Jun
25
Last August, I posted about a study published by University of California and University of Hong Kong researchers who determined that eBay bidders were more prone to bid on auctions that had a separate shipping & handling charge, than auctions that had both charges rolled into the price of the product under the pretenses of “free shipping.” This held true even if the total cost of the “free shipping” auction was less than the combined cost of the auction with the charges broken out.
I wrote:
eBay bidders are more willing to pay $11.00 total for a CD when the price is broken out by product cost ($7.00) plus shipping and handling ($4.00) than $10.00 for a CD where the shipping and handling are free.
Now another study has reached the same conclusion. In their article “Consumer Behavior in Online Auctions: An Examination of Partitioned Prices on eBay” published in the Winter 2008 edition of Journal of Marketing Theory & Practice, John Clark and Sidne Ward examined this phenomena in the eBay collectibles market.
They found that even experienced bidders (categorized as such by feedback history) are prone to be inattentive to the auction’s total cost and focus on the cost of the item itself. Items that included the shipping and handling in the base cost of the item generated less revenue than those with “partitioned prices.”
Why does this happen? From my last post on the subject:
Bidders either disregard (or overlook) the shipping cost when determining the value of a commodity, or create “separate mental accounts” for what they are willing to pay for shipping & handling and for the cost of the item itself. This concept basically says that the bidder is willing to keep the two expenses separate in his or her mind, and as long as both charges are reasonably low, he or she is willing to pay - despite the fact that combined, the expense is greater than the single charge for the item with free shipping.
So how do we reconcile this with eBay’s push (through incentives and disincentives) to get sellers to include shipping costs into the price of the auction and offer “free shipping?”
- First, I think we can all agree that eBay’s assertion that they are encouraging a “free shipping” policy in order to “improve the buyer experience” is bunk. This is the second study that indicates that buyers have proven through their actions that they have a better experience when the price of the item and the shipping charges are separate.
- Therefore, we can conclude that this another tactic by eBay to increase their company’s revenue. Don’t get me wrong, there’s nothing inherently evil with a company in a capitalist society working towards increasing their bottom line. Under their current policy, the shipping and handling fee a buyer charges is not subject to a Final Value Fee - therefore, sellers who charge a low fee for the item and an inflated shipping and handing fee are doing so in an attempt to circumvent the Final Value Fee. I think it’s fair for eBay to have an eye on recouping some of that money slipping through that loophole.
So why not charge a (reduced) Final Value Fee for the entire transaction amount? Bidders will actually be afforded an “improved buying experience” based on the findings of these studies. Sellers could charge what they needed or wanted for shipping and handling with fear of disadvantaged rankings in the Best Match search results. eBay could close the loophole that allows some disingenuous sellers to avoid paying final value fees.
It’s time to stop tip-toeing around this issue and address it straight on. The evidence is in. The current shipping and handling policies, incentives and disincentives don’t work for sellers, bidders, or eBay. Let’s move forward.
Related Posts:
Comments
RSS feed for comments on this post. | TrackBack URI
Leave a Reply