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As an Internet Marketer, Lancer Media’s responsibility is to expose our customer’s brands wherever their audience or demographic is. Sometimes, that’s in search engines like Google; other times it’s through RSS (blogs), social media, forums, discussion groups, foreign language translated websites, online shopping sites, etc.

For our retail customers, we’ve found that certain online shopping sites have established brand awareness and enough monthly visitors to warrant participation, i.e., Shopzilla/BizRate, Shopping.com, NexTag, PriceGrabber. We’re careful, though. The cost to online retailers of marketing products through online shopping sites can be significant because their fee structure is typically based on a CPC model. We constantly monitor and adjust category and product CPC bids to ensure a manageable Cost-of-Sale.

Other online shopping sites maintain other fee structures. For example, eBay charges a flat $15.95 per month, a product insertion (listing) fee and a 12% commission on each product sold (of the initial $50). PayPal then charges 2.9% plus a $0.30 fee to process the transaction. Costs add up and if you’re not careful, product expenses could exceed revenue. This type of CPA model prevents us from listing lower priced products.

Let’s use two product pricing examples to illustrate the cost of doing business with eBay/Paypal, a $20 widget and a $6 widget:

$20 Widget P&L
Revenue $20
eBay Listing Fee $0.20
eBay 12% CPA $2.40
Paypal 2.9% fee $0.58
Paypal $0.30 fee $0.30
eBay Store Flat Fee* $1.00
Total Transaction Costs $4.48
Profit (Loss) $15.52
Cost of Sale 22%

* eBay charges a monthly flat eBay Store fee of $15.95 which has to be figured into product costs somehow. We’ve opted to amortize those costs at $1 per sale. If you sell more than 16 products per month, your amortization costs will be less per product.

$6 Widget P&L
Revenue $6
eBay Listing Fee $0.20
eBay 12% CPA $0.72
Paypal 2.9% fee $0.17
Paypal $0.30 fee $0.30
eBay Store Flat Fee* $1.00
Total Transaction Costs $2.39
Profit (Loss) $3.61
Cost of Sale 40%

* eBay charges a monthly flat eBay Store fee of $15.95 which has to be figured into product costs somehow. We’ve opted to amortize those costs at $1 per sale. If you sell more than 16 products per month, your amortization costs will be less per product.

Conclusions

We determined that the cost-of-sale for the $6 widget was simply too large and not an acceptable cost model for us to follow. We didn’t list that $6 widget. However, we were comfortable with the cost-of-sale associated with the $20 widget. From there, it’s not as imperative that you run a cost-of-sale calculation for product prices above $20 because the cost-of-sale will only decrease. It’s the products priced below $20 that you must be concerned with. At which product pricing level are you willing to list your products in an eBay Store?