eBay have announced the end of mandatory free postage in many categories and instead introduced postage caps. There are a number of arguments for and against sellers offering their customers free postage, the most compelling of which is that “buyers like it”, but do they?

Partly the argument for buyers liking free postage is that it makes the purchase decision simple. The price you see is the price you pay, and there’s no need to do any simple addition to get the total price. However buyers aren’t stupid and they know that there is no such thing as “free”. “Free postage” should be more correctly named “Postage included”.

One of the overriding reasons for eBay to back track on their mandatory free post is that it simply doesn’t work for sellers. Too many have complained that being forced to offer free postage impacts on their margins to such an extent that they simply stopped listings certain product lines on the site.

Sellers who previously operated on a 99p no reserve auction format simply would take the risk that their item might sell for just 99p, but then cost them many times that in shipping fees. Free post has pretty much killed off the low start auction, which is without a doubt the best way to achieve the highest sale price. An auction starting at £8.99, because it’s a heavy item and will cost £8.00 to post, simply doesn’t appear as attractive as the same product priced at 99p plus £8.00 postage.

Others complained that mandatory free post was forced upon them too widely and that whilst in principle they agreed it could be desirable to buyers, in many cases it was to the buyer’s detriment. Take the example of a DVD seller:

Previously offering DVDs with say £2.00 postage for the first item and no extra for additional item purchased at the same time, with mandatory free post that £2.00 had to be added into the cost. An £8.99 DVD would now cost £10.99 which you may say is exactly that same cost as before. What happens if a buyer wants to buy two or three DVDs though? With free postage they’ll effectively be paying £2.00 delivery for each item, and there’s now no incentive to make multiple purchases from a single seller. At a stroke free postage wipes out every incentive for buyers to increase their average order value, and as any seller worth their salt knows average order value is the single greatest key to profitability.

“eBay’s original supposition for imposing mandatory free post was that it as well as being attractive to buyers it would also remove unreasonably high postage charges from the site. Replacing free postage with postage caps will achieve the same aim.”

Heavier items are even more troublesome; products which due to their weight incur a courier charge naturally cost more to ship than a DVD. If the shipping cost is built into the purchase price not only is there a disincentive for buyers to make multiple purchases but there’s no way for the seller to offer discounts for multiple purchases. A buyer wishing to purchase five items weight 5kg each will pay five courier fees whilst the seller can ship them for one fee in a single parcel. This might be attractive to sellers as they’re making great margins, but the reality is that the buyer is more likely simply to purchase elsewhere.

eBay’s original supposition for imposing mandatory free post was that it as well as being attractive to buyers it would also at a stroke remove unreasonably high postage charges from the site. Replacing free postage with postage caps will achieve the same aim, but will give sellers the freedom to use postage discounts as incentives to encourage multiple purchases again. The return of maximum shipping charges, discounted postage for second or subsequent items, and even optional free postage for sellers that wish to continue offering it give sellers the ability to differentiate themselves from the competition.

One other side effect of free postage has been to lower the quality of service on eBay. When sellers are forced to offer free postage, as the first shipping option displayed to buyers, they naturally choose the cheapest service. This will be the slowest worst postage option that they offer and yet it’s the one recommended by default to buyers.

Sellers should be offering a premium postage option to their customers. Encourage buyers to choose next day, tracked, signed for services – the quicker the product gets to the customer and the more secure the delivery method the better feedback is likely to be, and importantly sellers Detailed Seller Ratings should improve. If buyers downgrade to a cheaper (or free) postage option they’ll know they’ve selected a slower service and it automatically sets their expectations that it’ll be a couple of days before their item arrives.

The end of mandatory free postage once again gives sellers the ability to offer reasonable shipping costs, discounts for multiple purchases and the ability to guide buyers towards premium delivery options. That’s good news for buyers, for sellers and for eBay themselves.