Change to success fee calculation – what it means for you

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The way we calculate success fees for ‘in-trade’ sellers is changing. From 14 March 2018, in-trade sellers will be required to pay success fees on the final sales value (the price of the item sold + shipping costs).

Why are you making the change?

We want this fee restructure to encourage more in-trade sellers to give Kiwis a better deal, by offering free or low-cost shipping. Our research shows that buyers perceive shipping costs on Trade Me to be expensive, which can create a barrier to purchasing or lead to buyers abandoning a sale. We also see some listings with inflated shipping costs and this results in a poor experience for buyers.

It’s widely recognised that consumers seek free shipping when purchasing online, and offering free shipping has been seen to increase sales.

This change is also consistent with payment methods like Pay Now, Ping and Afterpay, where the fee is charged on the final sale value.

When does this come into effect?

Success fees on the final sales value will come into effect on 14 March 2018 for in-trade sellers, so any listings created or relisted from this point will be charged on the price of the item sold, plus the shipping costs.

Any listings created up until 11:59 pm on 13 March 2018 will be calculated and charged at the current success fee rate, even if the item sells on or after 14 March.

This is going to affect my business – what are you doing to help sellers?

Even though there are currently over a million listings offering free shipping on Trade Me, we understand this is a big change for a lot of our sellers. Therefore, we’ve tried to add value elsewhere with some discounted offers and new features – just for our in-trade sellers:

  • We’ve introduced the Gold Trade Rebate to reward the sellers that actively strive to improve the buyer experience. With each listing that meets our criteria you’ll get 10% off the success fees. See our Gold Trade Rebate blog for more information.
  • Building on the strong partnership we’ve developed with Fastway Couriers, we’re excited to let you know that from today they have discounted our already reduced ‘book a courier’ rates an additional 10% for all in-trade sellers. For sellers that use a different courier booking system, Fastway Couriers are happy to discuss a personal solution for your business and can be reached directly on 0800 4 fastway.
  • We’ve recently opened up multi-variant listings to Tradevine and other API users, which will remove the hassle of waiting for a buyer to email with their size/colour choice, and reduce the number of listings you pay high volume listings fees on.
  • With over 50% of Trade Me’s traffic coming from a mobile device, we’ve also been investing in our apps. In the coming weeks we will have Trade Me Stores featured in the iOS app, so your buyers who like to shop on the go see the very best version of your business.

What if I don’t know the shipping costs at time of listing?

We understand that some products are large or awkward to ship, and a bespoke shipping rate needs to be provided.

For in-trade sellers where it is difficult to determine the cost of shipping an item, due to the nature of the item, we have provided an option to choose “Bulky/overweight freight (custom quote required)”. It will still appear as “To be arranged” to the buyer on the listing.

We expect sellers to use this functionality appropriately, and not choose it for things such as mobile phone cases or dresses. We’ll be monitoring usage of this to ensure it is not abused. It’s also worth keeping in mind that listings without specified shipping costs are less likely to sell, so we’d always recommend trying to get a quote for shipping where possible.

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Does this mean I can add the shipping costs to the Buy Now price and offer free shipping?

Simply transferring the cost of shipping and adding it to your Buy Now price is not ‘free’ shipping, as the buyer is still paying the shipping costs. We do not recommend this – it’s misleading for buyers and a breach of the Fair Trading Act.

We suggest you rework your product pricing structure to offer free (or low cost) shipping on the items you can afford to. Read on for some more tips on how to incorporate free shipping into your business model.

How will success fee refunds work?

When a trade doesn’t go ahead as planned and you’re applying for a success fee refund, the process will work the same way as it does now.

  • Apply via the site for a full refund of your success fees. This will include fees paid on shipping.

Remember, you only pay a success fee if your item sells, and the total success fee is capped at $149 for in-trade sellers. The 15% Top Seller discount will also still apply to the full success fee charged.

How to make free shipping work for your business

Someone has to pay for the cost of shipping. The big question for any online retailer is how to offer free shipping to their customers, whilst balancing the expense to their business.

Here are some ideas to make it work for your business:

  • Factor free shipping into your operation from the moment you buy inventory and include it in your financial models. Yes, it will cut into your margins, but think of it as another marketing expense – a tool to attract more sales. The return on investment should stack up.
  • Shout it from the rooftops – “Get free shipping here!” Customers love it, but they need to be made aware of it too, so mention you offer free shipping (and any other unique selling point of your business) in your listings to attract buyers. Marketing this perk will reduce potential sale barriers and help you stand out from other sellers.
  • Pick a few products that you have healthy margins in and offer free shipping on those. You don’t need to offer free shipping on everything.
  • If you have a fairly standard product line, for example you only sell mobile phone cases, then flat rate shipping could be the way to go. It’s not free shipping, but at least the simplified shipping costs of “$2 anywhere in NZ” for example, will be easier for buyers to digest. Just be sure that you’re not drastically over or under-charging your customers.
  • Finally, online retailers can reduce overheads by negotiating preferential shipping rates with courier companies. We offer our ‘Book a courier’ service for reliable, low cost, competitive shipping within NZ. Again, free shipping is what buyers really want, but if you can’t offer it on all products, then ‘Book a courier’ may work for you. Our partners at Fastway Couriers are also offering an additional 10% discount off their Book a courier rate, for all our in-trade sellers.

New free shipping banner

Another benefit of free shipping is the updated free shipping banner in search results, shown below. We’ve recently changed this banner so that listings offering free shipping (selected during the listing process) stand out to buyers.

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Free shipping – it’s your call

At the end of the day, we can only tell you the facts about free shipping: that it can reduce abandonment rates, increase average number of items in the cart, and increase the average sale price of an order* – but it is up to you to decide which shipping model is right for your business.

Your customer’s experience when they buy from you is paramount, as it’s what makes them return time and again, and recommend you to others. Free shipping is great for your buyers, but remember it’s equally as important that shipping is still reliable and offers tracking. It really is worth the extra investment in using a quality shipping service, and you may be eligible for the Gold Trade Rebate.

We hope you can try out free shipping, and in the long-term see the pay-off by generating more loyal buyers and customer advocates.

Frequently asked questions

How can I get a refund of the success fee for shipping if I refund my buyer?

If your buyer has overpaid shipping (e.g. combined shipping) and you refund them via Ping, Pay Now or AfterPay, you may be entitled to a partial refund of success fees. For partial success fee refunds, contact our customer support team with the details. If you are fully refunding the buyer the total amount of the item plus shipping, then simply apply via the site as you do now.

For My Products and Tradevine users, you can also set up combined shipping offers on your listings for buyers using the Shopping Cart. This will mean all the combined shipping costs are taken care of automatically.

Tip: If you are unsure of how much combined shipping will cost you when creating a listing, our ‘Book a courier’ service offers a shipping calculator, which is a handy tool that gives you an accurate idea of shipping prices.

If I sell something for $1 reserve will I be charged a success fee?

It depends. If you sell something for $1 with free or $0 shipping, or the buyer picks-up, there will be no success fee to pay. However, if you sell something for $1 with $3 shipping, then you will pay a success fee of 32 cents (7.9%) on the final sales value of $4.

If you’re selling a lot of items at $1 reserve and charging a shipping fee, it could be time to think about different options such as offering a flat shipping rate or a minimum order amount.

Are you changing your search algorithm on 14 March to promote listings with free shipping?

No, we won’t be changing our search algorithm for the time being, however, we’ll be promoting free shipping in other ways. We’ve highlighted listings with free shipping with a new flag on our desktop site, and are looking to do the same for our mobile apps very soon. We also allow buyers to filter by listings offering free shipping in search results.

Why don’t you show the total price including shipping on search results?

We’re considering it, but don’t believe that this alone will address the issue that buyers perceive shipping on Trade Me to be expensive. By including success fees on shipping we’re hoping to encourage more sellers to offer free shipping, and reward those sellers with the Gold Trade Rebate. In turn, this should make us an even more compelling e-commerce site for buyers in New Zealand, and drive more sales.

My business sells large bulky items that require a freight forwarder and can be expensive to send. How will we manage this new fee on shipping?

We understand that this change could have a significant impact when shipping items with high shipping costs.

You could consider the following options:

  • You may want to consider a $0 shipping option for local deliveries.

  • Offer pick-up on suitable items could off-set any extra cost.

  • Set up a minimum order value on My Products or Tradevine, to determine which listings could qualify for free shipping.

  • Find out how combined shipping could work for you from this blog post.

  • Try to negotiate a better rate directly with your freight forwarder.

Keep in mind that listings without specified shipping costs are less likely to sell.

If I offer $0 shipping options, such as combined shipping, does this still count as ‘free shipping’ towards the Gold Trade Rebate criteria?

Yes, if the buyer has not paid anything for shipping then that counts as ‘free shipping’. So whether your listing is marked as ‘free shipping’, $0 combined shipping, or another $0 shipping option, they all count towards the Gold Trade Rebate criteria.

  *Source: http://rejoiner.com/resources/free-shipping-online-retail-sales/