Online auction sites generally charge a listing fee and then an additional charge based on the actual selling price of the item. You can also choose extra cost services, including featured positions, boldface or color listings, and multiple photos. We’ll use as an example some of the elements of eBay’s plan; others are similar. Currently (as of 2004), the insertion fee for items with an opening-bid price of less than $25 is about 60 cents; the fee for items with a starting price of $50 to $199 is about $2.40; and items with a price starting at $500 or more have an insertion fee of about $4.80. If you register a reserve price with eBay, the company adds a fee of as much as 1 percent of the reserve price. If the item sells (which means it is purchased at a level above the reserve price), the additional fee is refunded.
Then there is a final value fee. As of late 2004, eBay charged 5.25 percent of the closing value for items that sell for $25 or less. For items selling for as much as $1,000, the final value fee is 5.25 percent of the initial $25 plus 2.75 percent of the remainder. Items selling for more than $1,000 are assessed a slightly lower overall percentage of the selling price.
For most online auction sales, you should add a set fee to your product to cover shipping. Spend the time to research actual costs, and list a realistic price for shipping. If you set the fee too high, you will scare off knowledgeable buyers; if you set the fee too low, you will reduce your actual profit. Most of the auction companies, including eBay, offer guidance on shipping costs and may even have links directly to the U.S. Postal Service, United Parcel Service, and FedEx to help you calculate costs and arrange for shipment. Finally, you may have an expense associated with accepting credit cards or direct debit from checking accounts. In 2004, eBay’s affiliated company Paypal charged about 3 percent of the total amount (including selling price and shipping costs) for its services.
