eBay PowerSeller Nick Sevino (a pseudonym) answers questions about buying and selling on eBay.

Dear Nick,
What is the correct amount of shipping a seller should charge, and what constitutes gouging?
Roxy

Dear Roxy,

Many moons ago when I was selling computer mice, I started auctions at $5 with a $3 S&H charge. The mice didn't move at all. Then I tried selling with a starting bid of $1 with a $7 S&H charge. Lo and behold, those auctions sold well! We can't change the world. Many people are attracted to auctions that have a lower price and higher shipping costs.

There is no universal answer, and different categories and different items have different requirements. When deciding your shipping pricing strategy, one of the easiest and most effective tricks is to take a look at the competition and see what they are charging. I like to call this the Highway Principle. The Porsche you see speeding at 90MPH on the highway has a greater risk of an accident or traffic ticket. But on the other side of the coin, Grandma driving her Lincoln at 40MPH in a 65MPH zone creates a safety hazard.

The safest speed is going with the speed of traffic. Charging for shipping and handling is a little like that. If everyone in the CD (Compact Disk) category is charging $3.50, maybe that's where you should be. Potential customers may be turned off by shipping that is much higher than other sellers. But pricing shipping and handling below the competition may eat into profit and not create higher bids or associated good will.

Also remember that if you charge for shipping & handling, make sure you pack the item appropriately. I purchased a Kreepy Krauly (a device that crawls on the bottom of a swimming pool) on eBay. The S&H charge was $25. The actual shipping was only around $12, and the rest was handling. When it arrived, it came in the original retail box without any extra exterior packaging, and the box was scuffed. I felt a little cheated that the seller obviously made money on the shipping and handling but didn't spend a few bucks to make sure I received a pristine unit.

Next time you think about handling charges, consider the following costs.

1. Packaging
Never ever ship any product without an external outer cover. Buyers don't like to receive scuffed merchandise.

2. Labor to package
It takes time to package an item, to put a label on, to pack orders from an invoice. Even if you do it yourself, you should put a value on your time.

3. Labor for invoicing and accounting
It takes time to make an invoice, to correlate payments to invoices to export or input into accounting programs.

4. Supplies
Printer, Toner, Labels, Depreciation

5. Time & Expenses
Trip to Post Office and waiting in line, gas, wear and tear on your car.

6. Delivery Pick-up Charges
If you use UPS or Airborne Express and have a pickup, they'll charge at least $7 per week.

8. Shrinkage or Mis-shipments, products returned by Post Office as undeliverable.
A certain amount of packages will be returned as undeliverable and need to be sent again.

These 8 costs are only related to handling an order, and don't even include the expenses of running your business!

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If you have a question you'd like Nick to consider for a future issue of "Dear Nick," send it to nick@auctionbytes.com.