Posts tagged “insurance”.

eBay’s Silent Fee Increase

On AuctionBytes today there is a Letter To The Editor from a writer who signs themselves “Still Hopeful for Success on eBay”. Auntie May would say “Good luck with that, Pal”

I agree with the majority of what Still Hopeful says, neatly summarized in the final paragraph

“To make a long story short…if it’s not right for the seller to make monies on shipping or insurance…than neither should ebay/paypal. There are ways they can segregate the shipping fees from the final sales price, through their algorithms, as an act of good faith and practice what they preach.”

In my view, for PayPal fees it makes no difference where the handling is allocated. We have always paid for payment processing as a percentage on the total transaction and this is industry standard practice. The eBay fees are a different matter because this amounts to a hefty sneaky fee increase.

How hefty?

Click on the spreadsheet to enlarge, it will open in a new window or tab. The ’silent fee increase’ is between 26% and 157% depending on the sales format chosen. In my handy dandy mini spreadsheet the the first set of figures are fixed price with the same item offered at auction below. The auctioned item sold with one bid at the starting price. Postage is $5 throughout.

Industry Standards

In July I bought one pair of jeans from JC Penney, the shipping was $9.45. They were just work jeans, Lee I believe, and by the time they got here they had cost almost $50. They are good jeans but at that price I will need a pay raise to go shovel ‘end product of horses’ up at our ranch. This month I bought three pairs at Costco for what one pair cost at Penneys and they do their job which is to cover my situpon.

Interestingly, at the eBay Store, which was a stand alone website last time I looked, shipping to South Dakota for one key-chain was quoted at $7.

Some little doodad as seen on TV is invariably $7 for shipping and add another $7 for processing the second ‘free’ item. eBay ‘expert’ The Video Professor charges $6.95 to ship his ‘free’ DVD. * UPDATE: as of November 2009 the ‘professor’ now charges $9.95 to ship his ‘free’ video. These are industry standards and buyers pay them daily. If they don’t like it they don’t buy, and many are making that choice as I did with my jeans.

The eBay Standard

Dinesh Lathi, eBay eBay VP of Seller Experience has been pushing free shipping hard since the Spring 2008 eCommerce Summit in New Orleans where he said

“The fact of the matter is that free shipping is the standard for eCommerce now. Sellers who want to meet buyer expectations need to aspire to that. It is our job, the people here on stage, to help you do that. So, there are definite things in the works at eBay that will help you accomplish that. Look for that soon. “

That seed has grown and borne (def. #3) bitter fruit, eBay will soon require that sellers charge no more than exact postage and roll insurance costs and handling charges into the item price. eBay would prefer the percentage of listings with ‘free’ shipping increase from the current approximately 30% to 100%  The sheer hassle of the new policy added to the inherent danger to DSRs may do a lot to accomplish that goal.

Obviously sellers are not delighted by prospect of paying eBay inflated commission on out of pocket shipping costs. There are other considerations too. Where is the incentive to the buyer to purchase more than one item? How can you up-sell when each item must be priced to cover shipping costs as a one off sale?


It is indisputable that insurance has been an income producing racket among certain types of eBay sellers for years. By insisting insurance costs be added to the base sale price eBay has neatly mandated an increase to their own revenue stream while squeezing sellers already tight margins even harder to maintain pricing parity.

In the USA most people do not realize that our postage and insurance costs are relatively inexpensive compared to other countries. My friend Kevin in Australia wrote to me:

“I have had two requests for additional insurance charges on items in the $20 to $24 range in the last two weeks. At a minimum of $8.40 for an international transaction, it moves from me taking my risks (as I do - I do refund when claims are made that items have not arrived, after confirming that the buyer has supplied correct basic information - ie: postal address), to me either being rendered unviable or ignoring a valid buyer’s request for an additional service.”

What does the buyer think?

  • 74% of eBay shoppers were ’satisfied’ or ‘very satisfied’ with their eBay experience in Q4-08
  • 71% were ’satisfied’ or ‘very satisfied’ with their experience Q1-09
  • 69% were ’satisfied’ or ‘very satisfied’ with their experience Q2-09
  • What will the numbers be for Q3-09?

I can’t speak for the average buyer but quite often free shipping doesn’t work for me. I  look at the total cost, how much to get the item in my hand from the seller. For commodities I don’t always go for the lowest price, I am willing to pay more to a seller who is friendly and professional. If an item ships ‘free’ most of the time I am simply paying more.

Crystal Ball Department

The Crystal Ball Department contains no facts. Educated guesses, gut feelings and opinions work here.

Where is all this going?

  • There will be a sharp decrease in traffic as the new and improved Best Match launches in September.
  • Historically traffic has taken months to recover from Best Match changes.
  • Last quarter is not a good time of year to run that risk.
  • I think many smaller sellers will give up on eBay.
  • Some medium sized sellers may not survive past the holiday season.
  • Very large sellers (ChannelAdvisor client sized) will probably survive, they have teams of researchers working on their behalf.
  • Selection and choice will decline further as merchants move off the platform.

What do you think?

Y’all come back!
Full disclosure: I am an ex-eBay seller currently selling on my own website and

The Insurance Myth

eBay’s latest bucketful of site policy updates announced July 27th contain some long overdue revision of permitted Selling Practices.

This is, on the whole a good thing.

Together with cleaning up the often hostile and unprofessional language often found in eBay listings one of the most hotly discussed points is insurance.

Starting in October sellers will not be allowed to tack on additional charges for insurance. Here is the wording from the Selling Practices Policy effective sometime in October 09.

What you can charge

  • Actual shipping cost: this is the amount for shipping the item. It should be what you paid the carrier.
  • Handling cost: this can include the cost of packaging materials and insurance costs (if any).
  • Delivery Confirmation and extra services: if these options are offered to the buyer, you can only charge what they actually cost.

Note that it does not say the seller has to absorb the cost of insurance, nor that the seller may not insure. It simply states that the cost of insurance must be combined into the item price or the handling. Personally I don’t see this as a major change, this is the policy I have always followed, although it will disrupt the mega sellers who use insurance as a second income stream.

The smart seller will start using shipping labels which reflect actual postage costs rather than ’stealth postage’ because the eBay buyer now has another tool to wield next year, particularly if they bought more than one item.

See this series of blogs by the Brews News on that subject:

July 27th - eBay Says to Buyers: Oh, How I Love Thee… Let Me Count the Ways

July 28th - July 2009 Announcements: It’s Just Water Off a Duck’s Back

July 29th - Non eTRS eBay Sellers: Auctions, AdCommerce, or Anonymity

July 30th - Coming Soon eBay Counts Positives As Negatives

As a buyer

I want choice. I want the ability to choose between sellers, and if I want to pay for insurance I am not sure how I would handle being told I can’t have it because the seller is not allowed to charge me for it. I see a lot of fancy footwork in the future, special listings and the like, all of which will add to eBay’s take.

I resent mandatory insurance charges on a low cost item. A $5 pendant with $5 shipping is now a $10 pendant. Force me to pay $3 (30%) on top for insurance and outrage is setting in. Yes I do have the choice to buy or not. If it is a gift which I know will delight the person it is intended for I may allow myself to be extorted, and that is exactly how I feel about it.

As a seller

My business philosophy is expressed in the first paragraph of my eBay About Me page.

I believe that it is my responsibility to get the purchased item to my buyer in the exact same condition it was shown in the listing when they bought it. I agree it is ‘not my fault’ if the Post Office mangles it en route. Is it then the buyer’s fault?

If the item is low value and/or replaceable, based on my experience and my damage statistics, which have been very low, I do not insure. If my buyer has bought something irreplaceable or the potential loss is greater than I am comfortable absorbing, I insure, to protect myself from total loss. My buyer is protected by my business ethics because I am not selling on eBay these days.

Insurance and Delivery Confirmation are for the Seller!

You may have put all kinds of verbiage in your listing about not being responsible once the item has been dropped off to the Post Office in the past but that is pure myth, and has been for years. eBay’s Terms of Service make you as the seller liable to refund the buyer if the item does not arrive in the condition it left, or, does not arrive at all. Like it or not, if you do not do it willingly PayPal will refund the buyer.

When you log in to your eBay account you agree to be bound by their User Agreement and Policies, all of them. As a buyer, if eBay’s search or ‘unfinding’ bothers you, then use a different search, you may find the same item elsewhere or find something eBay has hidden from you because the seller has been ‘demoted’. As a seller, if eBay’s fees and policies make business unprofitable the choice is clear. For those who are happy, there is no problem.

Y’all come back!