The Economics of Ebay

Today in the U.S., our economy ideally is based around free market capitalist system, where the prices for goods and services are set freely by consent between vendors and consumers, by which the laws and forces of supply and demand are free from any intervention by a government or a monopoly. In a free-market economy, prices for goods and services are set freely by the forces of supply and demand and are allowed to reach their point of equilibrium without much intervention by government policy. This typically entails support for highly competitive markets, such as Ebay, where supply is high. Capitalism is an economic system based on private ownership of the means of production and the creation of goods and services for profit. According to economist Joseph Schumpeter, no other system has benefited “the common people” as much. With the addition of Ebay to the market in 1995, it has connected what were once separate markets and created a highly competitive venue in which to sell. Our market economy has given birth to the poor man’s stock market: Ebay. 

Ebay Headquarters, Photo credit: SeekingAplha

Ebay Headquarters. Photo credit: SeekingAlpha

No matter what the consumer wants, someone will be selling it on Ebay, and it will be well below market value. That is the nature of Ebay. That is why economists agree that Ebay is much better for buying than it is for selling.

Why not sell on Ebay? Ebay will always make more profit than you. Ebay is that friend that asks for a small bite of pizza, then engulfs the whole thing, and sheepishly says, “Oops, sorry.” Once a user creates an account on Ebay and begins to sell, the margins of profit shrink without the seller’s knowledge. Ebay charges if the seller decides to post the item for one week at a time, and if the seller sets a minimum price that the object has to reach when bidding (the hidden reserve price), Ebay will add on another fee. Then once an item is sold, Ebay takes ten percent of sales, while Paypal takes only thirty cents, plus 2.7 percent of what the product sold for (including shipping). That means a minimum of roughly 15 percent of what your item sells for is taken by the middle man, Ebay. Keep in mind that the seller chooses the starting price for their item, and in auctions it only takes one bidder, so if the price is set too low, there goes any profit. Pate Manje, a D.C. native and long-time seller on Ebay, prefers other platforms like trade up, which deals with buying and selling locally, without the fees of Ebay. She uses the app to run her highly profitable online thrift shop, “The days of selling things from around your house are too expensive now. Sell local and keep more of your money!” Katherine Fisher, electronics guru, has made her living buying and selling used cell phones and devices for the past three years. She recommends, “Amazon will get you better results, more traffic, and bigger profits. Consumers trust that platform more. Having said that, anybody that does online selling that does not have a website is bound to go out of business being dependent on someone else for their main sales.”

Despite Ebay not being the website to sell anything and everything, it is the best place for the consumer to buy whatever their heart desires. Anyone can find what they want on Ebay; no how matter weird or disturbing, it’s there, and it’s dirt cheap. Ebay sellers are trying to make the sale, so if supply is high and demand is low, then obviously the item will be sold cheap. Personally, I’ve had great success buying high-end clothing lines on Ebay; clothes that are brand new, from trusted sellers, for up to 90% off. A trusted seller is someone with above a 95% approval rating. Yes, there are scammers to be aware of besides Ebay itself, but they are often very easy to spot, either from the pictures of the item or the reviews of the seller. Once a buyer realizes the power of Ebay, it’s truly eye-opening. Upper School English teacher Josh Katz, “got hooked on the bidding process, I started spending most of my disposable income on the site.” Jordan Kowalski, one of the most dedicated sneakerheads in RVA who is always searching for rare Nikes, likes that he can refine his search to see what they have sold for in the past, “It’s cool to be able to use one site to compare dozens of shoes, and view trends of how often, how well, and how they have been sold and bought for in the past.” Once the buyer experiences the release of endorphins and dopamine after purchasing their desired item at a fraction of retail value, it can become addictive. Katz was addicted for over two years to the site, “After a while, I didn’t even really care about the product itself, I’ve long gotten rid of most of my purchases; I wanted the value, and with it the rush of ‘sniping’ a good buy away from other bidders.” Ebay raises a consumer’s risk of developing Compulsive Buying Disorder (CBD) by as much as 25%. This rush can become very addictive, making a poor man feel rich, while unbeknowingly emptying his already empty pockets further.

Despite Ebay not being the website of choice when it comes to turning a profit, it is the best market for a savvy spender. Ebay floods the market with too many items, from electronics to clothing to rare antiques, forcing a dramatic reduction in price if the seller chooses to be competitive. Ebay operates as a middleman that opens the door for international business deals, while encouraging the most competitive market that benefits the buyer much more than the seller.

About the author

Senior at Collegiate school. Has a twin brother. Likes soccer and protein.