Saturday, 5 January 2013

Brand whoring on a budget: Shopping services for auction sites (like Yahoo! Japan and MBok)

Step one: Picking a shopping service
Topics covered: Commission fee structures, final cost calculations.

Unless you are lucky enough to have friends or family in Japan who are willing let you bid with their account as well as play parcel forwarding service, you will have to find a shopping service.

Shopping services are businesses (either run by a single person or a whole office of people) that will bid on auctions on behalf of their customers.  Most will act as a proxy for online and physical store purchases as well.  There are some who will only make purchases from stores, not auction sites, so be careful to pick one that specifies that they will bid on auction sites if that is where you intend to shop.

These shopping services usually make their money by charging a fee (aka their commission) for each item purchased.  There are two types of commission structures; by percentage and tiered.

Commission by percentage is exactly that, your fee will be a specified percent of your purchase.  Whether the percentage calculated only on the auction end price, or if it applies to other costs as well depends on the shopping service.  The fewer cost types that are used to calculate fees, the lower the overall price will be.  10% fees can add up quick if the fees are calculated not only on auction end price, but also on domestic Japan shipping and international shipping costs.  For example:
If the commission fees are 10% of the cost then
2500yen yields 250yen in fees,
5320yen yields 532yen in fees,

Tiered commission fees are calculated by creating price ranges and applying a flat rate fee for each of these ranges.  For example:
1-2500yen yields 300yen in fees,
2501-5000yen yields 500yen,
5000-10,000yen yields 800yen,

Tiered commission can be a very good deal if you win the auction at the high end of a particular range; however, it can be less worthwhile if the auction ends at the bottom of the range, or if it's the final bid is just extremely low.  For example, in the above example, 500yen commission fees is a good deal for a 5000yen auction at 10% fees, but if the auction ended at 2505yen, 500yen in fees is almost 20% which is not nearly as good of a deal.  Or if you are hoping to get some small trinkets at very low prices, and win the auction at 200yen, 500yen in fees will raise the final price about 3 folds.

In my personal experience, percentage based commission fees, even higher ones around 20%, are great if you are planning to bid on a lot of cheap items.  Tiered fees are often better if you are bidding on more pricy auctions (but keep in mind the issue with where within the range the auction ends at).

Many shopping services use a mixture of the two.  Single person or very small team shopping services tend to be tiered for simplicity.

If you want to save as much as possible, collect a sample list of auction items you like, list the price you're willing to pay for each item and then apply a lot of math.

Here is the general formula I apply to calculate how much I can expect to pay to have the item in hand.  In order to prevent accidental overspending (worst nightmare for the frugal-minded), the assumptions are that each auction will be won for the maximum bid (and if it ends lower than that, I just think of it as a discount off of what I was willing to pay).

Percentage commission (for item cost, bank fees and domestic shipping)
[(1 + commission as a decimal) x (final bid + bank fee + domestic SH) + international shipping] x (1 + paypal fee as a decimal) = final item cost

Tiered commission (based on item cost)
(final bid + bank fee + domestic SH + international shipping + tier fee) x (1 + paypal fee as a decimal) = final item cost

Obviously they will need some adjustments depending on what the commission of the SS in question is calculated on and whether or not paypal and Japan bank fees are included in the commission.  If you do not have Japanese Yen on hand, the exchange rate and exchange rate fees* will need to be factored in as well.

*Paypal charges about 2.5% above the actual wholesale rate they receive from financial institutions for currency exchanges.  Credit card companies usually charge 2.5% above the actual exchange rate; however, unless you are paying the SS directly with your credit card, you will have to pay Paypal's rates to send payment through Paypal.  The difference between the paypal rate and direct from credit card rate (the wholesale currency rate Paypal gets) is about 0.1-0.2% (Save $1-2 for every $1000 spent), so for many people, this difference is near negligible and not worth the extra hassle since most SS's prefer or will only accept payment through Paypal.

Calculating this for every auction under consideration according to the many shopping service commission fee structures may seem daunting, but if you do it once for the sample list of auctions you compiled, it will tell you which SS will work out cheapest for the type of purchases you're most likely be making.  As long as you don't drastically change the type of items you normally bid on and buy, the results should hold true for quite some time.  If you decide to start purchasing very different kinds of items (ie. changing from mostly buying OPs and JSKs for building a new wardrobe to buying small accessories to finish your coordinates), it's usually worthwhile gathering a new sample list and recalculating where the best savings are.  When I say "type of item", this is based on weight and price, since those are the main factors that will decide the final cost to have the item in hand.

If you find yourself wanting to buy one or a very small number of items that are a very different type from what you would normally buy, re-calculate the final cost of the items for the various SS's to find where the best price is, but once you do so, also compare that to what it would cost to just buy it through your primary SS.  The reason is that for a very small amount, the cost to ship the items in a separate package may outweigh the amount of money you will save on commission and fees.  If this is the case, just buy them through your primary SS.  Use the calculations to determine if the final price is something you are willing to pay, or if it's easier to just take a pass rather than dish out the dough.

If you find yourself bidding on these items more and more, at the point where you purchase them frequently enough to justify shipping them separately, then you can go to another SS specifically for these items.

Lastly, once you've taken into account all of the factors directly related to the total price of the item, duty is the final barrier.  It will depend heavily on your country and the contents of the package.  If others in your country are rarely taxed on international packages received, you don't have too much to worry about, but if this is a concern for you, you can read more about duty and taxes here.

All in all, there are many factors to take into consideration when choosing a shopping service.  Miscalculation at any level can lead to a jump in the final price paid.  If you are on a tight budget, underestimate your maximum bid and overestimate the final cost to play it safe.  If you're on the fence about being able to afford a particular item, take a pass.  There will be plenty more items to bid on in the future.

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