There’s a lot of guidance online about the art and science of pricing merchandise. Actually, that’s a gross understatement. There’s an endless supply of theories, postulations, and concrete data on the subject, using everything from the Apple product pricing model to Kanye’s $120 white “hiphop” t-shirt to illustrate pricing strategy. But, when it comes to selling on eBay, we can keep it relatively simple. The formula consists of:
1. One part number-crunching
The first thing you need to do is determine your cost per backpack. Let’s say you got a killer deal: $5.00 each (hey, it could happen). The backpacks are pretty big, so you’ll need fifty boxes. This size backpack doesn’t quite fit in a USPS Priority Mail box, so you invest in two, twenty-five packs of boxes on eBay. You end up paying about $1.00 per box.
Next stop, packing supplies: You have an endless supply of tape and bubble wrap, but you add in $.20 each to cover that minor cost. Then, like professor Griff has suggested previously, you analyze your typical return rate to arrive at an additional $.25 that you factor in as your own personal returns “insurance” policy. This will cover the cost of the occasional return throughout the year.
Lastly, eBay fees: You plan to list the backpacks during a Free Listing Promotion, so no cost for that, but you will have to pay Final Value Fees. So, you plug some numbers into the Fee Calculator and determine that you’ll likely pay $2-3.00 for fees (this varies depending on whether or not you have an eBay Store, whether you’re a Top Rated Seller, etc.). For the purpose of this example, let’s say final value fees are estimated to be $3.00.
Here’s the cost breakdown:
You could add in your time too, if you’ve calculated how much that’s worth, but based on raw materials, you’d need to make $9.45 to break even on each backpack.
2. One-part market research
Now it’s time to dig deeper into how the existing Frozen backpacks are being priced on eBay:
OK, you’ve settled on the $25.00 range to be competitive, and to more than double your investment. Now it’s time for the psychology. There’s a theory called the left-digit-effect, which asserts that most people only see the digits to the left of the decimal point, completely ignoring or discounting the ones on the right. That’s why you see so many price tags ending in 99. To the human brain, $25.00 is considerably more than $24.99. However, you want to make sure that you beat out the competition at $24.99, so you settle on $24.75 to seal the deal.
But this isn’t the end of the story regarding the psychology of pricing. We recently asked sellers on the eBay for Business Facebook page whether they’d price an item at $19.99 or $20.00, and we got a slew of theories on the subject, direct from the people in the trenches. See what your peers had to say about this.
And, though we’ve arrived at a listing price for the purpose of this example, there’s more to be done. As with any business, it’s important to regularly assess how the market and demand for your item affects your pricing strategy in the long run. It’s also a good idea to run tests that fold in different variables, like listing some using the auction-style format, and some with free shipping, or a combination of the two. If you have an eBay Store, you might also want to test running promotions: 10% off $50, etc. The sky’s the limit. Now that you have the basic formula, it’s just a matter of mixing the ingredients together and weighing your results.
This is by no means every possible tip on pricing your items on eBay. This is just a basic example. Feel free to add your brilliant tips and insights below.
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