RON: So if it's up to 40%, I mean that's sometimes the items that you're selling, your margins aren't even there for 40%, right? You’re giving that up to Amazon. So a lot of people are doing their own thing, but maybe they started with Amazon so they could go global and get lots of volume and only make a few percent and that's how they made their money.
But now that they've made their money, they're able to afford at least a garage. Now they can at least start stocking items up and selling it themselves on their own eAuction platform. So that's the same thing here, where you may start some of these processes manually or you do the reverse. You may go find a mediator.
Like with escrow payments, for example. I think the last time we used Payoneer, most of the cut was like 15%. And I remember some people when we were starting to set these up, they would say, “Well, we're not going to use American Express or PayPal because it's 4%.” And they were freaking out that MasterCard, Visa was 3%, and to pay a whole one more percent for PayPal or Discover was 4%, they wouldn't do it. They didn't want to lose the 1%.
Well, with escrow payments, that takes 15%. So maybe you start there, and that at least gets you into the ability to sell million-dollar properties and jewelry and expensive art and things like that. But as you start having more money, maybe you bring that process in-house. So you become the bank, and you start charging the fund, and maybe it's you just charging 10%. So it's a lot cheaper. One of the reasons they come and sell through you is because you have a cheaper process, where other sites that are still using some of the other escrow payment APIs, if they're charging 15%, maybe one of your competitive advantages that you market is you only charge 10%, right? Because you've been able to bring that in-house.
We really need to think through how we're going to handle the payment and receipt of these expensive items and all the different steps to understanding where different issues might arise. Do we force them to—and we're going to talk about this in the next slide here—do we force them to use a particular ship and partial shipping company because they're the only ones that will warrant the shipment and take any responsibility there? Partial shipment is going to be another one.
So we've talked about the arbiter—that can be a third party, or you can set up something for your team internally to handle it. Most of the time, there's not going to be issues. I mean, there's going to be a lot of different auctions. And once you start getting to volume and have a lot of auctions, the likelihood of there being problems both goes up and goes down. As a percentage, it's going to go down. But the likelihood that it's going to happen, [it goes up].
Even if it's only 1% well, if you have 100 auctions, it's going to happen once. But if you have a thousand auctions on the eAuction software, you might have ten [problems] a day, right? So you have to start thinking through—as Chris mentioned, he always talks about the three-to-five-year plan, and I love that. What happens if this happens in three to five years? [What if] I plan for that and it accidentally happens in two weeks, right? I mean, we've all heard about viral videos. Well, what happens if your auction site becomes virally successful and you haven't planned for that success? Does it then fall on its face? We have a lot of problems and it's catastrophic to the point where everybody went, “Oh, that site is crap,” and they leave and they don't come back.
A lot of times the cliché [is true], you have one chance to make a good first impression. So think through that. Start smart, think through all the different mediation resolution processes, write down all the governance and policies, and make that plan. Even if we can't afford all of it up front, we have to do some of those processes manually, let's at least plan for success, whether you're running traditional English or reverse auction websites.