eBay recently hosted an online workshop in their forums with the goal of helping auction sellers improve their detailed seller ratings. One of their suggestions was to offer free shipping. A few observations are in order…
eBay is pushing the shipping and handling fee as an evaluation criteria pretty hard these days. Don’t spend too much emotional energy thinking that this is to improve “the buying experience.” It’s no secret that eBay makes no commissions off of shipping and handling fees that the seller charges the buyer. An item that sells for one cent but tacks on a $19.99 shipping and handling charge makes eBay no money in Final Value Fees. Through carrots and sticks, eBay is encouraging sellers to mark up the sale price of a transaction like this to $20.00 and to offer “free shipping.” In this scenario, eBay takes their commission on the entire transaction amount (plus PayPal’s cut on the transaction).
Studies by economics researchers indicate that buyers actually prefer a lower final bid price plus a marked up shipping and handling fee over bidding on a similar item that has a higher final bid price plus free shipping — even if the latter’s price is lower than the combined total of the former’s. This is because it is human nature to compartmentalize these expenses into different categories. We’ve become accustomed to paying shipping and handling in addition to the price of the product. Despite additional expenses for shipping and taxes, the mind subconsciously focuses on a product’s base price when calculating the value of a particular transaction. It takes a conscious effort to override this natural tendency and combine all the charges to evaluate the true value of a transaction.
It was pointed out by a participant of the eBay workshop that the average Shipping & Handling Charge Detailed Seller Rating of seller’s who exclusively offer free shipping is 4.8 (on a 5.0 scale). eBay could not refute this — and actually acknowledged the fact, stating they would study the causes of this phenomenon. I’m not sure how one gets a perfect score for the Shipping & Handling DSR — perhaps by offering rebates to the customer? There seems to be little incentive to offering free shipping if the best you can do is a 4.8!
eBay needs to consider the example they set. In their store, eBay charges $4.87 to ship a mousepad via USPS ground and $6.80 to ship a mug. I’m not saying eBay doesn’t incur expenses associated with the time and materials required to properly pack products and ship them. They do – just like all of us. And just like all of us who engage in eCommerce involving physical goods, it’s acceptable for eBay to pass on a reasonable shipping and handing charge to the customer.
Just as I don’t think it’s fair to eBay to sell and item for one cent and charge $19.99 for shipping in order to avoid Final Value Fees, I’m not buying into eBay’s “encouragement” for me to sell an item for $19.99 and charge one cent for shipping (so that eBay can charge FVF’s for the entire transaction amount). There’s an equitable and happy medium in there somewhere. I’m willing to meet eBay there — just as long as we don’t confuse this issue with improving the buyer experience.
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9 Responses to “Free eBay Shipping? Don’t Believe the Hype”
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[...] read a great article on eBay’s shipping fees and feedback at this blog. [...]
Great article. I quoted this on my own post about how Feebay is unwilling to fix the fundamental economic problem with their listing fees and policies.
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I have to agree with you, that ebay is just doing the free shipping to get more money and I am surprised that it is not mentioned more by the ebay blogs. I have found few instances of comments on how the supposedly “free shipping” gives ebay and paypal a bigger cut on their commissions. Not a very happy ebay seller right now.
To paraphrase a recent political figure – “you betcha”. It is hypocritical of Ebay to chastise us (sellers) for charging to much shipping, but encouraging us to charge as much as we possibly can get for the item.
And then they have the nerve to act as though we sellers are UNETHICAL! Really!
I’m unhappy about this too.
I have always wanted to shout to the world that eBay’s “recommendation” that sellers offer free shipping was a load of crap. They are completely aware that they come out ahead in the end and some sellers are lose in the end because they don’t charge enough for shipping. It’s bogus.
Don’t you know that every change that eBay does is for the good of all the sellers on eBay? Yeah, right. Every change that has to do with money has always worked out in favor of eBay. eBay thinks everyone is stupid.
Amen. Ebay’s fee policy is a steaming pile of crap, and as a seller I have very little incentive to offer free shipping. The total price is raised as a result and I have to pass those fees onto the buyer AND STILL get charged from the shipping I’m paying out of pocket. It makes no sense, but ebay loves it when they can charge 15 cents for every dollar on the full value with me alone footing the shipping bill and the buyer still not satisfied at the price markup since they instinctively know shipping is tacked on somewhere in the total expense.
There is no such things as really “free shipping” on eBay anyway. If you actually surf around, you’ll see that sellers who offer “free shipping” are already including their S&H fees into the prices of the items (and of course, eBay loves this idea as their final value fees would be higher). New eBay buyers might have fallen for the “free shipping” hype, but for experienced eBay buyers, I wouldn’t think so.
Agree. .
Ebay is a corporation. Their goal is to make as much money as they can, obviously. It is all cloaked with a puppies and bunnies message, but in the end they would kick their own mother in the head if it meant record profits. There are so many hidden fees now its ridiculous. That is the reason sellers can’t leave negative feedback for buyers-it means more money for ebay. They LOVE unpaid items-sure you get final value fees, but not listing fees. I recently sold a laptop 4, yes 4 separate times to non paying bidders. I generally start those at a safe level, so the cost to list is 4-5 bucks a pop. Profit on laptops isn’t great, so I loose everytime there is a non-payer. Oh-and the reason there isn’t more about their practices on the blogs is because they will remove your post if it is too critical. I had a post removed for a rant about a non-paying bidder being ABLE TO LEAVE NEGATIVE FEEDBACK!!!!!!
EBAY IS SO HYPOCRITICAL. The tell you to state policies in the listings, but in the end it doesn’t matter. I sold a camera for over $500.00 in the middle of November. Got + FB from buyer, but just before Xmas he said it is broken. He broke it, obviously. I lost the claim. Not sure I can return to distributor.
The thing is, buyers don’t realize that all the fee increases hurt THEM. I am transitioning to ecrater and my own sites. I am able to offer lower prices, yet still make more money when I do sell things. Yes, it is tough going, but I am tired of working my tail of for Ebay and pay pal. I still sell on ebay, but I will soon either make it on the other venues, or find another source of second income. Keep up the good fight, people.
http://chipsdigitalpc.ecrater.com/