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Minimum reserve on trademe.co.nz

Recently I have been asked what sellers should set as their minimum reserve for listing an item on www.trademe.co.nz - New Zealand's version of Ebay.

So I thought I'd post how we worked through this - while not directly related to intranets 'all things are connected'.

Example - Toby is using TradeMe to test the market for a new kid's product he has developed, Do it yourself tree houses for the 3 to 7 year old age group, Toby's Tots Tree houses.

Tree House kit - cost to manufacture NZ$80
Profit per kit Toby would like - NZ$20

As at 3 Nov 2008 TradeMe will charge Toby 6.9% for a successful sale under NZ$150

Toby is keen to make the most of the options available to promote the TTThouses so he has decided to pay for the following per item listed
  • Feature combo - NZ$3.95
  • Subtitle - NZ$0.55
  • One extra Photo - NZ$0.10
  • Scheduled end time for the auction - NZ$0.25
  • Reserve fee (so he can set the reserve) - NZ$0.25
Toby figures on the following being his labour time costs
  • taking photos - 10min
  • researching other listings - 10min
  • answering questions - 10min
  • arranging payment and pickup - 10min
  • actual pickup of the TTThouse - 10min
Total of 50minutes.
Toby will charge his time for this costing exercise at NZ$40 per hour
Total required to pay for Toby's time NZ$33

So Toby needs to sell his tree houses for the following amount at least:

NZ$80 + NZ$20 + NZ$3.95 + NZ$0.55 + NZ$0.10 + NZ$0.25 + NZ$0.25 + NZ$33
=
NZ$138.10
* 1.069
=
NZ$147.63

If Toby wants to include free shipping in the price, NZ$20 anywhere in the country, his price will go over NZ$150 so he falls into a different pricing bracket $10.35 plus 4.5% of the amount greater than NZ$150 that is paid.

NZ$138.10
+NZ$20
+NZ$10.35
=
NZ$168.45
+ (($168.45 - 150)*1.045)
=
NZ$187.73

This price (NZ$187.73) will cover
  • all of Toby's costs
  • allow him to sell his Tree Houses with "Free shipping"
  • cover his TradeMe expenses
  • pay for his time listing and actually selling via TradeMe
In conclusion
Be very careful how you price products you make or purchase if listing them on auction sites.

If Toby had sold his Tree Houses for NZ$120, or put a reserve of NZ$120 he would have been out of pocket for each and every one that sold for less than NZ$187.73

Toby though he might sell two a week so in the worst case he would have lost NZ$7000 over the course of a year.

Finally
One of the reasons I've posted this is for those of you who are looking can poke holes in our logic, so please let me know what you think and what your experiences have been.

DorjeM

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