Tuesday, January 28, 2014

the bad Math behind free eBay shipping

The latest eBay newsletter claims 55% of US transactions offer free shipping.

I experimented with free shipping on two of my auctions last week. Each weighed about 3 ounces packed, went a state over and cost $1.69 to ship. Both sold within days of the initial listing. eBay says listings with free shipping will rank higher in search results so maybe they are right. *shrug*

Of course, free shipping isn't really free. Most sellers with free shipping:
  1. Increase cost of item to cover the cost of shipping
  2. Charge a 20% restocking fee to cover shipping if something is returned
On my facebook groups sellers are constantly complaining about returns due to buyer's remorse. My current return policy does not refund the cost of shipping and the buyer is responsible for shipping costs if they choose to return something. (Of course, if the item is damaged in transit or something is wrong I will refund all costs including shipping but if the person simply changes their mind? They are better off keeping it and their mouths shut.)

Say you bought a $8 mug from me and paid $6 in shipping then changed your mind and wanted to return it:
  • The seller paid $14 ($8 for the mug + $6 shipping)
  • I would refund the $8 
  • I would not refund the $6 paid to USPS
  • I would not pay $6 for return shipping
The seller would end up paying $20 and being refunded $8. This is BAD math.

If I offered returns with a 20% restocking fee:
  • The seller pays $14
  • I would charge a $2.40 restocking fee (would not cover my cost of shipping)
Based on my two quick sales this week I am willing to offer free shipping on very lightweight items. The two items were a keychain and a set of earbuds. Each weighed about an ounce before packaging and should not have been damaged in transit. For heavier breakables we are calculating that auction!

If I need to wait longer for the less risk adverse buyer then I am willing to wait. Fielding returns would suck.


Van said...

Thanks for the informative post. eBay shipping and shipping in general is something many beginner sellers struggle with. I have the hang of it now on year of heavy online selling in.

Kimberly Hutmacher said...

I completely agree. I just posted about doing my taxes and realizing that I was paying way too much in shipping fees. Like you, I'm cutting my free shipping back to just the smaller lightweight items.