Increase Profits by Reducing Fees

Recognize which fees can add to your business, and which just add cost.

by Dennis L. Prince
- Oct 27, 2010

Whether costs are on the rise, sales are in a slump, or competition is just plain stiff, sellers need to remain diligent in reducing costs to sustain profits.

Tough economic times are especially merciless in challenging a seller's business goals. And while there was a time when folks lashed out at eBay in protest to the fees the site levies, astute merchants recognized that many of the site fees could be significantly reduced or avoided altogether.

So, as you continue to work tirelessly to attract bidders and buyers, ensure you're equally energetic in managing and reducing those site fees that chew away at your profit potential. Don't overlook the intrinsic value of some of the fees you will pay—as an investment in your business.

Some fees are good for you… and your business

The truth is that you will pay some sort of fees for listing on eBay. The site has long been an entrepreneur's dream venue, low in relative cost and high in global sales potential. For that opportunity to launch a small business or extend a brick and mortar establishment, the cost of doing business on eBay is cheap. While you should certainly consider launching your own commercial Web presence, it simply makes good sense to raise its visibility by listing on eBay to help you attract a larger audience.

You can immediately keep your costs lower when you resist piling on listing upgrades

Reduce costs, beginning with listing fees

A basic tenet in any crusade to reduce fees: Lower your opening bid price. If you list in the auction format, keep in mind that the lower your opening bid price, the lower you insertion fee. Consider that an item that opens with a $10 starting bid will incur a 50-cent insertion fee, whereas the same listing with a starting bid of $9.99 cuts that insertion fee in half, to just 25 cents. As the listing fee is based upon your established minimum bid, study eBay's listing fee structure and set your minimum bid within the lowest bracket possible.

If you choose to list in a fixed-price (Buy It Now) format, the insertion fee is only 50 cents, regardless of your asking price.

Add-ons to leave off

After you've found the best opening bid or fixed-price fee scenario, recognize how you can immediately keep your costs lower when you resist piling on listing upgrades. Although they're promised as methods to improve your sales success, these actually just siphon away a portion of your profits.

  • Title enhancements: Don't pay extra for bold, highlighted or other title adornments when occasional capital lettering and effective keyword usage help you do just as well if not better—and at no additional cost.
  • Listing Designer: Whether it's a high-tech layout or a playfully retro rendering, the listing designer might look nice, but it adds another fee to your listing. Customers are really interested in a well-written description and an accompanying photo of what you're selling—and both are free.
  • Cross-category listing: While it might make sense to have your item visible within two listing categories, concurrently, the truth is that few shoppers take the time to search for goods in this manner. Instead, they rely on search terms to find what they seek. Invest your effort into effective keywords (again, they're free), and you'll gain far more than the double-cost of listing in two categories.

Yet, some extra fees might be a good value

Of course, this isn't to say that all site fees are inherently detrimental to your eventual profit. Just as it makes perfect sense to pay reasonable fees to access the expansive eBay buying audience, it is just as prudent to selectively invest in site features and enhancements that could translate into better sales results. For example:

The fee incurred to access the eBay buying audience can be one of your best business investments

  • Reserve prices: While you may not like the surcharge attached to using the Reserve Price option, if you need to protect the value of an item to avoid taking a loss, this surcharge might be your inexpensive safety net. This is especially true of high-end goods that could be well served by the "insurance" the reserve price offers, preventing you from being bound to sell an item if it underperforms in an auction setting.
  • Relisting: At eBay, it's free to relist an item in the auction format for a second time. If the item sells the second time around, eBay will credit your account for the insertion fee. The benefit here is that you can make changes to your item title, description and picture in hopes of being more successful in a second listing—on eBay's dime.
  • Online payment: And, while sellers often complain of the fees being levied by online payment sites, remember that buyers who can pay with credit cards (accepted via online payment services) will invariably spend more than if they must surrender their limited cash on hand. If your items sell at good prices, the fees of using online payment services are the necessary vehicle that enables those sales. This is a cost of doing business—but this one is one of your best investments.

The best return on your fee investment

As mentioned, the fee incurred to access the eBay buying audience can be one of your best business investments. While you shouldn't actively bait and lure away eBay buyers to a Web site of your own (eBay has strict rules to this effect), be sure buyers can easily contact you—via e-mail or Web site URL—to inquire about what else you might have for sale. When customers actively seek you out to initiate additional transactions, this becomes the valued return on investment for those eBay fees you paid.

If you're operating your business well, extending your offerings at eBay and faithfully serving the customers you attract, you stand a best opportunity to continually increase your business traffic—both on and off eBay. And if this benefit comes by way of some wise fee investments along with prudent fee reduction, then you're doing good business indeed.

About the Author

Dennis L. Prince has been analyzing and advocating the e-commerce sector since 1996. He has published more than 12 books on the subject, including How to Sell Anything on eBay…and Make a Fortune, second edition (McGraw-Hill, 2006) and How to Make Money with MySpace (McGraw-Hill, 2008). His insight is actively sought within online, magazine, television and radio venues.

Opinions expressed here may not be shared by Auctiva Corp. and/or its principals.

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