How do Chinese/Hong Kong sellers make money on eBay with 99c free shipping items?

Over the years I have purchased a large number of items from eBay, many from China and Hong Kong, I also act as a seller on eBay. I started wondering how sellers could make an income from items being sold for 99 cents with free shipping.

After reading forums and researching, I thought it would be useful sharing this information.

I thought I would investigate two products, two that I have bought previously

  • a generic Nintendo DS stylus, and
  • a generic iPhone USB data cable

The cost of the product

Everyone one knows that phrase “Made in China’, China’s products are inexpensive do to lower labour costs and mass production of products which get exported all around the globe. But how cheap are these items, to give you an idea head to Alibaba.com, self described as source of “Manufacturers, Suppliers, Exporters, Importers, Buyers, Wholesalers, Products and Trade Leads”.

A Nintendo DS stylus made from ABS plastic the bulk price can range from around 5 cents per piece to as low as 3 cents for quantities over a thousand purchased.

Similarly, an iPhone USB data cable can range from 10 cents to 30 cents, again depending on quantity purchased.

So the actual product’s cost can vary from 1 percent to 30 percent.

Small padded envelopes can also be purchased in bulk for a few cents.

2x Nintendo DS stylus roughly 2 cent each

Postage

Let’s assume items are posted from Hong Kong, Hong Kong Post offers a bulk postage rate of $2.30 (Hong Kong Dollars) for a 20 gram item or $95 (Hong Kong Dollars) for unlimited items to the same destination (Country and City) not exceeding 1 kilogram.

The current (26th October 2012) exchange rate of 1 United States Dollar is 7.75035 Hong Kong Dollars. So to put the above postage costs into perspective, you can post 1 kilogram of items for $12.24 United States. If you were sending 20 gram packets, it would cost 25 cents each. The envelope to post the item weighs around 8 cents and the actual item from 2 grams to 30 grams.

But why does an international letter from Hong Kong cost less than it costs us to send a domestic letter? There a number of contributing theories,

  • High degree of automation, have you ever seen a hand written envelope arriving from Hong Kong? Probably not. The seller has already entered all the details online, the postal service just needs to scan the barcode, there is minimal human involvement.
  • Reciprocating postage agreements, countries have agreements with other countries on the basis of ‘you deliver our mail and we will deliver yours’. Now when was the last time you sent a package to Hong Kong, and now when was the last time you received a package from Hong Kong. There a significantly more received parcels, who pays to deliver these parcels, your local post office, how do they afford to deliver these parcels to your letter box, by increasing the costs to send parcels. Now you know why our postage rates are so much more expensive?
  • Bulk postage, Hong Kong is an aviation hub, owning the record for world’s busiest airport by cargo traffic. That small envelope you received was probably sharing the same plane with thousands of others destined to your city.

A typical envelope from Hong Kong

eBay and PayPal Fees

Now we get to the costs for using eBay and PayPal, we know these cost are high for the average sellers, eBay itself have stated they want a return of around 10% on every item sold. How do these particular sellers minimise costs?

PayPal Micropayments

PayPal offers a Micropayments account with a different fee system.

Instead of the normal 2.9% plus 30 cents for each transaction on a Business account, a Micropayments account offers 5% plus 5 cents for each transaction. What this means is that for transactions less than $12, it is more economical to use the Micropayments account.

Assume a 99 cent item, with a normal PayPal business account the fee would be 33 cents, but with the PayPal Micropayments account the fee would only be 10 cents, a 23 cent difference.

Here is an interesting fact, anything sold for less than 30 cents and received with PayPal Business account or 5 cents and received with PayPal Micropayments account and the seller hasn’t already made no profit.

PayPal normal account vs Micropayments account

eBay fees

To list an item costs 50 cents, but on that single listing there can be any quantity, for each item sold 7% of the sale price is applicable. Sellers are allowed to make changes to this listing, so the same listing can be used for a number of different items.

To put the eBay cost in perspective, on a 99 cent item it is roughly 7 cents on eBay fees alone.

Final Profit

So now we know all the costs associated with selling the item, what is the profit?

Adding all the selling costs, not including the cost of the actual product, we get 7 cents from eBay, 10 cents from PayPal, 3 cents for the envelope and 25 cents for postage at a total cost of 45 cents. Assuming the product can cost anywhere from 2 to 30 cents, the profit on a 99 cent item can range from 25 to 50 cents, or 25% to 50% net profit. No bad for a single item.

Let’s assume the seller is selling 10,000 items a year. That’s an income of $2,500 to $5,000 per year.  Increase the number of items offered, and that is quite a significant income.

Cheap SSD from Compact Flash card for older laptops

Okay, so this post is about 3 years too late, but I thought I would post it anyway.

I have a number of old laptops which I use as digital photo frames, we are talking original Pentiums II here. The problem is given the age of these, the hard drives are either extremely noisy and about to die, or already conked out. So what is a cheap reliable solution for these aged drives, a Compact Flash memory card and an IDE adapter.

I advise buying the dual models as it gives you four alternate ways to play with (two dual slots, and single jumper for selecting either master or slave). Two identical Toshiba laptops, would only accept these devices in a specific different configuration, perhaps it was the different adapter models though. A 4GB Compact Flash card can be purchased for $10, with the adapter around $2.

Below are two versions of the IDE to Compact Flash adapter;
IDE to Compact Flash adapter
IDE to Compact Flash adapter

And a cheapy Compact Flash card;
IDE to Compact Flash adapter

Okay, so the speed of these aren’t too great, but for what I am using them for they are perfect.

How to repair High Heel Shoes for a few dollars

A very easy guide on repairing high heel shoes for a few dollars.

The damaged high heel shoe culprit, notice the lack of any heel and the exposed dangerous metal pin.

Damaged high heel, notice the metal pin protruding

Damaged high heel close up

The first task is to remove the old metal pin, depending on how worn the heel is depends on the ease of doing so. If there is a little rubber still visible or about 1mm of the pin showing it will be quite easy. I like to use a vice to squeeze the protruding head and then pull the shoe while rotating left and right, it should be easy enough with pliers, only a little more fiddling around.

If there is very little of the metal pin protruding and you are finding it very difficult to get a good grip on it, I sometimes cut about 1mm of the white plastic heel around the pin with a knife to expose more of the pin.

Remove the metal pin in a vice or with pliers

Once the pin is removed, give the heel a file to make everything nice and flat. Notice quite a bit of wear on the heel, depending on how fussy the owner is, you can remove any hanging leather and give the heel a nice coat of black paint. Personally, I don’t think it matters as it is quite hidden when worn.

Metal pin removed

After a double spray of flat black paint.

After a double coat of flat black spray paint

Now, I purchased 10 pairs of 10.5mm (7/16″) replacement heel tips for £7.50 (roughly $15 Australian, including shipping to Australia) on eBay. I have found that the majority of heels are around 10mm, there was one instance I had a stiletto of roughly 8mm and all that was required was some grinding/filing to obtain the required size. The shoes pictured are 10.5mm.

Replacement heel tips

In some cases the size of the pin hole may be too large for the regular 2.9mm (7/64″) pin, so some convertors to 3.1mm (or what they call Flexitubes) may be required. I purchased 8 pairs for £2.85 (roughly $5.7 Australian, including shipping to Australia) from Stiletto Heel Tips Online.

Flexitubes - converts 2.9mm pin to 3.1mm pin

To fix the new heel to the shoe, first make a very basic shoehorn. Notice the wood is at an angle, as the sole of the shoe as actually at an angle to the heel. A slightly thicker piece of wood would have been better.

Very basic shoehorn

Hammer the new heel all the way down till the plastic heel is touching the shoe’s heel. Make sure it is facing the right direction, the curved size facing back, and the flat side facing front.

Hammer the new heel tip into the shoe

The completely repaired high heel shoes for the cost of less than $2.50 Australian.

Completely repaired high heel shoes