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Top 3 risks of selling gold Sovereigns on eBay

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Selling gold Sovereign coins on eBay £1 listing offers? What looks like a great opportunity to flog gold coins at minimal selling costs may end up a costly lesson. I learned the hard way that eBay is NOT a safe place to sell gold coins online.

During the course of 2019 many gold sovereign collectors became familiar with the biweekly eBay auctions put on by one of my several user IDs, for example SovereignStacker_2018, SovereignCollector, AndreasAfeldt. I prided myself (still do!) in giving collectors, investors, traders and stackers an opportunity to buy graded (mainly PCGS) proof QEII sovereigns.

I sold literally thousands of gold sovereigns, 2 pounds and 5 pounds, totalling over £1 million worth over the course of 12 months and it seemed like eBay was the perfect marketplace. Of course, a 10 % selling commission would completely wipe out the business model, but the £1 listing offers seemed to come on relatively consistently every 2 weeks or so. 

Many probably asked themselves why I was using several eBay accounts—this was for the simple reason of eBay selling limits. I will delve deeper into my strategy of selling on eBay in another blog post, as this really needs a full page of text to cover! 

Then the problems started. Aside from the usual hassle making phone calls to eBay to increase selling allowances, I had other unwelcome discoveries of dealing with eBay and PayPal. Below I will list the most common/expensive of these many risks.


Risk 1 - The PayPal clawback on a credit card claim. I think just about anyone having sold a considerable amount will at this point have experienced PayPal suddenly freezing funds in your account. It's all good and fine if funds reappear but sometimes they don't. Something that started happening more often the last 6 months is the credit card clawback. 

PayPal do not protect sellers when the buyer makes a claim directly with their credit card company, such as American Express. By first waiting a long time (2+ months) and then bypassing eBay/PayPal, they keep the merchandise and their credit card company refunds the payment.

It seems there are some clever people (at least they think they are--ultimately they will be found out but at the moment they are ahead) who use this lack of protection for their benefit. I have several friends with e-commerce businesses and they all shake their heads slightly irritated over the couple percent value loss they make every year on credit card claims with no returns. That's fine when the product costs £10 or £20 or even £50, but when you're selling gold coins to someone for £3,000 it's a lot to lose when you have to refund someone without getting the goods back!

I have spoken to a great many who learned this expensive lesson and to be honest I don't think PayPal will ever do anything about it, because let's face it--

Neither eBay nor PayPal were set up with trading gold coins in mind.

Gold coin transactions constitute such a minuscule part of their business. It just so happens that the £1 listing offer makes eBay the best option for private sellers to flog certain price sensitive product categories such as QEII proofs and older sovereigns in average grade. More on this below...

Risk 2 - Ebay doesn't "register" the £1 listing offer. This was a new one for me and it seems incredulous but believe me, this is an actual risk. You click the button at the top of the eBay website taking you to the opt-in page for the £1 listing offer, click the enroll button and Voila! you're all good to go. Or you think you are... It seems eBay can revert the offer at any point without informing you, so that when the month is over and your account has totalled £50,000 sales, you get an invoice for £5,000. Unbelievable, but once again, they're out there to make money, preying on their sellers and this was too good an opportunity to miss!


Risk 3 - Freezing accounts and funds. Here eBay and PayPal are working together (why are they not in Risk 1?? PayPal does not gather information on sellers based on their previous eBay history, which should impact their investigation...) First eBay freezes your account because you need to supply information, such as proof of ownership of items. PayPal then freezes funds of all your recent sales. Ebay investigates the information you sent (such as purchase invoices) but their decision is completely discretionary and you can't appeal with them because you can't get to the right person. 

PayPal has the legal right to freeze your funds for "investigation" for up to 6 months without giving any reason. 

Your 40 items on £1 listing offer just ended the Sunday evening, proceeds totalling £25,000. That's a handsome number to wait 6 months to get back (especially when you already sent the coins off!)

There are a lot of people who use eBay every day to buy gold coins. From a buyer's perspective it is arguably much better than from a seller's. At least buyers won't be asked to return bought items without a refund! But I also hear a lot of buyers complaining about scamming sellers without getting much help from eBay, so actually both buyers and sellers are experiencing difficulties dealing with eBay. 

With both buyers and sellers complaining about eBay, why is it still an important marketplace? How come people sit up on Sunday evenings waiting for the £1 listings to end from previous Sunday?

For private collectors, traders and stackers there are currently no other platforms where it is possible to sell unwanted items at such low transaction costs. Even with PayPal at 3.4 % it is much less than what other auction options are, where the auction house charges the buyer 20 % +VAT and the seller 10 %. Same thing often happens when people sell back to dealers. The broker (auction house/dealer/anyone buying to trade on) needs to make a profit but in my opinion takes too big a slice and too much of the value is lost in the transaction. Most types of collectable gold coins are impossible to trade at these transaction costs. Imagine having to wait years for the market to improve or the gold price to go up 30 %, just to break even!

Am I just being unrealistic with them, complaining about flaws which are inevitable when dealing with large numbers of private sellers? Perhaps problems are inevitable with the eBay business model, but I am very realistic, even understanding, when I view eBay and its policies--

I decided to stop selling on eBay when I realised that their business in the collectible gold coin market is successful only because there is a lack of other options. With this in mind, The Coin Cabinet will soon bring out a service that solves gold coin collectors, investors, traders and stackers dilemma, allowing coin people to transact at low transaction costs.

Contrary to eBay, our service will be setup exactly with this audience in mind--serving gold coin collectors, investors, traders and stackers, without any small-print risks or dirty backhanders!


 

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