4 - 2011

Alert: Beware the real price of Amazon re-selling

photo by cdsessums

We’ve been doing some cleaning at our house, and I came across a sealed DVD movie the other day. As I recall, we purchased it as a gift and then found out the would-be recipient had already seen (and hated!) the movie. We already have a copy of the DVD. We should have returned it, but now it’s been lingering in our basement for years.

So, being a modern girl, I turned to the Internet to sell it, just to get it out of the house. Often, I donate items to a charity, but in this case I figured it would be nice to make a buck, and so I listed it on Amazon.com.

In the process, however, I’ve really been shocked at Amazon’s process of charging fees for these low-priced items.

I listed the item with the lowest price so it would move quickly. That price was $1.67. I saw that I would get a shipping credit of $2.98, and so I thought I would have a margin to make a couple of dollars.

I was right — it did sell quickly. It was after the sale that I understood how Amazon’s commissions work. All told, Amazon’s commission and fees on that sale are $2.04.

That’s right — they are making more on the sale than my listing price!

An email from customer service broke it down this way:

Here’s how it works:
Sale price of the item
Shipping credit
– Variable closing fee
– $0.99 Fixed closing fee (waived for Pro Merchants)
– Commission of 6-15% of the sale price
= Total deposited to seller’s account

For your product low priced at $1.67 and with standard U.S. shipping selected by the buyer:
$1.67 (Sale price of the item)
$2.98 (Shipping credit)
– $0.80 (Variable closing fee)
– $0.99 (Fixed closing fee)
– $0.25 (Commission of 15% of the sale price)
= $2.61 (Total deposited to your seller’s account)

So, for this transaction, the customer paid $4.65. Amazon made $2.04. The post office is taking $1.88 for postage. I netted $0.73.

According to ItsDeductible.com, if I had donated the item to Goodwill, and taken the tax deduction (counting the item as a “high value” DVD with a retail value of $3.00), my net tax benefit would have been $0.75.

Hopefully, the buyer feels that he got a good deal. Thank goodness he didn’t pick priority shipping, which would have cost nearly $6 (that’s right … for a flat, four-ounce envelope) and erased my whole profit margin.

Notice that if I sold more (if I were a “power merchant”), I could have made $1 more on this item. Maybe the company is tired of dealing with piddly individual sales.

In the future, I’ll think twice about buying those super-low-price items on Amazon. Maybe I could have sold the video at a local store and gotten a little more money — and when I go to buy, could at least check a local store and probably pay the same price, with profits staying local instead of fattening Jeff Bezos’ coffers.

Don’t get me wrong — I love Amazon’s ginormous inventory, its great search tools, and so much more. You can find great discounts on the site, and it’s so convenient. But this experience left me wondering what price convenience when it comes to the “little guy” seller — and even when it comes to larger companies that retail through Amazon.

What do you think? Do you buy from Amazon? What about other large retailers? Or do you try to keep it local?

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