In 1995, Pierre Omidyar developed an auction website, as an experiment trying to sell a broken laser pointer, which he was about to throw. Surprisingly he found someone to buy it for $15. Subsequently, Omidyar had an idea of creating a “perfect market”. As economists define it, a “perfect maket” is characterized by perfect competition where the price is set when supply equals demand. This idea was the beginning of a new online phenomenon. Today, with 100 million active buyers and sellers, eBay has become the world’s largest online marketplace.
On eBay you can find everything being sold and traded, from the strange and impractical to the useful and simple. And with eBay’s dominance of online auctions, there will be millions of buyers on eBay who are looking for bargains every day. It has become the focus of a new breed of entrepreneurs who make money by trading online. Today, there is a highly significant number of users who trade full time on eBay.
I also highly recommend eBay for people who are new to ecommerce. eBay is an excellent place to start learning how to sell and buy goods online. Moreover, you will have all the marketing tools you need at your fingertips.
eBay millionaires are growing
Angus McCarey, retail director for eBay UK, said a 'surge' of businesses had started up on the site since the recession.
Anthony Ponsford a former lawyer, was working in a 9-5 job earning 55,000 pounds, before starting his company Piranha Trading. He started selling a variety of products using eBay from gazebos to cat scratchers. In 2010 he managed to increase his annual revenue from 39,000 in 2007 to 1.3 million pounds. Add to that the enjoyment of owning a business. Thanks to his online business, he says, ‘for the first time I am motivated to get out of bed in the morning’.
Today, you will even find teens (and tons of them) with no prior sales experience becoming successful eBay entrepreneurs. A good example is Ben Lang who started his online business at the age of 14. Check the video below.
One of the highly recommended books that sheds light on ebay’s journey since it started is Adam Cohen’s book The Perfect Store. Adam was very fortunate to interview Omidyar and listen to his story. Adam’s book is one of the highly motivating books about online businesses. If you enjoy successful e-business stories with lots of lessons to learn, and you are also looking forward to become an online entrepreneur, then this book is for you. It tells the complete spectacular story about what can be done, when you have an idea. It also recounts the challenges eBay faced and how they were overcome.
A Sample Transaction
Ebay registered member John is trying to sell his old expensive pen. John has been a member of ebay for the last two years. He has successfully purchased and sold 18 out of 20 items. Hence, he had positive feedback from 18 transactions, and negative feedback from two. This is how, his name appears:
John (18)
90% Positive Feedback
If you click on the number “18”, you will find a list of the feedback received from those who dealt with John. Now, he desires to sell his pen for $4,000, but is also willing to accept $3,500. He posts an ad on eBay with pictures of his pen and he describes its condition, quality, brand, etc... He then sets the auction to start on Monday and end on Friday. He also sets $2,000 as the starting bid and $3,500 as a Buy It Now price. Buy It Now is an option that the buyer can use to end the auction if he is willing to pay $3,500.
Ben was first to place a bid on the pen. He has placed a maximum bid of $2,500 on the item. The maximum bid is the maximum amount he is willing to pay for the item. His maximum bid is kept confidential from other bidders. The current bid visible on the item’s page will be increased only by the “bid increment”. The bid increment is the amount by which the current high bid visible on the page will be raised, whenever someone places a higher bid. If the bid increment is $10, then the current bid will be raised to $2,010. Next, Sam places a maximum bid of $2,030. Because Ben’s is the highest, Ebay will automatically bid for Ben, current bid will be $2,040.
One hour before the auction ends, Sam jumps again, and sets his maximum at $3,000, and becomes the highest bidder. Hence, the auction price is now set at $2,510. The auction finally ends, and Sam receives a notification that he got the item, while Ben receives an email informing him that he lost the bid. Sam then pays John using his paypal account. Consequently, John sends him the pen. John also send a positive feedback about Sam after receiving the payment. Sam will also post his feedback whether its positive or negative after receiving the pen.
Starting Your Business
To launch your ebay business, you need an internet connection, a computer, and storage space for your inventory. The majority of people get stuck at one question before starting “what do i sell?” Instead of contemplating a lot trying to answer this question without reaching a typical answer (there’s never one), you better start thinking about what items can you get and about being flexible. Remember, this is not about selling what you like, it is more about selling what is more profitable.
The key to being profitable is finding cheap products and good deals that can sell for a high margin. Running a business on ebay is just like any other business. There are many different places, where you get products. You can get your goods from wholesalers, dropshippers, antique shops, manufacturers, or you can manufacture your goods yourself.
Steps for starting
- A good start is trying to sell items you want to get rid of. Register at ebay, and post your items. This is usually the cheapest way to starting, and getting acquainted with the online market. It will also help you understand the ebay community. The community is one of the most significant assets of using ebay. You will learn a lot from other members who has become successful. The ebay community is one of the most vibrant communities online.
- After getting introduced to ebay and its community, now it is time to prick a product. When trying to pick a product for the first time, it is better to choose a product you know. Remember, that you will get questions from people who are interested in your product. Therefore, it will very unprofessional if you don’t know your products well. You also have to consider high profit margins, the saturation of the market, competitors, and your storage space.
- Your next step is finding a supplier for the range of products you want to sell. If you are running your own offline business then you won’t need to. Otherwise, you can take advantage of wholesale suppliers. Finding a suitable supplier selling good products with low prices can be very time consuming. The following websites can help you get started:
http://www.thewholesaleforums.co.uk/forum/
http://www.dhgate.com (Chinese wholesale marketplace)
http://www.thewholesaler.co.uk/ (Wholesaler directory)
http://www.wholesalers4u.co.uk/
You can also google “Your Product” + “wholesaler”, e.g. “cheese wholesaler”. Search products similar to the ones you chose on ebay, and note down the prices at which your competitors are charging. Make sure there’s a good margin between the cost of the products your wholesaler is charging, and the price your products will be sold at on ebay. When you make a deal with a supplier, he should also provide you with a catalog of the products along with prices. Another option is to find dropshippers. This will be covered in more details later in this post.
- You should also consider your expenses while selling your items. These expense will include:
- Packaging
- Couriers (shipment to your customers)
- Ebay and Paypal fees (around 9%)
- Use Spreadsheets for estimating your expenses, costs, profit margins, turn over and net profit. Use your spread sheet to cmpute and decide the prices you will be charging. Moreover, listing your items has now been made easier. Ebay provides a new listing tool called turbo lister for free. Now, take pictures and provide an honest description of your products. Remember, that positive feedback is essential for the continuity and growth of your business.
- Analyze, rinse and repeat. Analyze the results, find out your most profitable products, and replenish those products that are in high demand. You will get more experienced every month, and better at choosing profitable products and targeting your audience.
Ebay Business Models
There are a few business models that you can adapt while trading on ebay. These models are:
- Wholesale-to-Online: The wholesaler model has been discussed earlier. It is the simple model of buying products from a wholesaler and selling them online with a higher price. If you don’t already have an offline business, you will have to consider where to store your inventory. Moreover, when you begin, you shouldn’t take the risk and buy in high quantities. Always remember, you might not sell. Hence, I cannot stress enough how important it is, to test the market first and your products.
- Dropship-to-Online: This model is very similar to affiliate marketing. When you get a deal with a dropshipper, you will be advertising their products. In return you will get a share on the each sale. In this model, you do not have to worry about packaging, inventory, and the high risk of not selling your products. The dropshipper will be responsible for shipping the items ordered to the clients who placed an order on your listings. However, in this model, it can be a bit difficult to generate high profit margins due to the high prices of dropshippers. You will be very lucky to find a reliable dropshipper. Another major disadvantage is that your supplier will do the packaging, therefore your brand will not appear on the packages and your customers will notice that. Try to make a deal with your dropshipper to put your brand on the packaging. Moreover, any delays from your supplier will be blamed on you, and will affect your online reputation. If you are living in the UK, you will find the following websites useful:
http://www.dropshippingforum.co.uk/dropship/ (forum)
http://www.dropshiponline.co.uk/
- Unique and scarce products: In this model, you try to sell products that are very unique. If you are a collector you can easily monetize your hobby. Your suppliers can be stores with clearance stocks, antique shops, hobbyists, etc... Sometimes hobbyists are not business gurus, therefore you can easily find a good bargain.
A Few Things to Consider
Your goal will be to launch a successful growing business. The following are a few valid points to consider:
- Try to differentiate yourself from your competitors. Be proactive and approachable to your clients. Try to build a loyal customer base. Use personalized emails along with compliments while communicating with your customers. Treat them as your partners, and not as numbers. Retaining customers is always CHEAPER and more PROFITABLE than acquiring new customers.
- Be extremely knowledgeable about the products you are selling. You can even create a blog or a forum, to have open discussion with your clients about your products.
- Presentation is very important. Try to take high quality pics of your products, to draw customers’ attention.
- Try selling in different formats. Don’t get stuck to one format on ebay, and be professional.
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