eBay is the world’s leading online marketplace for discounted merchandise ranging from garage sale items, to fine collectibles all manner of new products. These items are sold by individuals and small businesses that operate eBay stores – and people are raking in big bucks by selling on eBay.
But as with running any small business, there are some challenges you should be aware of as you consider starting an eBay business. The marketplace is vast. There are lots of competitors vying for the attention of buyers, and there are fundamental issues to deal with, such as financing, warehousing and fulfillment.
Starting an eBay business
To get started, develop your life plan and then your business plan, just as you would for any business. Make sure that you’re passionate about the type of business you’ve chosen, make sure that it fits your lifestyle objectives, and that your goals are achievable.
When writing a business plan for starting an eBay business, think about what products you will offer. Will you be a retail store offering a variety of goods? Will you be a discount merchant known for offering specific goods? How will you distinguish yourself from the competition? Do you have exclusive access to buying the products you will offer?
It sounds simple – buy low and sell high, and “ Eureka!” – you have a profit. While the concept is simple, execution can be a bit tricky. Before you dive in, carefully think through your strategy for buying products at a price that’s low enough to allow you a profit margin when you mark it up to a price that is still attractive to your market. And take into account the likely sales volumes you’ll have, and how your profit margin combined with those sales volumes will support your operations and still deliver a profit to you.
If you’re interested in buying and selling collectibles, toys, antiques or other collectible items, you can tap into some great tools to help you research item pricing and trends in those markets. Smartcollector provides free research covering every collectible and antique category on eBay; other services, such as Andale, provide fee-based research tools that cover the remaining eBay categories.
Registering on eBay
Once you have confidence that starting an eBay store is for you, and you’ve laid out a logical and sensible business plan, you need to get registered as an eBay seller. To do so, visit eBay and click on the “Sell” tab at the top of the homepage. Follow the step-by-step instructions to register as an eBay community member. You’ll be asked to provide your basic contact information, as well as banking information, such as credit card and checking account numbers.
Structure and organization
Now that you’re “official” on eBay, it’s time to choose your business structure. Oftentimes, eBay entrepreneurs file for incorporation, or form a limited liability company (LLC). Even if you are operating your business part-time and/or from home, be sure to treat your business as a business, not a hobby.
It’s also important to create a separate set of books for your eBay business. Always avoid commingling personal and business expenses, which creates confusion at tax time by making it difficult to understand how your business is operating. Keeping clean and accurate books from the beginning is critical – open a separate business checking account in the name of the business. We also suggest that you obtain the appropriate insurance coverage for yourself and your business. In each case, we recommend that you “go with the pros” and work with a professional accountant, banker and insurance expert to sort through these issues.
Lastly, as a cautionary note, if you intend to run a home-based business, check with your local authorities to ensure that operating a business out of your home does not violate any ordinances.
Additional logistical issues you should address before starting up a business include: how you’ll pay for your merchandise; how you’ll warehouse your inventory; how you’ll receive payment from customers; and, last but not least, how you’ll fund your business. Remember, there are various financing options available to new businesses, but it’s important to seek the right kind of funding for your particular situation, not just any funding.
Getting the most from your dollar
For warehousing your inventory, consider your garage or basement as a first choice to save costs, as long as local ordinances allow this. To begin with, you will likely have limited inventory – you should avoid tying money up in unused warehouse space or excess inventory. Rental storage units are a good alternative choice for warehousing inventory if you don’t have room at home.
To receive payment for your goods, the eBay company PayPal is a good first choice. PayPal is an online payment service that enables buyers to pay for their purchases by drawing funds from their credit cards or checking accounts. The advantage to using the PayPal service as a seller is that you will not need to obtain a merchant banking account, which can be costly and difficult to qualify for as a startup business.
Open for business!
Now that you have all of the logistics in place, it’s time to open your eBay business. You’ll need to think carefully about how you will merchandise your products, the “look and feel” of your eBay store web pages, and whether you will sell products using the auction model or the fixed price model.
You may need to experiment with each before determining what works best for you. And don’t forget to do a good job with your photography. The only interface the potential customer will have with your products will be the photographs of the products. A great product photographed poorly will never look like a great product.
When it comes to packing and shipping products to your customers, take very special care to pack the products in a way that shows you care. You can even add a personal note to encourage repeat business. Once customers buy from you and have a positive experience, they are likely to become repeat customers. Repeat customers are the best customers to have, and are critical to growing your business.
Efficiency in your eBay business
Once your eBay business begins to grow to the degree that you find it difficult to manage alone, think “outsourcing.” You can outsource many non-core functions, such as bookkeeping, warehousing and fulfillment. You should stick to utilizing your core skills and let others do the “commodity”-type work. You may even want to consider software which helps you automate the entire process. There are several good auction management software products available, such as Zoovy and AuctionHelper, just to name a few.
Finally, pay attention to your eBay feedback rating. The eBay feedback system is designed to help eBay buyers and sellers police each other. When buyers have positive buying experiences, ask them for feedback. As you collect positive ratings, buyers will view you and your eBay business as an increasingly credible source from which to buy, and this is critical. When you are just starting out, work hard to communicate with your buyers to make sure they post feedback ratings for you.
Once you get the ball rolling, you’ll be on your way to great success as an eBay entrepreneur. So, start it up — on eBay!!!