Starting an Ebay business 101

I have been selling stuff occasionally on Ebay over the last 5 years or so. I knew that a bunch of people had ebay businesses, but I didn’t realize how many. The last figure I heard was that there are over 1 million Ebay businesses. I am sure some of them are part time businesses, but that is just amazing to me that there is that much potential available.

Deciding to start an Ebay business

I decided to try it out and see if I could start a part-time ebay biz. The great thing about it to me was that I could essentially turn it on or off when I felt like it. If I needed some extra income for a vacation I was saving for I could sell some stuff for a month or so and then when the vacation rolled around I could temporarily shut it down just by not listing any items.

It is this freedom that makes it a lot more enticing than the traditional “brick-and-mortar” businesses. I thought to myself that maybe I could turn it into a full-time income as well - if it was what it was cracked up to be.

1. Starting the Ebay biz

As I mentioned in an article I wrote called 7 steps to selling on Ebay for beginners I started by selling junk around my house. This is the best way to get your feet wet with Ebay. Actually, I take that back. The best way to get your feet wet is to purchase something on Ebay. This will benefit you in two ways:

1. It will help you to understand the Ebay community a bit better than you will if you just start selling. It is not the “virtual garage sale” that it once was and it is a rare case when you can imagine something that hasn’t been sold on Ebay.
2. I mentioned that Ebay is a community. This is not a cause for worry, but you do need to be aware that since it is still lightly based on an “honor system” that you need to prove yourself. Buying a few items and proving that you are an upstanding member who pays for items will help you out when you start selling.

I won’t go over the basics of Ebay selling since you can read that in the previous article mentioned. From here on I will assume that you know the basics of selling on ebay. So, let’s get started on the steps I took to start my Ebay business.

2. Picking a product to sell on Ebay

It may sound easy or difficult. It is some of both actually. I set out to supplement my current income, not necessarily to generate a full time income from it. Because of this I was able to take more of a chance by NOT picking the right product. I felt comfortable that if I jumped into an over-saturated market I could jump ship and try a new product.

I wanted to find something that I at least knew something about, since in my previous experiences of selling some of my wife’s clothes made me very aware that I know nothing about women’s clothes. I would get questions from buyers asking me how many inches it was from this to that. I didn’t even know what areas they wanted measured, let alone know how to measure them. Do yourself a favor and know at least a little bit about what you are planning on selling.

I finally found a product that was related to something that I knew a decent amount about, since it was a hobby of mine. No, I am not going to tell you what it is, because I am sure I would see a surge in competition a week after this article gets posted My “biz” is currently turned off, but who knows when I may turn it back on?

3. Finding a supplier

Google “(Your product) + wholesale” and combinations similar to find a supplier who will sell to you at wholesale prices. I know some people run small ebay businesses by finding clearance items at retail stores and reselling them on Ebay, but your profit margins will probably be smaller than if you bought them wholesale.

Most suppliers are going to want to make sure you are legitimately interested in becoming a dealer for their products, rather than just trying to get a deal for yourself. This process is probably going to be slightly different for different products. For me, I found some suppliers on Google and I asked a friend who he used.

Once you have an account with the supplier you should ask for a catalog and a pricing guide. If they have a website for dealers available, that will work as well.

4. Testing your Ebay market

Once I got a price guide from the supplier I was then able to see exactly what my purchasing price would be for the items that I would be selling. This is a very important number to get, because without it you won’t be able to test the profitability of the item.

Once I knew the price I would be paying for my items, I went on over to Ebay and did a search for each item. As you can see in the image below there is an “advanced search” link next to the search box. You can type your product in the field and hit the advanced search link.

That will then pull up this screen…

Make sure you check the completed listings box. This will pull up all of the results for the item that you entered. You will probably see some listings that were completed without selling and some that did sell. Ideally, each listing of your product would show as sold, but realistically I wouldn’t expect that. But skim through and click on the items that did sell and start a list of what prices they sold for. Hopefully, there is a decent sized variation between what the items are selling for and what you can purchase them for. Even if there is, don’t get too excited yet, because there are still lots of other expenses to account for.

Knowing what the items sold for is going to be very helpful in deciding if you should move forward with the product you have in mind. But even if it looks good, keep in mind that you still don’t know how many times the seller had to list the item to get it to sell. Currently Ebay allows you to relist one time for free, but if the item doesn’t sell again then you need to pay them another listing fee to list the 3rd time.

The easier option to test your Ebay market

What I just showed you is what I did because I didn’t really know there was another option. But there is and it is easier and will provide much more information for you. Ebay actually has a research area on their site that will basically give you the information we just talked about and a lot more. They do charge for it, but currently it is only like $2.99 for a 2-day pass. This will be the best $3 you spend.

5. Estimating other expenses

Now that I had gotten some solid numbers about what my item had been sold for in the past I had a starting point. From here I tried to get a best guess estimate (or exact if possible) of how much other expenses would be. These were a few other expenses that I had…

• Shipping and handling from my supplier to me
• Shipping and handling from me to my buyers
• Boxes and packing material (styrofoam peanuts, tape, etc.). I bought in bulk from uline.com and got an average cost of about $1 per item.
• Gas and wear and tear on my car from driving to the post office or bank. The post office is very close to my house, so this wasn’t very much for me.
• Ebay Fees (mine averaged about 6% of my selling price. This figure can vary widely.)
• Paypal Fees (my average paypal fee was about 3% of my selling price.)

After adding up all these expenses I still saw that I would likely be able to make a decent profit assuming that I would be able to sell each item within a couple weeks. If I would have had to relist each item 10 times to sell it, the Ebay fees would have eaten up most of my profits.

I was estimating that I could make about $20-$50 for each of the products I was going to sell. This was good enough for me, so I decided to move forward with it.

6. Buying the products

This was actually the easiest part for me. I decided just to sell the exact products that I had seen sold in my research. I figured if someone bought it before, they would buy it again (This was not necessarily true - I will explain later). I then just called my supplier and gave them my order. Two days later the shipment had arrived.

7. The photo shoot

I could only find one picture of each of my items on the supplier’s website. Knowing how important pictures are to Ebay buyers I decided I was going to take the most detailed and best pictures I could with the tools I had to work with.

1. I borrowed a higher quality camera from a family member.
2. I found the cleanest and nicest looking background I could to shoot against.
3. I grabbed about 5 bright lamps from around my house and placed them to get good lighting.
4. I took about 10 pictures of each item. Some full shots and some detailed pictures.

I spent a good deal of time on this process knowing that it was work that would increase my chances of sales. But, the other motivation for investing a lot of time was that if I did it well the first time, I wouldn’t have to do it again later. Once I had good pictures for the items, I could always use the same pictures when I sold more later on.

8. Listing the items on Ebay

If you are looking to do this as a full time or even a part time gig, I suggest you use a listing tool. I used Auctiva which I was pleased with. The great thing is that they host all of the pictures of my items for me. So I could take the 10 pictures and have them all included in my Ebay listing for free. There are many time-saving features that they offer as well.

I knew the items didn’t have a huge demand so I listed them all only with a BIN (Buy It Now) price. If I would have been selling iPods or something I may have been able to get away with a straight auction, but since I was willing to wait to make the sale at the price I wanted, I did BIN.

9. Analyze the results

My test run of selling 6 different items went pretty well. I listed all of them BIN as mentioned before. One item sold in the first listing and three more sold in the relisting. The remaining two items had to be relisted again (incurring another ebay listing fee) and one sold very quickly. The last item taught me a good lesson that I mentioned I would get to earlier.

I had assumed that if someone had bought it before, they would buy it again. This did not appear to be the case with this item. I should have used a bit of common sense, it was a very specific and random thing that not many people would have wanted. It just so happened that it was one of the recently sold items that I saw. I ended up just listing it again as a straight auction with my starting price being my cost. It did quickly sell and actually fetched a decent price.

Selling quicker or more profits

I chose to take my time selling these items because I wanted to see if I could get the prices I was asking for each of them. I could have lowered my prices and probably sold them all in the first listing, but that wasn’t my goal for this test.

Here is a breakdown of how the test went…

As you can see, it is clear which items turned out to be more profitable. This is why I recommend doing a similar test if you can before jumping in head over heels after one product. Lucky for me, some of the products that yielded the most profit also sold the quickest!

What was exciting to me was to see that by selling just three products I could make $100. So, in theory if I could sell 30 products in a month, I was looking at $1000. That’s not a bad part-time income!

Final thoughts about starting an Ebay business

There is really a lot to learn and as you sell more you figure out more and better ways to minimize expenses. I have learned a lot from selling on ebay, but there is still a lot more to learn. Just don’t be intimidated or afraid to try it out if it is something you are interested in doing.

I’d love to hear from others about their successes or struggles (whatever the case may be) starting an Ebay biz. Feel free to share in the comments below!

This article was featured in the Carnival of Personal Finance

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