How to Make Money and
not Lose Money Selling on Ebay
September 29th 2005
Don't lose money
One important aspect to be
considered in any business is the losses. eBay is no different. There
could be shipping loses, losses due to fraud and losses due to
mistakes. If you do enough business you are bound to make all of these
In an article I wrote on identity
theft I mentioned that the person that took my identity bought $300 of
merchandise from Walmart.com. Wal-Mart took the hit for that. If you
sell expensive items (over $100) you can become a target for fraud. Few
crooks want to waste their time on small-time capers. They also know
that if the item is too expensive the purchase will be closely
You need to protect yourself when
accepting credit card or Paypal payments. First require that sales over
$100 be shipped to a verified or confirmed address. Usually if you ship
to a verified / confirmed address you are protected from fraud. You may
want to get a signature for the delivery. The signature will cost you a
buck or two extra.
If the customer wants an item sent
to another address they can call their credit card company and add an
address to their account. They must call though. The address is added
quickly; usually within a couple hours.
If a shipment is lost make sure you
call the shipping company and find out where they left the package at
that location. Call the customer back to make sure they looked there.
Many times our customers find the item after this procedure. Shipping
companies always pay lost shipment claims.
In the case of FedEx Ground we have
learned that the driver is responsible for the delivery. The FedEx
driver actually has to pay for the “lost” shipment. This gives the
driver motivation to get the delivery cleared up. They have to keep
their losses to a minimum also.
You can also lose money with damaged
shipments. We have sold many heavy items and they usually need to be
double-boxed. Most carriers require three inches of packing material
around the merchandise. On some items we will incorporate an outer box
with packing peanuts, Styrofoam, and bubble wrap as packing material.
Neither FedEx nor UPS like paying
claims. They would rather deny them. They may claim that you did not
have enough packing material. They may claim that there is no evidence
that they damaged the item. Either way you lose everything including
the original shipping cost.
If there is a hole in the outer box
it is easier to get a claim paid. So make sure you ask the customer if
there was a hole in the box. File these claims promptly and keep track
of all of your shipping records. Try to keep damages to a minimum
because it can become an accounting nightmare.
If all goes well the customer gets
the item damage free. You will still need to deal with some customers
that want a discount because of minor damage. Here you may need to do
some bean-counting. It is OK to break even now and then, but beware
customers lie sometimes. You may want the customer to email the
picture of the damage.
We have had customers tell us some
blatant falsehoods. Sometimes they will tell us that the item does not
work. This is especially true if they used it once and now want to
return it. Sometimes they will plug an item in and find it does not
work. In some cases they forgot to flip a switch giving the outlet
power, or they just don’t know how to use it.
Customers will want to return items
for many reasons. They may not like what they got. They may claim that
it was described wrong in the ad. Sometimes our vendors will change the
box color. This gives the customer an excuse to ask for a discount.
Many times the customer will just wants some money back. This will cut
into your profit.
Let’s say on most items you can make
a 20% markup. Take out 3% for Paypal or Credit Card processing fees.
This leaves you 17%. There are fees associated with selling the item on
eBay also. This can cut the profit down to about 10%.
Now let’s say you get a damage claim
that FedEx or UPS does not pay on. With a profit of 10% you will need
to sell 10 items just to break even. If you get a damaged item and a
fraud claim you are now losing money.
We have had customers tell us that
the ad was wrong. They like to tell us that it is false advertising.
We don’t jump to take the item back anymore. We have found that
will lie hoping we pay shipping back. Shipping costs add up, and if you
pay shipping both ways you are liable to lose in the long run.
I believe it is a mistake to pay
shipping back for any reason. There are a couple reasons for this.
First off the customer will be more likely to keep the item if they have
to pay shipping back. Second, the customer may not package the item
right and you may lose practically the whole value of that item. You
might as well have thrown it in the trash or had them keep it for free.
We have paid shipping back and found
that the ad was right. But now the customer has evidence that we
received it. They will win with the credit card company and we are
stuck with a used or open box item. Plus we are out the money for
shipping both ways.
If the customer sends the item back
without double boxing it we charge them a 15% restocking fee. We will
refund the customer, but minus the original shipping cost and minus a
restocking fee. By doing this you will help keep your losses to a
minimum. You should always put all of these terms in the auction.
The only way we pay shipping back is
if there is a damage claim. But even then the shipping company covers
the shipping, so we are not out there.
We also quit giving positive
feedback right after the customer pays. For years we gave positive
feedback after the item shipped. We have learned that this is just
another bargaining chip the customer will use to try to “extort” money
from you. They will threaten you with a negative. This is will
cut down on the number of negatives you get. The angry customer
will likely give you a neutral rather than a negative
Nowadays our automated system will
give positive feedback only after we receive positive feedback. This
will also help cut your losses. Remember, after all is said and done
you may lose money selling on eBay. Keeping loses to a minimum is
There are three types of customers.
The first type will agree with whatever you do. The second it more
reasonable and will not always accept what you do. The third will
never be happy, even when you fixed the problem. You don't want
everyone one to be your customer.
If a person calls us on the phone
even if it is to ask some minor question, we anticipate a problem with
that customer. It is as if they are testing the waters. Not all of
these phone calls result in a loss, but we have determined that that the
ratio of losses is much greater with these customers. Remember the
customer is not always right. Your job is to not lose money.
In a future article I will describe
some of the ways you can package an item so it arrives at its
Best Syndication Staff Writer
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