Feb
25
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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4 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.