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A Simple Formula for Pricing Your Items on eBay

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Verified Blogger
Verified Blogger

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:

  • One part number-crunching
  • One part market research
  • A healthy dash of psychology
Now, let’s talk about how these components fit together. And, so that it’s less abstract, let’s use an actual item for sale on eBay. The big retail moment right now is Back to School, so let’s say that you bought a lot of 16” Disney Frozen Rolling Backpacks from your secret, never-to-be-revealed-in-public source. You already did your due diligence on eBay to ensure that there was sufficient demand for the item, and a reasonable profit opportunity prior to the purchase. Next step is to apply the formula to come up with an ideal listing price:

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:

  • Backpacks: $5.00
  • Shipping Supplies: $1.20
  • Returns “Insurance” Policy: $.25
  • Fees: $3.00
Total cost per backpack: $9.45

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:

  • First you’ll want to see what people are actually paying for your them vs. what sellers are “asking.” So you go to the Advanced Search page, plug in your item details, and select “Sold Listings.” From this you determine that the median selling price for your exact backpack is $28.20.
  • Next you’ll do a search on active listings for your exact item. Now you’re seeing pricing that fluctuates a bit. There are mostly fixed price listings mixed with some auction-style formats. The prices range between $23.99 and $49.00. However, you notice that one listing in particular in the $25.00 range shows “26 sold,” so you know that this is an attractive, realistic price for your customers. Plus, you reflect back on the average price that your backpack is actually selling for from the sold listings and, in order to stand out from the pack, you decide to keep your item in the $25.00 range.
  • You also decide to go with a fixed price format (vs. auction-style), since you know approximately how much you want to fetch for each backpack, they’re not rare or necessarily unique, and you’re not looking for the marketplace to tell you how much they’re worth.
  • You decide against free shipping in this instance because of the package size, and the way others have listed the item.
3. A healthy dash of psychology

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.
 

6 Comments
by mirabeau48 · Adventurer
mirabeau48
Adventurer

Here's a trick: set the price at $4.99 instead of $24.99.

joesoucie22012
Trailblazer

Except researching prices on Ebay is worthless when you cant see other sellers prices because Ebay is hiding listings. Also sold listings and compleated listings arnt showing up. What are we supposed to do.....just guess at prices?

by fstmseeker · Adventurer
fstmseeker
Adventurer

First this example is for a NEW, commodity item that has a fad element to it.  The $24.99 price is a great place to start and based on "research" of what similar items sold for recently. Once you pass the break even point you need to determine if demand remains strong or if you need to off discounts or further incentives (free shipping on orders above x dollars etc) to move remaining inventory. You probably won't have a shrinkage problem but fad items loss they luster quickly so plan to sell the last few at near cost.  Might be demands remains strong but best not to expect it then if it happens you are pleasantly surprised.  Again after you break even, you can experiment with different pricing strategies.

by bamboozarr · Adventurer
bamboozarr
Adventurer

 After spending hours upon hours researching a product using any resource, search engine and social media source I could think of, I realized that finding my product with the advanced search tool was a perfect way to find a median price I felt comfortable with. Then instead of listing right away, I spend a day or two watching other listings in both formats. When possible finding my product being sold in a promotional offer has been useful. Also I Like to search for similar product listings that have add-on or up-sell  deals for buyers. Offering accessories that go with your product will increase profits as well as sales. Collections have been a very useful source of information.

by bje51841-7 · Enthusiast
bje51841-7
Enthusiast

 I have a gold old school chandelier and have no idea how to price. 

by jani_arti · Adventurer
jani_arti
Adventurer

Sold listings and compleated listings you can find with Advanced Search.Electronics, Cars, Fashion, Collectibles, Coupons and More  eBay - Google Chrome.jpgeBay Search Advanced Search - Google Chrome.jpg