Monday, February 27, 2006

Fee Reductions For The Online Seller

One of the main hurtles to profitability for the online seller is the high cost in fees that go with selling goods and services online.

The reduction of fees should be the goal of every online seller. Less for them means more for you.

I have thought about it a lot, and here is what I have come up with as a way of reducing fees. I call it the ICE method. Identify all fees, choose fees that add value, and eliminate or reduce the unnecessary ones.

1. Identify all fees. Those who sell the services used by online sellers often say, "You get what you pay for!" Well this is a good saying (and it is often true), but there is a less often stated saying that applies, "Sometimes you pay more than the value of what you get!" Sadly this is often true too. Being successful as an online seller may depend on which of these sayings applies to your situation. So you have to watch out for hidden and not so hidden fees. Some of the many fees that you may encounter as an online seller are;

- Listing fees - The cost of putting your goods or services online.
- final value fees - The cost charged by the venue, when you sell something.
- postage / handling fees - The total cost of shipping items.
- extra services fees - This could be for any extra service that you pay for. (i.e. image hosting, order management, etc.)
- credit card fees - Fees that your credit card company charges for your online selling activities.
- educational fees - Fees that you pay for books and other educational goods and service.

2. Choose fees that actually add value. Which fees increase sales and add to your bottom line? Which fees really make it more convenient to run your operations. There are those situations where you really are getting what you are paying for. By all means if you really need or want a service then continue to pay for it. I am just saying take the time out to quantify the value of what you are getting.

- Is your mix of auctions vs. fixed prices optimized? Are you paying fees to list the same items over and over?
- Do you really need to pay to host your images? There are many good free services.
- Are you checking the postal rates you are paying closely? Do you use flat rate boxes to do shipping?
- Are you using your credit card in your business, what are the interest rates you are paying?
- Are you paying for books, training, seminars and other information that you could get off the net?

There is no easy answer to any of these questions, the answer is different for each online seller. But my point is that you need to think about and choose the fees that you really need. Examining your business for fees should be done often. Maybe as often as every month, or at least every six months.

3. Eliminate / Reduce all unnecessary fees. It is not enough to just examine and think about which fees you do not need. You must act to eliminate and reduce them.

The companies that make a lot of money when online sellers do not reduce fees depend on you to not eliminate unneeded services. In many cases they are counting on you to continue to pay the fees month after month. The sellers of services make it easy to set up fees and they make it easy for you to send them your money.

- Close down any stores that you are not selling enough items to make at least the fees on.
- Close down any accounts for storing images that you are not using but being charged for.
- Look for every opportunity to reduce the cost of shipping. The post office (and other shipping companies) has many products that vary in cost, it is possible to save just by comparison shopping.
- Look for information online (many of the online auctions sites have large and informative sources of information), only pay for information and training that you can not get for free. Have a good idea how the cost will add to the bottom line.

There are many things that the online seller has to think about. You can find articles and websites devoted to almost every part of online selling. There is not a lot of info out there about reducing fees. This is partly due to the fact that different sellers use different services and it is difficult to give general information that applies to all sellers. As an online seller you have to find the best ways to reduce the fees that you pay as you sell your goods and services.

I recommend that you use what I call the ICE method. Identify all fees, Choose the ones you need, and Eliminate the ones you don't need. And this will help you to FREEZE those fees in place.

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1 comment:

Anonymous said...

Hi--My name is Andy Bruce and speaking of large seller fees, how about that $40 a month shelled out to certain not-so-hot repricing tools?

Enter have built this free online Amazon seller repricing service. Developed in the spirit of true Open Source software, I don't ask for names or passwords or any of that garbage. It's all about making it as easy for small sellers to move their online merchandise as large sellers, using a search engine philosophy. You don't pay to search for an item on Google, why should anyone pay just to analyze and reprice their Amazon listings?

Anyway, the site is functional now and will be fully live within a month. It's all about love and Letting the Monkey Do It (Tooyen herself). I hope you check it out.

Thanks for your blog!

Andy Bruce