Monday, July 25, 2011

FREE SHIP vs. LOW COST SHIPPING

One of the "features" of being a seller on eBay, is the opportunity to continually update my listings and my "strategies" as eBay evolves.  Every couple of months, eBay announces a change, always with the goal of improving the customer experience.....or certainly, to improve the corporate revenue.  So, I study the changes and determine what I need to do to make my listings compliant with the new rules, while continuing to provide my customers with the best value possible and still turn a minimal profit. Yes, I understand that the goal SHOULD be to turn a GOOD profit, but at this point I am happy with a minimal profit.

One such new rule is that sellers no longer pay final value fees on the item cost alone. Now they are charged the final value fee on the total cost of the item PLUS the shipping and handling.  Now, the bottom line is that eBay wants all sellers to offer FREE SHIPPING.  They say they are encouraging this, because buyers LIKE free shipping.

Obviously, sellers are also buyers, so we DO understand the buyer experience.  Everyone wants a "deal," even on the hard to find items.  But the truth of the matter is that if a seller offers free shipping on all of his items, he must capture those shipping and handling costs in the price of the item.

Example:  A T-shirt costs the seller $9.00 to acquire.  eBay charges the seller 20 cents to list that T-shirt in his basic store, after also charging the seller $15.95 to operate that store for the month.  The seller lists the T-shirt at $15.49 in his store, and offers fixed price, low cost shipping, which includes insuring the package through U-PIC.

When the item sells, the sell is charged $1.77 final value fee (10% of the sale price of the item plus the shipping and handling charged).  The seller sends the customer an invoice for $15.49 + $2.22 shipping and handling, for a total cost of $17.71.  The buyer pays the seller through Paypal and Paypal charges the seller 81 cents for that payment.  The seller now purchases the postage to ship the 8 ounce T-shirt ($2.60), purchases insurance to cover the shipment (65 cents) and ships the T-shirt to the customer.

Total sale: $17.71
Total cost of sale (excluding materials, time of processing and monthly store fee): $9.00 + .20  + 1.77 + .81 + 2.60 + .65 = $15.03
Net income (before monthly store fees): $2.68

Obviously, I will need to sell a LOT of T-shirts to make a decent return on investment, but I am still determined to make it work.

Now, in offering the low shipping, I am able to offer shipping discounts for multiple items purchased and shipped together.  First T-shirt ships for $2.22;  each additional  T-shirt ships for $1.11.

Comparison of LOW COST SHIPPING vs. FREE SHIPPING

FREE SHIP T-SHIRT:
Sale price $17.71 (each T-shirt)
4 T-shirts total price: $70.84

LOW COST SHIPPING:
Sale price $15.49 + $2.22 S/H = $17.71 (first T-shirt)
Each additional T-shirt sale price: $15.49 + $1.11 S/H).
4 T-shirts total price = $67.51.

It may only be a savings of $3.33, but it is a savings and I'm convinced my customers appreciate that savings.  When eBay offers a way to offer discounts on multiple FREE SHIP items purchased and shipped together, I will update my listings and take advantage of the favorable search features offered to those who offer free shipping.  Until then, I will opt to offer my customers the opportunity to save on multiple purchases.

CHICKS T-shirts

THE MYTH THE LEGEND T-shirts



ADVICE FROM NATURE t-shirts

2 comments:

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Welcome to Judy’s Corner. I’m Judy. BACKGROUND: My little corner of the world is in Gloucester, VA. I work full-time to pay the bills and eBay is my pastime. I’m not quite ready to retire yet, but I’m getting there. I love to sing, I play guitar and violin, I do needlework and computer programming. I love to fish and work in the yard. I was active in my community theatre group for years until my work travel schedule started to interfere. Suffice to say, I like to stay busy. Enter eBay! I have met wonderful people through my transactions on eBay. I have even found an old school chum from those years when I lived in England, through a sale to a lady there! I’ve been buying and selling on eBay for over seven years. I appreciate dealing with honest sellers and I treat my customers the way I like to be treated. 100% Customer Satisfaction is not just my goal, it is my guarantee.