If you don’t know how to do this then things could go awry!
It seems that everyone is in product sourcing mode right now – and welcome to the club! I spend hours every week researching and sourcing products for The Source Report and just recently I’ve received a few queries regarding calculating the profitability of products – basically how to work out whether a product is viable when purchased at a wholesale price before going ahead with a full order.
Obviously it’s vitally important that you understand how to work out the amount of profit you will make per sale! So I thought I’d give you a heads up on calculating profits today so that you know exactly what to do right from the start when researching and sourcing products.
Now, unfortunately your Ebay, PayPal and Amazon fees can quickly eat into your profits.
This is a fact of online selling life I’m afraid!
You should be aware that insertion fees on Ebay are charged whether your items end up selling or not and of course final value fees on both Ebay and Amazon are charged based on your actual selling price (whether on auctions or on Buy It Now sales). So you need to make sure that when you calculate your profit margins you are doing so correctly.
I’m going to walk you through this now.
First up – Ebay:
When you list an item on Ebay as an auction or Buy It Now listing you are always charged a fee. This is called an insertion fee based on the starting price of the item if it’s an auction listing, otherwise it’s based on whether you have an ebay shop or not for BIN listings.
Then when your item sells, you also pay a final value fee based on the final selling price.
So, on Ebay, the total cost of selling your item is the insertion fee plus your final value fee. Fees do differ for business sellers and for private sellers so you should always double check what you are likely to be charged before you list. Don’t forget too that if you add any extras such as a subtitle then there is an extra charge for that too.
Here’s an example:
If you do not have an Ebay shop and you list an item as a Buy It Now with a price of £10.99 you will pay:
- Insertion Fee: 40p
When your item sells you will then be charged 10% of the selling price as a final value fee – but this does not include the price you are charging for postage (this calculation of 10% is the usual rate for sales up to £29.99 but does increase for higher value sales and also differs in some categories, so once again please double check to make sure).
- Final Value Fee: £1.10
So on your sale at £10.99 you will pay the insertion fee plus the final value fee of £1.10
- Total Fees: £1.50
As Ebay do update their fees from time to time and it will depend on which category you are selling within, you can get a full list of all Ebay fees here
Don’t forget that when you accept payment through PayPal you will also be charged a fee:
Standard fees are 3.4% + 20p on every payment that goes through PayPal and this is calculated including your postage charge. So again using the example above, if you list an item as a Buy It Now with a price of £10.99 and charge £1.99 for postage making your total selling price £12.98, you will pay:
- 3.4% + 20p of £12.98 = 64p
Add this to your Ebay Fees and so the total Ebay and PayPal fees you will pay for this example are:
Ebay Fees: £1.50
PayPal Fees: 64p
Total Fees: £2.14
Now let’s take an example for Amazon
On Amazon as a Pro-Merchant, you are not charged an insertion fee but you will pay a monthly fee to list your items (as many as you wish). This is £28.75 per month. You’ll then be charged a final value fee as a percentage depending on the category you have listed in – typically this is 15% but does vary per category. You can check the fees here
So on your £10.99 + £1.99 P&P item you will pay:
- £12.98 x 15% = £1.95
Plus of course your monthly fee which you will split between the number of products you have listed. The more products you have the more economical this is!
When calculating your profit margins, these are the fee factors you must take into consideration and it’s quite easy to do, but don’t forget to add in your other costs too! So you will have the following:
- Stock price including VAT and shipping to you
- Postage costs to your customer including packaging costs
Plus those fees we’ve discussed above:
- Ebay / Amazon fees – insertion and final value fees
- PayPal fees
Now just to make all that clear, here’s an example calculation:
Purchase x 50 wholesale items at £4.50 each inc VAT: £225.00
Shipping cost to you: £25.00
Total stock cost per unit: Stock + Shipping: £250 divided by 50:
£5.00 per item
List x 50 on an Ebay multiple quantity Buy It Now listing:
Listing fee: 40p (this is per listing – not per item sold!)
Sell at £10.99 + £1.99 P&P (calculated to include postage, envelope, label plus a small cost for your time): £12.98 per item
Your Actual P&P Cost (i.e. postage, envelope, label etc): £1.68
EBay Final Value Fee: £10.99 x 10%: £1.10 per item sold
PayPal Fee: £12.98 x 3.4% (+ 20p): 64p per item sold
Total Costs: £8.82
Selling Price: £12.98
Total Profit: £4.16 for the first item sold and £4.56 thereafter
It might look complicated – but it’s not! Besides, there are plenty of Ebay Fee Calculators online that you can use to help you.
Some are better than others, but at the time of writing, I found the best one is the Ecal one which you can access here
These calculations are absolutely free! There are new Ebay calculators popping up all the time so if you want to use a tool like this permanently, then keep checking for the ones that are updated when Ebay make fee changes or other amendments to the site.
Before I sign off on this particular blog post, I just want to let you know about some very important, exciting news! You see I’ve been working hard on the new revised edition of my best selling Ebay Powerseller Secrets manual and have been busy adding new chapters, new suppliers and making sure that all the information and examples I supply are absolutely current.
So, I’m delighted to be able to tell you that the new edition of Ebay Powerseller Secrets is now complete! You can check out all the details over here