VAT - Ebay - Selling at a Loss?

Discussion in 'Money, Accounts & Finance' started by manishp100, Jul 15, 2016.

  1. manishp100

    manishp100

    Joined:
    Nov 19, 2008
    Messages:
    283
    Hi All, haven't been around much as business is just too busy - double edged sword.

    I wanted a work out my Break even Price being VAT Registered for an ebay product and wanted to work out the correct formula - have been looking at competitors and noticed that some people - from what I take are making next to nothing on products and doing volume, I checked the persons accounts online and saw that they had approx 60k in the bank and bought over over 30k last year but their prices on ebay are rock bottom

    Disclaimer - I'm not in the business to be a busy fool however I am happy to lower price to increase sales to compete on particular ranges.

    Scnario:

    RRP - £15.99 (offering free shipping on ebay listing)
    RRP ex VAT - £13.325
    RRP Vat - 2.665

    Product ex VAT Cost - £8.18
    Product VAT paid - £1.636

    Shipping ex VAT Cost - £2.50
    Shipping VAT Paid - £0.50

    eBay Fee from RRP (10%) - £1.599
    Paypal Fee from RRP (2.4%) - £0.384
    Paypal Transaction Fee - £0.20


    Now, I know that a lot of people say not to take VAT into account - 1. Why? 2. I want to work out break even price so am taking VAT into account - maybe I am wrong about this.

    Costs:
    Product ex VAT Cost - £8.18
    Shipping ex VAT Cost - £2.50
    eBay Fee from RRP (10%) - £1.599
    Paypal Fee from RRP (2.4%) - £0.384
    Paypal Transaction Fee - £0.20
    RRP Vat - 2.665

    - Total Cost - £15.53 (rounded up)

    Income:
    RRP ex VAT - £13.325
    Product VAT paid - £1.636
    Shipping VAT Paid - £0.50

    - Total Income £15.46 (rounded off)

    So -
    Total Income - £15.46
    Total Cost - £15.53
    Difference = £-0.07

    Is this correct?

    Based on this the competitor is making £-0.07 loss per item?

    I have an accountant who is on holiday until midweek and I have a free weekend so wanted to just work things out for now.

    Thank you in advance to anyone that helps
  2. manishp100

    manishp100

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    Nov 19, 2008
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    283
    Anyone? lol
  3. psxgamer

    psxgamer

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    Jul 14, 2009
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    3,451
    Don't look too much to your competitors and take your business in your own hands. It's not because they are willing to sell at a loss or with tiny profit that you have to do the same.

    There's been a while I did the same (looking at a competitor). Not any business can survive without making a profit, hence you're a business. That competitor used to be the biggest seller I knew in my domain. Has been selling for peanuts for the last couple of years.

    Went my own road some time ago. As a result this competitor is almost out of business while I'm thriving.

    Just one of the examples. I've seen others doing the same and have all disappeared.

    Just try to be better. Better pictures, better descriptions, flawless customer support. It's not always about the price.
    Cody and manishp100 like this.
  4. manishp100

    manishp100

    Joined:
    Nov 19, 2008
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    Hey,

    Thank you for the reply, I never compete to kill margins but for ebay or some products I am approximately 20-30% more expensive and am not receiving sales on them, in the past I have reduced this easily as I have not been VAT Registered so I know my margins but with being VAT Registered it seems to be a different calculation which I am having a slight issue with.

    If I know what I am working with regarding the calculations I can price accordingly to reduce some lines where I am happy to sell for regarding the margin I would make and know I can compete without being a busy fool as I call it
  5. consultant

    consultant

    Joined:
    Jan 17, 2008
    Messages:
    827
    Do you calculations based on ex VAT selling & costs.

    By my calculation you are making £0.45 ex VAT profit!
    Product ex VAT Cost - £8.18
    Shipping ex VAT Cost - £2.50
    eBay Fee from RRP (10%) - £1.599
    Paypal Fee from RRP (2.4%) - £0.384
    Paypal Transaction Fee - £0.20
    Total - £12.87

    TX - £13.32

    Difference - £0.45



    Remember, you can also account for the VAT you pay in the running of your business.
    manishp100 likes this.
  6. beacon hill

    beacon hill

    Joined:
    Jun 28, 2010
    Messages:
    1,861
    "Costs:
    Product ex VAT Cost - £8.18
    Based on this the competitor is making £-0.07 loss per item"

    How do you know they are paying £8.18 ex-vat ?

    Most importers / wholesalers etc have varying prices depending on dealer levels.
    For example
    One item I sell has a dealer price of £7.62 with a retail of £15.99
    Because of my dealer level I can buy at a price that I could sell for less
    than £7.62 (basic trade price) if I wanted
    manishp100 likes this.
  7. manishp100

    manishp100

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    Nov 19, 2008
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    I know the price they are getting it for is standard cost - I am on a higher dealer level with the supplier and pretty good friends with them so we talk business all the time and they were happy to divulge this information to me as I have worked closely with them for many years and know them personally
  8. beacon hill

    beacon hill

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    "I am on a higher dealer level with the supplier"

    I take it you are paying lower than standard rate then ?..
    If not, I,d be having a chat again with them.

    One example for me. Item has a standard ex-vat price of £6.03 with an RRP of £12.99
    With me being on a higher dealer level I pay less than £2.50 ex-vat..So do I reduce
    the selling price ?..No, I sell at above RRP at £14.99 and is top ranked on e bay and sell more than
    anyone else.

    Like yourself I work closely with that supplier, and like many
    other brand name importers they visit me in person

    I,m guessing you can do the same with being on a higher dealer level. If so, you should
    have no problem undercutting your competitor or selling for the same price with bigger margins
  9. manishp100

    manishp100

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    Exactly that, I have slightly more favourable prices.

    It makes a difference sometimes when you are £5+ more expensive than the nearest competitor on ebay for certain product ranges (amazon and website not so much an issue) - I have adopted a strategy on some products to undercut get the sales (lower profit) and buidling a 'sold' history on certain products and then slowly bump the prices up and thats seemed to work for a while.

    I just wanted to find out the breakeven prices with the correct VAT Calulation in place along with marketplace fees etc.

    on my website I dont have to worry about this, I add a certain margin to particular products and away i go.
  10. paulbrown

    paulbrown

    Joined:
    Jul 8, 2010
    Messages:
    412
    As consultant said - you are making 46p on your example.

    Ignore the VAT in your calculations and just use the NET figures.

    If you still don't get it I will explain in more detail.
  11. TheDevil

    TheDevil

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    Oct 27, 2009
    Messages:
    4,962
    Hello,

    Are you sure you can guarentee you are paying less? We have many cases where we are told this but take it with a pinch of salt...

    Alan

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