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Ebay Store Fees v. Regular Auction Listings:
Is that hefty monthly subscription fee charged to operate an eBay store really worth it?
A friend of mine and I have both recently started selling on eBay.
While we were discussing our recent eBay experience we ended up on the
topic of eBay fees. One of our biggest concerns about selling here are
the somewhat high fees and still being able to make a decent
profit after listing fees, final value fees, and of course... PayPal
fees. So we discussed the advantages and disadvantages of opening an
eBay store. Most of you probably know that eBay offers this service for
a monthly subscription fee that varies depending upon the package you
choose. The cheapest option is the basic plan for $15.95 per month.
After that we have the premium plan for $49.95 per month. Then there’s
the most expensive plan, the Anchor plan for a whopping $299.95 per
month.
So by paying for this monthly subscription service does that mean you’re excluded from paying listing fees and/or final value fees? Of course not! On top of this hefty monthly fee you still have to pay for both listing AND final value fees. Although you do get a slightly discounted rate… and I mean slightly.
With the basic plan you are allowed to manage up to 250 listings/products at a time. The mid-range plan allows you to manage up to 2,500 listings at a time and the largest plan allows for 5,000 listings.
At first glance, these rates seem outrageously high. As I noticed the great number of eBay sellers that had stores I decided that it was worth it to do the math and find out how much I’d really be saving by opening an eBay store and just how much you have to sell to make operating an eBay store worth your while. Here’s what I found out…
So by paying for this monthly subscription service does that mean you’re excluded from paying listing fees and/or final value fees? Of course not! On top of this hefty monthly fee you still have to pay for both listing AND final value fees. Although you do get a slightly discounted rate… and I mean slightly.
With the basic plan you are allowed to manage up to 250 listings/products at a time. The mid-range plan allows you to manage up to 2,500 listings at a time and the largest plan allows for 5,000 listings.
At first glance, these rates seem outrageously high. As I noticed the great number of eBay sellers that had stores I decided that it was worth it to do the math and find out how much I’d really be saving by opening an eBay store and just how much you have to sell to make operating an eBay store worth your while. Here’s what I found out…
For
example, let's say you sell designer shoes on eBay. Hardly anything
actually sells for retail value on eBay. That's the whole attraction of
shopping here… getting a good deal. So let's say you buy a case of 10
pairs of designer shoes for $20 a pair. The retail price on these shoes
is $65.00 per pair so on eBay they’d probably go for around $45.00 if
they’re a desired brand name, brand new in original packaging, and
still in season.
That means you paid a total of $200.00 for the case of 10 pairs of shoes and you plan to resell all 10 pairs for around $450.00. Nice, you’ve made a profit of $250.00. How much of that $250.00 will go to eBay and how much will you actually get to keep? Let’s take a look…
That means you paid a total of $200.00 for the case of 10 pairs of shoes and you plan to resell all 10 pairs for around $450.00. Nice, you’ve made a profit of $250.00. How much of that $250.00 will go to eBay and how much will you actually get to keep? Let’s take a look…
- A lot of sellers like to start their auction listings at really low prices to save on insertion fees. With a hot item you can do this because you know it will always go for a decent price and you probably won't lose any money on it. Let's say you setup regular auction style listings for all 10 pairs of shoes and you start the bidding at $5.00 for each one with no reserve. This is the fee structure for the bare minimum. That means I’m not including anything extra like listing in more than one category, adding more than one photo, featuring your listing, etc.
Please keep in mind that I am not taking into account any shipping and handling fees so your actual PayPal fee would be even higher unless you offer free shipping which would add to list of things eating up your profits. If you list each pair for $5.00 each you’ll pay a 35 cent listing fee. If each pair sold for exactly $45.00 your final value fee would be $2.89. Then the PayPal fee on $45.00 would be $1.61 bringing you to a total of $4.85 to sell just ONE pair of shoes. How much has your profit margin already dropped due to fees? Let’s look.
Before eBay fees you profit $25 off each pair of shoes or have a profit margin of 56%. Once you account for the $4.85 in eBay and PayPal fees this brings your profit down to $20.15 or a profit margin of 45%. Your profit margin just went down a whopping 11% due to eBay fees. WOW! That means that your $250.00 profit for a case of 10 pairs of shoes will drop to a profit of $201.50 after you spend a total of $48.50 in fees to sell all 10 pairs. You will end up giving eBay 19.4% of your profit to sell all 10 pairs. YIKES! Let's explore other options shall we?
eBay Store Basic Plan ($15.95/monthly)
- I’m going to use the same scenario as above. Let’s say you have another case of 10 pairs of shoes that you paid $20.00 each for with an eBay selling price of $45.00 per pair. With an eBay store you get special discounts on insertion fees so you’ll pay only 3 cents instead of 35 cents for listing each pair, but here is where it hurts... Your final value fees have jumped from 8.75% of the initial $25.00 to 12% for store subscribers. WOW! That means your final value fee for each pair of $45.00 shoes sold is now going to jump from $2.89 to $4.60! OUCH… THAT HURT. Plus add your $1.61 in PayPal fees and that brings you to a total of $6.24 in fees to sell ONE pair of shoes! This does NOT include any portion of the monthly fee to subscribe to eBay stores. This is strictly listing fees, final value fees, and PayPal fees like the example shown above. This is getting so painful I can hardly continue…
Here is why...
When you view the page the gives you a main overview of joining eBay stores you'll notice that they advertise discounted rates to subscribers and at first glance it probably appears that if you sell in high volume you will save a lot of money. While this isn't necessarily false, it isn't anywhere close to true either. Subscribers DO get a discount of 32 cents on insertion fees, but it doesn’t make that big of an impact since insertion fees only account for 7% of your total fees spent when selling on eBay using regular auction format and only 0.04% when using eBay stores. That’s right… they’re giving you a discount on the portion of your fees that cost you LESS THAN 1% of the total amount you'll spend on eBay fees. Gee, thanks for the generosity eBay. Now how enticing does paying that hefty monthly subscriber fee sound to you?
The fact is that it does not matter if you sell 10 pairs of shoes per month or 500 pairs of shoes per month (which means you'd have to upgrade to the $49.95 monthly plan if you want to manage 500 listings at once). Having an eBay store does NOT save you money... even when you sell in volume. Here's a quick look at why...
Let's use the same shoe scenario, but instead of selling 10 pairs per month we'll pretend you are selling 500 pairs per month. That means your gross profit before any fees would be $12,500 for that month if you sell all 500 pairs. Now how much will you spend in fees?
If you listed all 500 pairs using regular auction style format and sold each pair for $45.00 you would spend $2525.00 in eBay and PayPal fees. You could actually save a lot of money by listing with a fixed price auction and changing your available quantity to sell several pairs of shoes per each listing. If you did this your fees could be significantly lower. But for the sake of this example, we'll just say you're listing 500 different auctions. This is the total amount you'd spend. That means you'll end up giving eBay and PayPal 20% of your gross profit that month if you do things the more expensive way and list every pair of shoes separately. Otherwise, you're looking at more like 18%.
If you listed all 500 pairs using eBay Stores and sold each pair for $45.00 you would spend $3120.00 in eBay and PayPal fees. Plus, don't forget to add your monthly store fee of $49.95 (remember we had to upgrade to the bigger plan to list 500 products) for all the benefits you're getting from being a subscriber. That means you're now at a total of $3169.95 for the month and you're going to shell out 25.3% of your gross profit on fees. Think using multiple quantity listings will make a difference? Wrong! Even if you set up only 5 listings that each had a quantity of 100 pairs of shoes you'd only save $14.85 in monthly fees out of $3120.00. Remember your insertion fee accounts for less than 1% of your total eBay and PayPal fees.
Simply put... eBay stores are NOT cost effective. It doesn't matter if you sell 10 products a month or 500 products. Sure I'd love to take advantage of having the e-mail marketing capabilities that come with eBay stores, but frankly the fees are not worth it. For $20.00 per month I can subscribe to any e-mail marketing service instead of paying $15.95 to subscribe to eBay stores plus an increase of AT LEAST 5.3% in sellers fees. Subscribers are already paying those monthly rates so why not make it fair and keep selling fees either equal for store subscribers and regular sellers or CHEAPER if anything. After all, there is a monthly fee to subscribe to eBay stores and it's supposed to be a PREMIUM service. What are the benefits if you're going to spend an arm and a leg when you can sell just as much with regular listings at a much cheaper cost? Vote "yes" if you agree that the store fees are too high and maybe eBay will do us all a favor and make joining eBay stores a beneficial business expense.
Guide created: 02/01/09 (updated 11/22/09)
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