Don't Undercharge for Shipping, HandlingWhile it's true that "free shipping" can at times act as a sales incentive, it's also true that you pay Final Value Fees on the full sale value if your items once listings end—which means that if you're routinely undercharging for shipping in ways that don't give you marketing benefits, you're paying fees that you don't have to pay.
The simplest way to ensure that this doesn't happen is to invest in a small scale and streamline your shipping process so that you can accurately calculate shipping costs rather than guessing at them. As you do this, don't forget to also include an allowance for handling, if necessary— the cost of packing materials, printing materials, paper for receipts, etc., as well as the labor time involved in boxing and shipping. All of these are legitimate expenses that should be rolled into a listing's shipping costs so that they don't figure into Final Value Fee calculations.
Reconsider PayPal if You're Growing FastIf you're doing a high volume and paying PayPal its percentage as well, you may find that you can increase your net revenue by switching to a direct credit card merchant account instead, perhaps leveraging an auction manager for online payment solutions.
PayPal is a great way for small sellers to begin (indeed, it's nearly the only way now that eBay has banned the acceptance of paper payments of any kind for eBay auctions) but its fees are actually high in comparison to the total cost of a merchant account and its transaction fees if you do enough volume to warrant the initial expense. If in doubt, consult with your financial institution about the plausibility of bypassing PayPal in favor of accepting your own credit card payments.
At the same time, be aware that for small purchases in particular, many eBay shoppers prefer PayPal payments for their convenience—one-click buying with no new per-seller “registration” or need to fill out forms with credit card numbers, names, and addresses. If your sales are primarily in low-value items for which there is a great deal of competition, you may find that a switch away from PayPal can actually hurt business.
For larger ticket items, on the other hand, many consumers actually prefer and will pay a premium for a direct credit card transaction with no intermediary.
Track Your Fees Using a Spreadsheet or LedgerIf all of this sounds indeterminate, a kind of “six of one, half-dozen of the other” proposition, it's probably because you don't actually know where you're paying your fees right now. If you're growing as a seller, especially if you have small online business ambitions, this is a no-no—an all too common one, unfortunately.
If this is you, your job is a simple one: begin to track your fees carefully using a spreadsheet like Microsoft Excel or OpenOffice Calc, or even using a paper ledger and a calculator, item by item. Don't just track what you are paying so that you know where your big fee expenses are, but also do calculations on what you would have paid had you used other options—for example, fixed-price listings instead of auction format, or a merchant account instead of PayPal.
Once you've actually done the calculations for a number of weeks, you should have a clearer picture of whether a series of switches makes sense in your case or not, and you'll gain both a confidence that you're keeping your expenses to a minimum and a clarity about the state of your business and your business model that will help you to maintain an edge in coping with market conditions.