The Free Shipping Conundrum

The conundrum of offering free shipping is that it actually costs a seller more than charging for shipping as the seller pays eBay more to offer free shipping.

eBay charges a final value fee (which has increased for fixed price) based upon the final selling price of an item. When a seller includes his shipping in his opening auction price or fixed price in order to offer free shipping, they end up pay more in eBay fees.
For example:

Fancy Doo-Dad – $25.00 with $10.00 shipping, the final value fee is calculated on $25.00
Fancy Doo-Dad $35.00 with free shipping, the final value fee is calculated on $35.00

Final value fee is between 6% and 15%, thus a seller would pay an additional $.60 to $1.50, which is, of course, passed onto the buyer. Thus the real listings to get equal pricing should be something like this:

Fancy Doo-Dad – $25.00 with $10.00 shipping
Fancy Doo-Dad – 36.50 with free shipping.

The cost that a seller is willing to sell an item is based upon their cost of goods and the cost to sell, thus if a buyer wants a better deal, they should look at sellers NOT offering free shipping as it costs them less to sell the item to them.

However, we all know perception rules and its likely buyers will be more attracted to free shipping listings, even if they cost them and the sellers more. You can’t fight city hall.

One Response to “The Free Shipping Conundrum”

  1. Gitty Says:

    I am experimenting now with these options. EBay is also discounting the final value fees on these Free Shipping listings, so hopefully it will even out. Time will tell.