How to Increase Your Profit Margin on eBay

increase profit margin on eBay
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Savvy eBay sellers are continually seeking new ways to reduce expenses, especially since rising costs are a part of any business. We pay eBay fees, PayPal fees, home office expenses, packaging expenses, and the list goes on. Here are a few ways to reduce your eBay expenses and increase your profit margin by paying attention to a few important details.

eBay Features

Use caution with listing upgrades or avoid them completely. eBay charges hefty fees for bold, highlight, subtitle, and other upgrades. These upgrades can get expensive. Do your own research and run listings with upgrades and without and determine if the upgrades have any effect on your sales. Always verify the listing fees before submitting a listing. Sometimes, an upgrade will be toggled on by mistake and you could be charged for an upgrade you don’t want. Make sure you understand the eBay fee schedule.

Always file Unpaid Item Disputes.  If a buyer has not paid for an item within 4 days, the seller can file a dispute. After filing the Unpaid Item Dispute, the buyer might pay. If buyers don't pay within another 4 days, eBay will refund the Final Value Fees. Even better, enable the Unpaid Item Assistant to automate this process. The UPI Assistant is free and makes unpaid items one less thing you have to think about.

Print labels through the eBay workflow. eBay and the United States Post Office (USPS) have a partnership and eBay sellers receive a discount when printing shipping labels. This discount can be significant – up to 40% on heavier items. There is no reason to load up your eBay packages and stand in line at a post office. Everything can be done at home and your postal carrier can pick up packages daily. Not only will printing labels through eBay add to your bottom line, but it will save valuable time.

Shipping Hacks

Use calculated shipping. Weigh items with the packaging when listing. eBay is integrated with the USPS. Sellers only need to enter the weight and class of mail for each item. The eBay system calculates the shipping cost based on the seller’s zip code, the buyer’s location, the weight, and class of mail. Using calculated shipping takes the guesswork out of shipping. This method also prevents the seller from losing money and the buyer from being overcharged.

USPS Priority mail supplies are free from the post office. The only requirement for using Priority Mail supplies is that they must be used for Priority Mail. Turning the materials inside out or covering a box with brown paper is strictly prohibited and can result in a fine. USPS supplies can be ordered online and delivered to your door.

If you need boxes for First Class, Parcel Select, or international orders, think about where to get free boxes. No need to buy boxes when there are free at many businesses in your community. Retail stores such as Walgreens, Dollar Tree, grocery stores, and WalMart will gladly give boxes away. Pay attention to any restocking going on in the stores when you are shopping and ask for boxes. Ask at your dentist or veterinarian’s office as they order supplies on a regular basis and may have boxes on hand. The post office does not allow the reuse of liquor boxes.

Trim your packaging. Make sure you aren't over-packaging your items. The more packaging you add, the more your item will weigh, and the more you will pay for postage. In some cases, reducing your packaging by just one ounce can mean the difference in a dollar or more per package. This is especially noticeable in first class and international shipping.

Similar to the previous item, if you are shipping items via USPS Priority Mail, try to use the paper Tyvek envelopes instead of a box. The boxes weigh more than the envelopes, and you will be paying more for the shipping if you use a box. Sometimes, a box is unavoidable if you are shipping a fragile or breakable item, but keep this in mind as a general rule. Always compare shipping options to determine if a flat rate package will cost less. Padded Flat Rate mailers are great for many different types of items.

Use First Class shipping when an item weighs less than 16 ounces. You can purchase your own poly mailers on eBay or Amazon for about three cents when bought in bulk.  Use First Class for these lighter items. You won't have to spend the minimum $6 shipping an 8 oz item just to get the free Priority Mail supplies.

Pay your eBay fees using a credit card with a cash back program. Check your credit cards to see which ones offer a cash back program. Using these types of programs can result in between 2% and 5% credit back to your card.

Free Shipping Isn’t Free

Offering free shipping on your eBay items may seem like a great way to appeal to buyers, but this comes at a cost. Of course, any business person knows that you aren't shipping the item for free, you are incorporating the shipping fee into the asking price of your item.

Years ago, eBay encouraged free shipping. One of the criteria to appear higher in their search algorithm, called Best Match, was free shipping. When eBay changed to the Cassini search engine, free shipping was no longer rewarded. As of July 2013, there is no benefit to adding free shipping other than as a marketing strategy.

Maximize Shopping Discounts

If you shop at thrift stores for inventory, take advantage of discounts. Learn when markdowns are taken and schedule shopping trips at the optimal times. For example, in the Atlanta market, Goodwill stores have four rotating color tags. Each week, a different color is 50% off. On Sundays, a different color tag goes on sale. Sundays are the best day to have the largest selection of merchandise on the new color tag discount. Some thrift stores have senior citizen days where customers over 55 receive discounts. Smaller thrifts may have “fill a bag” days where an entire bag of merchandise is a certain price, like $5.

To stay in the know about sales and discounts, check to see if the thrift store has a Facebook page. You can also ask the staff if they have an email list where they blast out sale information. Ask other thrifters if they know of any special sale events. Many thrift store enthusiasts make the rounds and know about sales at other stores.

Reduce Paypal Fees

Selling on eBay involves all kinds of fees. Paypal fees are one of them. If more than $3,000 a month is processed through your Paypal account, you are eligible to apply for a lower fee rate, called the Merchant Rate. Paypal users must apply for this rate, it is not automatically offered to you.

Sign into your account and complete the information. If you qualify, you will receive the merchant rate based on your account activity. The merchant rates are tiered based on how much money flows into your account each month.

Keep Good Records

Home office expenses can be deducted on your tax returns. Most eBay sellers operate as a Sole Proprietorship so these expenses can be itemized. To maximize your deductions, keep good records of all expenses related to eBay selling. These expenses include:

  • Printer ink
  • Labels
  • Packing tape
  • Shipping supplies
  • Storage systems
  • Mileage (to and from the post office, yard sales, thrift stores, consignment clients)
  • Advertising (business cards, Facebook ads, printed materials included in orders)
  • Internet fees
  • Mobile phone fees
  • Apps purchased for business
  • Software purchased for business
  • Educational materials (online courses, webinars, books, audiobooks, tutoring)

It pays to be organized. Keep all receipts for anything related to your eBay business. Even better, keep a spreadsheet or use a program like Go Daddy Bookkeeping.

Treat your eBay business like you would your household budget. Pay attention to the details. A small hole can sink a large ship. Those small expenses add up over time!