acceptable deal–for one item, from one vendor at a time. To be clear: that makes it a wash, not an advantage.

(This, by the way, is the first in a new category of posts at The ‘Lancer: “Robin Hood.” I intend to use this category for public service articles meant to expose ripoffs and scams, and to suggest creative ways to make life worse for ripoff and scam artists. Pyle’s The Merry Adventures of Robin Hood was my absolute favorite book growing up, and over half a century later is still a great inspiration to me.)

The ripoff comes when you buy more than one item from the same vendor. The more you buy, the more you inflate the vendor’s profit. The better a customer you are, the more you suffer. The vendor counts upon you to be an idiot. He hopes you will think: if there’s free shipping, hell, why not stock up?

Let’s take a fairly common vintage baseball card as an example. Suppose it costs $1.50 with free shipping with Vendor Joe. With another, Vendor Jill, it costs $0.75 with $0.75 also for shipping. In the second case, if you buy multiple items, Jill may readily agree to combine your shipping costs to a degree. (Since this is Jill’s moment of victory, if Jill did not, Jill would demonstrate the intellect of a prehistoric fern.) Joe’s shipping charges can’t go below zero, so Jill is sure to be the better deal. No matter what, when you get this so-called free shipping, you are absolutely being charged for the freight; the cost is just relocated to the item’s price.

That card costs either vendor fifty cents to mail, but appearances drive this whole monte game. In essence, Jill charges you the fifty cents plus a modest handling fee. Jill appears petty and pecuniary and nickel-and-diming. For gods’ sake, her shipping costs as much as her merch! What does she think I am, independently wealthy? Joe looks as if he waves a magnanimous hand and throws in the cost of delivery, just to do you a favor, fagedaboudit, good ol’ Joe.

Same amount. Same shipping. Same economics–except that you like Joe better. He’s the free shipping person! And when you buy two cards, your brain may think that the more you buy, the more you save, but you can see from this description that it is the other way around: the more you buy, the more you overspend. Suppose you buy ten cards in that price range. Obviously, they cannot all be shipped for one $0.75 shipping charge, but they surely can be shipped for far less than $7.50. Since Jill has not been lobotomized, she knows it costs less than $7.50. Jill also gives you credit for not having been lobotomized, so she presumes you know this as well. So she charges you perhaps $4.00, which still covers her overall shipping plus a little extra: total, $11.50.

Joe can’t lower shipping costs below free, so unless he offers a volume discount, his ten cards cost you $15.00. And whatever his volume discount, it is unlikely to beat Jill’s simple and fair charge.

Fagedaboudit.

Why doesn’t everyone go to Jill for their bulk buys? Joe counts upon your negative emotional reaction to Jill’s method, which appears to be dinging you for every little thing à la carte. (You mean I have to pay for extra sauces?) Also, you have to ascertain in advance what her policy will be, and that requires icky work-like stuff like reading and asking her questions. There is also addition and subtraction in play, which is math, thus even ickier and difficult and wasn’t on the test. It’s all so hard, and you just want to be done! The five-second instant gratification cycle has passed! Joe is hosing you, but you like him better, because he doesn’t quibble over petty stuff like shipping charges. Bing, bang, done, oh, I have a text coming in.

It’s a shell game. Ever seen those? Pick which coconut half (or overturned bowl, whatever) the ball is under. You always win the first time, just like a monte game. Or a nearby shill steps up and ‘wins’ to make it look good. When there’s more on the line, there is no way you win because the target has been moved in a way your eye will not track.

For one item, free shipping is a wash. Take it for gospel that the vendor pays for and is being paid for the shipping, whatever shell the money is under. Beyond one item, with the same vendor, the equation is simple:

The more you shop, the more you’re milked.

Joe really, really, really hopes you will never figure this out.

Ah, but what if Jill screws you by only discounting shipping a little bit?

First, this would defeat our non-lobotomized premise about Jill, because Jill would be stupid not to know she’s dealing with someone who has figured out the shell game and has chosen her on the logical presumption of better value. Jill is honest enough not to use the free shipping ripoff. Second, and consequently, Jill knows that she has a volume customer who may buy significant amounts from her in the future–but not if she gouges on the shipping. Once that customer trusts her to keep freight charges within reason, she will be a preferred vendor.

Joe? Fagedaboudim. Jill rocks. Joe’s running game on his customers.

Free shipping: just another shell game to make people think they got a bargain when in fact it’s a wash for one item, and a ripoff for more than one.