Auctionography - October 9, 2006

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This Week´s Auctionography: Avoiding Listing Fees that Don’t Make You Money

By Steve Nye, eBay Certified Consultant

This last week I reached a great milestone in my married life. My wife finally decided that she would let me get cable TV! I know it’s not that big of a deal, but I never had cable growing up, and therefore had to keep myself entertained with channels 3, 6, 8 and 10.

So, I was left with the big decision: Which cable provider should I go with? Recently, many cable providers have bundled their services to give you a “package” discount, and last Monday I started shopping around for one of these bundles, which would include my cable TV, Internet and phone line. I narrowed my choices down to two companies. I’ll refrain from using their names (making it so you have to go through the same agony as I did) and will just call them Company A and Company B.

Company A had a bundle with 78 channels while Company B had one with 120 channels. Although Company B was only $5 more per month for the extra channels, I was shocked with all of the installation and set-up fees. For example, to install the phone line and activate it was $65.99, the Internet was $49.99 to set-up, with a monthly modem rental (couldn’t use my own) of $4.99, and the cable was $49.99, plus a monthly digital box rental of $9.99. “Wait a second!” I said. Not only is it going to cost me $110 per month, but you are adding $165.97 in installation fees and $14.98 for monthly rental fees?

Surely there had to be a way of avoiding some of these outrageous and unnecessary fees, so I went back to Company A. I was pleasantly surprised to find out that for Company A, buying a bundle came with the bundle installation fee of $22.99, with no additional rental fees or surcharges. This makes my cable, Internet and phone bill $113.99 monthly. Period!

Just like I avoided the unnecessary fees of Company B, there are also many listing fees that are “unnecessary” for your products and that should be avoided, like the plague.

Determining Whether or Not a Listing Fee Is Worth It

Knowing which listing fees to avoid depends upon which ones do nothing to increase your profit margins or increase your success rate. This is especially true for high-volume sellers. When you are listing and selling several items a day, those listing fees really begin to add up. (And to tell you the truth, I’m horrible at accounting for these. I completely forget about them until I get my invoice from eBay. But of course by then, it’s too late to know whether or not the fee would prove to be worth it.)

Ultimately, if listing features aren’t doing anything for you, why keep paying the unnecessary listing fee? For example, to bold your title costs $1.00, but unless it increases your profits by at least that amount or increases your sales success rate by a considerable amount, then you shouldn’t use that feature. In the end, you will be cutting out expenses on unnecessary fees. Let’s use Auction PI Research and look at a few examples of this.

A couple weeks ago, I was tracking the sales of the new TMX Elmo. I decided to take a fresh look at the listing fees sellers were using to no avail. Using Auction PI Research, I found the LSR (Listing Success Rate) to be just under 75% and the ASP (Average Selling Price) to be $66.08. Any feature that does not get us above a 75% success rate or $66.08 sales price is not worth the cost of the listing fee.

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The report above tells us that using the Bold feature only increased our sales price from $66.08 to $67.99, a difference of $1.91. But remember that the bold feature cost you $1.00, making your increase in profit $0.91. However, in making $0.91 more, you also decreased your LSR by almost 10%. So now you need to ask yourself, is the extra $0.91 worth the 10% loss in sales? For a few items, probably not, but for many items?

Now look at the highlight feature. Although the highlight feature increased our closing sale by $2.44, it also decreased our success rate by 25%. Most importantly, a highlight feature introduces a $5.00 expense into your listing. This expense turns your $2.44 gain into a $2.66 loss, in addition to the 25% loss in sales.

Remember, we are comparing the affect the listing feature has upon our sales price. We then look at the affect the listing fee has upon our profit margins. You will need to compare these costs with your own sales and profit margins like we have done above to determine which listing features are making you money, and which ones are costing you.

Developing a Keen Eye for Listing Fees

Let’s take a look at another example, just so you can develop a keen eye when it comes to weeding out unnecessary listing fees. In doing this, I wanted to look at something completely different from TMX Elmo to show you how every product is different. I am looking to buy a portable DVD player, so I did some research to find the best price.

I found that the LSR for portable DVD players is about 64% while the ASP is $70.71. Now remember, any listing feature that does not increase our LSR or ASP is one that we should avoid wasting our money on.

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In looking at the research results for these DVD players, you can see that using Bold, Highlight and Gift features all increase the sales price by more than the cost of the listing fee. So, for ASP, these fees are less than your increased profit.

However, only the Bold feature increases both the LSR and ASP. This is when your keen eye for listing fees comes into play. The highlight feature increases your sale price by $54, which after the $5.00 fee, increases your profit by $49. At the same time, it decreases your success rate by 4%. Is the 4% loss in sales worth the $49 profit? Of course, this one is easy.

These results however are for a general search of portable DVD players. I looked into Sony, Panasonic and JVC and found that the various listing features all affected the LSR and ASP differently. How do listing features affect the success rate and profits of your own products? Only by relying on accurate research results can you leave out any guesswork and unnecessary fees.

Looking at Listing Fees from Different Angles

Although the research tells you the facts of what is successful and what is not, as the decision maker for your listings, you should look at listing fees at different angles. Here are a few to consider.

• Gallery Picture: Often the research results will indicate that a gallery picture did not increase LSR or ASP or sometimes both. The reason why that is the case is because most listings use a gallery picture to draw attention to their listings. However, that also means that most of the listings that did not sell also had a gallery picture. This decreases the success and price of the gallery picture results. Depending on your profit margins, using a gallery picture usually always helps your listing.



• Listing Designer: If you don’t already have a design or background theme for you listings, you may want to consider using the listing designer. This feature only costs $0.10, but adds much more value to your listing. People are more likely to buy from the more professional looking auctions. Go ahead and try running two simultaneous listings, one with the designer and one without. See if one makes you more money or gets more bids.



• Additional Pictures: Each additional picture costs $0.15. Usually two pictures is better than one for new items, and used items may need even more to show the extent of the wear/damage. People are more likely to buy when they are confident that the picture matches what it is they are looking for.

The key to remember is that every listing is different. A highlighted title may work for one product, but not for another. The most important thing is to carefully look at your products and the associated listing fees. Are you spending money on unnecessary fees or are your fees making money for you?

Now—please excuse me while I enjoy my new cable TV, without the excess fees.

Steve

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