Can you still make money on eBay?

by Rosalind Kent on 01 July 2011  |  17 comments
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eBay fees are being revamped, but how will it affect you?

Over the years there has been a stealthy increase in fees and decrease in advantages for the average eBay seller. With the recent announcement that eBay is introducing a new ‘change’ in fees, what will this mean for those trying to make a bit of extra money?

‘Change’ is reputed to be a good thing in some circles, however ‘change’ in the world of eBay actually just means ‘increase’. The change applies to the private sellers and means that they will be paying more in Final Value Fees when they sell an item in a fixed price listing.

Brief overview for sellers

If you are new to eBay, the billing system works like this. You list an item for sale, either in an auction format or with a fixed price, called a Buy It Now (BIN) price.

You will usually pay eBay a listing fee (although there are plenty of free listing day promotions to take advantage of). Then, if the item sells, you will pay a Final Value Fee. This used to be worked out on a tiered structure, depending on how much the item had sold for, but will now be a flat fee of 10% of the final price. If you accept payment via Paypal you will also pay a fee to them.

The fee increase

It’s important to note that this new 10% flat final value fee only affects private sellers who are selling an item on a Buy It Now basis, so auction sales are left unaffected. Sellers will only pay this fee if they make a sale, and they will get 90% of the sale price (minus listing fees and Paypal fees if applicable!).

eBay states that its new policy will “make it simpler and easier for you to calculate up-front the fees you'll pay”, which is a lovely spin on a fee increase.

The media has generally proclaimed the rise to be a terrible blow for private sellers, but is this actually the case?

• In most cases, sellers will not notice a huge change. Old fees for most items selling for up to £50 were 9%, so they have only actually raised the fees by 1% for these sales.
• Fees are capped at £40.
• There are some categories that will remain unaffected by this, specifically vehicles, property and contract mobile phones.
• Insertion fees remain unchanged.

Simpler and more transparent?

It is definitely true that eBay has simplified the process, and despite this costing the seller more, it will have its fans.

The present system has a number of different fees applying to different categories, making the process very confusing.

For example, in the technology category you would pay a Final Value Fee of 5.25% for items up to £29.99, then £1.57 + 3% of the final selling price of £30 or more, then £3.67 + 2.5% of the final selling price of £100 or more and so on!

In this respect eBay is absolutely correct in saying that it has simplified matters as all items will now have a 10% fee, regardless of value.

Tax and eBay

There may come a time with your eBay sales when you stop being a private seller and become a trader, wherein you will have to pay tax. If you are unsure about your status take a look at my previous article: The taxman is watching your eBay account. 

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Make some extra money

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There has also been a recent clampdown by HMRC on sellers who are not paying VAT, which you have to pay if you are trading above the £73,000 turnover threshold.

If you are a trader and are earning over this amount but have not yet registered for VAT, then do it now. HMRC is likely to offer a partial amnesty for those who voluntarily come forward, with any penalty being capped at 10% to 20% of the tax outstanding over the past five years. The penalties will be substantially more if you wait to be caught.

Summary

So, for most small-time private sellers there will be very little impact on their day to day sales. If you take the auction option, which I would always advise you to do if you are clearing out your loft and flogging a few second hand goods, then you will be unaffected. 

eBay itself says the change won't affect "the 180,000 small- to medium-size businesses and entrepreneurs trading professionally on eBay”, which is to all intents and purposes true … except for the fact that it has already increased fees for professional sellers in its last period of ‘change’, a fact it hopes you will overlook!

Despite this, you can’t help but feel a little exploited by eBay’s slow and steady fee increases. With eBay’s first-quarter profits rising by 20%, and stock rising by 43% in the last year, it's not doing too badly! Isn’t it just a little greedy to be increasing its fees at a time when most of us are tightening our belts to make ends meet?

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