Epic Ebaying: The Movement of Money

Ryan Heshmati

October 28, 2022

You just got your best offer accepted, or maybe you just won an auction with a last-second bid. Regardless of how you got here, the time in your eBaying journey to buy a t-shirt to make the payment has come. But where does that $15, and + $3 to ship, for your new treasure go? The transaction may, on its surface, only involve two parties, the buyer and seller, but money changes hands between more than just these two individuals in the chain that is an eBay purchase.

The first to see the dough

When credit cards, like those of Visa, are purchasing products, “interchange fees,” get charged. According to Forbes Advisor, these charges sit around 1.15-2.40%, which considering the frequency of credit card transactions, is nothing to sneeze at. Before the shipping companies, eBay, or the seller receive any funds, the credit card companies take their cut. 

Fees For Tees

That T-shirt, which costs you $18, has to arrive at your step, so USPS, UPS, or FedEx get, depending on weight, around $3. However, if the shipping cost is exactly the $3 charged, the seller loses money on shipping. The selling fees (Final value fees, depending on item category, are usually between 10-15% for many sellers) on the platform not only get subtracted from the price but also any shipping or handling costs charged to the buyer.

Seller’s Share

After eBay deducts all these fees, any ad rates and promotional campaigns run by a seller for the product sold must also get charged. These fees can be significant, depending on the competitiveness of the category of the item. All the different parties’ hands in the cookie jar can noticeably dilute the seller’s take-home pay. As someone who ran an eBay business over the summer of 2021, I estimate 17.4% of pre-sales-tax revenue went towards eBay’s cost breakdown category of “selling costs.”

Controlling the Cash

For over a decade, PayPal handled sellers’ funds and took a cut for itself. Four years ago, eBay transitioned to its own “Managed Payments” system. In response to eBay's 2018 announcement, Vox notes that  PayPal’s stock dropped around twelve percent in the after-hours market.

Wrap Up

While there are many costs involved with selling on eBay, and the seller receives significantly less than the list price in most cases once all parties take their fees, the value proposition eBay offers is still worth noting, too. In 2018, the chief of communications at eBay asserted internal research found eBay, through its sellers, was “... responsible for creating more than 690,000 jobs…” Especially for those not looking to advance much farther than clearing out old items, eBay presents an intriguing opportunity, despite the fees involved.