Economies of Scale on eBay
by Jerry
eBay Staff Member

Imagine the time and listing fee savings if you could compress ten separate auction listings into one, and improve your overall sales rate at the same time. Sellers who understand the concept of "economies of scale" and who consciously design their listings around them have discovered how to gain solid footholds in competitive categories.

"Economies of scale," defined in the context of the eBay marketplace, occur whenever the average listing cost per item decreases as the total number of items increases. The selling strategies that lead to economies of scale are derived from combinations of listing formats and policies, and optional enhancements.

Multiple-Item Listing Formats

The primary selling strategy is grounded on the use of multiple-item listing formats, and the recognition of a special pricing break point. The maximum insertion fee for any auction listing (Dutch Auctions) or multiple-item Fixed Price Listing is $3.30. Given a starting price per item, the seller's objective is to determine which quantity value would cause the insertion fee to equal $3.30.

Since the listing fee can't go any higher, a higher quantity value would cause the average listing cost per item to decrease. If the actual number of items in your inventory exceeds the break point, it is more cost effective to use a multiple-item listing format than to list each item separately.

Let's say, for example, you had 10 identical T-shirts, each with a starting price of $10 (or anything greater than $9.99). It would be more cost-effective to use a single listing with a quantity of 10 than to create 10 separate listings with a quantity of one. The potential to save on listing fees and to generate additional sales increases with the quantity of items. In addition, you'll also save a lot time managing a single listing with multiple buyers compared to multiple listings.

Choice Listing Exceptions

What if you don't have multiple identical items in your inventory, or you prefer to use regular auctions instead of Dutch Auctions or Fixed Price listings? By taking advantage of the Choice Listing Exceptions, you can offer multiple items that differ in specific ways in a single listing, and allow buyers to choose.

While choice listings are generally not allowed, the Choice Listing Exceptions allow a seller to offer custom-made items or services that are created or customized to the buyer's specification, such as personalized T-shirts. Under certain conditions, artists have taken advantage of this exception and created listings for commissioned artwork.

The second exception allows sellers the ability to offer a choice of color in otherwise identical items using multiple quantity listings.

Let's imagine that you have 100 T-shirts with an equal number of 10 different colors. Instead of creating 100 separate listings, you could create one listing with a quantity of 10, and allow the buyer to pick from 10 different colors. Although this exception naturally works for clothing items, there are many other items that come in a variety of colors. By creating listings that incorporate both the Choice Listing Exception with a multiple-item listing format, the potential to save on listing fees and increase your sales rate is even greater.

Optional Listing Enhancements

Many sellers of items costing less than $25 feel the costs of optional listing enhancements such as 10-day Listings ($0.10), Gallery ($0.25), or Featured Plus! ($19.95) cut into their profits too much. This is often true for single item listings. When these three enhancements are used in combination with the strategies described above, however, the final result is a "supercharged" listing costing a total of $23.60 with the strong potential to generate multiple sales.

At first glance this looks expensive. However, since you're promoting many items simultaneously, and not just one, the total listing cost per item is lower. Of course, before you use this strategy, you should run tests on individual items and starting prices to make sure there is sufficient demand. The 10-day option will extend you listing exposure by 3 days (42%) at an incremental cost increase of only 0.4%! The Gallery option represents 1% of the total listing cost. These are no-brainers. By using the Featured Plus! enhancement, you can leapfrog over the competition, and raise your listing to a whole new level of exposure. You can count on a lot more people looking at your listing, because it will be anchored to the top of category listing and search result pages.

Under real conditions, this selling strategy has been shown to increase the volume of sales and decrease the average listing cost per item. During the holiday seasons, when there are throngs of newly registered members eager to snap up items as gifts, this strategy works like magic.

Additional Information:

• Multiple Item Listings
• Choice Listings Policy
• Featured Plus! Upgrade

Additional Jerry's Tips:

• eBay Research Tools
• Wholesale Lots and Buying For Resale On eBay
• eBay Bookkeeping Tools
• eBay Stores Linking Strategies
• Second Chance Offer