posted on September 24, 2002 09:41:25 AM new
I have been in sales and marketing for 35 years. I have sold to and been privy to the marketing & mark-up strategies of the largest retailers in the world...from Wal-Mart to Uncle Sam; not to mention mail-order, premium & not-so-non-profits.
The opinions expressed re the fairness or lack thereof of realizing a profit from s/h fees have been interesting to follow....and the arguments against a profit there-by such that I thought I might share my experience.
First off, the arguments against realizing a profit in s/h seem to be based on the notion that to do so is an unfair, devious practice. Setting aside, for a moment, that this an auction environment inter-laced with fixed priced items; it is, nevertheless, a marketplace. And the marketplace is not a morality play. Profit is to be gained or lost due to the dynamics of the market (timing, scarcity, over-supply, urgency, ignorance & savvy). When an item clearly states fixed s/h fees, they are rightly to be assumed to be part of the buying decision. If the stated fees are egregious in any particular buyer’s estimation, then it is their option not to enter into the transaction. The only problem arises when the s/h fees are calculated ex post facto and are, to the buyer’s mind unfair.
The attitude of those who champion an exact pass-through of shipping charges and who damn those who mark-up for handling is, essentially, a naïve, self-aggrandizing position totally at odds with the realities of business and the economies of retail.
The assumption that a retailer realizes their total profit in the asking price of goods is simply false.
Rebates, spiffs, co-op, push funds, pull funds & placement allowances are several examples of profit centers apart from the retail asking price. More specifically to the issue of s/h, I know of no retailer of any size that does not consider their warehouse a profit center wherein fees and penalties are charged for the handling & mishandling of inbound and outbound shipments.
All of the arguments against a profit being realized by an eBay seller on s/h has, at its core, the assumption that it is unfair to the buyer to do so. If this is the case, then those who hold this opinion are essentially at odds with the entire retail market. Everyday they are paying more than what by their definition is fair, insofar as all of these hidden costs are eventually born by the consumer. Manufacturers segment & discriminate brands & cost of goods by market. The dynamic between themselves and the reseller results in what you & I as consumers pay.
What we have in eBay is a rather limited and unsophisticated model by comparison.
It is, however, a more transparent model and very much a buyer’s venue.
Caveat Emptor. Caveat Vendor.
[ edited by pandorasbox on Sep 24, 2002 10:55 AM ]
posted on September 24, 2002 09:52:13 AM new
I think you have stated the case quite well.
Where most of the problems actually arise, however, is when a seller disguises, misleads or otherwise plays games with the buyer.
A typical example is to say $3.85 for shipping in an auction description, which most people know is the cost of a one pound Priority Mail package, and then send it in an envelope with a couple of stamps.
While the seller is not exactly being dishonest, he is certainly intending to deceive, and deserves any ill feelings he created.
As to corporations with their handling charges, think of the bad reputation Columbia House and BMG Music have over their shipping charges. It is the #1 complaint I have heard over the years from people who one belonged and no longer do.
And these companies have tried everything to get these customers back, but not lowering the shipping to a reasonable level. So the consumer does react, when they have full information.
posted on September 24, 2002 10:34:15 AM new
Putting aside the issue of profits, fee avoidance, and the money related issues, and agreeing that a person who places a bid on an item that shows a clear, up front "handling" fee doesn't have an argument when s/he has to pay it, I think the real issue here is simply that it is not a good idea for a seller to include anything in his/her listing that might piss off a potential buyer.
From what I can see, many eBay sellers are whining about how their items are receiving less bids than they did last year and how their final selling prices are lower.
I wonder how many of these sellers include a statement like "Add $5.00 for Handling Charges" in their TOS?
I wonder how many of these sellers would see an improvement in their hits if they deleted this statement and added the $5.00 to their selling price instead?
I am a big-time buyer on eBay. I spend, on average, $300-400 monthly on eBay purchases through my various buyer accounts, both to add to my collections and to get stuff to sell at "real" auctions (where real profits can be made), and I can tell you without a doubt that showing a "handling" charge as a separate cost does piss off buyers
posted on September 24, 2002 11:28:17 AM new
litlux...
Does the Post Office and Priority mail have a copyright on the cost of $3.85? Personally, I always make an effort to round my numbers, but there are people who are so anal with numbers that they charge 'exactly' what it costs to ship and handle a product. The only deception in using $3.85 as the shipping cost is if the letters PM, words Priority Mail, or similar appear next to the price, and then the item is shipped less than such. Deception is in the eye of the buyer.
I never offer anything at $3.85. I offer $3.99 on some small items sent First Class. (advertised that way too..) But my cheapest price for Priority Mailed packages is $4.40. I use the free label as USPS, free DC. And I pay $3.85 at the counter, or at my door. This is not deception. I only get .55 for the cost of ordering the boxes, puting together the boxes, filling the boxes, order the stuffing supplies, printing the label, (cost of ink and paper?),labeling the boxes(cost of tape?, and mailing the boxes. .55 for about 10 minutes of work? Local Minimum wage is $6.75/hr. I collect (.55 * 6) $3.30 for that work.
Am I dishonest? No, I am undercharging. If it costs more or less for the seller who charges $3.85, then so be it. If I never get the package (as a buyer) then I have an arguement. Where is it! Cost of Shipping and Handling is just that.
posted on September 24, 2002 12:58:00 PM new
"I wonder how many of these sellers would see an improvement in their hits if they deleted this statement and added the $5.00 to their selling price instead?"
I cannot believe that anyone selling on ebay believes thay can do this.
Suppose a collectible that everyone agrees is "worth" $25.
Seller A starts it at $2.95.
Seller B wants to recoup shipping charges so starts it at $7.95
If all interested bidders agree it is worth $25, that's where the bidding will end.
Now tell me how Seller B has increased his return by "adding" to his starting price.
Or tell me how any seller can increase his selling price in an auction environment.
posted on September 24, 2002 01:09:39 PM new
I sell on ebay but I also buy. I can see two points to this argument. For example I purchased two items off 1 seller. I asked if s&h could be combined. It could not. I paid $6 per item and it came in an envelope with $2 postage. Profit of $10 for that seller and in one package. In this case I feel the seller could have been more fair. However I charge a handling fee when shipping via Media Mail because unlike Priority Mail supplies are not free. I charge exactly what I pay for the supplies. I do not make a profit from it and I feel honesty is the best policy so when I tell the buyer in my TOS there is a handling fee they know that is what they are paying for. I dont feel that this is unfair and I have never had a complaint. Only once someone questioned it and after I explained it to them they thought it made sense.
Just my opinion.
posted on September 24, 2002 01:20:57 PM new
And capotasto, how much would eBay LOVE you if you added $5.00 to the selling price? Remember, they get a percentage of your selling price AND your initial listing price. In other words, they get a percentage of your expenses TWICE! No intelligent business man pays more than he has to without getting nothing
.
A Man will spend $2.00 for a $1.00 item he needs.
A Woman will spend $1.00 for a $2.00 item she doesn't need.
posted on September 24, 2002 01:24:41 PM new
But we're not talking about shipping charges, which are always shown as/assumed to be extra to the selling price.
It's the "handling" charge over and above the shipping charge that turns most buyers off.
It turns us off even more when a seller tries to hide the "handling" charge in the shipping cost ... most regular buyers know how much it costs to ship an item.
Let's assume that two sellers have an identical item that they need to sell for $10.00 to make the profit they want. The shipping will have an actual cost $5.00 and their "handling" charge (ie. their cost of doing business) will be another $5.00.
Therefore, each seller has to get $20.00 for the item to satisfy his/her needs and cover their costs of doing business.
Seller (A) does this: Item sells for $10.00, plus $10.00 shipping and "handling"
Seller (B) does this: Item sells for $15.00, plus $5.00 actual shipping
Most seasoned buyers will choose Seller (B).
As a buyer, I know that my landed cost from either seller is going to be $20.00 ... but I feel better (ie. less pissed off) buying from seller (B).
So, after you have decided that you need that extra 5 bucks to "handle" the item, you need to decide whether you want to piss off your potential buyers or not in order to get it. It's up to you
I think your 'telling' statement is the use of the phrase 'seasoned buyers'.
The majority of the buyers on Ebay are not in it to 'buy and sell'. They are just impulse buyers. They don't care how the price is split between two items, just if one is cheaper. If neither is cheaper, then the ad they like best will win out.
In all of this bickering, I still see ads on ebay that just plain suck. Does it hurt business? only when two identical items are being sold. The only time I have seen only 1 available of an item, I was doing 'test' searches and mispelled a word.
S&H is a term that buyers understand. It's the super cheap, want it below what you paid for it, and then want you to pay for shipping, bidders that don't care for the term or its usage.
I STILL have people who try to paypal me the total of the auction and then expect that the fully disclosed shipping amount I will swallow just for them.
posted on September 24, 2002 04:39:01 PM new
So RB, you admit handling is a legitimate expense. You called it "cost of doing business" not "graft" this time.
Now figure this out.
If both items sell for $20.00...
Who gets their expenses paid and who pays eBay a portion of the "handling" to eBay for nothing?
Who next time has to RAISE their price to cover their expenses and further enrich eBay for doing nothing extra?
Who in the long run will have their expenses overrun them and they will go out of business?
Of course, we are dealing with "seasoned" eBayers, who generally have more brains than God gave a rock, and realize the price is the same for both items. Just that one of the sellers is putting a little more care into packing and shipping and you pay for that premium, but it doesn't cost you any more. The other guy may just throw your item in an old pizza box and slow boat it to you. I mean, hell, you're not paying for care and handling.
Almost forgot, who get to deduct handling expenses on their taxes? (Not the obvious parts, materials)
.
A Man will spend $2.00 for a $1.00 item he needs.
A Woman will spend $1.00 for a $2.00 item she doesn't need.
[ edited by mlecher on Sep 24, 2002 04:51 PM ]
posted on September 24, 2002 05:09:05 PM newYou called it "cost of doing business" not "graft" this time.
You don't like the word graft, so instead I put the word "handling" in quotes.
Who gets their expenses paid and who pays eBay a portion of the "handling" to eBay for nothing?
How much do you think you would be donating to Meg's Yacht Fund over a year if you had to give them a piece of your "handling" fees? Are we talking major bucks here?
Who next time has to RAISE their price to cover their expenses and further enrich eBay for doing nothing extra?
eBay sellers love and protect eBay, and they are willing to do or pay anything to play there. Why else would someone pay extra to have their listing in bold or use the BIN feature? These extras don't cost eBay anything either (and in spite of eBay's spin, these features don't really increase sales by 37% or whatever other BS number they are using today), yet many sellers are more than happy to give the extra $ to eBay.
Just that one of the sellers is putting a little more care into packing and shipping and you pay for that premium, but it doesn't cost you any more.
Once again, the cost of SHIPPING has nothing to do with this discussion. Realizing that, how do you equate a "handling" charge to better packing? How do you compare a "handling extra" seller's performance to one without?
I'm simply telling you that adding a "handling" charge turns off many, many potential buyers
The other guy may just throw your item in an old pizza box and slow boat it to you.
Once again, the slow boat analogy (SHIPPING) has nothing to to with this discussion. Realizing that, I'll wager that the majority of sellers who charge a "handling" fee will use the same old pizza box if that's what's handy. There is absolutely no guarantee that a seller who charges a "handling" fee will handle the item any differently than a seller who doesn't.
Besides, as a buyer, if you want to ship my DVD in a pizza box, as long as it gets to me undamaged and antfree, I could care less. Why would I pay you extra to use a padded mailer or a special printed label when I'm just going to throw it out anyway?
All sellers have a cost of doing business (btw, buyers do to). If, as a seller, you have enough confidence in your product and are willing to compete, why not include that cost of business in your selling price (ie. what real world sellers do) ? If, by adding those costs, you price yourself out of the market, you have to either reduce your costs (work smarter) or try something else to make a living.
posted on September 24, 2002 07:19:56 PM new
"If, as a seller, you have enough confidence in your product and are willing to compete, why not include that cost of business in your selling price (ie. what real world sellers do) ? "
Once more, dammit, you can't do that in an auction format. You can set your starting price, but you have no control over your selling price.
posted on September 24, 2002 08:24:43 PM new
Depending on how you acquire the merchandise you sell, the starting price CAN be used to absorb some of the cost of doing business. If you use yard/garage sales and auctions, you figure all of that into what you are willing to pay to get the stuff. I buy something for $10 and start it at $15 or $19 knowing the usual selling price is $25 so even if I get a minimum sale, I'm covered. Wholesale is much harder to work margins.
As a buyer I hate the excessive s/h. As a seller I try to keep it reasonable and hidden.
posted on September 25, 2002 12:49:18 AM new
"to say $3.85 for shipping in an auction description, which most people know is the cost of a one pound Priority Mail package, and then send it in an envelope with a couple of stamps.
While the seller is not exactly being dishonest, he is certainly intending to deceive."
No, it's called doing what buyers want. If I test three auctions with s/h of $3.50; $3.85, and $3.99, and realize $3.85 gets more bids, am I being deceptive by offering a $3.85 s/h, or delivering the price buyers are most pleased with?
"I wonder how many of these sellers would see an improvement in their hits if they deleted this statement and added the $5.00 to their selling price instead?"
On the other hand I'd wonder how many would see a decrease in bids by having a higher start bid. If I sell something normally at $10.00, I'd have a $5 start bid at the highest, but you suggest a $10 start bid would increase bidding. That is usually false unless demand is very good, but in that case I'd still only get one bid. It also isn't enough cover shipping.
"It turns us off even more when a seller tries to hide the "handling" charge in the shipping cost ... most regular buyers know how much it costs to ship an item."
Handling is a shipping cost. It's a cost incurred when a seller has to ship an item. Are sellers really "hiding" the handling charge, or just delivering the one price buyers like? How many items do you buy retail that have all the costs broken down listed on the label? None, buyers hate that. What turns buyers off in reality is the "shipping and handling" listed seperately.
"I'm simply telling you that adding a "handling" charge turns off many, many potential buyers."
Not true. Most buyers are willing to pay a handling charge, as long as it is reasonable. Since I don't put the s/h in my listings I have buyers that calculate it on their own and paypal me it, and the s/h they calculate for themselves is actually higher than what I would had charged them.
"why not include that cost of business in your selling price (ie. what real world sellers do) ?"
There are comparison sites where you look up items that you are interested in and compare the product's price from a variety of sites. You will often notice lower prices with higher shipping charges, and visa versa.
There's just no way around reality, offer lower prices to get buyers in but make up for it in shipping, or charge a higher price and lure them with a lower shipping. You could go the middle ground and attract zero buyers because the buyers are looking for some kind of "deal."
posted on September 25, 2002 05:24:12 AM new
RB
If I said add $5 OR 10 OR 20
and the parcel came to you and you saw I'd made 50c extra or $1 or 2, by your logic you would still complain.
AND SO
I add that amount to the estimated actuall postage;;DON'T tell you how much it is, so you won't freak out over the 50c or $2 which I was out in my estimate: and just give you a total
clearly states
fixed s/h fees 13.85
By the way:
I've never had a complaint for UNDERCHARGING, and I have sone so many times.
posted on September 25, 2002 05:58:14 AM new
austbounty ... I am sorry you are unable to understand what I have been saying in this and the other S&H forum, but unfortunately I cannot think of any smaller words I can use to help you with this difficult concept.
Perhaps someone else here will do some cuts-and-pastes of my statements that would, ahem, make my point a bit clearer for the hard-of-understanding ,and help you, specifically, realize that in the example you are using, I wouldn't complain at all.
posted on September 25, 2002 06:04:48 AM new
I thought that we beat this subject up on another thread and this will always be a touchy subject, so I will through in my two cents as well (again).
A lot of iof shipping and handling are grouped together in its own group since there is a cost of doing business and part of that cost is the cost of shipping. Sellers in an auction format (as long as they post it as a shipping and handling fee) also use this as way of tracking costs. Bigger ticket items (computers, dvd players, cameras, and other items) take longer to pack, reguire bigger boxes, and reguire packing material. Shouldn't these costs be part of the cost of shipping? Shouldn't the cost of having UPS come on a daily pickup be part of the cost of shipping a product out?
Since I do not sell smaller items, I really can not comment on that, but I do sell bigger items and all the costs are costs of shipping, and not the costs of doing business. Since I sell retail locally, would be it be fair to the local people to pay part of the handling fee for them to purchase it my store?
If the shipping and handling fee is clearly marked in the auction, (example shipping and handling is $ 8.50 ups) then the buyer has no reason to complain. If the seller states that the customer pays actual shipping and then tries to over charge, then there is a problem.
This is a subject that both sides sees that they are correct on, and this debate will go on forever.
posted on September 25, 2002 06:10:32 AM new
quickdraw29 .. good points.
I think most buyers do price comparing, especially on large dollar items. In my case, I don't buy large dollar items on-line (the maximum I have spent on an on-line purchase was just under $500.00 US for an item that is not available locally) because invariably when the cost of shipping and "handling" is added, it's cheaper to buy the item locally.
The problem that arises when some sellers add "handling" and some don't, some offer actual shipping rates and some don't, is that it makes it harder to compare an apple to an apple. I simply want to know my landed cost - why do the math when I don't have to.
I have no argument with sellers who need a "handling" fee to make up for what they lose in the final selling price of the item (or to avoid paying eBay their cut), as long as it is clearly stated in the listing. I don't bid on these types of listings, but those who do should expect to meet their contracted committment and pay whatever they agreed to pay when they placed their bid.
posted on September 25, 2002 06:16:20 AM new
How much would you be contributing to Meg's Yacht fund by including handling in the starting price....
First quarter ebay had 138 million listings. If 1/2 of those sold, that would be 69 million transactions. If everyone added handling to their starting price and figure 10 cents to eBay per transaction from handling, that is 6.9 million dollars times 4 quarters is 27.6 million.......
Yep, just small change...
ebay loves a poor business person....
.
A Man will spend $2.00 for a $1.00 item he needs.
A Woman will spend $1.00 for a $2.00 item she doesn't need.
[ edited by mlecher on Sep 25, 2002 06:18 AM ]
posted on September 25, 2002 07:19:51 AM new
au contraire...
Every seller has handling expenses, therefore, charges handling. Just some of us are smart enough not to let eBay get a cut or let it cut into our profit.
.
A Man will spend $2.00 for a $1.00 item he needs.
A Woman will spend $1.00 for a $2.00 item she doesn't need.
[ edited by mlecher on Sep 25, 2002 07:21 AM ]
posted on September 25, 2002 08:48:29 AM new
Not true.
Just since April 1st of this year (my fiscal year), I have purchased items from 208 different eBay sellers. Not one of them had an extra "handling" charge shown in their TOS.
I'm sure they all have a cost of business, and I'm equally sure I paid for it in the buy price of the item.
But, at least I didn't have to get a rotten feeling thinking that I paid some seller a "handling" charge in addition to the price of the item and the shipping cost.
Do you get it yet??? Why piss off your potential buyers when you don't have to? Build in that extra 3/4 cent you have to pay ebay for their cut of your "handling" fees in your starting price.
posted on September 25, 2002 09:07:42 AM new
All I am going to add in this and since I do ship bigger items, for us shipping and handling is an excepted practice with the items that we ship, and why should ebay get paid for the boxes and peanuts that we have to buy, it just creates higher costs
posted on September 25, 2002 09:27:20 AM new
I really must apologize for extending, rather protracting, this discussion w/ my original post.
RB: If I don't misinterpret your position, it is that a handling fee should be stated clearly as such, apart from the shipping cost.
Also, that any handling fee should be included in the stated offering price of the auction.
You justify this by asserting that it is only fair to the buyer and that handling charges, bundled into the s/h, is a devious practice and a usurpation of eBay's "fee avoidance policy".
Moreover, you maintain that buyers who do pad their shipping with handling charges are "pissing off" buyers, such as yourself and thus losing business.
Well, for starters you assertion that real world stores appreciate their total profit in the asking price of their item is false.
As I pointed out in my original post, there are numerous profit streams that feed gross profit. Hence, the asking price (mark-up from cost) in most real world stores is not their sole means of realizing profit.
This is in stark contrast to eBay, where for the majority of sellers, the final auction price does not benefit from rebates, co-op, etc.. Neither is there a way for sellers to pass through FVF’s & CC fees unless they do so in a Dutch/FP auction format. In other words, your sole profit model for a standard auction depends on your cost of acquisition.
As to "fee avoidance" per eBay specifically regarding s/h; the stated policy is a tacit acceptance of s/h....the issue of fee avoidance is only addressed in the most subjective way; i.e. “unreasonable fees". This is, as is with the language of most contracts, the broadest possible interpretation in favor of the grantee of rights (eBay). It is essentially a "we'll know it when we see it" statement and in no way prohibits bundling s/h, only admonishing buyers not to abuse the opportunity.
As for your entirely subjective claim that s/h is bad business because it drives away buyers (such as yourself) is impossible to prove empirically. Why business is down or up is an extraordinarily complex set of variables and I'm afraid "pissed off" buyers is not a quantifiable term.
posted on September 25, 2002 10:04:18 AM newRB: If I don't misinterpret your position, it is that a handling fee should be stated clearly as such, apart from the shipping cost.
Yes ... it if is stated and a bidder bids, there is an agreement to pay it.
Also, that any handling fee should be included in the stated offering price of the auction.
Not necessarily ... see above.
You justify this by asserting that it is only fair to the buyer and that handling charges, bundled into the s/h, is a devious practice and a usurpation of eBay's "fee avoidance policy".
Not quite.
Shipping is shipping (how much did that stamp cost?)
"Handling" is everthing else (the box, the peanuts, the drive to the post office, the time to pack the item, etc.).
I didn't initiate the idea of "fee avoidance" ... someone else brought that up. I am only saying that the "fee" eBay charges on a "handling" fee should be minimul and not worth an argument. If it is not minimul, then it stands to reason that the "handling" charges aren't either (unless you're shipping elephants or pianos).
Moreover, you maintain that buyers who do pad their shipping with handling charges are "pissing off" buyers, such as yourself and thus losing business.
I am saying that a seller who shows a separate cost for "handling" that a potential buyer has to add to the cost of the item and the shipping in order to arrive at a total cost does piss off many buyers, including me.
Well, for starters you assertion that real world stores appreciate their total profit in the asking price of their item is false.
Could be, but I cannot remember the last time I ever bought something off a shelf in a real life store where the price tag showed the price of the item and another cost (the "handling" charge) that I had to add to figure out how much it was going to cost me at the checkout stand. I know it's in the selling price!
As I pointed out in my original post, there are numerous profit streams that feed gross profit ...
I understand all of that.
Hence, the asking price (mark-up from cost) in most real world stores is not their sole means of realizing profit.
That too ...
This is in stark contrast to eBay, where for the majority of sellers, the final auction price does not benefit from rebates, co-op, etc.. Neither is there a way for sellers to pass through FVF’s & CC fees unless they do so in a Dutch/FP auction format. In other words, your sole profit model for a standard auction depends on your cost of acquisition.
There's the rub! There is a way for sellers to do this, but based on what I am reading here, most of them don't want to do it as it makes their starting price too high and they are not competitive. They would rather make their profits on nebuluous things like "handling" charges.
As to what pisses off a buyer, I know what pisses me off. If you, as a seller, also know that and do not think it is any concern, then simply keep doing what you are doing.
posted on September 25, 2002 11:36:40 AM new
RB Wrote:-
>>>>>>>>>>>
eBay sellers love and protect eBay, and they are willing to do or pay anything to play there. Why else would someone pay extra to have their listing in bold or use the BIN feature? These extras don't cost eBay anything either (and in spite of eBay's spin, these features don't really increase sales by 37% or whatever other BS number they are using today), yet many sellers are more than happy to give the extra $ to eBay.
>>>>>>>>>>
Well............what can I say, but......
YEAH BABY!!!!!!!!!!!!
We worship eBay!!
We worship eBay!!
We worship eBay!!
>>>>>>>>>>>>>>>>
Could be, but I cannot remember the last time I ever bought something off a shelf in a real life store where the price tag showed the price of the item and another cost (the "handling" charge) that I had to add to figure out how much it was going to cost me at the checkout stand. I know it's in the selling price!
>>>>>>>>>>>>>>>>>>>>>>
Since when is ebay the same as 'picking an item off the shelf'???
I'm sure any ebay seller won't mind and charge no handling also, as would I, if you came and picked it off my shelf,
BUT NO
You want it dellivered too (remember??)
LOGIC 101 [They A'int the Same]
posted on September 25, 2002 11:42:38 AM new
"Shipping is shipping (how much did that stamp cost?)
You're stating it as a specific act, I state shipping as a general category. Who's right? Both. You just want it broke down in exact costs; sellers lump it together. No big deal, that's the way it is. If buyers don't like it, don't bid, but it won't add to your final cost so why create an inconvenience for yourself?
