We've decided to put free shipping on just about everything we sell (domestically) in our eBay store. For over a year we've offered free shipping on postcards, but charged for large postcard lots, cabinet photos, cdvs and so on. We've made the decision to offer free shipping on all the other items we sell and ship domestically. International sales will still have a shipping charge.
At this point we're not charging shipping on any new items we list. Some of the older items still have a shipping charge, but those are slowly but surely being removed. In a month or two, pretty much nothing will have a shipping charge. On the older items we're not (for the most part) raising the price - so in effect by removing the shipping charge we're reducing prices on the vast majority of our inventory.
In order for free shipping to work, you have to know how much it costs to ship your item, and figure that into the listing price, if possible. You have to ship things safely, but you also have to be efficient about it. It takes experience to get the hang of it all.
In the best of all possible worlds, free shipping leads to increased sales. Free shipping worked well for us with the postcards - there was a noticable increase in sales. It remains to be seen if it will work with the photos. Photos are different - they're more delicate, they require more packing to ship safely, and because of all that they cost more to ship. Also the people who collect photos are generally not the same as the people who collect postcards, and we just don't know how this is going to work. It's a bit of a risk we're taking, we'll have to see how it goes.
It doesn't help that the post office recently increased shipping rates on many services.
For quite awhile now eBay has encouraged seller's to offer free shipping. eBay recently announced a change which will take effect in July (unless they move it back) that removes one of the biggest incentives for sellers NOT to offer free shipping. In July, eBay is going to charge a Final Value Fee (FVF) - the fee they charge sellers when an item sells - on the entire selling price. Right now they do not charge an FVF on the shipping charge.
Right now if a seller sells an item at a fixed price of $10.00 with a $2.00 s&h charge eBay charges a $1.20 FVF. If another seller sells the same item for $12.00 with no s&h charge, eBay charges $1.44 FVF. There is quite an incentive to charge a lower price for the item with a reasonable s&h charge.
After July they're going to lower the FVF by 1% (BFD if you catch my drift), but also include the s&h charge in the FVF calculation. Under this scenario both sellers would pay a FVF of $1.32. This removes the advantage a seller has by charging shipping & handling.
eBay also offers a "free shipping" search filter, enabling a buyer to search only for those items with free shipping. I have no idea how many people make use of that, but it's only reasonable to assume some do. So this new policy does a bit more than level the playing field - it actually gives a bit of an advantage to people who offer free shipping.
One thing I learned long before I started with eBay is that nothing ever remains the same. If you can't drive the change, you have to adjust. eBay is something I have no control over, so I adjust.