How to Make Money and not Lose Money Selling on Ebay

September 29th 2005

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 mistakes.

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 scrutinized.

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 some customers 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 critical. 

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 destination damage-free. 

By Dan Wilson
Best Syndication Staff Writer

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