Recently I decided to sell my Xbox 360 console on Ebay.  I never use it, so it just sits there gathering dust and taking up precious space.  Meanwhile, its resale value is constantly dwindling.  In a few years a used Xbox 360 console will probably be equivalent to junk, such is the state of our throw away society.  You’d have to pay someone to take it off your hands, so that it can be shipped to China and placed on a landfill site.
So getting rid of it now, while it can still pay me back some cash, makes perfect sense.

This is the problem that Ebay tries to solve for us.  Using its extensive community of users, and coupled to its Paypal monopoly, it allows us to convert unwanted used items from door stoppers into hard cash.  The reason this makes business sense for them is that they charge sellers a percentage of each sale.  And with millions of transactions every single day, Ebay make a handsome profit indeed.

So what does this mean for a simple games console sale? Here’s how my transaction worked out:

I placed my used Xbox console on Ebay as an auction but with a “Buy It Now” price of £50.  The item was snapped up quickly using the Buy it Now option, and the buyer immediately paid me £60 using Paypal.  £50 to cover the item, and £10 to cover the postage.  Ebay sellers are forced to offer Paypal as a payment option, so we have no choice but to use it.

Paypal Fees

Paypal take 3.4% plus £0.20 of all money received.  So even though only £50 applies to my sale of the Xbox (the £10 is going straight back out on postage), the 3.4% + £0.20 cost applies to the full £60 received.  The £10 I charged for postage is literally what it costs me to send the package, so the extra charge here has to come out of my sale cost.  So, so far I am down from £50 to:

Ebay Fees

Ebay charge me a listing fee of £0.50, plus 10% of my item’s final value, plus 10% of my item’s postage cost.  I don’t really understand the latter; the postage costs are not a profit for me – so the 10% charged here has to come out of my item sale cost! This works out as follows:

The Bottom Line

So all of a sudden, a transaction for which I expected to receive £50 has now turned into £41.26.  Percentage wise, Ebay have effectively received 17.5% of my item sale price.  It’s like paying VAT, except in this case the seller pays it!

So on the one hand, I’ve generated £41.26 of useful cash from an item which was effectively useless, and becoming more and more worthless with each passing day.  On another hand, Ebay have charged me £8.74 for the privilege of using their service to sell my item, and I’m therefore £8.74 down on what my item was actually worth.  If I’d tried to sell it on gumtree or something else instead, I’d potentially be a lot better off.

In the past I’ve sold items on Ebay that had final sale values in the thousands of pounds.  When you’re dealing with numbers like that, the amount that Ebay takes off you starts to get really big.  Sell an item for £1000 and you’re probably looking at giving ~£200 of it straight to Ebay/Paypal.  That’s tough to swallow! But at the end of the day, Ebay have engineered a monopoly on the used sales market.  For some transactions, especially niche items, they’re effectively the only game in town if you want to shift your gear.  So I’ll probably continue to allow them to rip me off, and in so doing I’ll perpetuate the madness.