I get a lot of email from trading assistants asking about fees. How much should I charge? Should I charge a listing fee? Should I charge the consignor if something doesn’t sell? What are my competitors charging?
The answer to the first question is the most important: You must charge enough to make a profit. To understand your profit you should first understand your costs. (This is true for any eBay business –not just the consignment business.) Remember to look at all of your costs, including advertising and marketing –how much are you spending to find goods to consign?
Look at all of your fees: PayPal, eBay, auction management fees, image hosting, and so on. Don’t forget your overhead expenses: ISP, email accounts, telephone, computer payments, office supplies. The best way to get a handle on your costs is to use an accounting program such as QuickBooks. QuickBooks can be a little complex to set up, but once it is running it will save you tons of time and allow you to fully understand the cost of doing business.
Should I charge a listing fee? My recommendation is yes. Psychologically speaking, asking the consignor to pay a fee gives the consignor an investment in the successful outcome of the auction. Also it tends to eliminate people who just want to waste your time and it will help filter out goods that probably won’t do all that well on eBay. It may also filter out the occasional seller who is just too skeptical, but in the long run your cash flow will be better and customers (consignors) will take you more seriously. An exception to this is when someone gives me something really valuable to sell or a large quantity of merchandise from a retailer or an estate sale. As I want these people coming back to me, I usually don’t charge them an up front fee.
Most Trading Assistants charge a sliding scale based on the final value of the auction. The higher the final bid, the lower the fee. In my book, How To Start & Run an eBay Consignment Business I recommend a fee schedule that starts out with a $3.00 listing fee for the first item and $1.00 for each additional item consigned at the same time. This fee is non-refundable. Then, I charge a final value fee of 30% on the first $300, 25% on the amount from $301 – $500, 10% of the value from $501 to $10,000. Anything over $10,000 I negotiate the fee.
I also recommend you charge reserve fees and category or home page feature fees up front unless you are really sure the item you are selling is in demand and will sell for a good price. If so, you can add the fees to your commission, or not, depending on the situation.
There are now over 500 eBay consignment businesses operating out of retail storefronts in various cities around the country and more are being added every week. If you would like to know what others are charging, Ina Steiner of AuctionBytes has compiled a fee comparison of 40 large consignors. Click Here to view the comparison chart.
One more thing on the subject of consignment selling: A question I frequently get is “I live in a small town. Do you think an eBay consignment business will work here?” I live in a town of 11,000 people and there are four eBay consignment sellers operating here including myself. Three of us do very well. One of them is a lady who used to own a consignment store. She does so well, she closed the store and just operates out of her house. We see her at the post office several times a week with armloads of packages to ship.