posted on September 15, 2000 09:44:08 AM
What about my Time?
That is the very question that Sellers ought to be asking themselves in my opinion. While not every Seller is trying to give a go at a real, tax-paying, established business, those who are ought to read this.
For those folks who wish to start up their own, real business selling at online auctions, they need to add in their time to their expenses. Sure, many people start out with $20 or less in inventory do the usual thing of rolling it over and using the profit to build up their business. These folks do not have the tens of thousands of dollars to get established in a huge way, so the only currency that they have is donating their time. That's fine at first.
Once of the first marketing things that a new business Seller does is to test market their ideas and their product (only an idiot invests into an inventory and only then sees if they can sell it). That means that for many things, you won't get a great discount price on a quantity of one or two items. That's when you "donate" your time. But once you get going and you know your business and you can start buying in large quantities in order to reduce your costs, you must begin to account for your time.
At first, I suggest that you account for your time that you spend making an item - if you do that, and once again when you figure out your starting price. It would be nice if everyone could simply tally up all of their costs, including shipping and materials, into the starting bid, but that's not always an option. I know for a fact that if I include that cost of postage, packaging materials, and my time in processing (accounting) and packaging the order into my starting price, I'll get little to no bids at all. So what must be done?
Until you can pad your starting price and get the amount of profit that you need to grow, you'll need to charge a shipping and handling fee (S&H). Many Sellers on AW, at least, faint in outrage at the thought that they'd ever charge for their time - especially in a Handling Fee; or pay for it as a Buyer! This thought comes as a real shock to many Sellers and Buyers, but please realize that in a tax-paying job, I simply won't work for free and neither would you. But when it comes to recouping even a few minutes of your time in your online auction business, that's somehow different!
The trick is to build up your business to where you are buying in a large enough quantity (and moving it quickly enough) in order to account for your time. And the time to start paying yourself for your hard work is as soon as can. Yes, you'll hear some folks say how they never charge for their time and it doesn't hurt them any. CRAP! Your time is a real expense whether you want to account for it or not.
$6.95 S&H for a 2-ounce item sent in an envelope as First Class mail is not exorbitant IMHO.
posted on September 15, 2000 10:00:12 AM
Why not simply use your "shipping" fee as a handling fee, then use your PO receipts as a business expense deduction?
No sense in calling the shipping fee a "handling" fee in your auctions[too much confusion for the bidders], but seems like a win-win situation for the seller.
posted on September 15, 2000 10:30:44 AM
I want to directly address this, reddeer, as you suggest is quite sensible.
1) all expenses that you "write-off" still come out of your bottom line. A loss is a loss is a loss.
2) In the times where I have tried your suggestion of simply rolling it all into one fee and call it "shipping", no greater amount of horror and trouble has ocured to my online business than doing that. Endless screaming, crying, yelling, threats, e-mails, nonsense went ona nd onand on as Buyers kept thinking that Shipping Fee = Postage Only. And NO, it didn't help to explain it in writing - most Buyers either e-mailed me for the information or simply didn't bother to read the xtra sentance or two. I finally gave it up and have had peace of mind ever since.
posted on September 15, 2000 10:41:02 AM
"Yes, you'll hear some folks say how they never charge for their time and it doesn't hurt them any."
What about the people who start EVERYTHING at 2 bucks, and it sells for 300.00 or more. And I mean they start EVERYTHING at 2 bucks and the shipping costs are THEIR costs. No hidden handling fees. How about when they drag that huge Oriental urn out of some dusty barn somewhere they found it at an estate sale...the gas to get it home, the picture taking, etc. Are they full of "crap"? I think not. They are doing something right...and not GOUGING for that extra buck or two and giving it a name like "my time" or "handling fees".
Oh yes, I understand it's a loss, but it's a loss I'm willing to accept as an online seller.
I live in Canada & in order to compete with the U.S. sellers my shipping/handling/ or whatever you want to call it must be in line with the rest of the U.S. sellers, or my overall sales would take a nosedive.
I find that the vast majority of buyers hate the handling word so I never use it in my descriptions. I simply call it "shipping" and keep it in line with what the actual shipping costs will be.
I would say I lose at least $1-$3 on every item shipped. BUT, I gain world-wide exposure to my items & they sell for 5-50 times what they would locally.
Using the shipping costs as a business expense helps lower my taxes at the end of the year, so I look at it as an added bonus.
Instead of looking at the hundreds of $$$ I eat in shipping costs each year, I focus on the thousands of $$$$ my items sell for on eBay, vs the chump change I would get for them in my area.
posted on September 15, 2000 11:03:32 AM
What exactly are we providing our buyers with here? Is is goods or services ???
In my case, I am providing goods on eBay. Just like any other retail sales operation. If I went to the grocery store, and the cashier added a surcharge for the time they had to spend stocking the shelves, ringing up my items, and packing them in bags, I certainly would not pay it. Would you?
I believe my buyers could not care less about my time, and I don't expect them to.
In retail, operational expenses are paid from the gross profits, and if you do you job well, you'll end up with net profits. If you don't, it's time to rethink your business plan.
Dumb typo.
[ edited by kathyg on Sep 15, 2000 11:07 AM ]
posted on September 15, 2000 11:12:44 AM
I have a couple of friends who have started their own businesses. One of the things that was common with the two different enterprises was that for the first couple of years, each one had to put in 14+ hour days. Why? Because that's the cost of building a business. You put in your blood, sweat and tears and then enjoy the fruits of your labor, that is, if you do it right.
If you work in management in a company, you are paid a set salary and you work until the job is done. Whether it's an hour extra or six, that's the job. Your time is a requirement of the position you chose to accept. Same with eBay.
"Using the shipping costs as a business expense helps lower my taxes at the end of the year, so I look at it as an added bonus."
Well, of course you would use the shipping costs as a business expense, regardless of whether you charge for shipping, shipping and handling, or nothing at all. Those expenses can be deducted *regardless* of your pricing structure.
So writing off shipping costs is hardly an "added bonus", no more so than any other expense you might have.
Basically, you have the following:
Income:
Bid Amount
Charge for S&H, etc (if any)
Expenses
Cost to buy the item
Shipping expenses
Other expenses
Income before taxes
Taxes
Net profit
Your suggestion that by using "handling" as a basis for the "shipping cost" charge somehow allows you to then claim the shipping costs is misleading at best, since you could always claim those expenses.
No "added bonuses" here, unless you were silly enough to NOT claim the shipping costs before you made this "discovery".
posted on September 15, 2000 11:29:38 AM
Kirk .... Geesh, must I simplify everything for you?
Yes, I know all that. My point was that sellers that aren't doing this as a business, and only a hobby, can't deduct *any* of those expenses, at least not where I live.
Now, if you go back & re-read my reasons for why I run my business the way I do, you'll see why every $ I make on eBay is an added "bonus", as compared to the prices I used to get when I sold locally.
posted on September 15, 2000 11:40:34 AM
Sticking an item in an envelope is a gross understatement of the work I do. Hmmm, let's see...
Acquire item (for example, flea market at 5:00 a.m.)
Research item, create auction description including graphics for the ad
Take and edit photo
Upload graphics
List item
Answer email inquiries
Create customer invoice
Send invoice
Send reminders, npb alerts and credit requests
Answer several "I sent money three days ago, where's my item?" emails
Process payment
Package item
Ship item
Leave feedback
After-the-sale support
plus...
buying shipping supplies, postage stamps, standing in line at post office for international orders, insurance, etc., and whatever else I forgot.
Is anyone seriously suggesting that sellers spend no more than one minute on each auction they run? Come on, get real.
The nice thing about being in business for myself is that I set the rules. I appreciate everyone's suggestions, but ultimately I decide. And I can't tell you how many times I've heard "if you do that, you won't stay in business." I've been selling at eBay for three years and I seem to be doing fine.
Geesh, must I point out ALL your mistakes for you?
We're talking about businesses here, not hobbies. Not that your "points" really make a difference anyway. Borillar makes the same amount of money whether he considers his handling cost to be his shipping fee, or whatever. Your "scheme" is not a win-win, its just business as usual.
Of course, I do admit your discussion of how ebay makes you much more money than selling locally is often valid, especially for people like you and I who live out in the boonies. It just isn't that relevant to the original post.
[ edited by captainkirk on Sep 15, 2000 11:56 AM ]
[ edited by captainkirk on Sep 15, 2000 11:59 AM ]
posted on September 15, 2000 12:03:33 PM
Here's an example. Last weekend I bought 40 copies of a children's software CD-ROM @ $4.00 each. Before I even list this item, I'll probably spend at least eight hours evaluating the software and creating the auction description. My ad will contain several graphics. Now if I want to make $20 an hour for my time, I need to sell each CD for at least $8 each. In reality, I make much less. Not every auction has a winner, so listing fees cut into profits. This doesn't even take into account all the auction-related tasks.
It might not seem like it, but selling that $7.99 CD is labor intensive. I charge postage, etc., plus a $2 handling fee. Some of the other items I sell are more profitable. I make almost nothing on children's software, but selling educational software for kids provides me with personal satisfaction. Also, if I incorporated the $2 fee into the minimum bid, no one would even look at the ad. The big sellers in that category are cheap, illegal home-made compilation discs.
As for "customers want low prices," that is not my philosophy. My philosophy is, "a good product at a fair price." That is, fair to both buyer and seller.
IMO anytime you are discussing selling on eBay, you are talking about business's & hobbyists. How can you not factor in what the hobbyist sellers are charging for shipping, and/or their items in general?
My guess is there are mega thousands of sellers on eBay that ony sell as a hobby. These sellers, just like the registered business operators, are my competition. I too was once simply a hobby type seller, and couldn't deduct didley on my antique trips. Now I can visit my friends the next province over & deduct the entire trip. I consider that an "added bonus".
I think Boriller understood what I was trying to say, and that was remove the words handling fee, but I can see where that would get some buyers a tad upset when the parcel arrived. Myself, I could careless what the seller is calling it, as long as the total is in their description.
For me, as an "added bonus" most U.S. bidders don't realize that when the parcel has $14.50 as the shipping cost, it really only cost me $10 U.S., which is usually already a buck or two under my quote. It makes for very happy customers & often times repeat customers.
But thanks for your Economics 101 spiel, I've always enjoyed reading them.
posted on September 15, 2000 12:11:20 PM
The sad thing is that $20/hour isn't really all that much, for a self-employed person in the western world, given the cost of living, etc.
I'm in exactly the same boat as twinsoft, in that i sell off children's software that my kids are done with. I'm lucky to clear $5/hour, when all is said and done, but I just hate the thought of these items being thrown out, when I can help someone educate their kids for a lot less money than buying retail software.
oh well, off to the weekend and *"dealing with"...kids in my case. 7 of them. Now *that's* the "real world"!
Your original suggestion ("Why not simply use your "shipping" fee as a handling fee, then use your PO receipts as a business expense deduction?" ),no matter how you try to clarify/justify it, remains nonsense, whether applied to a business or a hobbyist. In neither case does anyone make any more, or less money, by doing what you suggest. Your income is your income, and your expenses are your expenses, no matter how you "rearrange" them in your mind. Borrilar understood what you were saying as well, and discounted it immediately also.
I do agree with your point about handling costs irritating and confusing sellers.
I am glad, however, that you've enjoyed being educated by me over the years.
You'll have to wait until next week for more education from me, however, as home calls...
posted on September 15, 2000 12:32:22 PM
Kirk ..... Where I live, "hobbyists" would have a hard time convincing the Gov they could deduct shipping OR handling expenses.
Have fun with the kids, I'm sure they'll enjoy your lectures.
posted on September 15, 2000 12:44:44 PM
BTW - In neither case does anyone make any more,or less money, by doing what you suggest.
But you see Kirk, that's where you're wrong.
IMO how one presents their TOS can most definately make them more, or less, money.
It all come down to how a buyer perceives your TOS.
I also eat the 7% Goods & Services Tax for my Canadian high bidders. Using your logic I must be losing money by doing this.
I don't see it this way at all. What I see is Can bidders that are more likely to bid on my auctions, vs a fellow Canuck that states Can residents pay an additional 7%.
Most times those Canadians don't end up winning, but they do end up raising my final auction amount.
In other words, by not charging the 7% [which I have to pay the Gov on all Can sales] I am actually making more money, than I would if I did.
I'm sure you'll come back & say I can't prove this to be a fact, but I'm not really concerned about proving anything to you.
posted on September 15, 2000 12:48:28 PM
I agree with Julesy, though I think the term "ballsy" would fit better.
Please tell me that the initial post in this thread was sarcastic.
You know, everyone has to make a big thing out of every little thing they do nowadays. And every little thing has to have a cost, and everyone knows the value of every little thing and, of course, every little thing has to be paid for.
What a load of crap. We find things...we buy 'em...we sell 'em...we ship 'em. End of line.
No one has to worry about how much their precious time is costing anyone...if you don't have the time to do what you have to do to complete the commerce circle, don't get into it in the first place! For crissakes, doesn't anyone just enjoy the hunt? Doesn't anyone just like to see the price go up as an auction ends?
Those that need to be paid for every drop of gasoline, every swipe of the duster, every piece of tape and every iota of time involved in selling something, need to get lives.
posted on September 15, 2000 02:11:27 PMAs for "customers want low prices," that is not my philosophy. My philosophy is, "a good product at a fair price." That is, fair to both buyer and seller.
Sorry, chuck. Customers don't care about your philosophy either. I don't get much philosophy from mine -- what they seem to care about is money. All they want is their dingus at a low cost to them. Add 6.95 of 'cost recovery' and they'll bid that amount less, unless it's a full moon.
posted on September 15, 2000 02:54:08 PM
I agree with reddeer on this. In fact I think he taught it to me.
I too eat lots and lots of little expenses. I charge a flat shipping rate which I choose to call 'postage and packaging' and lose $ on all but the very lightest books.
While I am not a full time seller, eBay profits form a significant part of our family income. My auctions consistently receive significantly higher bids than my competitors. These high bids more than cover the costs I eat. In fact they cover them many times over.
And yes, it helps to live in the boonies - not as far in the boonies as reddeer but far enough to have unbelievable markups on many items.
posted on September 15, 2000 03:44:51 PM
I always offer free or at cost shipping. I have many repeat customers and I've only been selling on eBay for a few months. I buy a lot on eBay too and I refuse to buy from sellers who are obviously overcharging shipping. I know how much it cost to ship and insure an ounce or a pound and I will not pay more than a couple of dollars more. If you want money for your time, then you should seek out more profitable merchandise. My 2 cents.
posted on September 15, 2000 04:12:09 PM
$6.95 shipping fees are inappropriately "borrowed" from the catalog/ mail order industry that often uses fulfillment houses to warehouse, pack and ship their orders. Their fees are higher because they must pass along the price they pay.
Many dot-coms also use this model because they can't make any money from their products so they figure a buck or so from shipping is something they can throw in their big fat profit sinkhole.
If you are an individual seller, working one on one with the customer, you have all the more reason to be fair with your shipping fees.
If you need to account for your time in your shipping fees, through grossly inflated shipping charges, it makes me wonder whether you are selling a product or the service of packing and shipping. I mean, really, $6.95 is what I would expect to pay Mail Boxes Etcetera.
I have always felt that sellers should be able to recover their packaging expenses through a fair handling fee.
But to turn it into an outright profit center bewilders me.
Of course, there will always be a difference in opinions between the sellers who sell new retail items and those that sell antiques. Most sellers of new retail items cannot get anywhere near the antique sellers in terms of profits per item. The "I bought it for $5 and sold it for $75" is unheard of. So I can see where the price/profit pressure enters.
eBay is a very cut-throat market. When a seller feels the price/profit pinch, it is a sign to look for different ways to merchandise the product, in order to retain decent margins. When you continue to lower, and lower the price, you are in effect "buying the market" and when you have a grossly inflated shipping and handling fee, you are, in effect "gouging the market."
If a seller is deeply concerned about their "time" and receiving fair pay for it, then they should be in the business of providing a service and not a product.
posted on September 15, 2000 06:41:23 PM
We ship around 1500 items each month. We charge for shipping and handling. After all is accounted for (envelopes, packing tape, paying people to pack for us, cost of shipping, etc.) we still manage to clear an average of an extra dollar for our efforts for each item shipped. That works out to an extra $18,000.00 at the end of the year. Considering the time we put into the business, we do not feel bad about making this extra money at all.
We have had exactly 2 people email us about our shipping costs being higher than the actual cost in the last 6 months. Both were happy with the explanation given.
People don't just want the cheapest price, they want good service too. They keep coming back.
posted on September 15, 2000 10:07:35 PM
selecto: the fastest mouse in all of Mehico
Some people without hands can write and seal envelopes with their toes, and so, if we consider a person with hands may actually have four limbs working simultaneously then there is no reason why one could not have the capacity @ $6.40/envelope/limb to earn $1536/hour.
In fact, selecto if you are 'full bodied' you may wish to start up a packaging subcontracting service and 1/2 the charge and still be able to make a clean $768/hour.
I have taken the following from a previous posting.
I charge a standard 'approx.' US$10 above actual postage cost on all my items, but I don't actually spell it out as I'm about to, I just tell'em that 'some' of the money goes toward handling. Is that being deceitful?
I say aprox. because I often over charge a little because I go up the next weight bracket in my calculation if I think it's marginal.
I can estimate the postage before I pack because I use several sizes of standard boxes.
That money is partly for packing materials and, just in case you think it's fee avoidance let me tell you I pay my grandma to pack the boxes {.{I don't pocket the money}.} But I make her work very hard for your packing dollar.
She has used as much as US$1.00+ on packing tape alone (1 porcelain tea set)
Rigid foam boxes cost US$1.80 - US$3.00 each. Bubble wrap US$0.50 - $1.00
Thin particle/ mdf/ chip board cladding on foam box US$0.60
Phone call to customs sometimes avg./item US$0.03 - $0.04
Fax to customs nearly every time US$0.11
All wrapped up in thick brown paper because my customers are important to me and I like to demonstrate it to them. US$0.15.
No charge for genuine epson ink to print out label with name, no charge for 'fragile' stickers. No mention of biros, disposable blades for cutting, petrol to post office or phone call for credit card authorisation etc.
MUST I spell it all out. Is that being deceitful?
That means that my poor old grandma gets to work for under US$4.00 per hour for her packing because I charge her a little rental for the corner she uses in our laundry to do her thing in. But don't worry I'm not too soft on her just because we're related, I make her throw in delivery to the post office in her own time in my car. She gets to drop off 2 at a time, it's easy on her and besides she says she doesn't mind because she loves me…It's not like I'm ripping her off..
I don't tell the customers that my Granny is getting some of the money. Is that being deceitful? You see I think some of them get upset when they know the post office isn't getting to keep all the money.
It's not a wonder the small business person is being driven out by larger companies. Some people and it seems most, will stand in cue at the large department store, bank, large post office, and grin and bear it but when you try and let your grandma earn a whopping US4.00 per hour !#$%^&*.
If you feel your that right kind of person, can arrange all of that in any quicker time than my grandma & are prepared to work for just a little less, let me know.
