eBay Payment Changes Will See Profits Decrease By 74%

eBay Payment Changes Will See Profits Decrease By 74%
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From June 1st, businesses selling products on eBay will no longer receive payments via Paypal, after the two companies ended a 19-year partnership.


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Selling On eBay Will Only Take Place Via Managed Payments System

While buyers visiting the site can still use Paypal to purchase items, the selling process will solely take place via eBay’s managed payments system from start to finish.

But is this a good or a bad thing for the small business suppliers using eBay to market and sell their goods to a global audience?

JC Glancy, founder at business formation provider ZenBusiness, says the simplified payment updates will make the selling process much easier, but will impact sellers’ profitability:

“This change could jeopardize the profits of small businesses using eBay, as the company has increased its fees under the new system. Whilst sellers no longer have to pay PayPal fees, they will now be charged eBay’s flat rate (12.8% of a total sale plus a fixed fee of  $0.30 for all sales under £2,500.)

When comparing this to the previous  system, which consisted of PayPal’s fees, plus 30p and 10% for eBay, some have already taken to social media to raise their issues with the changes.

eBay users have complained on Twitter about the fees causing a loss of earnings, with one seller highlighting they would normally make $0.57 per sale on a $0.99 item, yet this has now been knocked down to just $0.15. We have calculated this to indicate a staggering 73.68% decrease in profit per sale.”

JC Glancy adds:

“Payments will now be sent directly to a seller’s bank account, with payouts initiated Monday through Friday, and within two business days of order confirmation. This means eBay can hold sellers’ profits for as long as three days depending on the time of the transaction, not the most ideal situation for small businesses struggling to keep on top of financial commitments.

“eBay buyers and sellers will continue to benefit from the eBay Money Back Guarantee, with any purchases made with a credit card between £100 and £30,000 entitled to a refund, should anything go wrong. However, this is more of a ‘simplified protection’ in comparison to Paypal’s buyer protection policy, which promises to safeguard users against breaches of contract, missing deliveries, and fake or faulty items.”

Jacob Wolinsky is the founder of ValueWalk.com, a popular value investing and hedge fund focused investment website. Jacob worked as an equity analyst first at a micro-cap focused private equity firm, followed by a stint at a smid cap focused research shop. Jacob lives with his wife and four kids in Passaic NJ. - Email: jacob(at)www.valuewalk.com - Twitter username: JacobWolinsky - Full Disclosure: I do not purchase any equities anymore to avoid even the appearance of a conflict of interest and because at times I may receive grey areas of insider information. I have a few existing holdings from years ago, but I have sold off most of the equities and now only purchase mutual funds and some ETFs. I also own a few grams of Gold and Silver
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