This is an update on my experiment in the economics of selling a product that is readily available here in the US overseas using the eBay & PayPal platforms.
In Part 1, I cover the basic background of the experiment, and how I landed on my solution of selling overseas. The item in question: the special edition Garth Brooks 5 DVD set, available for $20 exclusively at Wal-Mart in the US.
eBay, Garth Brooks, and Making Money on Inefficient International Markets
As quick summary, I was able to make a net margin of over 14.1% selling these DVDs on the eBay UK website using nothing more than freely available tools from eBay, PayPal, and the United States Postal service.
The first experiment went so well, I decided to order 10 more DVD sets from Walmart.com (so much for Garth Brooks selling out this year). This time, I attempted to sell them on eBay Germany. In the process I learned quite a bit about how to squeeze more margin out of my shipping, using PayPal’s international postage printing for the first time, and the hazzards of selling into a market where you don’t speak the language.
But first, the economics. Here is my scorecard for selling 10 Garth Brooks DVD sets on eBay Germany.
Sales Revenue € 459.50
Average Sales Price € 45.95
Shipping Cost $12.75 2.1%
eBay Fees $86.38 14.5%
Listing Fees $0.12 0.0%
Feature Fees $23.30 3.9%
Final Value Fees $62.96 10.6%
PayPal Fees $27.67 4.7%
Transaction Fees € 16.80
Cross Border Fees € 4.60
Pounds -> Dollars $1.3261
Currency Conversion Fee 2.50%
Total $ Revenue $594.11 100.0%
Total $ Costs $456.44 76.8%
Total $ Profit $137.67 23.2%
Total $ Cost/Item $23.88
Total $ Profit/Item $13.77 22.6%
Yes, that’s right. Though the economics were different, the overall profit margin for selling the Garth Brooks DVDs, purchased at full retail from Walmart.com, including shipping, was 22.6%. In fact, you could say that the “return on investment” for spending the$23.88 on the DVD was 57.7%.
Let’s do a quick breakdown of what was different about the economics of selling into eBay Germany:
- Lower Volume. Because eBay Germany had a lower sell through of the Garth Brooks DVD, I only sold 7 copies from my first fixed-price listing. As a result, I had to relist the last 3 for a second week. I should note that I listed the item in the core fixed-price format, at 45,95 Euro, with free shipping. The first listing included Featured Plus placement, but both listings included Sub-Title, Gallery, and Scheduled start time.
- Different eBay Fee Structure. I was surprised to see that the eBay Germany fee structure in DVDs is very different than the US & UK. As you can see, the listing fee was next to nothing ($0.06 each time), but the final value fee was quite a bit larger. The overall take rate for the DVD for eBay in Germany was 14.5%, higher than the 8.8% in the UK.
- Strong Euro = Strong Profits. At 45,95 Euro, the DVD sold for over $60 once you convert the Euro to dollars. Even with $12.75 USPS Global Priority Mail shipping, that leaves a lot of profit left over for the seller.
- Optimizing Shipping is Worth It. When I sold to the UK, it cost me $15.75 to ship the package. Why? Because I used the large USPS Global Priority Mail boxes, which made the package 1 pound, 10 oz. By shifting to a smaller box, I was able to get the package down to 1 pound, 8 0z. which was $3 cheaper. That’s over 10% profit margin right there!
Selling into Germany created new challenges. The first issue was how to create an item description in German. I tried two translation services: babelfish.altavista.com and translate.google.com. Neither did a great job, and both created weird, non-German characters in the result.
I cheated a little here – a friend of mine from the eBay Germany office was in town, and I asked him to “fix up” the auto-translation of my item description. In the end, I’m not sure it mattered. What I noticed was that all of my German buyers spoke English… not surprising in retrospect since they listen to Garth Brooks. 🙂 At the time, however, I thought it was something I needed to sell in Germany.
The second challenge was creating the listing. I found using the eBay Sell Your Item form in Germany difficult, largely because it was in German! I consider myself an expert in the form (considering that I managed the product team responsible for it for about six months). Still, I was surprised how long it took me to complete. I don’t know why, but error messages in German were fairly disturbing to me.
The last challenge was answering questions in German from buyers and potential buyers. I think I made this harder than it needed to be. I was so paranoid about not speaking German, for the first few days I actually took every email, translated it on Babelfish, and read it. I then wrote a response, translated it, and sent it back. Finally, in one email, I just sent back the response in English. Ironically, it turned out the buyers didn’t realize I was from the US. Once I wrote to them in English, they did the same, and the problem went away. But it was stressful while it lasted, particularly when one buyer was asking about bank payment, which is popular in Germany. I was really worried I’d end up with negative feedback for a few seconds there.
To close out my lessons here, let me give kudos to two awesome products:
- PayPal. The ability of PayPal to allow me to seamlessly collect money in another currency, and then either maintain that currency balance or translate it to dollars is just amazing. A miracle of the modern Internet. I don’t know how an individual could previously sell overseas with such ease, but I consider the 7.2% take rate of PayPal cheap for the priviledge.
- eBay/PayPal International Postage Printing. It took me a while to get over my fear of change here, but now that I’ve done it I will never look back. These packages weighed over one pound, which normally means you have to go to the post office to send them. Not anymore. I was able to print the postage, stick it in the clear USPS envelope, stick that on the package, and leave it on my porch for pickup. It lets you print the postage and the customs form. One small goof – I forgot to sign it one time. But my mailman brought it back the next day, I signed it, and it was off to Germany.
I’m still waiting for feedback from my last few sales, but now I’m glad to say I have some cool German feedback on eBay that I don’t really understand. But it’s positive, and that’s what counts.
For eBay sellers out there, both individuals and professionals, you should really consider opening your listings up to other countries, and potentially even listing them on those country sites. eBay & PayPal give you all the tools necessary, and as the above experiment shows, the difference can be significant.
In fact, the numbers here are so compelling, I would wager that eBay sellers who master the ability to sell internationally will have a fundamental economic advantage over those who don’t. More profit for the same inventory is always a winner in retail.