For those amoungst you who are devising a plan to generate millions from a brand new eBay-based business, or for those who are hoping to add the busy eBay marketplace to their existing list of sales channels, it can be difficult to work out quite how eBay and PayPal are related to one another and how their respective fee structures work.
With many merchants grumbling that eBay and PayPal fees eating away at their slim margins, it’s more important than ever to account for these costs fully when planning your business and making projections.
This article will outline both eBay and PayPal’s fee structure in order to help those planning to start earning money on the world’s most popular online auction site.
eBay & PayPal, Sitting In A Tree
Firstly, you need to grasp that there are two companies which you are going to be charged by when selling on eBay. Those companies are eBay and PayPal.
eBay is an online marketplace. They charge you to add your items to the website (insertion fees), and charge a commission when the item is sold (final value fees).
PayPal on the other hand is a payment processing service that works with eBay and many other online entities, and charge you seperately for dealing with your money.
To confuse the matter further, PayPal is in fact owned by eBay, though the two businesses operate relatively independently from one another. eBay will encourage you to set up a PayPal account to use for accepting payments in their marketplace.
While they don’t currently require you to use PayPal for accepting payment, you would severely limit the amount of potential customers you have if you don’t accept PayPal. Customers like to pay by PayPal because PayPal protects them from dishonest sellers – many eBayers won’t buy from a seller who doesn’t accept PayPal.
It’s also worth mentioning at this point that it has recently been announced that eBay will be spinning PayPal off into a seperate publicly traded business at some point in 2015. How this will affect either businesses fee structures is yet to be seen.
eBay’s Fee Structure
There are two main types of fee that apply when using eBay – the insertion fee and the final value fee. Insertion fees are charges that eBay make in return for allowing you to list your items on eBay, while final value fees are a commission that is paid after a successful sale.
Just Starting Out? – eBay Fees For Private Sellers
If you are just running a personal eBay account and selling a few bits and bobs, you are considered a private seller and can list up to 20 items on eBay, per month, for free.
You also get access to eBay’s scheduler software for up to 20 listings per month. At this point, eBay are not charging you anything for insersion, thought you will be charged a final value fee.
Final value fees
After your auction has ended and your item has sold to the highest bidder, eBay will deduct 10% of the total sale value (which includes postage) as their final value fee. If your item doesn’t sell, you don’t have to pay this fee, though your insertion fees still apply. Final value fees are capped at £250.
But I want to make the big money. What if I’m listing more than 20 items per month?
Once you are fully up and running on eBay, you may find yourself wanting to begin listing more than 20 items per month. At that point, you will be charged £0.35 per item listed, be it an aution or a Buy It Now format.
(Expensive) optional extras
You might also decide to take advantage of some of the optional extras that eBay allow you to use to improve the appearance of your listings. These are a little pricey, but anything that helps you stand out amoungst the thousands of sellers on eBay is welcome.
- Gallery Plus – Adds larger images to your listings in search results – £2.50 (or free in some categories)
- Adding a Buy It Now price – £0.50
- Adding a subtitle – £1.00
- Listing designer – £0.30
- Listing in two categories – Another insertion fee for the second category
- Scheduler – £0.06
Sometimes, you’ll want to list an item on eBay, but you don’t want to let the item go for less than a certain amount. This is when you need to set a reserve bid. When you set a reserve bid, the item will only sell if someone bids higher than your reserve.
If you need to set a reserve bid, you will be charged 4% of the reserve bid amountfor the privilege, though there is a cap on the fee of £150.
Fees for ending an eBay auction early
It’s not in eBay’s interests to have people ending their auctions before they are completed, so they will charge you if you do so.
If you end an auction after a potential buyer has already placed a bid, you will be charged the same amount as the final value fee would have been if the item had sold for that amount. You can avoid these fees by ending your aution within the first 24 hours of listing, and you won’t be charged this fee should eBay end your auction early for any reason.
When you sell items internationally on eBay UK, you will always be charged the fees for your country, not the buyer’s. However, if you list your items directly on another territory’s eBay site, you will be charged according to that countries fee structure and currencies. Your bank may charge also you for accepting payment from other countries.
Fee discounts for charity listings
You can also list items to be sold for charity, deciding how much of the proceeds from the sale you would like to donate. eBay will waive the same amount as you choose to donate from your basic insertion and final value fees, up to 100%.
Basic Shop subscription
If you are beginning to ramp up your personal eBay business, it might be worthwhile taking out a Basic Shop subscription. Available to private sellers, this eBay shop package costs £19.99 per month and gets you 100 included listings per month, be they auction-style or fixed price. After that, they are £0.35 each.
You also get free scheduling for those 100 listings – after that, scheduling reverts to £0.06 a time. Finally, with a Basic Shop subscription, you only pay 8% for final value fees, not the usual 10%.
This is an attractive option for those who have mastered selling on eBay and are looking to build up a business, but aren’t quite ready for one of the business packages that are available. For those of you who are ready, read on…
Scaling Up – Business Seller Accounts
The more enterprising amoungst you may wish to jump right into selling as a business on eBay, which works in a slightly different manner. Business seller fees depend on what types of items you are selling, how you have chosen to configure your listings, and if you have an eBay Shop subscription.
If you do not have a shop, you will be charged £0.30 per fixed price listing, £0.10 for auctions with starting bids of less than £1, and £0.30 for auctions with starting bids of £1 and over.
Being a business, chances are you will want to pay a subscription fee to eBay for a business shop. This is cheaper overall if you are listing and selling a substantial amount each month. This chart shows what comes with Basic, Featured and Anchor packages, and how much they each cost per month.
PayPal Take Their Cut Too
As well as the fees involved in listing on eBay, you will also have to pay PayPal’s fees should you be using their services to accept payment.
PayPal have a page where you can read more about their fees in different situations, but for eBay sellers, all you need to know is that it’s going to cost you 3.4% + 20p per transaction. Simple.
Hopefully this has clarified the costs involved in starting to sell on eBay (be it as a private seller or as a business), as well as on PayPal.
Make sure to account for these costs when making projections, as they do add up and can become a considerable expense to your business
Please note that the fees applied in the eBay Motors and Classified Ads sections are completely different so check them carefully if your business falls into these areas.