Tuesday, August 19, 2008

Update: Do The Math! Are eBay Changes Better for Your Business?

I've made an update to this post, to better compare the rates. Changes are in bold.

As I look into the numbers behind the eBay fee changes, it is clear they are decidedly less expensive in some categories, but are they truly less expensive than Amazon for media?

Lets say an eBay seller wants to list 10,000 FP listings under the new rules on eBay and they also list 10,000 items on Amazon. For argument sake each item is $10 plus $2.98 for S&H. Total revenue per sold item is $12.98. We will also say they sell 1500 items in a month from each site.

Listing Fees and Subscriptions.
  • Amazon - $39.95 to list (Pro Merchant fee) - Cost per sold item is $0.03 ($39.95 / 1500)
  • eBay - $500 to list (10,000 x $0.05) Cost per sold item is $0.33 ($500/1500)

FVF is the same on both sites so that is a wash, so each site charges $1.50 per item in FVF.

On eBay the payment side of the transaction is separate, so if they use PayPal and have $2.98 S&H they pay $0.59 in PayPal fees (2.2% plus $0.30 fee) I changed to 2.2% for PayPal because a seller listing 10K items is more than likely selling enough to earn that fee.

On Amazon, you would pay a $0.80 Variable Fee.

Total cost per item for Amazon - $2.33

Total cost per item on eBay - $2.42 (this is the updated cost and does not reflect FVF discounts earned)

Based on eBay's published info from May, regarding Power Seller FVF discounts, 34% of Power Sellers earned a 15% discount on their FVF which in this comparison would save $0.23 cents making the eBay fee lower than Amazon.

So the revised eBay cost with the earned FVF would be $2.19 as opposed to Amazon's $2.33 or a savings of $0.14 per item.

So in this comparison eBay has lower fees than Amazon if you are one of the 34% of sellers that received the 15% discount.

Do the Math!

Just my 12%

5 comments:

Anonymous said...

You can list any media item on Amazon for that $39.99. Non prefilled is now 15 cents on ebay. Of course ebay's cheap isbn database pales in comparison to the huge asin/isbn database on Amazon now.

Steve said...

I am really saddened to see ebay made this move. Ebay cannot be real and think they can price competitively to amazon and think it will work? Remember amazon is the biggest retailer of media on amazon; no 3rd party merchant can price items equal to or below amazon when amazon carries an item and be profitable. Remember amazon has fixed costs as a retailer and does not incur the 15% FVF.

Anyway the average profit margin on a video game is 20%.

So let’s look at a couple examples.

MSRP = $20.00
Dealer cost = $16.00
Ebay FVF $20.00 x 15% = $3.00
PayPal fee $24.00 x (2.2%+.30) = .83 cents
Thos leaves 17 cents profit for seller.


MSRP = $50.00
Dealer cost = $40.00
Ebay FVF $50.00 x 15% = $7.50
PayPal fee $54.00 x (2.2%+.30) = .1.49 cents
Thos leaves $1.01 profit for seller.

So the only way a seller on ebay can be profitable now is sell games above MSRP.

This is not even being competitive with amazon fees as amazon is cheaper. Amazon charges on shipping and handling but not payments, so same example on amazon

MSRP = $20.00
Dealer cost = $16.00
Amazon FVF $24.00 x 15% = $3.60
Ebay + PayPal = $3.83

MSRP = $50.00
Dealer cost = $40.00
Amazon FVF $54.00 x 15% = $8.10
Ebay + PayPal = $8.99

So why in the world would any seller place items on ebay over amazon with this move when fees are higher, buyer maintenance is way higher, and the overall process of doing business on ebay is a lot harder and higher maintenance then amazon. On ebay I get 1 email per item sold and on amazon I get 1 email per 100 items sold. I am also 50 times more likely to get a chargeback on ebay then amazon and 50 times more likely to get negative feedback.

Randy Smythe said...

Anonymous,

Yeah, those non-catalog items are better suited for stores than putting them in CORE and paying that 15 cents to list.

Steve,
Sellers will need to determine if this make sense for them. STR for media items will drop now because of all the product that will be in CORE but if their overall sales increase, they may think it worthwhile.

I've had about half-a-day to look at this stuff and still haven't made up my mind. Some of the ideas look good on the surface.

Steve said...

Randy

I am of the feeling sales will tank. STR is not a factor inasmuch as MQSP is 5 cent or15 cents to list. But lower selling fees means nothing without sales velocity and this shipping cap is problematic as well.

Fixed price never sold as well as auctions and still does not sell as well. on ebay my items sold come in time ending soonest and on 30 day FP or GTC this will not bode well for search placement .

Take me personally over the 1st 6 months of 2008 I averaged 40000 items listed to ebay per month and sold about 8000 items per month. I only carry about 450 sku’s. so now ebay wants me to list 450 items per month in MQFP. Do you think I will come anywhere near the 8000 items sold per month? Here lies my concerns

Randy Smythe said...

Steve, this is the problem. There is not enough demand for media items on eBay so adding all of this supply to core will just kill things.

They think they have the BM for Fixed Price problem solved. I'm not holding my breath.

What will happen is that the start bid $1 under the BIN auctions will go away and be replaced by FP