Fixed price Shipping Coming To eBay. What does it mean for sellers?

eBay’s recent mega-announcement included new shipping standards and there are more to come.

There are two parts to the new policies on shipping. Both of them will require sellers to look at their shipping strategy:

1. Free Shipping Fee Discounts – There is no question that buyers like free shipping and offering it does increase sales. This is not new. I have offered free shipping with Buy-it-now for years and it has never failed to increase my sales. I have found this to be especially true aroung the holidays, but it also works other times of the year.

Beginning on October 1, 2008 and running through the end of the year, all eBay will receive the option to use subtitle for free, worth $.50 per listing, when they offer free shipping. 

Eligible PowerSellers will receive double their PowerSeller Final Value Fee discount on these items. This promotion will also start on the same date and run through the end of the year when you offer free shipping. This is a fairly significant promotion as it can add up to a 40% discount. Although most PowerSellers will only see discounts in the 10% to 20% area.

In addition to the fee discounts, items with free shipping will continue to be advantaged in Best Match search results.

Although this is a promotion, I am fairly certain that eBay will continue some version of the fee discount after the end of the year.  The issue with free shipping is that although buyers really like it, and it does promote sales, eBay is earning fees on the shipping cost which are a net item for sellers.  So if eBay wants sellers to continue offering free shipping, I suspect they will institute some type of permanent fee discount for sellers who offer free shipping.

Obviously free shipping is something you need to experiment with. It is not applicable to all products and price points. For example, one of my products weighs 50 pounds and sells for around $200-$225. My actual shipping cost is around $50.  So this clearly wouldn’t work. (I did try it and I couldn’t get enough additional margin to cover the cost).

Likewise if you sell items for under $10-$15 it could be difficult to recover your shipping cost. So bottom line, if the free shipping model looks like it will work for you then try it –but try it first on a small scale before rolling it out for all your listings.

2. Fixed Shipping Limits on Media – This new policy only applies to media products (Books, DVDs & Movies, Music and Video Games) so far but I suspect eBay will expand this to other areas as time goes by. 

Fixed shipping limits are similar to the system that Amazon uses. The purpose is to stop sellers from selling lightweight easy-to-ship products at an artificially low price with an artificially high price for shipping. For example, just today I saw a $40 video game listed on eBay for $9.99 in a fixed price listing with a $29 shipping cost. The actual shipping cost is about $3.00.

This means that Media sellers will need to offer at least one shipping option within the specified limit. The dollar limits will be close to the standard media mail rate. I don’t yet know exactly what the shipping rates will look like. I deal with this on Amazon all the time. In my experience the rates are fair and pretty close to what I actually experience. On some books, I lose a few cents and on others I make a few cents.

eBay states that their buyer research shows that overly high shipping charges is one of the largest sources of buyer dissatisfaction, so it will be interesting to see if this works in bringing customers back to the platform. If it does, then you can expect to see eBay roll a version of this policy out to other categories.

One thing to remember is that media mail is slow. I wonder how this will impact seller DSR scores. I suspect it will. When I look at the big media sellers, in general, their DSR scores are lower than the eBay average but still high enough to get some fee discount. So if you are selling media there are two things you should do. First offer first-class mail as an option and secondly make sure you ship as quickly as possible after receiving payment and let the customer know that you shipped it quickly and remind them that media mail can be slow and this is beyond your control.

Well that wraps up each of the five changes announced by eBay last week.  Remember you have some time to deal with these. All of these changes will be implemented over the next few weeks.

Tomorrow I will do a final wrap-up commentary on these changes. When this is done, I will be compiling and editing these blog posts into a PDF document that my readers can download on my website. The link to download the document will be included in the next issue of the newsletter that comes out right after Labor Day.

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