Why eBay FREE SHIPPING powerseller discount making you loose money

We all wonder about eBay Power seller discounts for FREE SHIPPING listings – Where is the catch?

eBay is offering this promotion for powersellers for almost more then a year (since Last year eBay Changes throughout this year September changes). Here’s the drill, eBay offers Final Value Fee Discounts – Powersellers who list items in Auction-style or Fixed Price format with FREE Domestic Shipping and have either a Detailed Seller Ratings (DSR) of 4.5 or higher on all 4 DSRs or no DSR rating, will receive 15% off their total Final Value Fees per item listed. In addition, eBay periodically offers for powerSellers with high DSRs that qualify for Final Value Fee discounts will get double the discounts on their items sold with free shipping.

Well, the question is why:

eBay is definitely recognizing the importance of the FREE SHIPPING as a viable promotional tool. But still, how can it give away 20% or even 40% of it’s revnue source such easily.

Here is why:

• Discount is only on FVF- what seems 20% discount may end as a 5% discount in practice. The discount applies only for the final value fees of an item and not on the total seller fees. Usally that ends in 5% discount (check your last eBay invoice and calculation what % was in fact the applied to your seller account).
• FREE Shipping = item price increase = eBay fees doesn’t change- The magic calcualation shows no other, when eBay required, or strongly encourage sellers to apply FREE SHIPPING stragety, then most sellers will include the old shipping fees in the item price. Therefore, the average item price will be increased, and consequently the eBay final fees will be increased as well.

If item is sold at $100 + $25 shipping. Then eBay fees would be $6.25 ($4+$2.25). However, let’s see what happends when the eBay fvf discount applies.

Seller will list the item at $125 with Free Shipping, the eBay fees would be here $7.38 ($4+$3.38). an average power seller discount will be 15%. So the final eBay fees will be $6.27 ($7.38 – $1.11). that is $6.27, 2p higher than the fees without the free shipping discount.

Now, You have to remember that eBay discount is going to get lowered to 5% to most power sellers starting from Oct 09. that means that the above calculation will be updated to $7.01 ($7.38 – $0.37)- that is 12% increase in your eBay fees.

Bottom line, it’s important to do the math before celebrating the discount in our eBay fees. Once we do so, we’ll might be able to get the right formula that will remain our eBay fees intact as where the’ve been at least.

As regarding to the free shipping strategy: even if eBay has taken this to the wrong direction with the sellers discounts that aren’t suffice, the free shipping promotional tool is still a key business growth strategy. Buyers are becoming used to Free Shipping offers in the general e-Commerce market. See if Free Shipping boosts your sales and learn which pricing makes it work for you.

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