Ep 236 || Hobby vs. Business Selling: How to Determine Which One Fits Your Business on eBay

[podcast_team]

Mark Jaeger, VP of Operations at TaxAct, returns to shed some light on the differences, pros and cons between Hobby and Business selling. Brian and Griff answer questions on printing shipping labels, Promoted Listing ad rates, and how to be sure your sneakers qualify for Authenticity Guarantee.

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Brian: I'm Brian.

Griff: I'm Griff, and this is the eBay For Business Podcast. Your source for the information and inspiration to help you start, manage and, grow your business on the world's most powerful marketplace. This is episode 236. Ask me how my day's going, Brian.

Brian: Well, Griff, how is your day going?

Griff: Oh, it was going great until I started opening eBay purchases this morning and found myself covered in static clinging styrofoam peanuts.

Brian: You didn't? Not again.

Griff: Well, you know, not every seller listens to the podcast. And even if they did, not every seller is going to be convinced that they should STOP using styrofoam peanuts!

Brian: So my quarter bag left. You're telling me I should just get rid of and never use?

Griff: Yeah. I don't know how you get rid of it so that it's clean. They didn't think you can. Like I said last week, you can't recycle them. You thought that I was on a tear about thermal printers and I was And then you thought I was on a tear about the word vintage and I was, and I've put up the white flag on that. I can't stop this. It's like a tidal wave of bad language.

Brian: Well, it's incorporated into our site now too.

Griff: Yeah. It's that bad . And so, uh, yeah, I'm never gonna agree to it, but I I'm not gonna fight that fight anymore. What I will do is every time somebody uses the word vintage without a year, I'm just gonna roll my eyes. I figure that's my last protest is just keep smiling and just go, roll your eyes.

Brian: Roll your eyes. I'm surprised you got some peanuts. I haven't received any peanuts in a while.

Griff: You can buy those compostable peanuts, like I said before, and they're great. But I can understand a C to C seller, you know, they don't know any better. They're gonna send it out. But these are sellers that I know are b2c and it just makes you look like a rank amateur.

Brian: I don't, why don't they use the, the bubble wrap?

Griff: I don't know. But I just started off this episode with a screed.

Brian: You did. This is normally the end.

Griff: I think I just heard the sound of 2000 people clicking off their podcasting apps.

Brian: We should tell everyone to listen cuz you won't get the screed at the end. We're gonna have good happy news at the end.

Griff: We do?

Brian: I have no idea, but I'm trying to like, I'm trying to keep them listening.

Griff: Okay, well, we'll see. Anyway, yeah, there's stuff to talk about. You don't wanna miss it, so just don't pay any attention to my rant.

Brian: Rant. And please don't use packing peanuts. If you have a choice, please.

Griff: At least If you're gonna ship to me. Don't ruin my day. They literally were clinging onto my clothes. They were all over the floor. You try to sweep them up and they fly away. It's so arght! Styrofoam peanuts. I'm getting old. I have a list of things that make me angry. ( laughter)

Brian: I just heard three.

Griff: Well, vintage. I'm over that. And what was the other one? Thermal printers.

Brian: Yeah, thermal printers. I used mine last weekend.

Griff: Yeah, I used mine yesterday. I sold some stuff. Anyway.

Brian: Griff, what? So besides, uh, packing peanuts, what's up for this week?

Griff: Well, Brian, do you know the difference between selling as a hobby versus selling as a business?

Brian: I have some thoughts, but I'm not sure.

Griff: Yeah, I'm not either. So, we asked Vice President of Operations at TaxAct, Mark Jaeger. He's gonna return and address these questions and he was really eager to do so. Should be a good interview.

Brian: That sounds like an informative one. I'm gonna listen to that one.

Griff: You should as a pretend hobby seller. There's no way that somebody who worked at eBay as long as you should be considered a hobby seller.

Brian: So that's why for me, I was thinking it's a state of mind.

Griff: A state of mind is important. I think it's important to think of yourself as a business seller because you'll conduct yourself in a manner that avoids, for example, styrofoam peanuts in the packing.

Brian: Or using terms like vintage.

Griff: Please. Don't insult the rest of the audience. I'm gonna start getting hate mail again. You have to know when to run up the white flag and how to pick your hills on which you wish to die.

Brian: That was not one of them.

Griff: What about news?

Brian: Well, as a reminder in the news section of the podcast is on a hiatus for a month or so, but we will continue to urge you to check the latest eBay selling news at ebay.com/announcements to keep up to date with the news as it breaks.

Griff: Exactly. So no official news, Brian, but I have a bit of unofficial news and I think you may know what I'm talking about.

Brian: I do. We were on the same email thread this morning. Here I am writing out the show notes and everything getting ready and I get an email and I went, whoa. Why aren't we not talking about this? So I'm gonna talk about it. So here's what I'm doing. You know, I'm listing more stuff pre move. It's stuff I don't want to schlep to the new place. And so I've been creating, as I normally do, I always create drafts before I actually list something live. Cuz I like to go through and check. I tend to make a lot of mistakes. Not intentionally, but because I'm absent minded, I shouldn't even have a driver's license.

Brian: Are you a professor too?

Griff: Hardly I play one on this show, but no. But anyway, so I've noticed this thing this morning. I'm looking at the drafts, you know, I have two drafts ready to go and I'm about to submit them. If you submit them as more than two, two or more, it takes you through, it looks exactly like the bulk edit feature. And it will alert me, Hey, you idiot, you forgot to put a condition, you numb skull! You didn't put this item specific. Uh, hello idiot. How about how you're gonna get paid? So those are all those little red things in a column. But then I'm looking over at the draft page in Seller Hub and at the very end there's a column and it says expiration date. And I'm thinking to myself, what? I've never seen this before. Drafts last for 75 days and after 75 days there's unceremoniously deleted. So if you work really hard on that draft on day 76, it's gone. Well, now we have a little column that says you got 74 days left, you got 73 days left. And I thought, well, this is helpful.

Brian: And that's the column. There's even additional news.

Griff: What's that?

Brian: There's a little banner that goes up and says you've got 15 days. And it goes away too.

Griff: Yeah. So there's a bunch, bunch of alerts to let you know that that thing you've been holding onto and it's just the right moment. It's about to get deleted. And I noticed then we see this email and in the email they talked about, and I shouldn't even hint at this because they base this on seller feedback, but they said, you know, the obvious thing is to be able to keep drafts alot longer. Like indefinitely. And they sort of hinted in the email that that's the next thing they're looking at. So, you know, baby steps.

Brian: Yes. But at least now if you're a seller and you're paying attention, then there's that. You can go into your drafts, go into the page, and you'll know exactly where you stand on every draft.

Griff: Each one individually, it'll show how many days are left.

Brian: I thought it was a great enhancement.

Griff: Yeah. So that's my unofficial news, Brian. Draft expiration alerts. Pretty cool.

Brian: So yeah, what moving on business or hobby seller? Which is which?

Griff: Well, we're about to find out.

Griff: One of the most popular questions we receive here at the podcast comes from sellers who ask us about being a hobby seller. What does that mean? What are my responsibilities? I only sell once or twice a year. And of course we can't answer those questions because as we've said many times here on the podcast, we're not qualified to provide tax advice. But Mark Jaeger is vice President of Operations at TaxAct and he knows the answers. So we asked him to return to the podcast to help shed some light on this important topic, the differences between selling as a business and selling as a hobby. Welcome back, Mark.

Mark: Hey Griff, thanks for having me back. Happy to be here.

Griff: Mark, what is the difference between a business and a hobby?

Mark: It's a great question. We know it comes up a lot and, and first I would say it's important to define the terms business and hobby. The IRS expects that if you start a business, you intend to make money from it, right? This isn't necessarily a business that says, yeah, I'm just gonna lose money. And, and I'm fine with that because I just enjoyed doing it. Overall there's a few questions you just kind of have to ask yourself, and this is what the IRS looks at it as well. Do you put in the necessary time and effort to turn a profit? Have you made a profit in this activity in the past? Or can you expect to make one in the future? Do you have the necessary knowledge to succeed in this field? Do you depend on income from this activity? And are your losses beyond your control?

Griff: Taking a lot of deliberate losses is not recommended.

Mark: No, not at all.

Griff: So it's all about intention then. What are your intentions for conducting this activity?

Mark: Yeah, that's absolutely right. So really a hobby is any activity that a person pursues because they enjoy it with no intention of making a profit.

Griff: Like owning a sailboat.

Mark: Like owning a sailboat. Yeah. Anything with boats in general. I don't think anybody's in a, in a good profit making business there. And obviously many people engage in hobby activities and that eventually turn into a source of income. However, if determining that the hobby has grown into a business can actually be a little confusing. Bear with me here, Griff. Hold on to the edge of your seat because there's 11 different factors that determines whether their activity is a business or hobby. So first the taxpayer carries out activity in a business-like manner and maintains complete and accurate books and records. You're behaving like you should as a business. Two, the taxpayer puts time and effort into the activity that show, they intend to make it profitable. Makes sense.

Griff: Most eBay sellers I know would qualify on point 2.

Mark: Yeah, that's right. Three, the taxpayer depends on income from the activity for their livelihood. They're not just doing it to earn a dollar here or there, maybe to pay for a PlayStation five or anything like that. They're doing it as part of their livelihood. Four. The taxpayer has personal motives for carrying out the activity such as general enjoyment or relaxation. Five. The taxpayer has enough income from other sources to fund the activity.

Griff: So if I'm employed that helps fund this activity then.]

Mark: It could Yes. That very well could. That's right.

Griff: That could mean it's a, a hobby, not a business.

Mark: That's right. So six losses are due to circumstances beyond the taxpayer's control or are normal for the startup phase of their type of business. Each business, which we will get into an interesting one a little bit later here, Griff, but each business can be a little bit different. Seven. There is a change to methods of operation to improve profitability. I mean that one's probably not very important to most of viewers here.

Griff: Well, maybe, maybe so though. So for example, I might hire part-time help to increase profitability.

Mark: There you go. Yeah. You're trying to pull in more sales to, to hire in more individuals. That makes sense. Eight taxpayer and their advisor have the knowledge needed to carry out the activity. As a successful business, you're not me as a tax person maybe trying to create a physical therapy business in the healthcare profession, that one probably doesn't make a lot of sense. .

Griff: I have no background. I can't even give a back rub.

Mark: Yeah, exactly. Nine. The taxpayer was successful in making a profit in similar activities in the past. Yep. Makes sense.

Griff: Yeah, I've done that.

Mark: 10 activity makes a profit in some years and how much profit it makes. I mean, again, we're trying to show, we're making a profit in order to be a business.

Griff: But there may be some years where you show a loss, it's just not continually year after year.

Mark: Yes, that's right. And then last, the taxpayer can expect to make a future profit from the appreciation of the assets used in the activity.

Griff: That is so me. We've got these 11 points. I think they're actually really prescriptive. I feel comfortable then just from those defining myself. But I'm always curious about what the IRS thinks. How does the IRS determine the status of a seller's activity given those 11 points?

Mark: So a lot of what the IRS does, they come up with, uh, what's called safe harbor rules. And these safe harbor rules are generally supposed to provide, you know, individuals like all of us a little clarity into what we should be. So the IRS safe Harbor rule pretty much states that if you turn a profit in at least three of the five consecutive years, you are engaged in it for profit as a business.

Griff: That makes sense.

Mark: Yep. Now that one little point I made earlier, Griff, about a unique situation that I found a little interesting. There is an exception for individuals in the business of horse training, breeding or racing that they only have to show a profit in two of the prior seven years. In those three specific cases. I don't know clearly at least early on there's not a lot of money in horse breeding.

Griff: Let me make a note of that. I will put it in the same column as owning a sailboat.

Mark: Owning a sailboat. That's right.

Griff: Okay. So that's a one exception. I doubt very much that exception is going to apply to anyone who listens to this podcast, but I could be wrong.

Mark: That's right.

Griff: Okay, so we've got it established. How do I improve both for my own benefit and in the eyes of the IRS? How do I improve my position as a for-profit business?

Mark: Yeah, really it's about following good business practices. So to be considered a legitimate business, it'll help if you can show that you are following good practices, like setting up a separate business checking account. You really wanna separate personal and business overall keeping business and personal expenses separate. That's really what we talked about as it relates to expenses. So not just your bank account, but your expenses for your cell phone and things of that nature. Maintaining a good business record keeping system. Some people use Excel, some people use a shoebox. How deep down you want to get is is up to you. But we really should separate those things. And then lastly, not quite lastly yet, but registering your business with a state as an llc, not something you really have to do, but it does help to further legitimize your business overall.

Griff: All right. Any more?

Mark: Yeah, we obviously want to comply with the rules. It's important that if there's state and federal tax laws, right, including collecting sales tax, paying annual estate business renewal fees or franchise taxes, it's really important to do that as well. And I apologize one more. I'm sneaking in on you Griff. It's just about a regular business hours in a business website, right? If you're out there selling something, You could set up that business website overall. Obviously we know people may have their site for selling on eBay, but then even kind of working within regular, regular business hours for selling is always helpful as well.

Griff: Yeah. And I think everyone would consider their eBay store. You know, there's a lot of sellers that don't have their own website. Everything is in their eBay store. Or if they're multi-platform, they may have other store in other marketplaces. I think that would be considered their online presence though. Correct?

Mark: That's right. Then that's legitimate.

Griff: When we were putting this segment together and I was thinking about the things we could talk about, I know that the IRS sometimes can make what seem like pretty arbitrary decisions and I was wondering if the IRS could change my business status to hobby or back to hobby or to business based on the activity they've seen in the past couple years. Did they do that? Is that possible?

Mark: You know, it is possible if your business claims a net loss for too many years or fails to meet other requirements, the IRS may classify it as a hobby that's just well within their right to do that. Which ultimately would prevent you from claiming a loss related to the business.

Griff: Or just your deductions as well, right?

Mark: Exactly right. Exactly right. Right. Those deductions ultimately lead to your business getting a loss. So that 100% accurate, Griff.

Griff: Oh geez, I don't wanna, I don't want this to happen. Is there anything else they could do? Like the dreaded audit?

Mark: Very possible. It could trigger an audit, right? Just determining whether it's hobby or business income. Now over the last 10 years, the IRS just hasn't had a lot of funding to do real specific audits, especially if the opportunity to go after those individuals wasn't worth, you know, the juice worth the squeeze kind of thing overall. Now the IRS has got more funding this last year thanks to some recent legislation. So there are opportunities for them, but really I know right away they're focused more on their customer service than they are about auditing more people. And when they say they want to audit some more individuals, they're looking at individuals with income over $400,000. But nonetheless, right, it is something to to think about, right? It's something as you really approach your business, you approach your records and receipts how you document your profit as a motive. If you have a written business plan that helps, it's a prerequisite for indicating an intent for profit. And really it can always show ways in which you're modifying your business to cope with unique years. Like during the covid years when, when you could run into higher losses than you would normally expect.

Griff: Which is another good point about keeping good records and making sure you're managing your business in all of the numbers. Because instead of being fearful of an audit, you can actually say, yeah, go ahead. I'm coming right in here. I've got everything. I know that my numbers are accurate. Happy to prove it to you. Here's a box of donuts just in case.

Mark: That's right.

Griff: We talked a little bit about this in the past and I just wanna make sure we're clear on this cuz a lot of sellers, they may be s straddling the fence here in a way that's not beneficial for them, where they're claiming they're acting as hobbyists, but you know, really they're not. What are some of the reporting consequences a seller should keep in mind when they're actually classifying themselves as a hobby seller?

Mark: Yeah, that's a great question. So if you are a hobbyist or you would deem the activity that you do as a hobby, the one thing that we've pointed out already on this podcast is you cannot deduct any kind of expenses as it relates to the income that you make from that hobby income. So if you're out there, you purchase, you send things through shipping or whatever it is that it may be, only the income can be reported on your tax return and without any expenses or deductions to offset it. So you are gonna pay a higher tax potentially. Obviously each person's tax situation is different on your tax return for that hobby income. So that's one of the main things to know because there used to be that you could deduct your hobby expenses back before 2018, but that was removed as part of the tax reform changes. So that option is really gone for everybody overall. Now the nice thing about this, I guess if there's a positive, right, as a business owner, you have to pay your share of FICA and Medicare taxes on the profit from your business as a hobbyist, you at least don't have to do that. So if there's a silver lining on the hobby side, sure you're gonna pay ordinary income tax rates just like W2 wages or anything else along those lines. But at least you don't need to pay more in FICA taxes as a silver lining.

Griff: Alright. Not much of a silver lining. If you think of the potential savings that come from being able to declare expenses, and when we say you can't declare expenses, does that also mean that you can't declare what it costs for you to sell that hobby item? So if I purchase something like a rare trading card for a hundred bucks and I sell it for 500, can I not deduct that initial $100 that I spent to buy the card?

Mark: Yeah, that's right. That's right. Now that's personal property. That would be the case, if it's just considered normal personal property. But if we're deeming this as a business type, and I understand we're not calling it business, but we're calling a hobby, hobby income. Yeah. It's, you're, you're pretty much paying the, the income on what you actually sold that thing for.

Griff: We're gonna have people that are listening to this episode and they're gonna say, yeah, I understand all of that. I still want to keep my status as a hobby seller as opposed to a business seller because I only sell two items a year and yeah, I'll have to pay income tax on it, but that's fine. How does someone in those circumstances report hobby selling?

Mark: Yeah, so on your tax return, again, this is the 10 40 tax return that you file personally with the IRS each and every year there will be a line item that talks about hobby income. You know, maybe your software provider doesn't have a line for it, but it does get reported on schedule one of form 10 40. This is other income overall. Again, it gets treated just like other ordinary income like W2 wages and things of that nature. That will be the location to put it, you know, there's not a lot of details you need to provide around it outside of this is hobby income and this is the dollar amount.

Griff: What if I'm a self-declared business seller, but I occasionally sell a few things in my own from, you know, personal belongings. Can a seller do both? Can I actually report somewhere else that, hey, this was income that I made on personal items that really wasn't business income?

Mark: Yeah, I definitely think that that's the case. And, and we'll go back to the previous statement around how important it is to keep good records, right? We're really trying to keep those receipts, those expenses for items that you deem personal versus business separate. So that way if, if summary does come knocking, which we're hoping that's not the case, you have good bookkeeping that's gonna be able to show that these two items were different and, and it wasn't related to the business overall.

Griff: That makes sense. What about automatic audits? How often does the IRS like automatically audit to see whether it a business seller or a seller on eBay is truly a business or a hobby? How does that work?

Mark: The IRS is gonna be a little more coy around when they're going to do something and when they're not gonna do something. There's no definite timetable for this type of tax audit. Really, they're just concerned around the activity. If there's some things there that show audits, so for instance, I'll give you a few examples. If your activity has large number of expenses with little or no income from a business standpoint, and they do that, you know, for a few years in a row, it's gonna trigger in their system that something funny is kind of going on here. If losses are being used to offset other income on the tax return, they're looking for schemes there. Because sometimes if you have, if you're able to reduce your income overall, you may qualify for certain refundable credits that may lead to really big payouts from the IRS to you on your personal refund. I wanna say that that can happen, like that's normal, that that may happen. But I think they're looking for continuously that, that that happens overall.

Griff: Year after year after year,

Mark: Year after year after year after year. So they're, they're looking more for a pattern over a few tax seasons and a few, I'm gonna say three or four than they're looking for a pattern in one to two years because it could perfectly be legit that that end up happening in a given tax year.

Griff: Ah, okay. Hey Mark, tell people where they can go to learn more about TaxAct.

Mark: If you wanna learn more about TaxAct, you can go to www.taxact.com. We do have a partnership deal with eBay overall, and that's gonna be at taxact.com/partner/ebayfive.

Griff: And we're gonna put that link as we do every link that we ever mention in the summary overview for this episode 236. Mark, I want to thank you for joining us. It's always a pleasure having you on. We always learn something.

Mark: It was great to be here. I love talking taxes. Love to help out these hobbyists and business owners and good luck everybody on following your taxes this tax season.

Griff: Mark Jaeger is Vice President of Operations at Tax Act and you can visit the eBay TaxAct page again at taxact.com/partner/ebay25 and we'll put that link in the summary overview for episode 236.

Brian: You got questions?

Griff: Well, we've got answers. We've always got answers and sometimes they're even correct. This week we have three questions to answer. Brian, are you ready to tackle them?

Brian: I sure am. Okay. Should we jump right into it?

Griff: No, let's take about 10 minutes of just shooting the breeze. Now let's jump right Into it.

Brian: Our first question was emailed to podcast ebay.com. By seller Nancy who writes, Hello. love the podcasts and all the great information. Are we able to print a postage label without printing the online label record instructions? If so, can you explain how to do it? Regards Nancy. So Griff, is this possible?

Griff: Okay, I'm just gonna spell it out right in the beginning. If you're printing out on an 8 by 11 piece of paper, it's not possible to print one label and not have those instructions show up on the other half. No way to do it. Well I kinda lie. There is sort of a way to do it, but it's so complicated, it just doesn't make sense. You can save the label as an image.

Brian: Like a PDF.

Griff: Well, a PNG.

Brian: Oh, an actual image.

Griff: Yeah, so you can save it as a P, that's the default. But you can also save it as a, it's called a portable network graphic format, PNG or ping. And then you can copy and paste it onto a page in the Word doc and you can move it around.

Brian: That sounds like a lot of work.

Griff: Yeah. Why would you wanna do that? No, so anyway, your options when you go to print a label is on eBay, on at least there's three paper sizes. One is 8 by 11, which a lot of new sellers and even some business sellers are still use. Yeah. Which means that you print it out on a piece of paper, you gotta cut it in half to get rid of that half, throw it away, then you tape it with a lot of tape onto a package. Sounds really cool, huh? There's also the two by seven for those little Dymo printers and other kind of printers for printing postage in a small format that goes like on an envelope or a small box. And then there's the one that really savvy smart business sellers use, which is the four by six format, which coincidentally is the default format for wait for it. Thermal printers. So I'm not gonna try to push Nancy over the cliff about getting a thermal printer, but I will tell you this at any time during the print label process, there's always an option during the review and pay section, whether you're doing bulk labels or a single label where you can change the paper size. And one of them also is a label printing preference. And there is a preference for using an 8 by 11 sheet where you print two labels on one sheet. So if you're really not interested in getting a thermal printer because you know, stick in the mud, stubborn old mule, not you, Nancy, of course , No not Nancy. But if you're still want to, you know, use those 8 by 11 inkjet laser printers, whatever you can select to have two labels print on the page and you would select two labels and it would apparently would print. But those are your only options. I'm afraid. There are labels that you can put into your inkjet or I think there's some for laser jet that are two adhesive labels on 8 by 11 sheet. That way you don't waste them. And another thing a lot of sellers would do is they would print out that one label and I think maybe I'm suspecting this is what Nancy would want to do and then turn the paper around and then print use it again.

Brian: Yep. So the upshot is Griff?

Griff: Buy a thermal printer problem solved. I couldn't help myself.

Brian: Softball pitcher. Home run hit.

Griff: Just don't buy a vintage thermal printer that's gonna be packed and sent to you in peanuts. Styrofoam peanuts. Okay. Thank you for that question. Our next question comes from an old friend of the podcast, Tiskett. Who this time has a question about promoted listings. I'll read this and then we can discuss, cause it's got a lot of issues here.

Brian: Oh, PL.

Griff: Promoted Listings here at eBay we're acronym prone. We like to call it PL. We actually call it PLS now.

Brian: So PLS. Yeah, PLS is for Promoted Listing Standard. And then we've got advanced.

Griff: Now as a seller of pre-owned clothing says Tiskett. I began promoting my listings at about 1% last year. eBay then changed the policy to require a minimum of 2% as a top-rated seller. Over the past year, I found myself steadily increasing the percentage and finally just selecting the "suggested" amount from my listings to be noticed in such a competitive category. Recently, an option for Dynamic Promoted Listings appeared, which allowed the promoted listing percentage to vary based on what everyone else is doing out there. Since it was eBay's recommended option, they made it very easy for us to select. But I'm growing more skeptical given the rates continue to be so high. I noticed the suggested rate is now often between eight and 12%. So that's her observation. Here's questions. If all sellers who use promoted listings selected the recommended dynamic option, how is this not driving that percentage even higher? Does this negate the benefit of promoted listings putting sellers on the same level playing field? I understand it's a business decision, but with all due respect, these fees are just getting to be a little too much for this Tisketts basket and I'm inclined to just to stop promoting, take a hit and simply pass my savings directly to organic listing buyers. Thanks for your help with this complex question and no need to send any swag. Tiskett.

Brian: It's a question we've seen in the community.

Griff: A lot. So I thought we'd take a stab at answering this. And I wanted to start off by reminding Tike and anyone else who's using this new feature, the dynamic rate is just that. It's dynamic in real time. It's the average based on what sellers are indicating as a percentage when they're in that category and selecting, uh, you know, the same keywords and everything and it's similar items, it also changes in real time. Thus that's why it's dynamic based on the current rate activity. So actually if every seller used the suggested dynamic rate, that rate would probably stabilize at the rate amount cuz everyone would be using it.

Brian: But that's not what happens in real life because that rate is suggested not mandated. And so many sellers will indicate rates that are higher or lower than the suggested rate. Even if it is dynamic changing in real time.

Griff: That's because people are testing it. They're seeing what works.

Brian: I did this last weekend with an item that I have that's been kind of languishing. So I put it on a campaign but I I, the suggested rate was over 7% and I was like, I'll start at five.

Griff: Yeah. I always start lower, much lower cuz I've been promoting some different items in my store to get rid of them. But I'll start at a lower rate and then over time if the item hasn't sold, I'll start gradually increasing it. Cuz the important point about the promoted listing feature is that it's an optional, let me stress this optional marketing tool, no seller should feel they're being forced or compelled to use it. But our advice with any marketing tool, including promoted listing, has always been to test your way into it.

Brian: And don't just apply the same rate percentage to all your listings. What some sellers call the peanut butter approach, spreading one rate over all your listings, especially with the new model that just went into effect March, few days ago. March. Yeah. Yeah. Test what works. Even if that means starting with a rate that is significantly lower than the suggested rate amount.

Griff: Yeah. Because you should never want to give eBay more money in PL fees than you need to.

Brian: Yeah. The goal is sell the item while optimizing how much you give eBay.

Griff: Yeah. Which in optimizing means the lower the amount you have to pay for the fees.

Brian: Right. Exactly. We'll take as much as you wanna give us, but your goal really should be sell the item leveraging the tools that we give you in the most efficient way that you can.

Griff: Yeah. And I feel that's our job here at the podcast. Yeah. Is not to encourage you to spend money recklessly or heedlessly. You want to test your way into this and you don't want to necessarily apply promoted listings to every single listing. Be thoughtful.

Brian: It's common sense, right? Ultimately, I mean it's a, we're not giving something that's counter to our business because ultimately we want successful sellers. Our colleagues want successful sellers, otherwise we don't get any money.

Griff: Right. And if you're cutting into your margin so deep that you're promoting the item and selling it and then not making a profit and that wasn't your goal, that could be a goal if you're in a liquidation phase, right? Where you decided that I'm gonna take a hit on X number of items so I can get that cash back, that's different. But if that's not the goal of your selling for these particular listings, don't spend more money than you have to to get 'em sold.

Brian: Right. And the nice thing about promoted listings and especially with promoted listing standards with the change that they made with the dynamic ad rate, is it actually gives sellers another lever because you actually now don't have to go manually manage that. You can actually let the system manage it for you, which might actually make you more efficient in how you spend those marketing dollars to get sales.

Griff: It's still worth the attention you should pay on an occasional basis to see in that campaign, what's the current rate. And if the current rate has dynamically moved up beyond what you can swallow as an expense and still make a profit, then you want to adjust that rate down or stop the campaign altogether based on what your own needs and what your testing shows you.

Brian: I think many of our listeners will remember the old TV advertisement that it was all set it and forget it. We are in a dynamic marketplace. You can't go by that old, they were selling some like...

Griff: I am tying to remember what it was.

Brian: Was. It was some kind of cookware it was like, set it and forget it. Right. And someone will remind us.

Griff: There's some ad guy 40 years ago who came up with that and made millions of dollars for their company.

Brian: Exactly. But you have to remember that eBay's not a satin and forget it. It kind of place because there are millions of sellers in our marketplace. There are other marketplaces out there as well. You kind of always have to be looking at your inventory. So yes, I like the dynamic ad rate that we've introduced because it does allow more flexibility and a little more convenience for sellers. But you can't just set it and forget it.

Griff: What matters most, by the way, I think we can end on this because this is a very important consideration that you and I talk about all the time. What matters most with promoted listing is it's overall appeal, not what you've put as a percentage for promoting it. And this is things like starting with a great picture, a good title, but really, really important. And I would put it at the top, price. If your item, even if it's sponsored, is higher in price than other items that are showing up next to it or below it that are of the same item but lower in price. And you're wondering why the item isn't selling. It's not because it's not getting exposures because consumers aren't dumb. They can see the price range right on the eBay search result page. And if your promoted listing is up there, but it's much more expensive than other items, if for all intents and purposes are exactly identical, you're doing yourself a disservice. So promoted listings Isn't gonna save your listing if it's not appealing.

Brian: Right. I mean that's a really, really good point.

Griff: Yeah. Well Tiskett. I don't know if we answered your question.

Brian: If Tiskett doesn't take anything away from what we just talked about, that last point is what she really should take away from.

Griff: Yeah. But I think she's a smart seller. She probably knows this.

Brian: Agreed. Our next question comes from seller David. He sent this to podcast@ebay.com. Hey Brian and Griff, thank you for the latest podcast about the sneaker category on eBay. I have another 12 page essay for you. He definitely was listening last week. Oh brother. Feel free to cut anything out, summarize if it's too long. My name is David. I've been selling on eBay for almost three years. I'll hit the three year mark on April 14th this year. Well congratulations on three years.

Griff: Absolutely.

Brian: I've sold many sneakers through the authenticity guarantee program and overall really enjoy the program. Gives buyers a peace of mind and protects sellers.

Griff: And you don't have to pay for shipping.

Brian: You do not. I've been experiencing issues with some of my listings, not qualifying for the program, even though I believe they meet all the specific criteria. Been an issue for a while now and I can't seem to get a straight answer as to why this is. I spoke with many eBay customer service representatives and even a member of the eBay sneaker team, but never really got a straight answer. It's a big part of my business and I'd really like some clarity on this. I feel like I might be losing out to the other competition on the market selling the same shoes because my listing doesn't have the authenticity guaranteed badge and theirs does. I'm so sorry for the long email. I definitely have a lot to share when it comes to selling on eBay. Thank you for all you do, David. it's coffee, always on eBay is his user id. Well thank you David.

Griff: I wonder what David could, what do we need? I need shoes. David, sell me some shoes.

Brian: Given his username. He needs a coffee mug.

Griff: Yeah, I think he's getting that. He sent me his address. So he is getting the coffee mugs. Well by the way, I should mention here, we've been waiting for the new and improved mugs to arrive finally from China and they did. So they're going out this week if you've been waiting for your mug and we did have like 12 of the old mugs and I said, Mark, just get rid of them. We're gonna start off with the new ones. So those of you who have been waiting for a mug, you're gonna get more than you bargain for. Just let me know what you think of them. They're pretty cool. So I was as perplexed as David because I've sold shoes. I've always had the authenticity guarantee for anything that is at that price point of around a hundred bucks. It's always there. So I scrutinized the listing or the listings he reported to me as not qualifying. It was clear to me they should have qualified. I couldn't figure it out. So flummoxed, I asked Steven Livingston, Sneaker Team, you remember Steven? He was on the show recently. To take a look at the issue, take a look at the listings. And they got back to me in a jiffy with the reason that some of David's shoes didn't qualify and I was amazed.

Brian: And?

Griff: They were all missing style codes.

Brian: Style codes?

Griff: Yes. The style code for the sneakers. On some of his listings. He didn't actually indicate them in the item specifics. So all brand name sneakers have what's called a style code and you can usually find it on the outside of the box if it comes with the box and it's on that little label you see as a different set of numbers. Or it's also on the interior label that most shoes have, you know, either underneath the tongue or on the side wall of the shoe itself.

Brian: So if the seller doesn't enter a style code for a listing for a pair of sneakers, those sneakers will not qualify for authenticity guarantee?

Griff: Correct. And here's the thing.

Brian: Wow.

Griff: I know. How would any seller know this? It's not a required item. Specific.

Brian: I didn't know it and I used to sit on the same floor with the AG guys.

Griff: Maybe they didn't even know it! It's not, there's not a mention of it anywhere on the listing page that the style code is required for authenticity guarantee. So for the record, I've always entered the style code for any shoes I have listed on eBay. But for some reason there's a lot of sellers who don't, or worse, they'd never indicate the style code. And I've seen these in listings on eBay, but I always do.

Brian: Wow. Well this little requirement for authenticity guarantee inclusion should be made clear to shoe sellers at the very least on the listing page.

Griff: Yeah, I agree. And so does the Authenticity Guarantee Team apparently, because I emailed them back and said, you know, I can't find any mention of this and I suggest we actually make some mention to alert. And they said, oh yeah, I think this may have been just an innocent oversight on our part. So yeah, they're gonna, they're gonna do something. But in the meantime, you've heard it here first on the eBay for Business Podcast. Breaking news!

Brian: Another reason to listen, this should have been a news item.

Griff: I wanted to hold it off for the question, that's why.

Brian: But I'm glad he wrote in and I'm glad you were able to find, find the answer.

Griff: So even if your shoes don't qualify for authenticity guarantee because they're not at that inflection price point, people are gonna find them a lot easier if you put in the style code. So there is an item specific for shoes, specifically all shoes, the sneakers that says style code. It's not a requirement yet. Put the style code in.

Brian: Some people might search with it.

Griff: I search for them all the time. So it's really important to have that number, that style code for that particular brand of shoe in there.

Brian: Well that's some really good information for all of our sneaker sellers out there. And even for those who are looking.

Griff: You can search that way too.

Brian: You could search for those that don't have, haven't included it, and maybe get the items at a better price cuz there's no demand.

Griff: It's like when we used to encourage people to search for misspellings. And then now that's not so common. But yeah, style codes make a difference. And you know, you can never have too many shoes.

Brian: Okay, Imelda,

Griff: You learn something here on the podcast and it's also fun.

Brian: It is. Well if you wanna join the fun here on the eBay for Business Podcast, call us on (888) 723-4630.

Griff: I know that people aren't phone prone these days. They want to text or send emails, but we'd love to hear your voice. (888) 723-4630. You can call that number anytime of day, any day of the week at your convenience. And you can leave a question or a comment or you might indicate that you would like to talk to us live on the show and we'll arrange for that.

Brian: Yeah, I love it when people call in and we do the live ones. We did just last week.

Griff: Yeah, we can, even though it's a recorded podcast. We can do that.

Brian: And if you're not a call on the phone person, you can email us at podcast@ebay.com. That's podcast@ebay.com

Griff: And now it's your Three Point Podcast Checklist

Brian: Number one or number. Check the Announcement Board at ebay.com/announcements for up to date seller news every day.

Griff: Number two. I know you think I got into a better mood, but anyway, I can't do this. Start investing in No, not a thermal printer though. You should this week. The reminder is don't present yourself to your buyers as a rank amateur seller. Stop using cut up USPS bubble mailers. You know, the ones you get for free of their website. Stop using them as packing materials and start investing in professional materials like compostable peanuts or bubble wrapper or better. You know what I use to pack most of my items so that they're safe. And it works. Unless the item is really heavy. I use eBays tissue paper from the store. You can put it in the compost heap or recycle it, you bundle. You know, you just sort of crunch it up into balls and it doesn't cost that much. It's lightweight. It doesn't increase the weight of the package. So, you know, use that stuff. All right, rant off.

Brian: And please don't use the word vintage.

Griff: Grrr!

Brian: Number three. Need to review anything in this episode. It's easy. Check the transcript for this and all episodes for follow up on what you've heard and define the links we referenced during the episode.

Griff: And on our next episode, we'll talk to eBay Product Manager, Rika Patel, to talk about business policies because apparently a lot of you out there haven't adopted them yet. And it makes me sad. It keeps me up at night. I shed little tears when I think that there's eBay sellers that could be using business policies. And we're going to give you the real good case why you should. Plus there's a little bit of news involved as well.

Brian: We'd like to again, thank our guests this week. Vice President of Operations at TaxAct. Mark Jaeger.

Griff: eBay for Business Podcast is produced and distributed by Libsyn and podCast411.