The Fixed Price Trap
In some of the categories I regularly browse, there are thousands of items that I see every week. Years ago, I complained that there were hundreds, and now there are thousands!
A lot of this is because when you list a fixed price item, you can select a 30 day term and check the Good 'Til Canceled (GTC) button so eBay will relist the item until it sells.
HOT TIP: Each time eBay relists an item for you, the listing moves down in best match search results. If you relist it yourself, the listing will appear near the top of best match results in the first day.
In fact, the bump from relisting an item yourself seems to be so great that some sellers are canceling all their Fixed Price Listings and then relisting them whenever eBay does free listing promotions. (From what I see you can do this in your selling manager pane on eBay in groups of fifty listings quite quickly.)
Note: If you relist from within the eBay selling manager the people following the item(s) continue to follow them. (For auctions their watch panel has a link to view relisted item.) This doesn't happen if you relist from within Turbolister.
Maybe I should have called this article:
Never Use Good Til Canceled.Let me shift gears here. . .
I was at a train show a while back where another seller said, "I was hoping you wouldn't be here because I don't sell much when buyers see your lower prices."
Now, the man who complained about my prices being lower than his does have a point. I'm selling my stuff for 20-50 percent of his prices (I'm selling all the good stuff on eBay and then blowing out the cheap stuff at the local shows.)Let me explain my business here. . .
I run ads to buy trains. Over the course of a month I'll make 30-50 purchases. Most of these purchases are just a set or two of trains, but about once a month, I'll get a large quantity from one person.
This means storage is a major issue for me.
In fact, I doubled the size of my rented storage unit in October, and it's already quite full. The crap seems to expand to fill whatever space I have.
Each set of trains is usually an engine, a few cars, along with track and transformer. I keep boxes of track to sell at the shows, and once the boxes are full, I throw out all the rest of the track I get until I start holding it after the next show. The transformers are either sold on eBay, sold at shows or just thrown out. Probably 80% go right into the garbage.
This leaves the train itself. Usually the loco will be auctioned on eBay within 3 weeks of my purchasing it so I have my money back within a month. The cars that are worth at least 2 times the shipping cost are also listed on eBay in auctions.
Take a recent purchase for example. I paid $30 for a set of trains. That's an engine and four cars. I left the track and transformer at the guys house because I'd just be throwing it out when I got home anyway and it's a great way to prove it has no value.
Aside: It isn't worth going out to buy a set of trains for $30 by itself. I group calls by neighborhood and visit with between 3 and 7 callers on each trip. That day I looked at and bought 4 sets of trains.
Anyway, I sold the engine on eBay two weeks later for $56 plus shipping. This means I've already gotten my money back on the deal, and even made a little profit to cover my advertising and other costs.
The cars are worth $7 each, and will cost me about $9 each to mail. This means listing them individually on eBay won't work.
As group I could get $12-15 for the 4 cars, but would have to charge about that for shipping. If they sold for $12, after eBay/PayPal fees I'd net about $10.00.
If I take them to a local show and put $7.00 each on them, they won't all sell. I might sell one or two, but I'll certainly be bringing some of them home.
I could sell two of them at the first show for $14, and then throw out the other two and still be better off than if I had sold them on eBay. But that's throwing away money.
Over the course of a few shows I'd sell them all even if I had to drop the price to $5.00 on the last few cars. So best case at $7 each, I'll get $28 for the 4 cars. If I drop the price on a few cars maybe I'll get $24-25. This is a better way, but still involves storing them between shows.
Rather than dealing with the hassle of taking items home from the show, and knowing that I'll have more, I just price them at $5.00 each. At that price they will all sell at the first show.
Selling them this way I'll make $20 on them, which is about $9.50 more than I'd make selling them on eBay.
So by selling them for $5.00 each I'm making a trade off between getting the highest amount of money for them, and selling them in the quickest time.
Back to the man who complained about my low prices. . . He would price the same cars at $9 or even $10 each so he has room to haggle.
Here's an important point -- I don't care what his prices are. I only want to maximize my sales within the time, space, and effort constraints I have.
I talked with this man at a show last summer, and he said he'd love to do the deals I do, but he can't afford to. Of course not. He's got all his money tied up in the trains.
Now, I started this article off talking about Fixed Price Listings. Is what this man complaining about me undercutting his prices similar to what happens on eBay?
Yes. It's the same.
Actually, it's WORSE.
You see, at a local show the regular buyers know I have deals, and their first stop when they get to the show is usually at my table.
Imagine if a buyer could walk up to the door of a show and see that there are 10 of these $7 cars at the show. One offered by the man mentioned above for $9, seven offered by sellers scattered around the hall for $7, mine at $5, and one way over in the corner by the bathroom for $4.
Assuming all the cars are the same, they'd sell based on price. The $4 would sell to the first interested buyer, my $5 car would sell to the second buyer, and then the $7 cars would sell based on location. The $9 car would only sell if there was demand for more than 9 cars.
That's what a buyer on eBay sees.
It's actually WORSE on eBay because the show has a time constraint. On eBay there is a constant stream of new items being listed. EBay NEVER ends. This means that by the time the 10th buyer comes along, there are likely to be more cars listed at the $7 price or even lower.
This is price competition.
I'm going to shift gears here so I can hammer the point home. . .
Last year I asked you readers to tell me about other eBay oriented newsletters you read. Some of you mentioned one written by a woman who tells about how much she paid for something, and maybe a little tale about the shopping trip, and then links to the sold item on eBay so you can see what it brought.
I think is great from a motivational point of view. Maybe her readers will see some of her surprising sales and start actually doing something.
In fact, I thought about sharing some of my surprising sales with you, but decided against it.
I'll give you an example to show why I decided not to share my surprises with you. This example also explains why I go out an look at trains I expect to buy for $30 and sell for $70.
Last summer I paid a man $70 for a set of trains I figured would sell for $200. One item I figured at $40, one at $120, and the rest were cheaper items I thought would sell for $5-10 each at shows.
Now, I was fully planning on selling the car for $10 at the next train show. The only reason I even checked the expensive car out was I had the common version of the car sitting here and noticed they were different.
All my surprising sales can be traced back to me finding something I wasn't familiar with, or two buyers going into a bidding war and pushing the price of something into the surprising range.
We can ignore the bidding war because that's not something I have control over. That means the whole story comes down to me saying I was surprised by something because I didn't know what I was doing.
But somehow I should be able to turn this example around so you think I'm an expert.
If your whole business strategy involves buying interesting items at yard sales and then hoping you'll make money when you sell them, you might as well just go to the casino. At least at the casino they'll give you free drinks.
Back to the woman who brags about her surprising sales.
I looked at her eBay listings. She has over 10,000 Fixed Price items on eBay. Things like a $5 plate, an $8 vase, and thousands of similar items. Some of the items I looked at had notes in the listings saying they were revised as far back as 2006.
SEVEN YEARS TO SELL AN EIGHT DOLLAR VASE?
It's hard to figure the amount of listing fees she paid for a vase that took seven years to sell because the fees changed over the years. When first listed the vase would have cost 5 cents a month. Currently insertion fees for fixed price listings run between 5 and 25 cents per month with a bunch of free listings included in the store subscription.
If we assume she paid 5 cents a month for the listing for 84 months, we get insertion fees of $4.20. The final value and PayPal fees are another 96 cents. That leaves $2.84 to cover the cost of the item.
During the summer she wrote in her newsletter about moving into a bigger warehouse. While packing, she decided some of her items weren't worth moving so she cancelled the listings and donated the items to Goodwill. Maybe if she'd given more crap to Goodwill she wouldn't have needed a bigger warehouse?
More Fixed Price Insanity. . .
Recently I bought something on eBay from a seller with about 4500 fixed price listings. I paid immediately with PayPal. The next day I got a refund along with a note saying they couldn't find the item. This seller has dozens of negative and neutral feedbacks from buyers complaining about not getting an item because the seller couldn't find it. (I didn't leave him a negative because I've made mistakes and hoped for some understanding from my buyers.)
I just started on the fifth page of this article so lets sum this up.
Avoiding The Fixed Price Trap
There obviously has to be some line with Fixed Price items. I can't tell you where your lines should be, but can give you some ideas for finding them.
Failing to pay attention to price expectations is the Fixed Price Trap.Now, I'm certainly not saying that when you buy something expecting to get $5, and it turns out to be worth $100, you should sell it for $5 anyway. That would be stupid. But it's just as stupid to tie your profits up for years trying to get a few extra dollars.
I've written before that we make our money when we buy. When we sell items, we are just liberating our profits so we can put them and our seed money back to work on the next deal.
Every time I write about this, I get emails telling me I'm wrong. This whole article has been about what happens when people forget that their profits are made when they buy.
That's something to think about,
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After reading. . . Pay Only What YOU Think It's Worth.
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