I’ve recently started a big push toward selling on eBay. And while up to this point, my efforts have been relatively successful, I’ve certainly hit a few bumps along the road that have hurt my profit margin. However, as I move forward with my selling efforts, I’m making note of some of the major cost areas that can really kill my profit margin when selling on eBay.
Purchase price and competition
It’s important to bear in mind the price you initially paid for items when listing them on eBay. Listing an item for $20 that you paid $20 for isn’t going to make for a profit once the commission, any listing fees, and shipping is accounted for. Also, it’s important to know what your competition is for a particular item. Listing a particular sale for $20 when the same item is being sold by competitors for $5 (unless your item is unique in some way) isn’t likely to make for a quick sale and could potentially cost you money (depending upon the type of listing or if there is a reserve price set on the piece) even if it doesn’t sell.
eBay doesn’t operate on goodwill alone, and that means that there are commissions charged upon the items people sell. However, at around 10 percent (depending upon the type of sale and sale price), this rate is often much lower than one might find at places like consignment shops or antique malls. Still, it’s something to factor into your sale prices. Knowing that you’re only going to clear around 90 percent of a sale item’s final price could factor into your overall profit margin.
The cost of shipping for certain items might surprise you. Selling an item for $5 only to realize that the shipping is $5.80 can be a harsh blow. Therefore, researching weights, sizes, and shipping costs ahead of time can help keep your profit margin intact and the surprise of these nasty little costs to a minimum.
Packaging and handling
Personally, I like projecting a professional image in the handling and packaging services that I offer. This means that I provide one-day handling times and professional packaging. However, more professional packaging can mean higher costs. Things like business-style envelopes, bubble wrap, product containers, tape, printer paper and ink cartridges, and similar items all cost money and can add to overall shipping costs.
Listing and other fees
Depending upon your level of sales with eBay, you may be eligible for numerous free listings. However, exceeding your free-listing threshold or not paying attention to fees associated with additional listing content, pictures or descriptions could drive up your sale costs and kill your profit margin in the process.
It’s important to bear in mind that some or all of your profits made on eBay could be taxable. Not only might you be subject to income taxes – both state and federal – but there could be sales tax involved as well. Thoroughly understanding how taxes will come into play on your sales can help you prepare for the chunk of your profits that may end up in the tax man’s hands rather than your own.
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The author is not a licensed financial or tax professional. This article is for informational purposes only and does not constitute advice of any kind. Any action taken by the reader due to the information provided in this article is solely at the reader’s discretion.