eBay: Low cost vs Amazon: Premium service

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That Royal Mail were one of the Platinum sponsors of ChannelAdvisor Catalyst was very apt. For me almost the whole two days of the conference revolved around postage discussions and presentations including the Royal Mail and Amazon presentations, the Consumer Panel and conversations with the eBay shipping team in the eBay lounge.

It’s becoming strikingly obvious that eBay and Amazon approach postage from two different views. For the last two years eBay have concentrated on offering free or capped shipping and driving down unreasonable shipping charges. Listings get promoted in search results for offering free shipping as the first postage option and although compulsory free postage is a thing of the past many categories now have capped postage.

Offering free postage as the first option by definition means the cheapest and usually the slowest, untracked delivery method. Whilst free post (or capped postage) may present buyers with low prices it doesn’t lead to the best service. While some buyers may choose to upgrade to a premium postage option and pay a surcharge from experience most will stick with the first option offered.

In contrast Amazon offer their standard offering as default. Options are available to downgrade to Super Saver if you’re not in a hurry for your purchase, or to upgrade to next day delivery. Amazon also upsell their premium next day delivery with Amazon Prime, where for a fixed fee all of your purchases will be delivered next day for a year.

Amazon are themselves a retailer and appear to understand that it’s not all about cost, charging more for standard postage but offering options to upgrade or downgrade means that they’re always going to beat eBay on service.

Amazon also actively promote items offered from 3rd party products if they use FBA (Fulfillment by Amazon). This then enables the products to benefit from Amazons fast dispatch, and gives Amazon Prime customer the option of free next day delivery.

Today’s Internet buyer tends to expect items to be delivered within one or two days of purchase, not to wait the three to five working days that services low cost shipping services generally offer.

If eBay want to be retailer friendly and guide buyers towards standard or premium postage options they need to encourage sellers to offer premium postage options. By all means encourage sellers to offer free postage, but don’t insist it’s the first postage option offered to gain a boost in search. How about offering a boost in search for sellers who offer 24 hour delivery with same day or next day dispatch? For many customers speed of delivery is more important than the lowest cost service.

The eBay and Amazon marketplaces have two different postage philosophies, eBay are encouraging sellers to offer the lowest cost thus generally the worst service as first choice. Amazon offer a premium option but guide regular buyers towards their premium next day service with a low cost option for those who actively choose slower delivery times.

As a buyer how important is fast delivery to you? Do you prefer to pay the absolute minimum possible or would you routinely prefer to pay a little extra but have your purchases within one or two days of payment?

15 Responses

  1. The problem with the postage options on ebay is that you cant say offer parcel post free and have priority mail be whatever priority costs MINUS what parcel post costs. You end up having to make it a flat rate (where it could be 25 cents difference in some zones and $10 difference in other zones or worse if it is a BULKY item that catches a dimensional weight).

    This also goes for overnight.

    It would be very helpful also if you could have calculated shipping minus a set amount. IE parcel post free. Priority mail calculated MINUS $7.

    I find that regardless of what the customer wants shippingwise they are NEVER willing to pay for it. When I offer a $5 priority mail upgrade, fewer than 10% of people opt for it. They may grouse about how long it takes and may ding your stars, but they arent willing to pay the extra for the faster delivery. They are happy if you pay for it for them of course….

  2. It depends a bit on what your selling but I don’t think “free” postage should mean that an item is sent by the cheapest means possible and I don’t think this is what eBay want sellers to do.

    If you sell on eBay and want to be a TRS don’t use second class/slow services. If you have a website and want repeat custom don’t use second class/slow services.

    All costs have to be budgeted for. I would suggest that goods be priced in such a way that a customer can receive their purchase within a time frame that matches there expectations.

  3. postage costs have developed into a discount system in many buyers minds
    they feel they are losing out in someway, they know free postage is not free so they want their share if you send two

  4. I’d always be happier to pay a little extra for a better service, so for me Amazon’s model is much more attractive.

    I certainly wouldn’t buy off eBay if I needed anything in a hurry.

    But as a seller, to achieve TRS status, you really have to offer free shipping, and post the fastest (usually the most expensive) method. Ebay need to address this.

  5. if ebay want a free postage model why dont they encourage it by shouldering more of the cost
    being high in search does bugger all for me ,there are still millions more to compete with, money is what dings my bell

  6. I did a trial recently on a range of items on eBay that had free 2nd class postage. They were selling fairly well, and most other seller were offering free 2nd class too. I had as the second option, 30p to ‘upgrade’ to 1st class and very few people used it.

    As a test I tried putting the 30p for 1st class as the first option, then free 2nd class as the second option.

    Sales dropped dramatically on those items and not one person chose to pay the 30p extra for 1st class, so I guess the average eBay buyer just wants the cheapest, but they still want the premium service.

    eBay have said (repeated again today on the UK PS forum) that they want a race to the bottom on price, and something has to be compromised if you want to be the cheapest, or you won’t have a business any more. So either you offer the cheapest service available or you look expensive in comparison to your competitors.

    eBay’s corporate mind-set seems to be cheapest=best, something that I disagree with most vehemently.

  7. As a media seller who had to change the text about ‘Combined postal Discount’ on over 1,000 + listings postal charges or not is a very important part of my selling strategy.

    I experimented with 1st and 2nd class post and there was rarely any difference in delivery times. The difference however is in the buyer’s perception. If they see a 1st class stamp they are more inclined to think 1st class service, and 2nd class stamp 2nd class service.

    As a buyer I have paid 1st class postage and have been disappointed to find the purchase taking a week to arrive. It seems that some sellers waited a day or two before posting, which makes the postage class somewhat pointless.

    As a volume seller offering free post I post every working day, sometimes twice a day. With SMP every buyer is notified that their item has been dispatched, and even sending 2nd class many items arrive the next day. Keeping my prices competitive in a saturated market and posting 2nd class makes better business sense than increasing item prices and risking sales, just to keep my stars bright and shiny.

    I was comparing the price of one of my products the other day and there were 5 sellers including myself all selling the same line of which 4 of us, including me were Trusted Sellers. The 5th seller was listed last and guess what he was the cheapest and had outsold all of us on this product line.
    Ebay introduced the TSR badge and shiny stars as a means of control and manipulation.

    I would much prefer £s in the bank than stars, bangles, stripes or badges.

  8. There is a slightly more cynical interpretation of Amazon’s presentation of their shipping options: their customers have either bought the Amazon Prime service or want free shipping. So Amazon make the paid-for service the default to steer you away from the free service as, just like many ebay sellers, they would rather you didn’t take them up on the offer.

    ** Always goes for the free shipping on Amazon and has found it plenty quick enough **

  9. If you are buying direct from Amazon the free shipping is usually adequate in my view and if you are a regular buyer Prime is a good deal.

    But what no-one seems to mention is how it works for market place sellers who are not using Amazon fullfilment.

    In my category Amazon takes a whopping 28.5% commission out of my postage cost.
    When I offer standard special delivery at £5.05, Amazon only give me £3.61. In order to break even I would have to charge over £7 and customers will no doubt think I am overcharging.

    The Ebay system is riddled with inconsistancies and crude rules and regulations many of which could be sorted by a proper checkout with shopping cart. But at least Ebay see the sense in not charging commission on postage charges.

    Amazon’s aim of being the cheapest venue on the internet is ludicrous with their current charging practice.

  10. The problem with Fulfilment by Amazon is the fees:

    Storage: £ 0.30 / cubic foot per month
    Order Handling: £ 0.25 Per Order
    Pick & Pack: £ 0.60 Per Unit
    Weight Handling: £ 0.10 per 100g

    So it adds up to around £2 per item for my products, as this is presented to the customer as ‘free’ p&p, product prices need to be at or below the RRP. This cost is in addition to the 15% in fees charged on the whole selling price.

    So even if the customer pays for First Class post rather than Super Saver none of the payment received for postage is passed on to the seller – this means in many cases Amazon is paid twice for the P&P by both the buyer and seller.

    Also you have the cost of getting your products to Amazon warehouse

  11. The main issue is customers expect so much now and are not willing to pay for it, its a case of want a brand new bmw for a price of second hand ford escort.

    Ebay keep pushing this way of working more and more, in real life you get what you pay for, this applys to postage.

    The best way on ebay is to offer the first option as the cheaper one which brings the buyers in as its displayed on the listing, then when they buy the product they can choose the second option at checkout if they want and take the more expensive next day service.

    As far as TRS – its just a joke – find a company any where in the UK on the high street who can say less than 0.5% of there customers go away unhappy.

    TRS needs to be scrapped and replaced with something that works – Based on customer service and the quality of products you offer.

    P & P should not come into it nor dispatch time (time from our door to customers as most buyers think it means)

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