making a living from ebay part 3

Chapter 3. Creating a Business Plan

Before you can start your eBay business, you have to determine just what type of business you want to start. Yes, you know that it’s going to involve selling (hopefully lots of) stuff on eBay, but what kind of stuff are you going to sell? And where are you going to get that stuff? And just how are you going to manage the selling and shipping of all that stuff? And, if everything goes well, how much money do you expect to makeversus how much money you have to spend?

Whenand only whenyou can answer all these questions, you’re ready to start building your new business. Until then, you’re just fooling around. Not that there’s anything wrong with fooling around, of coursethat describes millions of typical eBay sellers, most of whom do just enough work to make a little money. But if you want to make a lot of moneyif you want to run a true business on eBaythen you have to do your homework and figure out where you want to go and how you’re going to get there.

This act of figuring out what kind of business you’ll be running is best done by preparing a business plan. If that sounds terribly formal and complicated, don’t stress outit doesn’t have to be. The plan for your business can be as simple as some bullet points written out in longhand, or as sophisticated as a professional-looking desktop-published document. Your plan is simply a formal declaration of what you want to do and how you want to do it. The key thing is to set down on paper the details about the business you want to create, and then follow the steps in your plan to build that business

Thinking It ThroughBefore You Start The key to planning your eBay business is to sit down and give it some serious thought. You don’t want to rush into this new endeavor without thinking through all the details. While it is possible to stumble into eBay profitability, the most successful sellers know what they want to do and how they want to do it. In other words, they have a plan for success. If you don’t plan your business in advance, chances are you’ll run into more than a few surprises. Unpleasant surprises. You don’t want to get six months into your business and then find out that you’re losing money on every sale you make. Far better to think through everything beforehand, so you’ll know what to expect. No surprisesthat’s my motto. Can you start selling on eBay without putting together this kind of business plan? Of course you can. Can you be successful without a business plan? Maybebut probably not, at least not in the long term. It’s easy to start selling on eBay and even to generate a small profit in the short term. But to launch a business that generates sustained profits, you need to plan for that success. If you don’t know where you want to go, you’ll never get there. The easiest way to begin this planning process is to ask yourself a series of questions. When you can comfortably answer these questions, you’ll have the framework of your business plan. What Type of Business Do You Want to Run? The first question to ask is the most important: What type of business do you want to run? Or, put more pointedly, what types of merchandise do you intend to sell on eBay? You see, you can’t just sell “stuff” on eBay. That’s not a real business; that’s an online garage sale. No, you have to determine what kind of “stuff” you want to sell. And you probably want to specialize. You took a good first step toward determining what to sell when you worked through the preliminary product research in Chapter 2, “Researching Your Business Model.” As you learned there, you can easily find out how well any given type of merchandise performs just by searching eBay’s closed auctions or using one of the many available research tools. Use this research to help you determine whether selling a certain type of product makes sense. You want to look at sales potential, sell-through rate, and the average final selling price. If the research shows high profit potential, you’ve made a good choice. If the research shows low sales or low profits, it’s time to do some more thinking. You might have your heart set on selling a particular type of product, but if the sales potential isn’t there, why bother? Note You can examine six different types of eBay businesses in Part 2 of this book. These general business models include “The Second-Hand Reseller” (Chapter , “The Collector/Trader” (Chapter 9), “The Bulk Reseller” (Chapter 10), “The Retailer” (Chapter 11), “The Manufacturer/Craftsperson” (Chapter 12), and “The Trading Assistant” (Chapter 13). Of course, the answer to this question is easy if you create or produce your own merchandise. For example, if you’re a painter, your product is your artwork. If you make hand-sewn quilts, your product is your quilts. Your business is based on your product; your plan is to use eBay to sell your artwork or your quilts. Everything you do from this point forward is designed to accomplish that goal. If you don’t yet have a source of merchandiseif you could, in fact, sell anything on eBaythen you have to decide what type of merchandise you want to sell. That involves determining the type of item you want to work with (smaller and lighter is good, for shipping purposes; cheap to acquire but commands a high price from bidders is also good) and then finding a source for those items. You may also want to choose a business model that plays off a personal interest. For example, if you collect comic books, selling comic books on eBay could be interesting and fun. The point is that you have to know what you’re going to sell before you can figure out how to sell it. That’s why this step is so crucial to putting together your business plan. How Much Money Do You Want to Make? Knowing what you want to sell is one thing. Knowing how much money you want to make is another. And, unfortunately, sometimes they don’t match up. (This is why planning is importantso you’ll know what works before you’re hip-deep in things.) Start from the top down. For your business to be successful, you have to generate an income on which you can comfortably liveunless, of course, you’re looking for your eBay business to supplement an existing income. In any case, you need to set a monetary goal that you want to achieve. This number will determine how many items you need to sell. What you don’t want to do is set up your business first and then ask how much money you’ll make on it. Successful businesses start out with a specific goal in mind and then work toward that goal. Unsuccessful businesses open their doors (figuratively speaking, of course) without knowing where they’ll end upand, more often than not, end up going pretty much nowhere at all. Let’s work through an example. You’ve talked it over with your family and decided that you would be extremely happy if you could quit your current job and generate the same income from your eBay business. You currently earn $30,000 a year, so this becomes the financial goal of your eBay business. That $30,000 a year translates into $600 a week, on average. (Figure on 50 working weeks a year, giving yourself 2 weeks of vacation; also keep in mind that certain weeksaround the Christmas holiday, especiallywill generate more sales than others, which is why that $600/week is an average.) Now you have to determine how you’re going to hit that $600/week target. We’ll also assume that you’ve already decided what types of items you want to sell. For the purposes of this example, let’s say that you’re selling gift baskets. Based on your research (primarily by looking at sales of similar items on eBay), you’ve established that you can sell these gift baskets for $20 each, on average. So you do some quick math and determine that you need to sell 30 of these $20 gift baskets every week to reach your $600/week goal. (That’s $600 divided by $20.) Stop right there! There’s something wrong with this calculation. Can you figure out what it is? Here’s the problem: This simple calculation fails to take into account any of your expenses! That $20 per item represents your gross revenue, not your net profit. So we have to go back and figure out the costs involved with the sale of each item. The first cost you have to take into account is the actual cost of the merchandise. Let’s say that you pay $5 for each gift basket. Subtract that $5 product cost from your $20 selling price, and you have a $15 profit for every item you sell. But that’s not your only expense. You have to pay eBay for every item you list and for every item you sell. If you accept credit card payments, you’ll pay a percentage for all purchases made with plastic. And if you avail yourself of an auction management service, you’ll pay for that, too. Altogether, these nonproduct costs can add up to 1015% of your total revenues. Let’s use the top figure15%and subtract $3 for each $20 sale. Now let’s do the math. Take your $20 selling price, subtract your $5 product cost and $3 for eBay-related fees, and you have a net profit of $12. To generate $600 a week in profit, you have to sell 50 gift baskets. (That’s $600 divided by $12.) That’s not the end of the math, however. Based on additional research, you determine that only about half of the eBay auctions in this category end in a sale. So to sell those 50 items, you have to launch 100 auctions every week, half of which will end with no bidders. That’s a lot of work. Now you need to start thinking about the options available to you. What if you could find a better-quality gift basket that you could sell for $40 instead of $20? Assuming you could keep the rest of your costs in line, that would cut in half the number of auctions you have to run every week. Or what if you decided you could live on $20,000 a year instead of $30,000? That would reduce your financial nut by a third. You see where we’re going with this. By working through these types of details ahead of time, you can fine-tune the amount of money you expect to make and the amount of effort you have to expend. Want to make more money? Then find a higher-priced (or lower-cost) item to sell, or plan on listing a larger quantity of items every week. It’s all relatedplan where you want to go; then you can figure out how to get there. How Much Time Can Youand Do You Want toDevote to Your Business? Now you’re at a point to ask if all this work seems reasonable. Taking our previous example, can you physically manage 100 item listings a week? Can you pack and ship 50 items a week? And, more importantly, can you realistically sell 50 items a week? Are there enough potential customers to support that sort of sales volume? If you plan on making eBay a full-time activity, you’ll have eight hours a day, five (or six) days a week, to devote to managing your auctions. If, on the other hand, your eBay business is only a part-time job, you’ll have less time to spend. Think it through carefully. Can you reasonably expect to do what you need to do to reach your desired level of sales? Of course, if you’re selling more expensive items (or, more precisely, items that generate a higher dollar profit), there’s less work involved. Let’s say you’re an artist and think you can generate $200 in profit for each painting you sell (at an average selling price of $250 or so). At these prices, you need to sell only three items a week to hit your $30,000/year target. (That’s $600 a week required profit divided by $200 profit per item.) And, since each piece of artwork is unique, you might have a higher close rate than you would on a lower-priced commodity itemso you might have to list only four items a week and ship three, which won’t take up too much of your time. On the other hand, if you’re selling less expensive items, you’ll have to do a lot more sales volume to hit your desired income level. For example, if you’re selling $5 computer cables that generate a $3 net profit, you’ll have to sell 200 cables per week to make your nut. (That’s $600 a week required profit divided by $3 profit per item.) And that’s a lot of items to sell. The point is that you have to realistically estimate the amount of work involved to run your eBay business, and then determine if you have that kind of timeand if it’s worth the effort to you. If you have only a few hours per week to spend, you might not be cut out to be a high-volume seller. (Unless, of course, you’re selling very high-priced/high-profit items.) If you’re willing to put in the hours, however, higher income can result.

Why You Need a Business Plan Okay. You’ve thought through what you want to sell and the amount of work involved, and you’re convinced that it’s doable. Why not just get started now? There are several good reasons to put your planning down on paper. First, by formally writing down your plan, you’re guaranteeing that you’ll actually think through what you’re going to do; you won’t slide by without doing the critical thinking. Second, by committing your plan to paper, you have a real plansomething you can follow in the future and use as a benchmark when evaluating your success. And third, if you need to obtain any funding for your businessto purchase inventory, for examplepotential lenders or investors will want to see the plan you’ve put together. This last point can’t be ignored. Most potential lenders and investors require that you present a detailed business plan before they will even consider giving you money. Since your business plan contains information about your potential market, your business, your strategy, and your planned operation, any investor or lender can read the plan to get a quick snapshot of you and your business. Note Need to borrow money to start your eBay business? Check out Chapter 4, “Evaluating and Arranging Funding.” For that reason, a business plan should not only reflect how you plan to run your eBay business, it should also contain everything a potential lender or investor needs to make an informed decision about whether to give you money. Without a business plan, you won’t even get in the door.

How to Create a Business Plan You may think that a business plan has to be a complex document, full of long sentences, overly technical terms, convoluted legalese, and detailed financial data. Nothing could be further from the truth. If you can talk about your businessand you no doubt can, at lengththen you can create an effective business plan. The best business plans are conversational in tone, are easy to read and understand, avoid as much legalese as possible, and include only enough financial data as necessary to paint an accurate picture of your business’s potential. In fact, you could probably dictate the bulk of your business plan in a single sitting, based on your inherent knowledge of what you’re trying to accomplish and why. Imagine you’re sitting in a restaurant or a coffeehouse, and someone you know comes up and asks you what you’re up to these days. You answer that you’re in the process of starting up a new eBay business, and then you start to tell a little story. You tell this person what your business is all about, why you’ve decided to get into this eBay thing, what kind of opportunity you see, and how you intend to exploit that opportunity. If you’re on good terms with the person you’re talking to, you might even share the revenues and profits you hope to generate. Here’s the type of story you tell: “Let me tell you about what I plan to do. You see, there’s a big market out there for gift baskets. They’re very popular with women, especially older women, who buy them for gifts. They’re so popular, eBay has created a dedicated gift basket category on its site. “I did a search on eBay and found that the average gift basket sells for about $20, and in a typical week there were more than 500 auctions for these items. I’ve found a source for gift baskets that are better than what you typically find online, and think I can provide eBay’s buyers with a better product than they’re currently getting, but for a similar price. “My source will sell me these gift baskets for $5 apiece. If I sell them for $20, on average, I think I can take 10% of the sales in the category. That means I’ll be selling around 50 gift baskets a week. Taking all my costs into account, that should generate about $30,000 in profit a year. “To handle this volume of sales, I plan to set up kind of an assembly line in my spare bedroom. I’ll buy the gift baskets in bulk and store them in my garage. I can purchase shipping boxes from my local box store and ship the baskets via Priority Mail. The buyers will pay all shipping costs, which I’ll inflate a little to cover the cost of the box and packing material. “In addition, I’m going to subscribe to one of those auction management services, which will make it easier to manage all my customer communication and keep track of who’s paid and what needs to be shipped. And I’ll sign up for PayPal so that I can accept credit card payments. “At the start, I think I can manage the entire business myselfwhich is what I’m quitting my job to do. If things really take off, I can hire my cousin Helen to help me out with the packing and shipping. But that’s probably a ways down the road; for now, it’ll be just me, which is all I’m planning for. If I can hit my numbers, I’ll be very happy to take home $30,000 a year for my efforts.” As you can see, this short story (a little more than 300 words) tells your audience everything they need to know about your planned eBay business. They know why you’re starting the business, they see the opportunity presented, they understand how you expect to profit from that opportunity, they sense the unique things that you intend to do, and they learn how much money you expect to make. It’s all there, presented in a logical order; everything important is included, with nothing extraneous added. In short, you’ve just created your business planorally. Now all you have to do is put it down on paper.

The Components of a Winning Business Plan

Now that you have the outline of your business plan in your head, let’s look at how to translate your story into a written document.

Note

This chapter presents the type of bare-bones business plan you need for a small eBay business. If you want to create a really serious business planor a plan for a larger business opportunitycheck out my companion book, Teach Yourself Business Plans in 24 Hours (2001, Alpha Books).

In essence, you take your oral story and write it down, in a logical order. The typical business plan is divided into several distinct sectionseach of which maps to a part of your business story. What you have to do is take the story you just told and sort it out into short sections that help the reader understand just what it is your business is about.

Of course, your particular business plan can contain more or fewer or different sections than presented here, but it should contain the same informationbecause this information will describe and drive your new business. If you were writing a business plan for a big corporation, each section might be several pages long. For the purposes of your eBay business, though, think along the lines of a few sentences or paragraphs instead.

You see, the length of your business plan document depends entirely on your particular circumstances. If your business plan is solely for your own personal use, you don’t need to make it any longer or fancier than it needs to be. It’s even okay to write in bullets rather than complete sentences. If you expect to present your business plan to others, by all means go a little fancier and use proper grammar and punctuation. The key thing is to include all the information necessary to get your points across.

Mission

The Mission part of the plan, typically just a sentence or so long, describes your dream for your businesswhy you’re doing what you’re doing. Although this is the shortest section of your plan, it is sometimes the most difficult section to write. That’s because many people find it difficult to articulate the reasons why they do what they do.

Sometimes called a mission statement, this section describes the whatwhat your business does and what you’re trying to achieve. Someone reading your Mission section should know immediately what your business doesand what you don’t do.

Using our ongoing example, a relevant mission statement might be something like: “I intend to sell high-quality gift baskets to targeted buyers on the eBay online auction site.” It should not be “I plan to make a lot of money on eBay.” That isn’t a very specific mission, and it certainly isn’t market-driven.

Note

A mission is different from a goal in that a mission defines a general direction, while a goal defines a specific target. A business will have but a single mission, but can have many individual goals.

Opportunity

The Opportunity section, sometimes called the market dynamics or market analysis section, describes the compelling reason for your business to exist; in other words, it presents the market opportunity you’ve identified. Typically, this section starts out by identifying the target market, sizing it, and then presenting growth opportunities.

The goal of this section is to describe the market opportunity you seek to pursue and to convince potential investors that it’s a significant enough opportunity to be worth pursuing. As such, this section will include narrative text (you have to tell a story about the market) and some amount of numerical data. Which data you choose to present, how you choose to present it, and how you weave it into your narrative will determine the effectiveness of this section.

When the Opportunity section is complete, the reader should understand the basic nature of the market you choose to pursue, the size of that market, the market’s growth potential, and the types of customers who comprise the market. You can obtain most if not all of this data by searching eBay for similar types of merchandise or by browsing through relevant categories.

Why do you need to present market data in your business plan, anyway? The answer is simpleto help you sell prospective lenders and investors on your specific business strategy. You also need to realistically size the opportunity for your own needs; you don’t want to pursue merchandise categories that aren’t big or robust enough to achieve your financial goals.

In the case of our ongoing example, you might want to include data on the number of similar auctions during a particular period, the average selling price for these items, and the close rate (number of auctions that result in a sale) for this category.

Note

Learn more about performing market research in Chapter 2, “Researching Your Business Model.”

Strategy

The Strategy section of your plan details how you’ll exploit that immense market opportunity described in the Opportunity section and puts forward your potential eBay activities. This section typically includes information about the products you’ll be selling, as well as how you plan to obtain and market these products. In essence, you want to describe the business you’re in, what you plan to sell, and how you’ll make money. You’ll probably want to include some sort of timeline that details the major milestones you will likely face in successfully implementing your new business.

For our ongoing example, you’d explain that you’re selling gift baskets (and maybe describe what a gift basket is), present where and how you’re obtaining your merchandise, describe how you’ll be selling the items on eBay, and then detail the selling price, cost, and profits associated with your sales.

Organization and Operations

The Organization and Operations section describes your company structure as well as the back-end operations you use to bring your products and services to market. If your employee base consists of you and no one else, that’s okay; if you have plans to hire an assistant or two, throw in that information. The key thing in this section is to describe your “back office,” how you plan to get things done. That means describing how you’ll create your item listings, how you’ll warehouse your inventory, and how you’ll pack and ship your merchandise.

In short, this section of your business plan is the place where you detail how your business is structured and how it will work.

Strengths and Weaknesses

The Strengths and Weaknesses section is the last text section of your plan. A lot of businesses don’t include this section, but I think it’s well worth writing. In essence, this section lays bare your core competencies and the challenges you facewhich are good to know before you actually go into business.

I like including strengths and weaknesses in a business plan, for several reasons. First, summarizing your competitive advantages serves to highlight those unique aspects of your business strategy. In addition, ending the text part of your plan with a list of your strengths is a great way to wrap things up; in essence, you provide a summary of the key points of your plan. Finally, by detailing potential challenges you might face, you get the chance to reassess the reality of what you’re about to attemptand to proactively address these issues before they become real problems.

Note

Although everyone will want to see a few common financial statements, know that different lenders and investors will have different requirements in this regard. You may want to enlist the assistance of a qualified accountant or financial advisor to help you prepare these financial statementsand to prepare for any financial questions that may be asked of you.

Remember, when you answer potential challenges with distinct strategies, you turn your weaknesses into strengthsand present yourself as being both realistic and proactive.

Financials

The final section of your business plan document is the Financials section. This is the place where you present the financial status of and projections for your business. Put simply, these are the numbersat minimum, an income statement and a balance sheet. You’ll want to include your current statements (if your business is already up and running) and projections for the next three years.

Whether you’re borrowing money or trying to attract investors, your potential business partners will want to know what size of business you’re talking about, how profitable that business is likely to be, and how you expect to grow revenues and profits over the years. Your financial statements provide that critical information. In addition, this section helps you come to grips with the financial realities of what you plan to do.

In a way, the Financials section defines the goals you have for your eBay business. The revenues and profits you project for future years are your company’s financial goals; they’re the yardstick with which you’ll measure the success of your business strategy over the next several years.

When you’re making your projections, you should make sure that the numbers you forecast actually make sense. Is there a logic to the revenue buildup over the period? Do the projected expenses make sense in relation to the projected revenues? Are these numbers realistic? Are they achievable? Are they comfortableto both you and to your investors? Bottom line, do the numbers feel right?

Note

Don’t know an income statement from a balance sheet? Then turn to Appendix A, “Accounting Basics,” for a brief financial refresher course.

Remember, the numbers you put together quantify your financial goals. Once you accept them, you’re committing yourself to running a successful eBay business.

Writing the Plan

Now that you know what goes into a successful business plan, all you have to do is write it. As daunting as that sounds, it isn’t that difficult. The hardest part is just sitting down and getting started. Carve out a few hours of an evening or on the weekend, close the door, turn off the radio, and disconnect the telephone and the Internet. Concentrate on the task at hand, starting with a rough outline and filling in the details as if you were telling them to a friend. Take as much time as you needa few hours, a few evenings, or a few weeks. Don’t overthink it; just start writing and worry about editing later.

Once you have a rough draft down, reread it as if you were a stranger to the story. Even better, give it to someone else to read and see if it tells that person everything he or she needs to know about your business. See what questions they have, and incorporate them into any changes you need in your second draft.

After all the words are right, you can spend a few minutes making your document look pretty. Print it out, give it a final proofreading, and you’re done. Then, and only then, you can start using the planto get your eBay business up and running.

Chapter 4. Evaluating and Arranging Funding

Believe it or not, you may be able to start your new eBay business with zero dollars in your pocket. A lot of people do; that’s one of the things that makes an eBay business attractive.

It’s more likely, however, that you’ll have some startup costs involved. If nothing else, you’ll need to purchase some initial inventory and shipping supplies. How much money you need depends on the type of business you’re setting up and how you plan to handle your day-to-day operations. And if you need more upfront money than you currently have in your pocket, you’re going to have to find a source for these additional funds.

This chapter is all about this initial fundingand your ongoing financial needs. You’ll need to determine how much money you need, how much money you have, and where (and how) to obtain the difference.

How Much Money Do You Needand Why?

Before you go seeking funding for your new business, you first have to determine how much money you need. This isn’t as easy as it may sound.

First, you need to establish why you need this funding. That’s because the why will sometimes determine the who (to ask for money).

Note

Operating expenses are the ongoing, day-to-day costs of doing businessrent, utilities, office supplies, packing supplies, and the like.

Assuming that you’re starting your business from scratch, you’ll need enough cash in the bank to pay for all your operating expenses until the time when you start generating real profitswhich could be a period of months or even a year or more. You’ll also need cash to purchase your opening inventory, as well as any capital expenses you need to make (for computers and similar items).

Estimating Costs

Let’s start on the costs side of things. Just what do you need to purchase to get your business up and running?

Your business costs fall into a handful of major categories, which you should enter into a monthly planning spreadsheet, such as the one here. You can adapt this worksheet for your own particular circumstances, and for the specific items you intend to sell. (If you’re spreadsheet savvy, you may even want to plug it into Excel.) You should plan out your costs in each category on a month-by-month basis, for at least 12 months.

Need some details? Here’s what these categories should include:

• Capital expenses. These are the big one-time purchases you need to make just to get started. Capital expenses are those items that have a high cost and a long life, such as personal computers, printers, digital cameras, scanners, office furniture, and similar expensive pieces of equipment. Lower-cost equipment, such as postal scales, typically doesn’t fall into this category, nor do disposable items such as boxes and shipping labels. You should enter the total expense for each item in the month you plan to purchase it.

Cost Estimation Worksheet
Month		1	2	3	4	5	6	7	8	9	10	11	12	TOTAL
Capital Expenses
	Computer
	Printer
	Furniture
Rent and Utilities
	Office rent
	Warehouse rent
	Utilities
	Internet
Sales Expenses
	eBay fees
	PayPal fees
	Shipping
Packing Supplies
	Boxes
	Labels
	Other
Office Supplies
	Paper
	Toner
	Other
Inventory
	Item 1
	Item 2
	Item 3
TOTAL

• Operating expenses. Most small eBay sellers operate out of their homes, so you’ll likely have no additional office space expenses. However, if you need to rent a storage bin or warehouse space, or plan to lease office space, you should include those expenses here. This is also where you track the fixed monthly costs of your Internet service, auction management tools, advertising and promotion, research, and the like. Do not include any rent or utility expenses (for your house) that are already being paid; include only new expenses directly related to your eBay business.
• Sales expenses. This is where you track your eBay and PayPal fees. These are variable expenses, typically figured as a percent of your projected sales. (You can do the figuring yourself, based on the various services you sign up for; in a pinch, I’ve found that these expenses average between 10% and 12% of total revenues.)
• Packing supplies. This is where you’d put that postal scale, as well as boxes, labels, sealing tape, and the like.
• Office supplies. This category is for all your consumable office itemspaper, pens, paper clips, printer toner or ink cartridges, staples, and so on.
• Inventory. While not an operating expense per se, this is probably the biggest ongoing expenditure for most eBay sellers. If you have to purchase the items you intend to sell, you include those inventory costs here. This is also where you put your “manufacturing” costs, such as materials and labor, if you’re making the items you intend to sell.

Once you fill in the worksheet, you’ll have an estimate of how much money you’ll need every month for the next 12 months. This number is not how much cash you actually need, however. After the first month or so, your ongoing revenues should help cover these costsas you’ll discover as we continue working through this process.

Note

You shouldn’t plan on hitting your stride right out of the gate. It’s reasonable to expect your sales to take a few months to ramp up to their full potential, so it’s best to plan for lower sales when you’re first starting out. One of the most common business mistakes is to underestimate the number of months it will take for your new business to start generating significant revenues.

Projecting Revenues

It’s hard to gaze into a crystal ball and say with absolute certainty how successful you’re going to be with your eBay sales. All you can do is make a reasonable guess, based on all the planning you did back in Chapter 3, “Creating a Business Plan.”

Use the following worksheet to detail your projected sales over a 12-month period.

Sales Projection Worksheet
Month	1	2	3	4	5	6	7	8	9	10	11	12	TOTAL
Sales
Item 1
Item 2
Item 3
Item 4
Item 5
Item 6
TOTAL

Determining Cash Flow

Now that you know how much money you think you’ll have going out (costs) and coming in (revenues) every month, you can calculate your monthly cash flow. This isn’t your monthly profit, by the way, although it’s probably close; it’s just a measure of your business’s cash position.

You calculate your cash flow by starting with the amount of cash you have on hand (typically the ending cash from the previous month), adding your cash sales for the month, and then subtracting your cash expenses for the month. The resulting number is your cash position at the end of the monthwhich becomes your starting cash on hand for the next month.

If your cash position at the end of the month is a negative number, your out-flow exceeds your intake and you’ll need to come up with additional funds to meet the cash shortfall. If you get a positive number, you’ve generated extra cash that monthwhich you can use to pay next month’s bills, put in your savings account, or go out and buy something nice for yourself.

Note

The breakeven point is that point in time when your expenses and your revenues become equal. Any business conducted before that point was done at a loss; any business after the breakeven point is generating an operating profit.

Use the following worksheet to calculate your monthly cash flow. Remember that the Cash on Hand number is equal to the Cash Position number from the previous month. If you’re profitable, the Cash Position number will keep growingand the first month it goes positive is the month that your business breaks even.

Cash Flow Worksheet
Month	1	2	3	4	5	6	7	8	9	10	11	12
Cash on Hand
plus Total Sales
minus Total Expenses
Cash Position

Now here’s the thing with cash flow: It doesn’t matter how much cash you end up with at the end of the year; if you don’t have the cash when you need it, you’re short. That’s why you need to project your cash flow on a monthly basis. (Or, if you want to get really obsessive, you can calculate it weekly; after all, your expenses build up at least that frequently.)

Let’s work through a quickie example, as shown in the following worksheet.

If you look to the end of the 12th month, you can see that you’re in a very good cash position. You’re generating $1,275 in cash each month, and should have a total of $9,200 cash on hand. However, if you look at your very first month, you see that you end that month $2,950 in the holeand you stay in a negative cash position for the first four months of operation. It takes you until the fifth month to dig yourself out of the hole, when your cash position becomes positive.

All of which means that you need to come up with enough cash to get you through those first four months.

Cash Flow Worksheet: Mike’s Gift Baskets
Month	1	2	3	4	5	6	7	8	9	10	11	12
Cash on Hand	$0	(2,950)	(2,600)	(1,950)	(1,000)	$275	$1,550	$2,825	$4,100	$5,375	$6,650	$7,925
Total Sales	$1,000	$1,500	$2000	$2,500	$3,000	$3,000	$3,000	$3,000	$3,000	$3,000	$3,000	$3,000
Capital Expenses	$3,000	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0	$0
Rent & Utilities	$200	$200	$200	$200	$200	$200	$200	$200	$200	$200	$200	$200
Sales Expenses	$100	$150	$200	$250	$300	$300	$300	$300	$300	$300	$300	$300
Packing Supplies	$200	$225	$250	$275	$275	$275	$275	$275	$275	$275	$275	$275
Office Supplies	$200	$200	$200	$200	$200	$200	$200	$200	$200	$200	$200	$200
Inventory	$250	$375	$500	$625	$750	$750	$750	$750	$750	$750	$750	$750
Total Expenses	$3,950	$1,150	$1,350	$1,550	$1,725	$1,725	$1,725	$1,725	$1,725	$1,725	$1,725	$1,725
Cash Position	(2,950)	(2,600)	(1,950)	(1,000)	$275	$1,550	$2,825	$4,100	$5,375	$6,650	$7,925	$9,200

So how much initial cash do you need? All you have to do is look at the biggest monthly loss in the Cash Position line; this number represents the funding requirements for your new initiative. In essence, you want to obtain enough funding to pay for all your expenses until your business becomes self-funding through monthly operating profits. Anything above that figure is a safety net; anything less is a disaster waiting to happen.

Note

If you have to borrow money just to pay your rent or mortgage, you’re in no position to be launching a major eBay business. Make sure that all your basic needs are met before you invest more money to become a high-volume eBay seller.

In our example, the biggest negative cash position comes in the first month. That number$2,950is the amount of initial funding you need to get your business up and running.

Now for the tough question: Where do you get the money?

Where to Find Funding

When you need to finance the startup of your business, where you go for funding depends a lot on how much money you need. The less money you need, the easier it will be to find it. If you need really big sums, your options become more limitedand the process more involved.

Let’s look at all the places you can find funding for your new eBay business.

Personal Savings

The easiest place to look for money is in your own bank account. If you’ve been frugal with your money, you might have enough cash on hand to cover the startup costs of your eBay business. Just remember to work through your monthly cash flow to determine when you’ll generate enough cash to pay yourself back.

The advantages of going the self-financed route are obvious. You don’t have to spend time wooing a multitude of lenders and investors, and you don’t have any obligations (legal or financial) to anyone else. The disadvantage, of course, is that it’s all your moneyand you could lose it all if your new business fails. You also lose whatever interest your money could have been otherwise earning.

It’s possible that you don’t have enough money to completely fund your eBay business. So self-funding isn’t always a viable option. If you have the money, however, it’s the fastest and least-complex option available.

Credit Cards

Getting an advance on your credit card is another way of borrowing money from yourself. The big difference between this method and withdrawing funds from your savings account is that you have to pay interest on the funds advancedwhich could be a couple of percentage points every month. You may also be charged a fee for making a cash advance to yourself. So when you’re calculating your payback schedule, make sure you factor in these additional costs.

Friends and Family

If you don’t have the funds, maybe someone you know does. Depending on whom you know (or are related to), you may want to consider borrowing your startup funds from a friend or family member.

The upside of dealing with friends and family is that you’re dealing with friends and family. The downside is also that you’re dealing with friends and family. Borrowing money from people you know is always a little tricky; even the best of friendships can be tested when the issue of money is involved.

If you decide to hit up someone you know for a loan, my advice is to keep things as professional as possible. That means starting with a well-written business plan and then writing up the entire transaction as a proper loan, complete with an agreed-upon payback schedule and a reasonable rate of interest. Treat your friend just as you would a banker, and make all your payments as scheduled. This way you’ll avoid (as much as possible) having this business interfere with your personal relationships.

Loans

If you need more than a few thousand dollars, you may be forced to visit your friendly neighborhood bank or lending company and apply for a small-business loan.

Lenders, of course, require you to give them back the money you borrowedwhich means you have to include the loan payback in your financial plans. (This is also the case when you borrow money from friends and family.) You also have to factor in interest payments, which can be significant. This means, of course, that when you’re putting together your financial plans, you have to make sure you generate enough profits to cover the loan and interest payments.

Still, if your funding needs are large enough, taking out a loan may be your only option. If this is the case, make sure you borrow no more (or no less) than you really need and that you can realistically pay back on a regular basis. Also be sure to shop around for the best rate possible. When you’re talking about the large amounts typical of business loans, a difference of a quarter or an eighth of a point can significantly affect your total payback and your monthly payments.

When you’re preparing to approach a banker or a loan official to ask for a loan, remember that lenders aren’t expecting some huge payback on their investment; they merely want their principal back along with the designated amount of interest. What they’re interested in, then, is your ability to repay the loan. So keep these points in mind when making a presentation to a lender:

• Show stability. Show your personal stability. Show the stability of your business model. Show anything you can that says “stable” and “low risk.”
• Concentrate on cash flow. Lenders are less interested in your profitability (although they are interested in that, too) than in your ability to make loan payments. This means you want to stress your cash flow, which hopefully is positive and hopefully is large enough to cover your loan payments.
• Look professional. When you deal with professionals, you need to look professional. That means creating a solid business plan and printing it out in a professional fashion. It also means working through your financials so that they’re as solid as possible. And rememberwhen you’re dealing with bankers and loan officers, think staid, lowkey, and conservative.
• Show a real use for the money. Bankers won’t want to lend you money without a good justification for it. (On the other hand, they also won’t want to lend you money if you’re so down on your luck that you really need it to survive; you’ll have to strike a balance.) Show exactly how the money will be used, and be precise; bankers are nothing if not detail oriented.

Note

If you have trouble getting a bank to lend you money, you can enlist the services of the Small Business Administration (SBA). The SBA offers a number of different types of loans as well as loan assistance. Learn more at the SBA’s website at www.sba.gov.

Most lenders will want to see not only your business plan, but also your current balance sheet and projected P/L. (That’s your profit and loss statement projected over the next year or two.) You may also be asked to put up collateral for the amount of the loan. For this reason, many small businesspeople get their startup funding by taking out a second mortgage or line of credit on their houses or other property.

Note

Large-scale financingbank loans, investors, and venture capitalmight be necessary if you’re expanding into the consignment selling, or Trading Assistant, business, especially if you plan to open a retail storefront. Learn more about this business model in Chapter 13, “The Trading Assistant.”

Investors

When you need more funds than you can get with a simple loanwhen you want to raise really large amounts of money, typically in the tens or hundreds of thousands of dollarsyou need to consider equity funding. It’s called equity funding because you sell equity in your business in return for the funding dollars. The people or companies that buy shares of equity are called investors; they’re investing their money with the hope that their equity position will be worth more at a later date than it was when they purchased it.

When you take on investorsof any typeyou’re gaining partners. An investor buys a share of your business and thus has a lasting equity stake. Even though that equity stake can be small, it’s still therewhich means for every investor you add, the business adds a new co-owner.

The stake of the business that an investor purchases is called a share. Each share of your company’s stock that you sell is assigned a specific price; this price can vary for different types of investors and will vary over time. As long as your company is private, you set the value of your shares. Once your company goes public (and it doesn’t ever have to, of course), the value of the shares is set on the open market of a stock exchange.

Note

Although your business plan is a good document to use when looking for a loan, it is just one of the documents you need to prepare when pursuing equity funding. Any time you sell stock in your company, the Security and Exchange Commission (SEC) requires that you prepare and distribute a private placement memorandum (PPM), which must contain some very specific information in a very specific format. Your business plan can accompany your PPM, or you can use your business plan as the cornerstone of your PPM. Ask your lawyer for more information.

There are many types of investors you can pursue for equity funding. In most cases, you’ll be going after small investorssometimes called “friend and family” or “angel” investors, people you know from other business dealings who are willing to invest in the future of your business. If your funding needs are really large, you’ll be dealing with venture capital (VC) firms, who will demand a major stake in your business in return for their investmentand will expect high growth numbers to make their investment worthwhile.

The ins and outs of equity funding are beyond the scope of this book, and (fortunately) beyond the needs of most eBay sellers. If you think you want to form a business with equity partners, you’ll need to bring in expert legal and financial help to put the deal together.

Which Funding Option Is Right for You?

Among these various funding options, which are the best for you and your new business? To find out, you have to get down to work and do some comparisons.

If you have relatively modest goals and funding needs (as most eBay businesses do), you’re not large enough to show up on the radar of the big venture capital firms. This is probably for the best, because it’s unlikely you’d want the hassle (and control issues) associated with venture capital funding.

Equity placement with small investors is also out of the question for most eBay businesses. Again, this is probably for the best, as you have all sorts of legal issues, not the least of which is developing a dividend-based or profit-sharing payout for your partners.

A more popular source of funding for eBay sellers is your friendly neighborhood banker. It’s much easier to get a bank loan than to solicit investments. Borrow enough money to get up and running, make sure you pay it back in time, and then you’re free of all obligations.

Even more popular is the self-funding option. If you start modestly (and you should), you probably have enough cash in the bank (or a high enough credit card limit) to handle your minimal startup costs. Just make sure that the costs of launching your business don’t keep you from paying your rent or mortgage, and you should be able to pay yourself back in short order.

Chapter 5. Establishing a Legal Business Presence

Now that you have a plan for your business and know how to arrange funding to get things started, it’s time to work on the nuts and bolts of setting up an official and legal business.

Wait a minute, some of you are probably thinking. There are millions of sellers on eBay who don’t go through any of this legal stuff, who sell items out of their garage and do just fine, thank you.

This is true. But those sellers aren’t trying to make a business of it; for them, selling on eBay is a hobby or an occasional pursuit. If you want to make serious money on eBay, you have to treat your activity as a serious businesswhich means setting yourself up as a legitimate business entity.

Choosing a Type of Business

When you’re setting up any small businesseBay businesses includedyou first need to decide what type of structure you want your business to have. The different types of businessessole proprietorship, partnership, and corporationeach have their pros and cons, and you should seriously evaluate which structure is best for your individual situation.

Note

I am not a lawyer, nor am I an accountant; I just write books. For that reason, you should take the information in this chapter as general in nature, and consult an appropriate professional for more specific legal and tax-related advice.

Sole Proprietorship

Most eBay businesses are set up as sole proprietorships. In this type of structure, you are your businessand vice versa.

A sole proprietorship is the easiest type of business to form, and the easiest to manage on an ongoing basis. You don’t have to file any papers of incorporation, nor do you need to withhold and pay monthly payroll taxes and the like. You file income tax for the business under your own name, using your Social Security number as your tax identification number. You’ll file and pay this tax in quarterly estimates (described in the “Dealing with Taxes” section, later in this chapter), but the paperwork burden is minimal compared to other forms of businesses.

On the downside, the owner of a sole proprietorship is personally responsible for the debts and legal obligations of the business. That means if the business owes money, you’re personally on the hook for itand if your business gets sued, you end up in court.

Note

For more information about the legalities of starting a small business, check out Business.gov (www.business.gov), the U.S. govern-ment’s guide for businesses; the Business & Human Resources section of the Nolo website (www.nolo.com); and the Entrepreneur’s Help Page (www.tannedfeet.com). Another good source of information is your local secretary of state’s office (or website), which should have all the forms you need to get started.

Registering as a sole proprietorship is relatively easy and relatively cheap. You can probably handle all the paperwork your-selfalthough using an accountant or attorney is never a bad idea. Your business can share your name, or you can do business under an assumed name or dba (doing business as). To do this legally, you’ll need to file a fictitious name affidavit in the county in which you do business. If you choose to open a bank account under your business name, you’ll need to present this fictitious name affidavit. See the office of your county clerk for specific details.

Partnership

A partnership is like a sole proprietorship, but with more than one owner. The two or more partners have to contractually agree as to who is responsible for what, and how to share the business’s profits or losses. You’ll definitely want to draw up formal partnership papers, which means bringing in a lawyer. Legal registration is similar to that of a sole proprietorship.

In a partnership, all partners are held personally liable for losses and other obligations. This also means that one partner is liable for the other’s actions; if your partner runs up a huge debt or is sued, you can be held responsible.

In addition, breaking up or selling a partnership is often problematic. If one partner wants to quit, the other one(s) has to buy out his or her shareand valuing a business at the breaking point is seldom quick or easy.

A partnership has to file a tax return and must have a Federal Employer Identification Number (EIN), although the business itself pays no income tax. The individual partners report the company’s income on their personal tax returns.

A few words of caution, however: If you’re thinking of opening an eBay business in partnership with a close friend or family member, know that one of the most effective ways to ruin a good friendship is to go into partnership together. Even the best friendships are tested in the stressful environment of running a day-to-day business. I’ve seen far too many friendships end up on the rocks because of shared business stresses. It may very well be true that while friends can be partners, partners can never be friends.

Corporation

Almost all large businesses (IBM, Microsoft, Viacom, and so on) are incorporated. Small businesses can also incorporate, although for many, going to the effort is more trouble than it’s worth.

One of the main advantages of incorporating your business is that it separates you personally from the business entity. That means your personal liability is reduced if the business falls into debt or gets suedin theory. In practice, however, lenders will often require the owners of small corporations to sign personal guarantees, which pretty much obviates that purported advantage.

Another advantage of incorporating is that if you eventually have to hire additional workers to help you run your eBay business, you can set up health insurance and retirement plans for your company’s employees. In addition, if you ever decide to get out of the business, selling a corporation is easier than selling other forms of businesses. Corporations can also sell stock, so if you have dreams of going big time, this is the way to start. There may also be tax advantages of incorporating. Consult your accountant for details.

And, depending on the amount of revenue your business generates, you may pay fewer taxes as a corporation than you would as an individual. At higher levels, you can shield some of your personal income from employment tax by having the corporation pay you a dividend rather than a salary. (Dividends don’t have employment tax attached; salaries do.) Of course, any dividends paid to stockholders (that would be you) are still subject to personal income tax. You’ll need to consult your accountant to determine which if any tax benefits accrue in your particular situation.

Potentially offsetting this tax savings is the fact that the corporation itself has to pay taxes on its profits. You minimize this corporate tax burden by taking all the profit out of your corporation, typically in the form of a big year-end bonus or dividend to yourself, so that the business has no net profit. It’s a numbers thing.

These benefits come at a cost, however, in the form of increased fees and paperwork. At the very least, a corporation must have a Federal EIN and withhold and pay monthly employment taxes for each of its employees. (That’s you again.) You’ll probably need an attorney or accountant to handle the details for you.

Thee are several types of corporations you can form, the most popular of which is the subchapter S corporation. This type of incorporated business is the simplest to set up, and the profits of such a business aren’t subject to corporate taxes. (You’re still subject to personal income taxes, of course.) Forming a subchapter S corporation also enables you to offset any business losses against your personal income.

If you have additional investors in your business (besides yourself, that is), you might want to consider filing as a limited liability corporation (LLC). In an LLC, the business’s income and losses are shared by all investors, although investors are subject to limited liability (hence the name) for the corporation’s debts and obligations.

In addition, several states recognize another form of small business corporation, called a statutory close corporation (SCC). An SCC typically is less formal (and therefore easier to establish) than a typical corporation, with operation similar to an LLC. You should ask your lawyer about the benefits of forming an SCC if you live in Alabama, Arizona, Delaware, Georgia, Illinois, Kansas, Maryland, Missouri, Montana, Nevada, Pennsylvania, South Carolina, Texas, Vermont, Wisconsin, Wyoming, or the District of Columbia.

Note

While it’s always good to work with a local attorney, you can complete your incorporation papers online with LegalZoom (www.legalzoom.com). This website lets you create all manner of simple legal documentstypically for a lower cost than you would otherwise.

All this said, most small eBay sellers opt against forming a corporation for their eBay businesses. I can only speak for myself here, but I’ve found that whatever slight advantages incorporation might offer to a small business are more than offset by the increased paperwork. For an eBay business just starting out, sole proprietorship is probably the way to go.

Filing and Registering

While it’s possible to just go online and start selling on eBay, if you’re running a business, you probably have to register with your local government. The rules differ from state to state (and sometimes from county to county!), but a good attorney or accountant can fill you in on what specifically you need to do where you live. You should also check with the staff at your county clerk’s office or chamber of commerce, or on your state’s official website; they’ll tell you what you need to do.

As to what exactly you need to do, many states, counties, and cities require that you register any new business with them. Some locales require you to obtain a permit or license for your activity; you should also check to see if your location is zoned for the type of business you plan to conduct.

Note

For a state-by-state list showing where to obtain business licenses, check out the Where to Obtain Business Licenses page on the SBA website (www.sba.gov/hotlist/license.html).

As we’ll discuss next, you’ll also need to collect, report, and pay sales tax on all sales you make to residents of your state. That means obtaining a tax license and number from the state, and possibly a sales permit or reseller license from your local government. Your sales tax number also functions as a resale certificate. You can present this number to any wholesalers you work with, which saves you from paying sales tax on the goods you purchase.

Dealing with Taxes

The only things sure in life are death and taxes. We’ll skip the death conversation and focus on the tax side of things, because that’s (hopefully!) more relevant to budding eBay sellers.

Collecting Sales Tax

Here’s the question nearly everyone asks: Do I need to collect sales taxes on my eBay sales? The answer is a firm “perhaps.”

Part of the answer depends on how much business you do on eBaythat is, whether your eBay sales are part of a steady business or more of an occasional hobby. Not that I’m recommending it, but occasional eBay sellers can probably get by without collecting sales tax, just as most individuals running garage sales fly under the tax radar. When you’re running a legitimate dayto-day business, however, there’s no sliding by this requirement: You must collect sales tax, and you must report your collections to your state tax authorities. Failure to do so has legal implications.

Of course, just what sales taxes you collect depends on the state in which you live. If your state has a state sales tax (and all but Alaska, Delaware, Montana, New Hampshire, and Oregon do), you’ll need to charge sales tax on all sales made to buyers who live in the same state you do. You do not have to, at this point in time, charge and collect sales tax on sales made to out-of-state or out-of-country buyers.

So, for example, if you live in California, you charge sales tax on all sales made to California residents. If someone from Nevada buys something from you, you don’t charge tax.

Of course, when you collect sales tax from a customer, you also have to report and forward that tax to your state government. This procedure varies from state to state, so you’ll have to check with your local authorities (or your accountant) to get the appropriate details of how this is donemonthly, quarterly, or whatever. You can also find this information online.

Note

eBay makes it relatively easy to collect sales tax on your in-state sales. All you have to do is check the appropriate option on the Sell Your Item listing form when you’re creating your auction listing. Tax will automatically be added to the final price during the checkout process.

Check out the list compiled by the Multistate Tax Commission (www.mtc.gov/txpyrsvs/actualpage.htm).

Paying Taxes on Your eBay Income

While we’re on the subject of taxes, here’s another one you’re not going to like. When you’re running a legitimate eBay business, you’re going to have to report all the money you generate from your eBay sales as income. Failure to report your income is definitely actionable.

Again, if you’re just selling a few items a month, the government probably isn’t going to come after you for nickels and dimes. (Although it could if it wanted to.) But when you become a high-volume professional seller, your eBay activity is a real businessand real businesses have to pay taxes. That’s all there is to it.

If you’re running a sole proprietorship, the income you generate from your eBay sales, less any expenses related to those sales, is your business income, which you report on IRS form Schedule C. Your business income then becomes part of the calculation for your personal income tax, which you report on your normal form 1040. (It goes without saying that this process is even more complicated if you’re incorporated.)

Unfortunately, keeping track of the taxes you owe is a little more complicated when you’re running your own business than it is when you work for someone else. Since you’re working for yourself, there’s no employer to withhold taxes from your paycheck (what paycheck?); instead, you’ll need to estimate and pay these taxes quarterly, using IRS form 1040-ES. (You’ll also need to pay state quarterly estimated taxes, using the appropriate state form.) You might as well mark the dates on your calendar nowJune 15, September 15, January 15, and April 15 are the four quarterly payment dates.

Fortunately, most everything you spend money on that’s related to your business can be deducted from your taxes as a business expense. And I mean everythingInternet service, your computer, automobile trips to the bank or office supply store, even a fair share of your household utilities (for that portion of your house you use as a home office) may all be legitimate deductions. And the more deductions you have, the lower your reportable income for tax purposes.

Note

It’s important that you factor your quarterly tax payments in your budget. If you’re used to having a regular job, with your taxes automatically deducted from each paycheck, paying this way will be a new thing for you. When you run your own business, you’re responsible for estimating your own taxesand for making those payments every three months.

All this accounting sounds complicated, and it iswhich is another reason to hire a professional to handle your business accounting and taxes. Your accountant will know just what you can and can’t deduct, no guessing involved. Even better, it’s likely that your accountant will find things to deduct that you never thought ofwhich will more than pay for his or her fee. You can also get “official” tax information from the Internal Revenue Service. Check out the IRS’s Small Business One Stop Resource website (www.irs.ustreas.gov/businesses/small/).

Withholding Employee Tax

Depending on the size and complexity of your eBay business, you may need to worry about one more type of tax. If you have employees working for you in your eBay business, you’ll need to withhold income tax from their paychecks, and then report and pay this tax to the state and federal government. This is actually a fairly complicated process, and not for the numerically challengedyet another good reason to employ the services of a qualified accountant.

If you have to deal with withholding taxes, the federal form you need to file is the SS-4; more information is available on the IRS website. For state withholding information, check out the state-by-state list compiled by the Federation of Tax Administrators (www.taxadmin.org/fta/link/forms

Setting Up Your Bank Accounts

When you’re running a business, your banking needs are likely to be different from your previous personal needs. While you can make do by running your eBay payments through your personal savings and checking accounts, it’s much cleaner to establish a separate banking identity for your business. This way it’s clear which funds are personal and which are business-related.

Merchant Checking Account

The best business practice is to set up a merchant or business checking account separate from your personal accounts. While you’re not required to do this, it will make your recordkeeping easier. Having a bank account in your business name should also minimize any potential confusion when it comes to depositing or cashing checks made out to your business name or dba.

To set up a merchant account, you’ll need that fictitious name affidavit we talked about earlier. If you’re running a partnership, the partnership’s bank account should be separate from all the partners and should require more than one name on the checks. (That’s to protect against any one partner running off with all the funds.)

Note

Rather than setting up a specific merchant account, it may be easier (and cheaper) to set up a second personal accountespecially if you’re a sole proprietorship. The important thing is to set up a separate account; it doesn’t have to be a literal merchant-type account.

Dealing with Credit Card Payments

While you’re at the bank, you should ask about what’s involved in establishing a merchant credit card account. You’ll need to accept credit card payments for your eBay auctions, and if you can easily and affordably set up a merchant account with your bank, all the better. Know, however, that most banks make it difficult for small businesses to do this; you’re probably better off going with PayPal for your credit card payments.

Obtaining Insurance

If you’re truly relying on your eBay sales as your sole source of employment, you’ll need to obtain health and disability insurance for yourself and your family (if you don’t already have it)and, if you’re incorporated, for your employees. While eBay offers a health insurance plan to PowerSellers, all other sellers are on their own.

Note

Learn more about PayPal and credit card payments in Chapter 16, “Managing Customer Payments.”

You can also shop for health insuranceand find a wealth of other informationwhen you join the National Association for the Self-Employed (www.nase.org), a great organization for all types of self-employed businesspeople.

Fortunately, while you’re on your own, you’re not truly alone; there are many health-care insurance providers that offer plans for small businesses and the self-employed. In addition, many business organizations and associations offer group insurance plans to their members. Here are some websites you can use to search for small business health insurance:

• HealthInsurance.com (www.healthinsurance.com)
• Health Insurance Resource Center (www.healthinsurance.org)
• Insure.com (www.insure.com)
• National Association of Socially Responsible Organizations (www.nasro-co-op.com)

You should also consider obtaining insurance on your business itself. This type of business insurance is designed to protect you from specific business liabilities, such as creditors and potential lawsuits. Check with your insurance agent to shape a policy that works for you.

Hiring Professional Help

Now that I’ve sent your head spinning with all the paperwork required to get your eBay business off the ground, let me tell you how to make most of these details go away:

Hire someone to do it for you.

That’s right, when it comes to setting up and managing a small business, there is a definite advantage to hiring professionals to handle all the paperwork and record keeping. Yes, it’s an additional cost you’ll have to pay, but for most of us it’s not only worthwhileit’s a necessity.

What kinds of professionals am I talking about? Just two: an accountant and an attorney. The attorney is necessary to help you get your business registered and legal, and the accountant is necessary to keep track of your taxes and finances on an ongoing basis. While you might be able to do all this work yourself (or not), a professional is more likely to know what’s required, and thus keep you out of any potential hot water. Professionals also do this for a living, so they can do it better and faster than you can. Let the professionals handle all this busy workso you can focus your attention on the important job of running your business!

And rememberall professional fees are tax deductible.

Note

Learn more about hiring an accountant and managing your business’s accounting in Chapter 6, “Setting Up a Recordkeeping System.”

Chapter 6. Setting Up a Recordkeeping System

When you’re running a business, you need to keep track of what you’re doing. That means keeping records about what you sell, whom you sell it to, and how much money you make (or don’t) from what you sell. These records not only help you manage your business on a day-to-day basis, they also help you prepare your yearly taxes.

This chapter walks you through the records you need to keep and suggests how to set up your own recordkeeping system.

Why You Need to Keep Good Records

How profitable is your business? You’ll never know if you’re not keeping trackwhich is reason enough to set up some sort of recordkeeping system.

Keeping records can be both a defensive and an offensive activity. It’s defensive in that you have key information about your business in case you ever need it in the futureto answer a query from the IRS, for example, or to investigate a customer complaint or notify customers in the case of a product recall. It’s offensive (in a good way) in that you can use this information to generate more sales, by selling additional items to your existing customer base.

And then there’s that matter of tracking the progress of your business.

You need to know how much things cost and how much you sell them for in order to gauge the success of your business. If nothing else, you have to report your business income to the Internal Revenue Service at the end of each year, and you can’t do that if you don’t know what you’ve sold and for how much. The more detailed and accurate your recordkeeping, the easier it is to put together your yearly tax returnsand to claim all the allowable deductions against your income.

In addition, setting up a simple accounting system lets you generate monthly financials, which tell you on a near-real-time basis just how well your business is (or isn’t) doing. After all, you don’t want to wait until the end of the year to find out that you’re going brokeor getting rich!

Components of a Bare-Bones Recordkeeping System

When we talk about setting up a recordkeeping system for your eBay business, we’re talking about assembling and tracking some very bare-bones data. Let’s look at each component of the recordkeeping system in detail.

Inventory Records

Setting up an inventory management system sounds like an extremely complex undertaking. It’s really not. Just think of it in these simple terms:

You want to track when you got your stuff, how much it cost you, when you sold it, and how much you sold it for.

That’s not rocket science.

In the old (pre-PC) days, many businesses tracked their inventory on 3″[.dotmath]5″ index cards. (I know; I used to work with a system like this.) Each card typically included the following information:

• Item name
• Item description
• Item model number (if appropriate)
• Item serial number (if appropriate)
• Cost of the item (sometimes called the cost of goods sold, or COGS)
• Date the item was purchased
• Date the item was sold
• Final sales price of the item

The one bad thing about “the old days” was that we had to enter all this information by hand and then manually add up the numbers on all the cards at the end of each month. Now that we all have personal computers, however, a lot of this manual work is automated.

The simplest way to track your inventory on a PC is to use a database program, such as Microsoft Works Database or Microsoft Access. You can also use a spreadsheet program, such as Microsoft Excel, as a kind of simple database; Excel’s database functions are good enough for most small business inventory management.

Just set up your database or spreadsheet with fields for each of the items listed previously. Then create a new record for each item in inventory. Whenever you purchase new inventory, create new records. When you sell an item, mark the record for that item sold, and fill in the date sold and sales price fields.

At the end of each month, have your program run a report that lists the total cost of the entire inventory you currently have in stock. You should also run a report showing all items sold and calculating your total profit (sales price less cost of item) on these items. That should provide the basic inventory and sales information you need for your accounting system (discussed later in this chapter).

Once you get good at it, you can use your inventory management system to help you decide when to order more items for sale. Set a minimum quantity that you want to keep in stock, and program your database to alert you when the number of units on hand drops below this number. This capability is particularly useful when you’re selling large quantities of each item and when you have to purchase each item in quantity.

Another option for tracking the inventory of your eBay business is to use one of the advanced auction management tools offered by various third-party sites. These tools are discussed in more detail in Chapter 19, “Automating Auction Management.” The best of these tools will track both your inventory and your customer activity, all in a single package.

Customer Records

Just as it’s important to track what you sell, it’s also important to track who buys it. Establishing a customer management system not only lets you recall which customers you’ve sold to, it also lets you match up your customers with specific item purchasesand possibly leverage that information for future sales.

You can use Access or Excel to store your customer information. In addition, you can use eBay Selling Manager or most other auction management tools to track your customers and their sales activity.

What customer records should you keep? Here’s a short list:

• Customer name
• Customer address (street, city, state, ZIP code)
• Customer email address
• Item number purchased
• Item description
• Price of item purchased
• Date item listed for auction
• Date auction closed
• Date item paid for
• Payment method
• Date item shipped
• Shipping method
• Shipping cost
• Tracking information

You might also find it useful to track all the communications you send to each customer. This way you’ll know which customers you’ve contacted about payment and who might need a reminder email.

Note

You can feed some of this customer information back to your inventory management systemwhich is why a lot of recordkeeping systems integrate the inventory and customer management functions. The date sold and sales price data, specifically, transfer directly to the same fields in your inventory management database. There’s no point in entering the same information twice if you don’t have to.

Once you have all this customer information stored, what do you do with it? First, it’s good to have, just in casejust in case a customer claims not to have received an item, or just in case a customer has a complaint and wants his or her money back. In addition, some sellers use their customer lists to solicit additional sales, mailing or emailing them when they have new merchandise available or a sale coming up. It’s always wise to know who your good customers are; making additional sales to an existing customer costs less than acquiring a completely new customer.

Financial Records

You can use the information stored in your inventory and customer management systems to help you prepare your ongoing financial records. In particular, you’ll want to transfer the data relating to item cost, date sold, and sales price; this information will form the key lines on your monthly income statement.

You’ll also need to track additional information relating to the costs of running your eBay business and then use that information to perform your regular business accounting. In particular, you’ll need to hold onto certain items for tax purposesspecifically those little pieces of paper that document items you’ve purchased or sold. Even if your “system” consists of throwing all your receipts in an old shoebox or file folder, you need to hold onto all these itemsnot only for your monthly accounting and end-of-year tax preparation, but also in case the IRS ever decides to audit you.

How long should you hold onto your original documentation? Some experts say to hold onto all your receipts and invoices for a minimum of three years, but that might not be long enough. For example, the IRS requires that you keep documentation on all your assets for the life of the asset. And if the IRS thinks you’ve filed a fraudulent return, there’s no statute of limitations at all.

This means you might want to hang onto this basic documentation forever. Just clear out a corner of your garage or attic where you can store all your shoeboxes, and be done with it.

What kind of hard-copy documentation should you be holding? Here’s a short list:

• Bank statements
• Credit card statements
• Receipts for all business-related purchases and expenses (including shipping expenses)
• Invoices for all inventory purchases
• Invoices or sales receipts for all items sold
• Automobile mileage (keep a log for all business-related travellike all those trips to and from the post office)

Note

Want to learn more about setting up a small business accounting system? Then check out Accounting for Everyone (www.accountingforeveryone.com) or the Accounting section on the BusinessTown site (www.businesstown.com).

Setting Up an Accounting System

Throwing all your receipts in a shoebox is just a start. To truly track your business’s finances, you need to incorporate all the data from those receipts and from your inventory and customer management systems into some sort of an accounting system.

This chapter isn’t the place to go into all that’s involved in setting up a detailed small business accounting system; lots of other books and online resources are more appropriate to the task. We can, however, take a look at what you need to track to make your accounting system work.

Tracking Your Business Activity

All accounting systems track basic types of activities: revenues and expenses. Revenues are the sales you make to your eBay customers. Expenses are the costs you incur in the running of your businessthe inventory you have to purchase, as well as all those other things you need to buy to make your business run.

In accounting terms, the money you take in creates a credit on your books. The money you spend creates a debit. When your credits exceed your debits, you’re making a profit (or at least generating positive cash flow). When your debits exceed your credits, your business is losing money. Obviously, the former position is preferable.

To make your accounting system work, you have to enter each and every financial activity of your business. Purchase some merchandise for sale, enter it in the books. Make a sale, enter it in the books. Buy some supplies, enter them in the books. You get the idea.

Note

Confused? Brush up on these essential accounting concepts in Appendix A, “Accounting Basics.”

At regular intervalstypically at the end of each monthyou add up all the credits and debits (after putting them in the proper slots) and take a snapshot as to how your business is doing. These snapshots are the financial statements you use to measure the financial condition of your business.

Key Financial Statements

There are two key financial statements that you should prepare at the end of each month. They are the income statement (sometimes called a profit and loss statement, or P/L) and a balance sheet. These documents measure the condition of your business from two different angles.

Income Statement

The income statement reflects the revenue your business generates, the expenses you pay, and the profit (or loss) that filters down. This is done by showing your revenues, subtracting the cost of goods sold (which reveals the gross profit), and then subtracting all your operating expenses to show your net profit. And, after all, it’s that net profit number that really matters.

The top of the income statement lists all the money your business took inyour business’s revenues. The bottom of the statement lists all the money you paidyour business’s expenses. Subtract the bottom from the top and the number you get, expressed on the last line of the statement, is your business’s profit or loss.

Most businesses will create an income statement for each month in the year and then a comprehensive income statement at the end of the year. Many businesses like to track their progress over the course of the year and create a year-to-date income statement at the end of each month, as well.

Balance Sheet

The other essential financial statement is the balance sheet. The balance sheet looks at your business in a slightly different fashion from an income statement. Instead of looking at pure monetary profit (or loss), the balance sheet measures how much your business is worth. It does this by comparing your assets (the things you ownincluding your cash on hand) with your liabilities (the money you owe to others).

Assets go on the left side of the balance sheet, and liabilities go on the right. The total number for each column should be equalhence the “balance” part of the title. You should generate a balance sheet at the end of every month and at the end of the year.

Note

See Appendix A for a detailed explanation of income statement and balance sheet line items.

Software for Small Business Accounting

How do you put together all your business data and generate these financial statements? You have two practical options: hire an accountant or use an accounting software program. (You could also, I suppose, keep your books by hand, on oversized sheets of ledger paper while wearing a green eyeshadealthough hardly anyone except latter-day Bob Cratchets do it that way anymore.)

We’ll look at accounting software first.

There are many different programs you can use to keep your business’s books. The simplest of these programs are the personal financial management programs, such as Quicken and Microsoft Money. They may be able to do the job if your business is simple enough, but most small businesses will find them somewhat limited in functionality. A better choice for many eBay businesses is QuickBooks, which is a more full-featured small business accounting program. If your business is big or unique enough, however, even QuickBooks might not be powerful enough; in that instance, you can evaluate other more powerful business accounting packages.

Quicken

The most popular financial management program today is Intuit’s Quicken (www.quicken.com). Quicken comes in various flavors, only one of which has features of use to the small business. That version, Quicken Premier Home & Business, lets you track your business expenses, record assets and liabilities, generate customer invoices, and create basic financial statements.

Microsoft Money

Microsoft Money (www.microsoft.com/money/) is a direct competitor to Quicken. Like Quicken, Money comes in various flavors; the version of interest to eBay businesses is Microsoft Money Small Business. This version offers similar functionality to Quicken Premier Home & Business, as well as basic payroll management.

QuickBook

A better option for most small business owners is Intuit’s companion package to Quicken, called QuickBooks (www.quickbooks.com). There are a number of versions of QuickBooksSimple Start, Pro, Premier, and Enterprise Solutions. For most eBay businesses, either the Simple Start or Pro version (shown in Figure 6.1) should be more than good enough.

Figure 6.1. One of the most popular small business accounting packagesIntuit’s QuickBooks Pro.

[View full size image]

You can use QuickBooks not only to do your monthly accounting and generate regular financial statements, but also to manage your inventory, track your sales, and do your year-end taxes. QuickBooks even integrates with PayPal, so you can download all your PayPal-related transactions into the software program, and manage everything all in one place.

Intuit also offers a web-based version of QuickBooks, called QuickBooks Online Edition, which you can access from the main QuickBooks website. This Online Edition keeps all your records online, so you can do your accounting from any computer, using nothing more than your web browser. QuickBooks Online Edition isn’t quite as robust as the standalone version, which makes it best for those eBay businesses with simpler needs. You’ll pay $19.95 per month (or more, depending on the plan) for this service.

Tip

If you use QuickBooks, you want to download eBay’s Accounting Assistant program. Accounting Assistant lets you export eBay and PayPal data directly into QuickBooks, and is free to usealthough to generate the necessary data you also need a subscription to eBay Stores, Selling Manager (Basic or Pro), or Seller’s Assistant (Basic or Pro). Get more detailsand download the programat pages.ebay.com/help/sell/accounting-assistant-ov.html.

Other Small-Business Accounting Packages

If QuickBooks doesn’t satisfy your accounting needs, other small business accounting programs are available. Some of these programs are more fully featured than QuickBooks, and more complicated to use. That might not present a problem if you’re relatively numbers-savvy, but if accounting doesn’t run in your blood, some of these programs might be more than you can handle.

Here are a few of these accounting packages to consider:

• Business Works (www.2020software.com/products/Business_Works.asp)
• Cashbook Complete (www.acclaimsoftware.com)
• DacEasy (www.daceasy.com)
• MYOB BusinessEssentials (www.myob.com)
• Peachtree Accounting (www.peachtree.com/peachtreeaccountingline/)

Working with an Accountant

Even if you use an accounting program like QuickBooks, you still might want to employ the services of a professional accountantat least to prepare your year-end taxes. That’s because an accountant is likely to be more experienced and qualified than you to manage your business’s tax obligations.

Many small businesses use QuickBooks to generate their monthly financial statements but then call in an accountant to prepare their quarterly estimated taxes and year-end tax statements. This is a pretty good combination; you can have QuickBooks print out just the right data that your accountant will need to prepare your taxes.

Of course, you can also use an accountant to handle all of your financial activities. This is a particularly good idea if (1) your business is generating a high volume of sales, and (2) you aren’t particularly interested in or good at handling the books. You’ll pay for this service, of course, but if your business is big enough, it’s probably worthwhile.

Where do you find a reputable accountant? You should check with your local chamber of commerce or SBA office, as well as other local small business organizations. It wouldn’t hurt to ask other small business owners; word-of-mouth is often the best way to find simpatico service providers.

In addition, you can use the Internet to search for small business accountants in your area. Check out these websites:

• 1-800-Accountant (www.1800accountant.com)
• CPA Directory (www.cpadirectory.com)
• The National Association of Small Business Accountants (www.smallbizaccountants.com)

However you find an accountant, know up front that he or she will need you to keep some very specific financial recordslike those we discussed earlier in this chapter. Your accountant can’t track your business unless you’re tracking your business, so work with your accountant to set up the best recordkeeping system for your business needs.

Chapter 7. Organizing Your Home Office

Running an eBay business involves a lot of workand a lot of different work. There’s a fair share of bookwork involved, especially when it comes to managing your eBay auctions, which means working behind a desk or at a computer. Then there’s the physical management of your inventory. And the packing and shipping of all the items you sell.

All of these back office activities have to be done someplace. Assuming that you’re running your eBay business out of your home, that means carving out space to run your businessspace for your desk and computer, space to store your inventory, and space for your “shipping department.” That might mean appropriating a spare bedroom, or setting up shop in your basement, or even portioning off part of your kitchen or living room. Wherever you find the space, it’s important to get your back office set up and running smoothly so that you can perform your day-to-day eBay operations with a minimum of fuss and muss.

Setting Up Your Home Office

Let’s start with the “white collar” part of your eBay operationyour home office. This is where you’ll perform all your online operations and manage all your paperwork.

Note

All of your business expenses should be tax deductible, so keep track of all your receipts.

Personal Computer

A decent personal computer system is a necessity for any eBay business. After all, you need the computer to get online and manage your eBay auctions!

How fancy a computer do you need? Fortunately, not too fancy. Your computing needs will be fairly modest, so you don’t have to spend a lot of money on a state-of-the-art powerhouse PC. In fact, you can probably get by with one of the lowest-priced models availableor just use your existing PC, if you already have one.

What kind of PC are we talking about? Here are the minimum specs I recommend if you’re looking to buy a new PCand more is always better:

• 2.8GHz microprocessor
• 512MB memory (RAM)
• 100GB hard drive
• CD-R/RW drive
• 17″ LCD monitor
• Windows XP Home Edition operating system (or Windows Vista, when it’s available)

In today’s market, you can find a PC that fits these specs for around $500 or so. And if you’re an Apple fan, similarly featured Macintoshes are also easy to find.

Naturally, you should also outfit your PC with the right type of modem for your Internet connection, which we’ll discuss in a few pages. Ideally, that means a cable or DSL modem for a fast broadband connection, rather than a (slower) dial-up connection.

Note

Learn more about buying a new PCor upgrading your old onein my companion book, Absolute Beginner’s Guide to Computer Basics, 3rd Edition (Que, 2005).

If you have more than one PC in your home or business, you might want to invest in the appropriate equipment to network your computers together. Your network can be either wired or wireless; the easiest solution is to buy an all-in-one networking kit that includes all the equipment you need to assemble and configure the network.

You can shop for a new computer in a number of places; just about every type of retailer carries computers these days, from Wal-Mart to CompUSA and everywhere in between. You can even find good buys on brand-new or used PCs from fellow eBay merchants.

Note

When it’s time to go PC shopping, check the professional equipment reviews at CNET (www.cnet.com) and the user reviews at Epinions.com (www.epinions.com).

Computer Software

You’ll use your PC not only to access the eBay website, but also to manage all your auction transactions and your business’s recordkeeping. That means you’ll need to install the appropriate computer software for your business needs.

What software do you need? Table 7.1 shows what I recommend.

Table 7.1. Recommended Computer Software
Function	Software	Website
Web browser	Internet Explorer or	www.microsoft.com
	Mozilla Firefox	www.firefox.com
Email	Microsoft Outlook or	www.microsoft.com
	Outlook Express
Letters, memos	Microsoft Word	www.microsoft.com
Photo editing	Adobe Photoshop Elements or	www.adobe.com
	PaintShop Pro or	www.jasc.com
	Picasa	picasa.google.com
Number crunching	Microsoft Excel	www.microsoft.com
Customer database	Microsoft Access or	www.microsoft.com
	Microsoft Excel
Accounting	QuickBooks or	www.quickbooks.com
	Quicken Premier Home & Business or	www.quicken.com
	Microsoft Money Small Business	www.microsoft.com

You should also consider a decent backup system, to create archival copies of all your important customer and accounting records. I recommend investing in a second, external hard drive for this purpose. You can find large backup drives for well under $200, and most come with their own automated backup software. Alternatively, you can use an online backup service, which lets you back up your files online to a separate Internet site; this way, if your office burns down, your key files are safely stored offsite. Some of the more popular online backup services include @Backup (www.backup.com), IBackup (www.ibackup.com), and Xdrive (www.xdrive.com).

Note

You can get Microsoft Word, Excel, and Outlook together in the all-in-one Microsoft Office suite. See www.microsoft.com/office/ for more information.

Printer

One of the key components of your computer system is your printer. You’ll be printing lots of invoices and labels, so there’s no point spending the money on a color printer. Buy a good black-and-white model that can handle a heavy printing load.

You’ll need to choose between inkjet and laser printers. Inkjets are lower priced but could end up costing you more in the long run; all those replacement ink cartridges add up over time. Laser printers cost more, but are faster and better suited to heavy printing loads. If you think your eBay business will generate a high volume of sales, a laser printer is probably the way to go.

If you think your business will need fax capabilityor if you see the need to make copies of documentsthen consider a combo printer/fax/copier/scanner machine. These units (sometimes called all-in-one machines) are very efficient, both in terms of cost and in desktop footprint. You can find combo units in both inkjet and laser varieties, starting from $250 or so.

Finally, consider investing in a separate label printer for your packing and shipping operation. While you can print labels from your main printer, a free-standing label printer (and associated label-printing software) is often more convenient, especially if you’re shipping dozens or hundreds of items each week.

Scanner and Digital Camera

You might not think of these next items as absolutely necessarybut you’d be wrong. You need both a computer scanner and a digital camera to capture images of the items you’ll be selling on eBay.

A scanner is good for scanning images from flat itemsCDs, books, small packages, and so on. A digital camera is needed to capture three-dimensional items. Both pieces of equipment save their images as digital files, which you download to your computer’s hard disk. Once they’re stored on your PC, you can edit the pictures with your image editing software, as you’ll discover in Chapter 23, “Displaying More Powerful Photographs.”

What kind of digital equipment should you buy? The scanner is relatively easy: Go for a decent flatbed scanner, something in the $100 range. Choosing the right digital camera is more complex. You can find models as low as $100 or as high as $1,000 (or more!). Fortunately, your needs are modest. You don’t need a camera with lots of megapixel resolution; the pictures you post on eBay will be low-resolution JPGs. Look for a model that’s easy to operate and (especially if you plan on selling smallish items) includes a macro or close-up focus capability. You can probably find what you need in the $200 range.

And, while you’re at the camera store, spend an extra $20 or so to buy a tripod. This is a small price to ensure rock-steady photographs of the items you intend to sell.

Internet Connection

As you manage your eBay business on a day-to-day basis, you’ll find yourself connecting to the Internet a lot. For that reason, you may not be happy with a traditional dial-up Internet connection. As you probably already realize, a dial-up connection is slow (56.6 kilobits per second) and cumbersome (you have to make a new connection every time you want to go online). For your new eBay business, something better is in order.

That something better is a high-speed broadband Internet connection. A broadband connection can speed up your Internet access by 10 times or more; plus it’s always on, so you don’t have to waste time dialing in to connect. Whenever you want to check your eBay auctions, just launch your browser and you’ll be connected to eBay almost instantly.

Three primary types of broadband connections are available today. You can choose from

• Digital cable Digital cable is the most popular form of broadband in the U.S. today. Cable modems easily connect to digital cable lines and typically offer speeds between 1Mbps2Mbps.
• DSL (Digital Subscriber Line). DSL piggybacks on your existing telephone lines and provides speeds of at least 384Kbpsmore typically, 500Kbps1Mbps.
• Digital satellite. If you have a clear view of the southern sky, you can get your Internet via satellite. Download speeds average 400Kbps.

Note

Learn more about all types of broadband Internet services and find a provider near you at Broadbandreports.com (www.broadbandreports.com).

You typically get DSL service from your local telephone company, and cable broadband from your local cable television company. Digital satellite service is available from HughesNet (www.hughesnet.com) and StarBand (www.starband.com). DSL and cable broadband typically run $40 or less each month; satellite Internet service will run a little more.

Telephone and Fax

Your home office needs its own communication systemand that means more than just email. You’ll need a separate phone for your office, even if that phone shares your home line. (You can choose to invest in a separate business phone line, but that’s probably not necessary unless you generate a large volume of outgoing or incoming calls.) Consider a phone with a built-in answering machine or access to some sort of voice-mail system, so that you won’t miss any calls when you’re away.

If you do decide to go with a separate business phone line, invest in a two-line phone. This way you can run both your home and business lines into the same phone, and use either line as necessary. You can find a good two-line cordless phone for less than $200.

Another option is to use your cell phone as your business phone. This is a good way to keep your business calls separate from your personal calls. This is also a good idea if you need to remain in contact with the outside world even when you’re not in the office.

Yet another way to go is with an Internet-based phone service. eBay recently purchased Skype (pages.ebay.com/skype/), which lets you call anywhere in the world using your Internet connection as your phone line. Skype and similar Internet phone services typically cost less than traditional landline phone service, although you may have to purchase some additional equipment to get your new phone system up and running. In addition, eBay lets you add Skype “click to call” buttons to your eBay profile and certain types of auction listings. It’s worth considering.

You may also have need of a fax machine. While a separate fax machine will work (and, with the proper devices, connect to your regular phone line), a better solution for many is the all-in-one printer/fax machine we discussed earlier. If nothing else, an all-in-one machine takes up less desk space than separate printer and fax machines.

Tip

An option to purchasing a fax machine is to use a web-based fax service, such as eFax (www.efax.com), which lets you send receive faxes via the Internet, using your web browser or email program.

Filing System

In the course of running your eBay business, you’re going to generate a lot of records. Many of these records will be electronic, which are easy to deal with by using the appropriate software program. However, you’ll also generate a fair amount of paper records, which you’ll have to keep on file.

Short-term paperwork probably needs to stay on top of your desk. You can employ the “multiple pile” method of desktop filing, or you can go the more organized route and use a series of desktop baskets and organizers. I recommend the latter.

For your longer-term paper storage, nothing beats a good, old-fashioned filing cabinet. Go for either a two- or a four-drawer model, and keep things organized with the appropriate filing folders. You don’t have to buy anything fancy, either; those low-priced metal filing cabinets work just as well as expensive wooden ones.

Furniture

The subject of filing cabinets brings us around to a bigger issueoffice furniture.

The biggest and most obvious piece of office furniture you need is a desk. Your desk has to be big enough to hold your computer, printer, scanner, and other equipment, and still provide enough desk space to let you spread things out and do a little paperwork. That probably rules out using a folding card tablealthough some swear by the old wooden-door-laid-on-top-of-two-filing-cabinets approach. My personal preference is an L-shaped desk with filing-cabinet drawers on either end; I put my computer equipment on one side of the L and use the other side for desk-based paperwork.

Another option is to go with a smaller desk and a separate computer stand. In any case, just be sure you have enough space for all the different kinds of office work you’ll be doing.

Of course, you need a place to sit while you’re doing all this work. Your office chair may be more important than your desk, in that it directly affects your physical comfort. Choose the wrong chair and you could end up either uncomfortable or in physical pain. And since we come in all different shapes and sizes, it pays to get a chair that adjusts to your own personal prefer-encesand to test-drive any chair before you buy it.

We already discussed filing cabinets, but you should also consider whether you need a bookshelf or two in your office. If you find yourself frequently referring to printed matterlike this book, for instance!then by all means include a bookshelf in your office plans. Remember, your bookshelves can hold all types of books, from dictionaries to phone books to software instruction manuals. If you need one, get one.

Your local office supply store should have a good variety of furniture to choose from, at affordable prices. Also good are retailers like Ikea or traditional furniture stores. If you’re on a tight budget, consider buying your furniture secondhand. Check out the “previously used” section at your local business furniture rental store, or keep an eye out for companies that are going out of business. (A lot of entrepreneurs were able to snatch up fancier-than-normal furniture when all those dot-com companies went bust!) Naturally, eBay is also a good place to look for these kinds of bargains.

Office Supplies

Don’t forget to stock your office with all the odds and ends you need to conduct your daily business. Your personal needs may differ, but here’s a starter list of the office supplies you’re likely to need:

• Note paper
• Letter paper (plain and letterhead)
• Envelopes (plain and letterhead)
• Labels
• Pens
• Highlighters
• Paperclips
• Stapler and staples
• Rubber bands
• Sticky notes
• Ruler
• Scissors

Note

eBay has created a special portal specifically for the needs of eBay businesses. Check out the eBay Business Marketplace (www.ebaybusiness.com) for deals on office equipment, computers, and the like.

You should find space in your immediate office for those supplies you’ll be using on a regular basis. Additional quantities can be stored somewhere less convenient.

Configuring Your Space

Of course, you have to have enough space to put all this new equipment and furnitureand that space has to be conducive to actually working. It won’t do to place your home office in the corner of a busy living room. You need to be able to separate your work life from your personal life. That might mean utilizing a separate roompreferably one with a door you can close.

How much space do you need? Think through all the equipment you’ll have; then add an appropriate amount of clean desk space to write checks and spread out a few file folders. Make sure you have enough room to actually roll or walk around comfortably. Then take this total spaceand double it. That’s right, you’ll always end up needing more space than you think, so you might as well plan for it from the start. Over the next several months you’re bound to buy more computer equipment, add extra filing cabinets, or need to store something that you hadn’t planned on. Plus, you might actually have visitorsand where will they stand or sit? Your home office has to be comfortable, so don’t start out cramped. Whatever space you allocate, you’ll end up filling it!

And where, pray tell, should this space be located? This is definitely a personal decision, and one that depends on what space you have available. I definitely don’t recommend carving out space from a high-traffic public area. It’s better to find a spare bedroom or area of your basement that you can partition off. Worse comes to worst, you can use a corner of your bedroomassuming, of course, that it’s a room that is otherwise vacant during working hours.

Another option, of course, is to rent office space outside your home. While this might sound appealing (especially if you want to get away from the kids while you work), it’s expensive and not typically necessary. Still, if you can find affordable space nearby, it’s worth considering.

After you stake out your space, make sure it has enough electrical outlets for your needs. Consider everything you’ll be plugging inyour computer, monitor, external modem, printer, scanner, telephone, desk lamp, whateverand make sure there’s a plug for everything. And, while you’re at it, make sure you have the appropriate phone and cable jacks for your telephone, fax, and Internet connections.

Note

Remember, your dedicated (not shared) home office space is eligible for the home office tax deduction. Consult with your accountant for more details.

You should design your workspace with you in the center. Put your most important taskyour computerright in front of you, and everything else within reasonable reach. In this aspect, it pays to think vertically. That means incorporating a series of shelves above your desk, rather than spreading out sideways from your working area. There are lots of innovative storage options available that let you expand your workspace up instead of out.

Ergonomics is also important. You want everything in your office to be within comfortable reach. You should pay special attention to the relationship between your chair, computer screen, keyboard, and mouse. Consider one of those split ergonomic keyboards, such as the Microsoft Natural keyboard.

You should also pay attention to light. Your office needs to be well-litand that means more than a small desk lamp. Natural light is always good, if you have a window nearby, but appropriate artificial lighting is also necessary. Consider a combination of uniform and task lightingwhich probably means both a floor or overhead lamp and a desk lamp. And you don’t have to make do with flickering fluorescent lighting, either; you can upgrade both desk and floor lamps with full-spectrum bulbs that simulate sunlight.

Setting Up Your Packing and Shipping Center

Your office is the place where you handle all your eBay-related paperwork and online activities. It is not where you store the items you have for sale or where you pack them up for shipping. You’ll need to set up separate areas for inventory storage and for packing.

We’ll discuss inventory storage last. Right now, let’s focus on setting up an efficient packing and shipping center for your eBay business.

Finding the Space

The first thing to consider is where you’ll be doing your packing. The place you choose depends to some degree on what kinds of items you’re selling. If you’re selling relatively small items, you can get by with less space. If you’re selling really large items, you’ll need a lot of space. You’ll have to do the math.

However much space you need, you’ll want this space to be dedicated to the task at hand. If you’re shipping out dozens (or hundreds) of items every week, you don’t want to have to assemble and disassemble your packing area every time you sell an item. It’s best to have everything set up and ready to go, permanently.

What type of space do you need? Well, you’ll need a large, flat areasome kind of tabletop or countertop, large enough for you to spread out your boxes or envelopes as you pack. You’ll also need space to store your packing supplies, and additional space nearby for your packing boxes and envelopes. Then you’ll need some sort of staging area to temporarily store your packed boxes until they’re shipped. Again, depending on the size of what you’re selling, this could amount to a fair amount of space.

Where should this space be? For most of us, it has to be someplace in the house. Many eBayers carve out a part of their garage for this operation. I use my kitchen. (I’m not much of a cook, so I might as well use my kitchen for something productive!) In any case, the space needs to be large enough but also easily accessible for the task at hand.

Essential Supplies

Your packing center needs to include storage space for the supplies you use for packing your eBay items. You need to keep these basic packing supplies on hand so that you’re not constantly running off to the office supply store every time one of your auctions closes. These items should always be available and easily accessed.

What items are we talking about? Consider the following items:

• Packing tape (both clear and brown)
• Bubble wrap
• Styrofoam peanuts or old newspapers
• Scissors
• Box cutter or similar kind of knife
• Postal scale
• Black magic marker
• Shipping labels
• Return address labels
• Other necessary labelsFragile, This End Up, and so on
• Labels or forms provided by your shipping service of choice
• Rate lists from your preferred shipping service(s)

Note

Another itemnot on the listyou may want to keep on hand is a rolling hand cart. This type of small, lightweight cart is particularly useful when transporting multiple items to the post office, or from one end of your house to the other.

Now for some elaboration. I recommend clear tape not just to seal the box but also to tape over the address label and make it somewhat waterproof. Brown tape can be used to tape over labels and logos when you reuse an old box. I prefer Styrofoam peanuts to newspapers because peanuts don’t leave ink stains and because of the weight factor; using newspapers as filler can substantially increase your package weight, and thus your shipping costs. (Of course, newspapers are free and peanuts aren’tbut peanuts are cheaper than the added shipping costs you’ll incur with newspapers.)

The other materials are somewhat self-explanatoryalthough you might ask why you need a knife when you’re packing. I find myself using the knife primarily to slice off old shipping labels from boxes I reuse for my eBay shipping. Although some old labels tear off rather easily, most don’t. To remove them, you have to cut (shallowly) around the label and then lift off the outermost layer of the cardboard box.

That’s just a start, however. Learn more about packing your items in Chapter 17, “Organizing Your Packing and Shipping.”

Boxes and Envelopes

The other items you need to find space for are the boxes and envelopes in which you pack your items. Of course, what types of boxes and envelopes you need depend on what types of items you’ll be selling. Chapter 17 will help you determine the kinds of shipping containers to use. Read ahead to learn more.

Once you’ve determined what sizes and types of shipping containers you’ll be using, you’re faced with another challenge: Where do you find supplies of these items?

The first thing you need to know is that some boxes are free. That’s right, if you’re shipping via the U.S. Postal Service, you can get free Priority Mail and Express Mail boxes, envelopes, and tubes. Some post offices carry these free containers, or you can order in bulkbut still freefrom the eBay and the USPS (ebaysupplies.usps.com) and have them delivered directly to your home. (Figure 7.1 shows some of the free co-branded eBay/USPS boxes available for Priority Mail shipping.)

Figure 7.1. Free shipping containers for USPS Priority Mail.

[View full size image]

Most post office locations also sell various types of boxes, padded mailers, mailing tubes, and other packing materials, although their prices tend to be a little on the high side. A better choice for high-volume shippers is your local office supply store, such as Office Depot, Office Max, or Staplesor a specialty box/shipping store.

Another good source of shipping supplies is your fellow eBay retailers. Several eBay Store sellers specialize in packing supplies for other eBay sellers. Just go to pages.ebay.com/businessmarketplace/ and click the Shipping & Packing Supplies link.

Note

Other carriers may or may not offer their own free shipping containers. FedEx, for example, offers certain sizes of envelopes and boxes for your (free) use, as does UPS.

Finally, there are lots of online merchants that offer good deals on packing materials. Check out BubbleFAST (www.bubblefast.com), eSupplyStore.com (www.esupplystore.com), ShippingSupply.com (www.shippingsupply.com), and Uline (www.uline.com).

Note

Many eBay sellers recycle old boxes, shipping out their items in boxes that were originally shipped to them. While this works for low-volume sellers, it doesn’t look very professionaland it’s unlikely that you’ll have enough old boxes sitting around to meet your high-volume shipping needs.

You’ll definitely want to stock up on those boxes and envelopes. I like to keep at least a one-month supply on handand if you can get a good deal on a larger quantity, go for it! Of course, you have to find a place to store all those boxes. One good approach is to keep a week’s supply in your in-house packing center and store your extra boxes someplace less centralin your garage or basement, in a shed, or even in a rented storage bin. You can then transfer supplies of boxes as needed to your packing center.

Managing Your Physical Inventory

Now we come to the big space hogyour product inventory. That’s right, you need someplace to store all the items you plan to sell.

Again, if your items are small, your storage needs are simpler. If you sell baseball cards, for example, it’s easy to find space for a lot of small, flat items. If you sell basketballs, on the other hand, you’ll need a lot more physical volume for storage.

Where should you store your inventory? Here are some suggestions:

• A spare closet
• Your garage
• Your attic
• Your basement
• A friend’s garage (or attic or basement)
• A spare room
• A storage shed
• A rented storage bin
• Rented warehouse space

Naturally, the first few options are less expensive than the last few. If you absolutely positively have to rent storage space, make sure you figure those costs into your business plan. For most eBay businesses, however, you’ll want to minimize your storage costswhich means minimizing your space needs, as much as possible. That means either keeping less stock on hand or selling physically smaller items. (In this fashion your storage capacity can help determine the types of items you intend to sell.)

Note

Here’s another optiondon’t stock anything for sale. That’s right, depending on what you sell, you might not have to carry your own inventory. You may be able to employ the services of a fulfillment company. You make the sale (via eBay), but the fulfillment company carries the inventory and ships directly to your customers. A variation on this is to become an authorized dealer for a particular brand or product, and let the manufacturer handle the inventory and shipping. Learn more in Chapter 14, “Purchasing and Managing Your Inventory.”

Finding the space is only part of the equation. If you’re selling smaller items, you may need to install some sort of shelving to help organize your inventory. Consider the type of inexpensive plastic or metal shelving that you can find at your local hardware or home store. You might also need some sort of container to hold your really small items. Think about plastic drawers or bins, or even clear plastic bags. Again, home stores and office supply stores should stock what you need.

If you have a variety of items in your inventory, you’ll also need some way to identify what you have on hand. That means some sort of labeling system, which can be as simple as handwritten pieces of paper or cards. If you really have a lot of different items, consider creating some sort of plan-o-gram or map to help you remember where you put what.

How much inventory should you stock? Not too muchespecially if space is at a minimum! I like to have no more than a few weeks’ worth of inventory on hand; anything more than that and you’re at risk if sales suddenly turn downward. On the other hand, you may need to buy larger quantities to get an attractive discount, or perhaps you may only be able to buy your items in large lots. In any case, the less stock you can keep on hand, the betterand the easier it will be to find space for.

Of course, you don’t have to stock all your inventory where it’s easy to get to. Just as with your shipping boxes, you can store a certain amount of inventory where it’s convenient for immediate shipping and store the rest offsite until you need it. Just make sure you can get your hands on enough items to fulfill the sales you make. The last thing you want to do is sell something that doesn’t exist!

Part 2: Choosing a Business Model

8 The Second-Hand Reseller

9 The Collector/Trader

10 The Bulk Reseller

11 The Retailer

12 The Manufacturer/Craftsperson

13 The Trading Assistant

Chapter 8. The Second-Hand Reseller

In the first section of this book, we discussed the planning you need to do before you launch your eBay business. Deciding what type of eBay business you want to run is part of that planning.

So what kind of eBay business should you launch? It all depends, of courseon what type of merchandise you want to sell, how you want to acquire that merchandise, and how you want to price and sell it. This combination of what you sell and how you sell it will define your eBay business model.

If you browse through the various sellers on eBay, you’ll discover a lot of different types of businesses. Some eBay businesses sell high-priced goods, some sell low-priced goods; some sell used merchandise, some sell new merchandise; some buy their goods at garage sales and estate sales, some buy direct from manufacturers. It’s a real mix.

Interestingly, all these hundreds of thousands of eBay businesses can be divided into a few common business models. There are those businesses that acquire a variety of used merchandise to resell; those that buy bulk lots and closeout merchandise to resell; those that buy and sell collectible items; those that sell products that they themselves create or manufacture; those that sell new in-the-box merchandise; and those that sell items on consignment from others. When you’re deciding what type of business to launch, chances are you’ll choose from one of these six business models. Which leads us to where we are right now. In this and the next five chapters, I’ll provide a general overview of these different types of eBay businesseshow they work, their pros and cons, what you can expect from each. I hope these overviews will help you better choose what type of business you want to run.

Note

Obviously, not all businesses fall squarely into a single model. Every business is unique: Some sellers fall into multiple categories, and some sellers conform to models not described here. But these half-dozen business models define the majority of eBay businesses, and thus are worth looking at in depth.

Easing into BusinessBy Selling What You Own

Probably the most common type of eBay business is what I’ll call the secondhand reseller. This is, as the name suggests, an eBay seller who buys and sells second-hand merchandise. This type of seller doesn’t sell new merchandise, he doesn’t purchase large lots of closeout items, he doesn’t necessarily specialize in a particular category of collectibles. This type of business sells the kind of stuff that people have lying around the house, cluttering the garage or basement. Some people might call it junk, but to a savvy seller, it’s a potential goldmine.

If this type of selling sounds familiar, that’s because it’s the type of selling that most casualthat is, nonbusinesssellers do. Selling stuff from around the house is how most people get started selling on eBay. You have some old clothes hanging in the spare closet, or some unused utensils in the kitchen, or some discarded tools or electronics sitting in the garage, and you decide to make a quick buck by selling them on eBay. If you do your job well, you sell that first round of leftovers and generate a little spare cashand get a taste of what selling on eBay is like.

The next thing you know, you’re looking for more stuff to sell. You start cleaning out the closets and basement and attic and garage, looking for more junk you can put up for auction. If you have a lot of junk sitting around the house, this can fuel your auction business for several months. But sooner or later you run out of stuff you want to get rid ofand then what do you do?

Well, if you’re like some of us, you ask your friends and family if they have any old stuff they’d like to part with. Maybe you start hanging around garage sales and yard sales, looking for bargains that you can resell on eBay. You keep your eye out for anyone getting rid of anything that might be of valueand you keep sorting through your own possessions, opting to sell off unwanted presents, out-of-style clothing, and anything else that isn’t nailed down or plugged in.

This is how a lot of big-time eBay sellers got started, and it’s actually a great way to learn the ropes. Sell a few dozen items like this, and you’ll get a good idea of how eBay selling works. You’ll gain valuable experience in preparing items for auction, in creating auction listings, in managing the auction process, and in packing and shipping. You may even get the opportunity to deal with a persnickety buyer or two; unpleasant as this may be, it’s great training for when you have to provide customer service on a larger scale.

In fact, the only difference between the occasional junk seller and the full-time second-hand reseller is volume. The more stuff you find to sell, the closer you move toward becoming a real eBay business.

Moving from Pastime to Business

How do you make the move from occasional seller to a full-time business? It’s a matter of volume, yesbut that volume is predicated in identifying a constant flow of merchandise to resell, and in selling that merchandise at an acceptable profit.

The business of reselling second-hand merchandise is a real business, as you know from the proliferation of bricks-and-mortar flea markets, second-hand clothing stores, and the like. The only difference between you and them is that you sell your merchandise on eBay, rather than in a traditional storefront. Like the traditional second-hand merchant, you face the big challenge of finding merchandise to resell; it’s only the way you sell that’s different.

To build a business based on the second-hand reselling model, you have to put together a plan for locating merchandise for resale. You have to lay out a budget for buying second-hand goods, and then feed that merchandise into your eBay sales machine. You can’t just hope to stumble over stuff to sell; you have to actively pursue second-hand merchandise to ensure a constant flow of inventory.

And when you obtain that merchandise to resell, you have to put it somewhere. Inventory management is a big part of running a full-time reselling business. You have to store all your inventory, as well as (in some cases) clean it up or fix it up for resale. You have to know what you have at any given point in timewhere it’s located, how much it cost you, and how much you plan to sell it for. The more different types of items you resell, the more complicated this all becomes.

Occasional eBay sellers don’t have this type of hassle. They don’t have to section off part of their garage or basement to store merchandise that they plan to resell. They don’t have to budget funds for purchasing merchandise, nor worry about how high they can mark up an item over the initial purchase price. They’re just selling stuff for fun, and the money they generate goes straight into their pockets. You, on the other hand, need to funnel the profits from what you sell back into your business, to help pay for additional merchandise that you’ll resell next week or next month. For them, it’s a one-time thing. For you, it’s a continuing business.

Where, then, is the line between reselling as a hobby and reselling as a business? To me, there are two factors. First, as a business, you’re in business to make a profit; hobbyists are often in it for enjoyment, and any profit generated is secondary. Second, as a business, you invest the money you make in additional merchandise to resell; hobbyists simply keep (or spend) any money they happen to make. If you actually generate a profit and then reinvest that profit to buy more merchandise to sell, then you’ve moved across the line and are running a business.

Sell Everythingor Certain Things?

Some second-hand resellers will sell anything they can make a profit on. Other resellers, however, prefer to specialize in particular types of merchandisechildren’s clothing, for example, or antiques. Each approach necessitates a slightly different business model.

Selling all types of used merchandise makes it somewhat easier to find inventory to sellyou’re not as picky about what you buy. By not limiting your selection, you also get to play in a lot of different product categories and open yourself up to all manner of pleasant surprises. That said, there’s more work involved in researching, storing, packing, and shipping a wide variety of items, since you never buy or sell the same thing twice; every piece you handle has new and different requirements.

When you limit your selection to a handful of specific categories, you can more quickly become an expert in those categories. When you buy and sell second-hand clothing, for example, you’ll learn all the ins and out of the used clothing marketwhat sells, what doesn’t, what something is worth, how to efficiently pack and ship it. Deal with one type of item long enough and you develop a good eye for bargains and for potential hot sellers. You can also work out an efficient routine for listing, storing, packing, and shipping those similar items.

What kind of specialization are we talking about? There’s a lot you can focus on. Some of the most popular categories for second-hand reselling include used books; used men’s, women’s, and children’s clothing; vintage clothing (which is different from “used” clothing); vintage toys, model kits, and other collectibles; records and tapes; jewelry and watches; and antiques. Just about anything that anyone might collect is a good category to specialize in; also good are those categories in which people like to get good bargains on used items (such as clothing).

That said, limiting your selection to a single type of item means you might have to pass over potentially lucrative merchandise outside your category of specialization. In addition, you may have to visit a larger number of garage sales and thrift stores to find enough merchandise to feed your ongoing auction business.

So which should you dosell anything (within limits) or specialize? That’s a personal decision; both models can be profitable. You should choose the business model that best suits your interests, as well as your own strengths and weaknesses. Just know that whichever model you choose requires a slightly different approach, and plan your business accordingly.

Running a Second-Hand Merchandise Business

So what is it like to run a second-hand reselling business? Let’s take a quick look at the day-to-day routine of a typical second-hand resellerfrom finding stuff to sell to shipping it out after a successful sale.

Finding Merchandise to Resell

The biggest challengeand a big part of the workloadof a second-hand reseller is finding merchandise to resell. Where does a successful second-hand reseller find items that will sell on eBaywhile avoiding pure junk that nobody will want?

There are lots of places where you can find used merchandise for sale. Savvy resellers know to haunt local garage sales, yard sales, tag sales, rummage sales, and the like, to pick up the cream of what’s available before it gets picked up by other buyers. Also good are estate sales and auctions, where you can purchase a lot of different merchandise all in one place. Depending on what type of item you want to sell, you can sometimes find merchandise at antique dealers and flea marketsalthough you might not always find good bargains there. Along the same lines, traditional used, second-hand, or vintage retailers can sometimes be good sources to fill your inventory. You can’t forget thrift stores and dollar stores (including the ubiquitous Goodwill Stores), or even pawn shops, although you may need to sort through a lot of merchandise to find the best bargains. And eBay itself can sometimes be a source of goods for resaleif you can score a low-enough price from a seller.

Note

Learn more about acquiring merchandise of all sorts in Chapter 14, “Purchasing and Managing Your Inventory.”

Another approach is to actively solicit merchandise for resale. Some sellers have good luck placing small “wanted” ads in their local newspaper classifieds. If you go this route, offer to pay cash on the spot, and offer to buy in bulk. Make sure, of course, that you’re well-versed in the type of items you’re buyingso you can buy smartly, without investing in a lot of unsellable merchandise.

Notice the emphasis on finding used merchandise. By definition, the secondhand reseller specializes in selling second-hand items. That doesn’t preclude you from picking up the occasional new item for resale, especially if you can get it for a bargain price. You want to be on the lookout for closeout and liquidated merchandise, factory seconds, returned items, and the like. Look for closeout sales at traditional retailers, bulk bargains at the wholesale clubs, and the ever-popular going-out-of-business sale.

Of course, one of the challenges of acquiring inventory is buying merchandise at as low a price as possible. Obviously, you want to avoid paying full price for anything, and negotiate as low a price as possible, if negotiating is part of the deal. You’re looking for items that cost you a buck but can be resold for $5.00 or more. You don’t want to pay $4.50 for that $5.00 item; you have to develop a talent for finding real bargains.

Sometimes you have to buy a bunch of junk to get a few treasures. This is especially the case when haunting estate sales, where you may be forced to bid on piles or boxes of merchandise. You purchase the entire lot in the hopes of finding a few items that have high resale potential. The rest of the stuff might end up in the trash.

As you can probably tell, this whole business of finding low-priced merchandise to resell is a lot of work. It’s also a constant choreyou’re always on the lookout for items that you can pick up for pennies and resell for dollars. For many second-sellers, this is the most fun of the whole process; it’s kind of like an ongoing treasure hunt!

Managing the Auctions

Once you’ve acquired your inventory, you have to do something with it. For the second-hand reseller, organization is important. When you purchase a group of items, you have to identify and categorize them, clean them up or fix them up as necessary, and then put them someplace where it will be easy to find them when they’re sold.

After the merchandise is cleaned up for sale, it’s time to start the auction. You’ll need to do a little research so that you can intelligently describe the item in the item description and judge an appropriate starting price (and estimate a probable final selling price). Then you’ll have to photograph the item, create the item listing, and post it for auction on the eBay site.

Obviously, if you’re running a high-volume business, you’ll be posting more than one auction at a time. Most second-hand resellers try to have a dozen or more auctions running at any given time. You may want to start and end all your auctions on the same day, or you may want to stagger your auctions so that you have something closing on every day of the week. However you approach it, you’ll need to be prepared to spend a lot of time at the computer getting things launched.

The period of time the auction is running is actually a bit of down time for you; there’s not much to do over the course of the auction other than watch the bids come in. This time between launch and close is when most secondhand resellers do their inventory hunting. If you don’t need to be at the computer, you might as well make good use of your time by finding more stuff to sell!

Packing and Shipping

Once the auction closes, you then have to contact the buyer and collect payment (typically in the form of a credit card payment to your PayPal account).

When the payment is in your hands, it’s time to pack the item and ship it out. This is one of the more challenging parts of the process, especially if you sell a wide variety of merchandise. In fact, it’s best if you work through the packing before you start the auction so that you know what type of box is required, and what other packing materials are necessary. It’s also good to estimate the shipping cost ahead of time (so you can include the cost in your item listing), which means weighing the item (including the packaging) and choosing the appropriate shipping service.

Note

Learn more about packing supplies and shipping services in Chapter 17, “Organizing Your Packing and Shipping.”

Packing done, you now need to ship the item, which probably means a trip to the post office. If you run a lot of auctions, you might not want to make a separate trip for each item you sell; many sellers prefer to “gang” their shipping so that they travel to the post office only two or three days a week. Better to take several boxes at once than make lots of trips for single items.

And remember, you’ll probably be dealing with lots of different sizes of boxesand, perhaps, several different shipping services. One of the things with selling second-hand merchandise is that no two items are alike; every sale you make is a new experience!

Pros and Cons of Second-Hand Reselling

Is second-hand reselling for you? Let’s take a quick look at the pros and cons of this particular business model.

Pros

What are the advantages to the second-hand reseller model? Here are a few of the things that many resellers like about this type of business:

• You won’t get bored. For many eBay sellers, the fact that every sale is different is one of the appeals to second-hand reselling. There’s a certain joy of discovery when you search for items to resell; you never really know what you’re going to find next. It’s hard to get into a rut when every item you buy or every sale you make is different from what you’ve done before. If you think that selling one type of item day-in and day-out would get boring, the “sell anything” school of secondhand reselling is for you.
• Specialization breeds familiarity. On the other hand, if you choose to specialize in a particular type of second-hand merchandise, you won’t have that much variety in what you buy and sell. What you gain, however, is familiaritywhich is a good thing. If you build up a high volume of business in a particular type of item, you’ll get to know that category very well, which makes it easier to buy smarter and sell more efficiently. If all you do is sell used tools, you can become very good at selling that type of item.
• Riding the trends can be profitable. Successful second-hand resellers become quite adept at identifying and riding category trends. It’s a fact that some categories get hot as others cool down; it’s quite rewarding to acquire a batch of merchandise just when that category is on the upswing. It requires some skill to predict the trends and identify merchandise that is just on the verge of being hot. Sometimes this requires you to buy merchandise and then sit on it for several months, as you wait for the trends to turn. But if you can learn to buy low and sell high, you can make a lot of money with this business model.
• You have insurance against category downturns. For those second-hand resellers who don’t limit themselves to a single category, that variety is one of the great things about second-hand reselling. If one category cools down, simply quit selling those items and move to something else. Sellers who specialize in a particular category can get seriously burned when a category capsizes. By not relying on a single category, you’re protected from the vagaries of any given category.
• There’s a low initial investment. One of the most appealing things about this type of eBay business for newbies is that it doesn’t take an arm and a leg to get started. Since you’re not dealing with large minimum inventory purchases, as you are with some other models, you can get started by buying just a few select pieces for resale. You can start with a larger inventory, of course, but you don’t have to; you can size your business as big or as small as you’re comfortable with.
• You can make the occasional big score. This is what most secondhand resellers live forfinding that item you pay 50 cents for at a garage sale and then reselling it for $50 or more online. Scoring big requires one part luck and one part skill at identifying diamonds in the rough. Most resellers develop a good eye for finding valuable items that others have overlooked. Rememberwhat’s junk to one person is a vintage collectible to another!

In short, second-hand reselling is a good choice if you’re fast on your feet, like a lot of variety in your life, and have a good eye for finding bargains and identifying items with high resale value.

Cons

Now that you know what’s good about this type of business, let’s look at some of the challenges. They include

• There’s a lot of junk. Let’s face it, not every piece of junk you obtain is a diamond in the rough; some of it’s just junk. Especially when you’re buying large lots at auctions or estate sales, you have to wade through a lot of rubbish to get to the good stuffand a lot of that rubbish is old and smelly and not very pleasant to handle. Even if you don’t mind handling other people’s hand-me-downs, what do you do with the stuff you can’t sell? Junk is not always fun.
• Making it saleable takes work. Even the good stuff you acquire might take a lot of work to become saleable. You may need to wash or dry clean used clothing, patch up some holes and sew on some buttons, polish up the jewelry or silverware, and get out your screwdriver to fix minor electrical problems. You can’t sell junk that looks like junk; you have to make your merchandise attractive to potential buyers. The elbow grease you put in is part of the cost of running your business.
• You have to put it all somewhere. So you hit the garage sales and flea markets every weekend, stuffing your car full of good deals you can resell for a tidy profit. Where do you put all that stuff until it’s sold? I hope you have a big garage or unused basement because if you’re a high-volume reseller, you’re going to have lots of stuff stored away at any given time. And the larger the items you sell, the more space they require. If you get successful enough, you may have to consider renting a storage barn or other warehouse spacewhich adds to your business costs.
• It’s unpredictable. Some people like to be able to plan everything out well in advance. If you’re one of those people, you should steer well clear of second-hand reselling. Second-hand resellers seldom know what they’ll be selling next week, next month, or next year. What your business will be is dependent on what items you can find to resell between now and then. Bargain hunting can be fun, but it’s extremely unpredictable.
• There’s no consistent source of inventory. While some resellers are able to find steady sources of merchandise, most rely on picking through the bargains at flea markets, thrift stores, and estate auctions. It’s not like you’re ordering items out of a catalog; you’re constantly on the hunt for more stuff to sell. Not only is this manner of acquiring inventory unpredictable, it’s also a lot of work. And there’s no guarantee that you’ll actually find enough viable merchandise to keep your business afloat.
• It requires constant research. Since you’re constantly acquiring all manner of items for resale, you are also on a constant quest for information about those items. How do you know what a particular coin or figurine is worth? How do you know what category in which to list that item you picked up at a garage sale last week? How do you adequately describe that batch of used magazines you’re ready to list for auction? All this requires research, and lots of itwhich can be extremely time-consuming. For some, research is both fun and enlightening; for others, not so much. If you don’t like Googling for answers, this part of the business won’t be much fun.
• There’s more effort required to list each item. Along the same lines, every item you list requires a new and unique description, photographs, and item specifics for the item listing itself. There’s no economy of scale, since every item is a new experience. With other business models, you resell similar items over and over, and you can save time by using eBay’s “Sell Similar” option. Second-hand resellers don’t have this option because they’re never selling anything similar to what they sold before.
• You get little or no efficiency in packing and shipping. For many second-hand resellers, no two items they sell are alike. That means every item will take a different sized box, and will need to be packed and shipped differently. There’s no economy of scale when you need a limitless variety of boxes and packing material; there’s also no learning curve when you’re packing a glass vase today and a pair of socks tomorrow. Sellers who specialize in specific types of merchandise can get by with stocking just one or two different types of boxes, and create a bit of an assembly line for packing and shipping those items; second-hand resellers can’t.

In other words, all those factors that make second-hand reselling an adventure also help to make it a bit of a challenge. There’s little consistency, little predictability, and little efficiency to be gained from selling so many different types of items. Plus, making all those items presentable takes a lot of workand a lot of space to store them until they’re sold. If you opt for this business model, make sure you consider all these issues beforehand and are comfortable with them.

How to Become a Second-Hand Reseller If second-hand reselling sounds good to you, what are the next steps? First, I advise you to dip your toes in the water before you make a final decision. This step is particularly easy with this type of business, because you probably have lots of stuff around your house that you can sell on eBay. Take a half-dozen items and put them up for auction. Work through the entire process to get an idea of what’s involved. See if you really like it. If you do, you need to do a little planning. Take another read through the chapters in Part 1 of this book, “Planning and Launching Your eBay Business.” Do some research about what types of merchandise are hot and what aren’t, put together a short business plan, evaluate your funding needs, start up some sort of recordkeeping system, and have a talk with your accountant. Think about how much space you need to store your inventory, where you’ll do the packing, whether your home office is sufficient for all your auction management tasks. In short, get ready to go big time. Then you need to get into bargain hunting mode. Figure out the best sources of second-hand merchandise in your area. Locate the flea markets and thrift stores. Find out where people advertise their garage sales and yard sales; learn how estate sales work. Get smart about identifying merchandise with high resale potential. And when you’re done with all this preparation, just turn the key. Start buying, start listing, and start selling. This is an easy type of business to start small and then ramp up as you get more experience. You don’t have to plan on selling $2,000 worth of merchandise your first month. Go easy until you’re comfortable with what you’re doing, and then start doing more of the same. That’s how little businesses become big ones. Seller Spotlight: clact eBay seller clact is, in reality, Martin Adamo, a 40-year-old CPA and investment advisor, and his wife, Cheryl, who works as a controller at a mid-size business. Martin owns his own accounting firm and, with Cheryl, runs an eBay business that specializes in reselling secondhand merchandise. Their eBay store, shown in Figure 8.1, is called Once Upon a Bid (stores.ebay.com/Once-Upon-A-Bid/). Figure 8.1. Martin and Cheryl Adamo’s eBay Store, Once Upon a Bid. [View full size image] Martin and Cheryl got started selling on eBay in January of 2004. Under the clact ID, they sell a variety of items on eBaybooks, collectibles, toys, games, and “Funny Friends,” a line of stuffed animals made by Cheryl’s employer. They find merchandise to resell at a number of different places, including local flea markets, thrift stores, book sales, and discount stores. In addition to selling on eBay, Cheryl is an eBay educational specialist. She teaches the “Basics of eBay Selling,” “Beyond the Basics,” and “Basics of eBay Buying” courses in the Greater Wallingford area, near New Haven, CT. (You can view information about Cheryl’s classes at clact.poweru.net.) Martin and Cheryl believe that it’s best to have many sources of items across many categories, in order to have maximum flexibility. They’ve found that by offering a lot of different items, they can get a feel for what people like or are looking for, and if it does well, they tend to do more of that type of item. The initial cost of the item is also a consideration. Martin says that they get the best return with items that cost very little to acquire. For example, he once acquired a used book for $1 and resold it for $70. As Martin states, “Things acquired for less than two dollars account for much of our profits.” Most months Martin and Cheryl list 350 or so items for auction. Their sell-through rate is typically in the 40%60% range, although some categories achieve sell-through of 80% or more. They’ve been averaging close to $2,000 each month in revenues. I asked Martin about his most memorable sale, and he related this story: “Back when I first started selling, I would sell to U.S. customers only. I received a very nice email from a fellow in Holland. He was beaming that he just found a book I had in the listings while browsing, titled Hope for the Flowers. He had remembered and wanted this book for years, but could never think of the title or author. He saw the gallery picture and was excited and wanted to know if I would ship to him. I did, and he was particularly happy that the book had an inscription from one person to another in high school about love, he thought that made the book special.” The Adamos’ advice to other resellers is simple: Read and research. As Martin says: “I read almost all the new books on eBay selling, I also read a few of the e-books sold on reputable sites. I learn something from almost every book or e-book. These little things add up to success in the eBay world. There are many excellent books out there. Also, I read and research other sources of information as much as possible. I strongly recommend that new sellers buy a few books (which can later be resold on eBay, as they sell well) and make at least a brief business plan before launching their sales.” All that research has certainly paid off for Martin and Cheryl, who are now eBay PowerSellers with a solid red-star feedback rating. You can read more about Martin and Cheryl’s eBay experiences on their blog, The Incredible World of eBay (worldofebay.blogspot.com).

Chapter 9. The Collector/Trader For many eBay sellers, their businesses began as an offshoot of a hobby. If you’re a collector, chances are whatever you collect is actively bought and sold on eBay. And anywhere there’s buying and selling, there’s a business opportunity! What kinds of things do people trade on eBay? Just about anything imaginable, from antiques to vintage clothing to comic books to HO trains to political buttons to sports cards to glass milk bottles to Hummel figurines to plastic model kits to pocket watches to Barbie dolls to…well, you get the picture. Just as there are numerous bricks-and-mortar stores that specialize in various types of collectibles, there are also many eBay businesses that are collectibles-based.

Turning a Hobby into a Business

The step from hobby to business is a matter of setting up yourself to sell the things you collect, and then doing that selling in volume. If you’re a serious collector, you’re probably already using eBay to purchase items for your collectionit’s the world’s largest marketplace for collectible items, after all. Well, if you can buy collectibles, you can sell them, too. And there’s your business model.

There’s a comic book store near my house. The guy who runs it started out as a collector, amassing huge boxes full of old comics in his basement. One day he realized he had enough comics collected to start his own store, and that’s what he did. People come into his store to buy vintage comics and also to sell him old comics from their collections. Is he running a business or indulging a hobby? Both, actually. It’s as good a reason as any to open a business; his business is buying and selling those things that he loves.

You can apply this same model in the eBay marketplace. If you’re a collector, by definition you have a collection of things. That collection can be the starting inventory for an eBay business. Assuming that you keep feeding that inventory by collecting additional items (either on eBay or in the real world), you can set up a continuous stream of auction listings, as well as populate a companion eBay Store. Your customers, of course, will be your fellow collectors and hobbyists.

Naturally, running a collecting/trading business is slightly different from simply collecting as a hobby. You need to feed your sales by buying new collectibles on a consistent basis; you need to set up an assembly line to photograph, list, pack, and ship the items you list for sale; and you need to manage your hobby like a business, keeping track of sales and expenses and worrying about taxes and the like. But all that probably won’t take much more work than what you’re already expending on your hobby. You’re just going pro, is all.

Grading and Authenticating Your Merchandise

When you’re selling collectible items on eBay, it helps to know what kind of shape your items are in. Most serious collectors expect the items they buy to be exhaustively photographed and described, in accordance to the conventions of that particular collectible category. For many categories, that means grading the item’s conditionaccording to some very formal rulesor getting the item authenticated.

If you’re not familiar with the process, grading is a way of noting the condition of an item, according to a predetermined standard. Collectors use these grading scales to help evaluate and price items within a category. If you know the grade of your item, you can include the grade in the item’s title or description, and thus more accurately describe the item to potential bidders.

What kinds of items are typically graded? It’s a long list, including stamps, coins, comic books, sports cards, and gems. In addition, anything of a sufficient value that’s autographed can and probably should have the signature authenticated. If you play in one of these categories and don’t grade your auction items, you won’t be considered a serious dealer.

Understanding Grading Systems

When it comes to grading, every category does it a little different; there is no such thing as a “universal” grading system for all items. For example, trading cards are graded from A1 to F1; stamps are graded from Poor to Superb. You’ll need to learn the specific system for the items you intend to sell.

That said, many collectible categories use a variation of the Mint grading system shown in Table 9.1.

Table 9.1. Mint System Grading
Grade	Abbreviation	Description
Mint	MT, M, 10	An item in perfect condition, without any damage or imperfections.
Very Fine	VF	Similar to mint.
Near Mint	NM, 9	An item with a very minor, hardly noticeable flaw. Sometimes described as “like new.”
Near Fine	NF	Similar to near mint.
Excellent	EX, 8	An item considered above average, but with pronounced signs of wear.
Fine	F	Similar to excellent.
Very Good	VG, 7	An item in average condition.
Good	GD, G, 6	An item that has clear indications of age, wear, and use.
Fair	F	An item that is heavily worn.
Poor	P, 5	An item that is damaged or somehow incomplete.

Grading can sometimes be a little confusing. Why is Near Mint below Mint, but Near Fine is above Fine? Beats me, but that’s the way it is. In addition, degrees between grade levels are often indicated with a + or . (For example, an item between Fine and Very Fine would be designated as F+.) Naturally, the definition of a Mint or Fair item differs by item type.

Note

eBay provides a page of links to “authorized” authentication services at pages.ebay.com/help/community/auth-overview.html.

Getting Graded

If you’re not sure what grade an item is, you may want to utilize a professional grading and authentication service. These services will examine your item, authenticate it (confirm that it’s the real deal), and give it a professional grade. Some services will even encase your item in a sealed plastic container or bag.

Where can you get your items graded? Table 9.2 lists some popular websites for grading and authenticating collectible items.

Table 9.2. Grading and Authentication Services
Collectible	Site	URL
Autographs	Global Authentication	gacard.net/ebay/cardmain.asp
	James Spence Authentication	www.spenceloa.com
	OnlineAuthentics.com	www.onlineauthentics.com
	PSA/DNA	www.psadna.com
Beanie Babies	Peggy Gallagher Enterprises	www.beaniephenomenon.com
Coins	American Numismatic Association Certification Service	www.anacs.com
	Numismatic Guaranty Corporation of America	www.ngccoin.com
	Professional Coin Grading Service	www.pcgs.com
Comic books	Comics Guaranty	www.cgccomics.com
Jewelry	International Gemological Institute	www.e-igi.com
Native American artifacts	Authentic Artifact Collectors Association	www.theaaca.com
Photos	PSA/DNA	www.psadna.com
Political items	American Political Items Collectors	www.apic.us
Sports cards	Beckett Grading Services	www.beckett.com/grading/ebay/
	Global Authentication	gacard.net/ebay/cardmain.asp
	Professional Sports Authenticator	www.psacard.com
	Sportscard Guaranty	www.sgccard.com
Stamps	American Philatelic Society	www.stamps.org
	Professional Stamps Experts	www.psestamp.com

The cost of these authentication services varies wildly, depending on what you’re authenticating, the age or value of the item, and the extent of the service itself. For example, Professional Sports Authenticator rates range from $5 to $150 per sports card; Professional Stamps Experts rates range from $8 to $500 per stamp, or (in some cases) 4.5% of current catalog value. Make sure that the item you’re selling is worth it before you go to this expenseand that you can recoup this expense in your auction.

Running a Collector/Trader Business

Running a collector/trader business isn’t a whole lot different from buying and selling items as a hobby. There are a few more details to worry about, and you will probably want to ramp up the volume. That said, let’s look at what’s involved in running a typical collector/trader business.

Finding Merchandise to Resell

The first stage in the process is collecting items to resell. Obviously, one important source of merchandise is other collectors. You’re used to thisyou buy some items, you sell some items. That’s the way collecting works.

You probably don’t want to limit your purchasing to the collector’s market, however. Depending on the type of item you intend to trade, you may want to scour garage sales, estate sales, flea markets, pawn shops, conventions, and the like for hidden bargains. The key is to pick up items of value to collectors from sources that don’t necessarily have the same level of interestand that value those items for far less than would a serious collector. You’ve probably been doing this a little already; it’s time to ramp it up and become a serious collectible hunter.

Preparing Items for Auction

Collectors have differentand higherexpectations than the general public. Whatever you collect, you’ll need to clean it up and get it into a presentable condition. For some items, that means enclosing the item in an particular type of bag or container. Comic books go in plastic bags, cards go into a penny sleeve or top loader case, stamps go into transparent envelopes, and so on. Take care to make every item a true collectible.

Obviously, this is also the time to get the item graded or authenticated, if necessary.

Managing the Auctions

Providing detailed descriptions of your collectible item listings is important. Include the item’s grade, describe the condition, note any flaws, and so on. Also include photos or scans of the item. Antiques require lots of photos to document the item’s condition; other items, such as comic books, cards, and stamps, can be handled with a nice clean scan.

Once you list the item, be prepared for lots of questions from potential bidders. This is part and parcel of a collectibles auction; collectors want to know exactly what it is they’re bidding on. Some of the questions will be quite detailed and often technical. Make sure you can provide good answers, and that you do so in a timely fashion.

Packing and Shipping

After the auction ends, you’ll need to pack and ship the item in an appropriate fashion. Again, different types of items have their own particular pack-ing/shipping needs. Make sure you do what you need to do to get the item to the buyer in pristine condition. Depending on the price or rarity of the item, you may also want to offer shipping insurancejust in case something bad happens in transit. Remembercollectors can be persnickety!

Pros and Cons of Collecting and Trading

A collecting/trading business can be a lot of fun; after all, you’re still working with your hobby, even if you’re out to make a profit. Let’s look at what’s good and what’s bad about this particular business model.

Pros

What are the good points about basing a business around your hobby? Here are a few of the pros:

• It’s your hobby, so it should be fun. The theory is that since you like collecting this type of item, you’ll also like the business of selling it. If you like collecting soap opera magazines, a business based on selling soap opera magazines should be more fun than working in an office and filing forms. If it’s not fun, why do it?
• You already know a lot about it. This assumes that you don’t start collecting an item the day before you open your eBay business. If you’ve been collecting for a few years, presumably you’ve gained some expertise. All that research that typically gets done before launching a business, you don’t have to door at least, you don’t have to do as much. If you know what you’re doing (collection-wise, anyway), moving into a business environment won’t be that difficult.
• There are established rules. Most collectible categories have their own established ways of doing things. If you collect comic books, for example, you know that there’s a certain grading system to use, a certain way to store and pack the books, and so on. You don’t have to reinvent any wheelsjust follow the rules that everyone else follows.
• You already know your customer base. One of the key things about selling is to know who your buyers are. If you’re a collector, you already know other collectors. You know your customers; you know what they like and dislike, and what they’ll pay big money for. That’s a big head start over starting any other type of business.
• There’s always the hope of a big score. The holy grail of any collector is to find that one item sitting in someone’s attic or lying on a penny table at a garage sale that you can sell for $10,000 to informed collectors. While you might never find that holy grail, what other business offers the opportunity for that type of score?

The main benefits of running a collecting/trading business, then, accrue from the fact that you’re already involved in this category, as a collector. You know what you’re doing, and turning your hobby into a business is a relative small step.

Cons

Now that you know what’s good about this type of business, let’s look at some of the challenges. They include

• You can only do as well as other collectors. Collecting is rather predictable, the search for a holy grail aside. Yes, there are ups and downs and some guys are better at it than others, but most collectors are going to do just about as well as other collectors in the business. The opportunity to break out from the pack is small.
• You’re stuck if there’s a market downturn. If you’re a collector, you’re presumably focusing on a single type of collectible. What do you do when the market goes bust? If you’re buying and selling vintage slot cars and the slot car market goes soft, you’re pretty much stuck. The lack of diversity can be a big business risk.
• Do you really want to sell your private collection? Most collectors get started in business by selling the very items they’ve been collecting over the past several years. Do you really want to part with your precious collection? You may need to build up an inventory of items less valuable to you, or set aside part of your collection as not for sale, to avoid seller’s remorse.
• Hunting for new items to sell can be challenging. Collecting can be a lot of fununtil you’re literally forced to find more stuff to collect to feed your business. For many collectors/sellers, the hunt for new merchandise takes at least as much time as they spend on managing their eBay auctions. Do you have the right stuff to be on continuous watch for new collectibles to sell?
• Grading/authentication/packing can be costly. If you’re collecting items that are expected to be graded or authenticated, make sure you factor those expenses into the cost of running your business. Additionally, you may need to purchase specific mounting or packaging supplies to meet the expectations of your customers, and that might be a tad more expensive than sticking a coin into a first-class envelope.
• If it’s a business, it might not be fun anymore. This is probably the biggest risk of running a collectibles-based business. If you have to do it full time, for money, it’s not a hobby anymoreit’s work. And work isn’t always fun. I’ve met quite a few former hobbyists who got burned out when they went pro. If you want to keep loving what you do in your spare time, think twice about doing it full time.

Bottom line, running a collectibles-based business has the same risks as running any other type of businessplus a few. The biggest risk is the exclusionary nature of it; many risk-averse businesspeople prefer to have a more diversified product mix, to protect against downturns in any single category. If you can get past that, however, there’s a lot to be said for this business model.

How to Become an eBay Collector/Trader

Want to turn your hobby into a business? Then you need to get serious. Make a full inventory of your current collection, and assign individual values (both original purchase value and estimated current market value) to every item you own. Put together a plan for obtaining more items, on a regular basis. Work out all your possible costs, including storage and packing. Research eBay to see if your sales projections are reasonable. Crunch the numbers to see how much profit you’re likely to generate.

Do all that, and the next step is easy. Create a few auction listings and get the business off the ground. The move from collector to eBay business is a short one!

Seller Spotlight: bushellcollectibles Many eBay sellers make a good living selling collectiblescase in point being Jeanette Bushell, who operates under the bushellcollectibles ID. Jeanette is 37 years old and lives in northwest New Jersey. Her eBay business is a part-time one; during the day she works as a business professional in Manhattan. (That’s four hours of commuting every day!) Jeanette says that “coming home to eBay helps me unwind from that commute and keeps me wishing for the day when eBay is my full-time joband I don’t have to take the train anymore!” Jeanette started on eBay by buying cross-stitch supplies, but didn’t become a seller until about a year later. The first items she sold were cross-stitch books and kits, but then got into selling the kinds of antiques and collectibles that she’d been interested in all her life. Today she specializes mostly in vintage souvenir collectibles”the more fragile, the better.” She sells items from all over the United States, often back to the town or city they came from originally. Finding collectibles to sell is part of the fun; as Jeanette says, “I live for the thrill of the hunt.” She says that the best places to scour for treasures are tag sales, flea markets, thrift stores, auctions, and antique/collectible stores. She loves finding something at an antique store for a bargain price and then reselling it on eBay for a tidy profit. During her prime selling months (she tends to sit out the summer), Jeanette lists about 4060 items per month. About 45% of what she lists actually sells. She doesn’t consider herself a “big hitter,” but still generates between $500 and $800 a montha good second income. In addition, Jeanette supplements her eBay sales by selling in a local antiques and collectibles mall. She finds that the two channels complement each other quite well, and what she learns from one place helps her with her sales in the other. One of the nice things about selling collectibles, Jeanette notes, is that you often help people find those long-lost or broken items from their youth. She recalls the following story: “I sold to one lovely lady a Singer sewing machine pin dish. She wrote back that she had been looking for this for years, as her mother had this dish but it had been broken. When she won the dish, she was so happy to get back this happy memory from her childhood, as her mother had passed on.” When it comes to selling, Jeannette says that her biggest challenge is storage space at home. All those collectibles have to be stored somewhere! She offers the following advice to prospective sellers: “Set up an eBay Store and keep a good-sized inventory, so even if you’re not able to list in the auctions every week, your customers will see that you’re here to stay and will keep you bookmarked to check back often. If you don’t sell an item, relist at a lower price or put the item in your store. You cannot expect the person who wants your Napco turkey candle holder to be online 24/7. I have found that if an item doesn’t sell the first time, sometimes it will sell a few weeks later from my store.” (You can check out the Bushell’s Collectibles store, shown in Figure 9.1, at stores.ebay.com/Bushells-Collectibles.) Figure 9.1. The Bushell’s Collectibles eBay Store. [View full size image] Jeannette also recommends setting up an About Me page and providing some personal information about yourself. “I have received numerous emails on my About Me page alone, people who liked my cats or just the fact that I took the time to create the page and keep it updated.”

Chapter 10. The Bulk Reseller

In the previous two chapters we examined two types of eBay businesses that resell used merchandise acquired at garage sales, flea markets, collector’s shows, and similar places. Reselling lots of onesies and twosies can be profitable, but it’s certainly a labor-intensive model. You’re always on the search for something new to sell, and you’re always reinventing the wheel.

That’s why many sellers prefer selling large quantities of a single item to selling small quantities of multiple items. Instead of buying one shirt to resell, you buy 100 or 1,000 shirtsand thus sell 100 or 1,000 units of the same item. In many ways, this is a more efficient business model, as you can build your business around a single type of item. You can take one photograph and reuse it in hundreds of item listings, you have to stock only one type of box, and you’ll always know what your shipping costs will be. Being a bulk reseller might lack variety, but it makes up for that varieSelling in Bulk Means Buying in Bulk

When you want to sell large quantities of a single item, you have to buy large quantities of a single item. This requires buying in bulk, so you can have enough inventory to last for several weeks’ or months’ worth of auctions.

Where, pray tell, do you purchase bulk quantities of merchandise? There are plenty of options, if you know where to look.

First, know that most bulk items offered are not first-run goods. Yes, most of it is new (not used) merchandise, but it’s often last year’s model, factory seconds, store returns, overstocked inventory, and the like. That’s why it’s available in bulk and at good prices; it’s “leftover” merchandise waiting for someone to take it off the supplier’s hands.

This means that you want to shop for bulk merchandise at wholesalers who specialize in closeout and liquidated items, or at thrift stores or dollar stores that offer large lots of items for sale. You can find lots of these closeout suppliers on the Web, including eBay Merchandise.com (www.ebaymerchandise.com), Liquidation.com (www.liquidation.com), SalvageCloseouts (www.salvagecloseouts.com), and Surplus.net (www.surplus.net). What all these suppliers have in common is that they don’t sell single items; everything they offer is in bulk quantities.

A recent visit to SalvageCloseouts found such items as a lot of 2,000 girl’s summer outfits ($2.95 per outfit, or $5,900 total); five plasma TVs ($1,295 per unit, or $6,475 total); a pallet of high-end linens and bedding ($850 per pallet); 1,000 pieces of costume jewelry ($1.95 apiece, or $1,950 total); and a trailer load of 34 pallets worth of Sears-brand hardware and toolsmore than 1,600 items in all (best offer accepted). That’s a lot of variety.

Most of the bulk merchandise offered by liquidators consists of brand-name items that were ordered by a given department store but didn’t sell; instead, the store returned the items to the supplier. Instead of destroying the returned merchandise, the supplier offers it at fire sale prices in the liquidation market. The only catch, of course, is that you have to take a large quantity, and you have no choice as to what exact items are included in the assortment.

Note

Learn more about buying closeout and liquidated merchandise in Chapter 14, “Purchasing and Managing Your Inventory.”

That said, you get what you get at really good prices. It’s cheaper for the supplier to sell 1,000 of an item to a single buyer than it is to sell one item each to 1,000 buyers. So you buy your 100 or 1,000 units of a particular item (in various sizes and colors, of course) and obtain your inventory at literally pennies to the dollar. Your hope is that you can take this closeout merchandise and sell it for higher prices on eBayand thus profit handsomely.

The downside of buying in bulk is that you have to buy in bulk. You’re not just buying a dozen jeansyou’re taking a dozen dozen, or more. Even if you get the merchandise extra-cheap, that’s still a large check you have to write. And, even more challenging, you have to find someplace to store all that merchandise until you sell it. That’s if you can sell it, of course.

Specializeor Vary Your Inventory?

When you buy in bulk, you have some choices to make. Obviously, if you buy 1,000 pairs of baby shoes, you’re going to be selling baby shoes for some time. But what do you do when your inventory runs out? Do you order more baby shoes or move onto something else? For that matter, do you sell baby shoes exclusively or order additional lots of some other type of merchandise to sell simultaneously? In other words, do you specialize in one type of bulk item, or do you vary your inventory?

Specializing in a given type of item has appeal, in that you can tailor your operation to that product category. There’s a downside, however; you’re stuck if the category fizzles out. It may be better, in the long run, to move in and out of various types of merchandisebaby shoes this month, sunglasses the next, DVD players the month after. Although, to be fair, every time you change categories, you’re essentially starting up a new type of business. You’re a shoe seller this month, a sunglasses merchant the next, and an electronics retailer the month following.

Even if you wanted to specialize in a specific category, that might not always be possible. That’s because you’re limited to buying what bulk inventory is available at any given time. Yes, SalvageCloseouts might have a great deal on girl’s summer outfits this week, but when it’s gone, it’s gone. When you go back to order more, there probably won’t be any more left. You’re at the mercy of whatever closeout or liquidated merchandise is available at any given time. You may still be able to play within a general category (women’s clothing, for example), but you probably won’t be able to specialize in a particular type or brand.

Running a Bulk Reseller Business

Let’s say that this business model sounds good to you. What’s life like when you choose to be a bulk reseller?

Making the Buy

Probably the most important part of bulk reselling is making the initial product purchase. That means scouring the liquidation and closeout websites, looking for the best buys, and then ponying up to place an order. Some eBay sellers watch the sites for weeks on end, waiting for that one load of merchandise that has the best potential. You definitely shouldn’t make a buy at the first site you visit. Shop around, like a serious consumer, and be savvy about what you finally buy.

Of course, making the buy means writing a big checkor, more likely, making a big charge to your credit card. Most of these websites accept credit card payments, some accept checks (although business checks are more accepted than personal checks), and some will even let you open an account of credit, providing you meet their business requirements. In any case, you’ll probably be laying out $1,000 or more in a single purchasewhich you won’t get back until you sell all that merchandise.

When you’re making your purchase, pay attention to shipping charges. Some liquidation sites offer free or discounted shipping for large orders, but most don’t. You’ll definitely want to factor in the shipping to your order’s total cost.

And that shipping cost could be hefty, since you’re receiving a lot of merchandise. Here, size makes a difference. A lot of 1,000 socks isn’t that big a shipment, physically, while a lot of just a dozen plasma TVs can cost a ton to ship. Make sure you get an estimate of shipping costs up front, before you finalize the order.

Storing and Managing the Inventory

After you place the order, you wait around for the merchandise to arrive. This is a good time to plan out exactly where you’re going to store those 1,000 frying pans or 100 electric motor scooters. That’sone of the challenges of buying in bulkwarehousing in bulk. Move the car out of the garage, clean out the basement, talk to Aunt Edna about taking over her spare room. You may even need to rent a storage bin or other warehouse space.

Note

If you want temporary storage space at your own home, consider renting a container from PODS (www.podsusa.com). Different sizes are available, and you need rent it for only as long as you need it.

Note

Learn more aboutinventory management systems in Chapter 19, “Automating Auction Management.”

Receiving the merchandise could also be a challenge. Depending on what you order, you might be surprised to find a huge semi truck pull up outside your front door. The merchandise could be packed in multiple manageable boxes, or it could be loaded into a single large pallet. And that truck may or may not have a lift in the backwhich means you could be faced with manhandling a huge crate off a truck platform five feet off the ground. Avoid surprises by finding out how the item will be shipped before you order.

When you finally warehouse the inventory, you’ll need to do so in a way that organizes the individual items and makes it relatively easy to pick and pack from the lot. You don’t want to store everything in a huge stack. Put the size 32 reds in one place, the size 34 blues in another, and so on. Then make a map or guide to all the bits and pieces of your inventory, so you’ll know immediately where to go when you get an order.

Speaking of getting organized, you’ll also need to create some sort of inventory management system. You’ll want to know at any given time how many small, medium, and large items you have, and in what colors. After all, you don’t want to take an order for an item that you’ve sold out of. Managing your inventory can be as simple as creating a big Excel spreadsheet, or as complex as writing your own database program. Many eBayers strike a middle ground by using an auction management tool that includes an inventory component. However you do it, it’s important.

Managing the Auction Process

Once your inventory is stored and cataloged, it’s time to start selling. One of the nice things about buying in bulk is that you get to sell the same items over and over again. No need to reinvent the wheel here; you can take one photograph and reuse it in hundreds of auctions, just as you can with your item description and other copy. You can also figure out your shipping costs ahead of time, which makes the item listing process that much easier.

One thing you want to be prepared for is that you probably won’t be able to sell the entire quantity of what you ordered. Among those 1,000 Tommy Hilfiger shirts you ordered will be one or two in such an ugly color or unusual size that no eBay buyer will ever be interested. At some point you’ll give up on the last of these leftovers, which means writing them off your booksand eating the cost of that unsaleable inventory.

By the way, when you have this much similar inventory to sell, you should definitely consider listing multiple items with either a fixed-price listing or an auction with the Buy It Now option. You should also consider augmenting your eBay auctions with a permanent eBay Store; an eBay Store is a good place to sell bulk merchandise, as well as to “park” those items you haven’t put on auction yet. Turn to Chapter 27, “Opening an eBay Store,” to learn more.

Packing and Shipping

You’ll also want to set up some sort of assembly line for packing and shipping your items. Since you’ll be shipping out lots of the same thing, you can get by with a single type of box. And you can save money by buying that box in large quantities. If you know you’ll be selling 1,000 items, you might as well order 1,000 boxes.

Ah, but where do you put 1,000 boxes? This presents another storage challenge, but it’s probably worthwhile, considering the discount available for buying packing supplies in bulk. Just something else to plan for ahead of time.

Pros and Cons of Bulk Reselling

Are you cut out to be a bulk reseller on eBay? Let’s take a quick look at the pros and cons of this particular business model.

Pros

What are the advantages to buying and selling in bulk? Here are a few of the things that resellers like about this particular type of business:

• You’re selling high profit margins. When you buy in bulk, you buy at a high discount. (Or you should, if you do your job right.) Assuming that you pick the right merchandise, you can still command a fair price when you resell that merchandise on eBay. Buying low and selling high is one of the key ways to make big bucks in businesswhich is one of the prime appeals of this business model.
• There’s a lot of consistency. When you’re selling the same type of item week-in and week-out, you don’t have to reinvent any wheels. You set up your business around the inventory you buy, and then settle back and let things pretty much run themselves. No need to worry about what surprises might come up tomorrow.
• Item listing is very efficient. Part of that consistency is the fact that you’ll probably be able to create similar auction listings for all the items in your inventory. This depends somewhat on the assortment you purchase, of course, but if you buy 100 model 8520-B DVD players, you don’t have to write 100 different descriptions. Create the item listing once; then copy that description for each additional listing you run. The same thing goes for photographs: Take one photo and reuse it in multiple auctions. This is less true if you have 1,000 pairs of shoes in all different colors and styles, but there still will be some similarities.
• Packing and shipping are also efficient. The similarities definitely continue over into the packing and shipping process. If you have 500 T-shirts of the same general shape and size, you’ll quickly learn the best way to pack and ship those shirts. That means you can customize your packing operation to efficiently pack all those shirts and buy a large quantity of boxes (or envelopes) at as cheap a price as you can find. You don’t have to worry about stocking multiple types of boxes for multiple items; one type of box will do it.
• You can book additional sales through an eBay Store. Naturally, you’re not going to put all 1,000 baby rattles on auction at once; you’ll spread out the auctions over a multiple-week (or multiple-month) period. That doesn’t mean you can’t sell those items that aren’t yet up for auction, however. Open an eBay Store and list all your excess inventory; you can generate sales without having to run individual auctions for all the items.

As you can see, the primary benefits of the bulk reseller model are profit and efficiencywhich itself translates into profits, in terms of time savings. It’s a big operation, with potentially big returns.

Cons

Okay, so if bulk reselling is so great, why doesn’t every eBay seller do it? That’s because this business model offers some very significant challenges, including

• It’s a big inventory commitment. This is not the type of business you just dabble in. You can’t test the waters by selling a shirt or two. You have to dive in head first and order 100 or 500 or 1,000 units of a single type of item. That’s a big commitmentand a big risk. What do you do, after all, if those 1,000 coffee mugs don’t sell?
• It’s a big space commitment. All that inventory has to go somewhere. Just where are you going to store a pallet of sporting goods, or a container of men’s briefs, or a gross of pots and pans? If you live in a small (and already crowded) house or apartment, buying in bulk may be physically impractical. And if you choose to rent additional warehousing space, that’s another cost of doing business you need to factor into the equation.
• It’s a big financial commitment. Here’s the show stopper for a lot of sellers. Buying in bulk requires spending big bucks up front. Do you have the $11,000 it takes to buy a full pallet of closeout electronics, or even the $750 it takes to buy a lot of 50 leather jackets? You have to spend money to make money, but what if you don’t have the money to spend? You don’t want to get in over your head to buy a few month’s worth of inventory. If your funds are limited, bulk reselling may be out of the question.
• It’s a big financial risk. Buying in bulk is also out of the question if you can’t afford to lose that money. Again, what do you do if all those DVD players don’t sell? Once you make the investment, you’re stuck with the merchandise, even (and especially) if no one wants to buy it. If you can’t afford to lose that $1,000 (or $5,000 or $10,000), you shouldn’t spend it in the first place.
• It’s a challenge to manage. Even if you can afford to buy in bulk, you might not be up to the management challenge. Do you have the systems (computer or otherwise) set up to track 500 or 1,000 different units of inventory? Can you identify which units have sold and which haven’t? Inventory management is a bit of a science, and it requires an organized mind and some technical know-how. If you’re not that organized (or don’t want to invest in a computerized solution), you’ll quickly get buried under the work.
• You’re tied into a single category for an extended period of timeeven if the category cools down. Here’s another risk. When you buy a lot of 1,000 pairs of designer boots, you’re going to be selling boots for a good long time. What do you do if the fashion trends change a month into your endeavorand you still have two months’ worth of inventory left? This long-term inventory commitment makes you somewhat of a slow-moving reseller; you won’t be able to jump on and off the fast trends and evolving product life cycles. You definitely don’t want to invest in a product with a short shelf lifecommodity products are safer!
• There’s no guarantee of future supply. When you finally run through your supply of 10,000 no-name golf balls, what do you sell next? Chances are your original supplier has no more of what you originally purchased, which means you need to source another product for your next bulk purchase. If you like long-term consistency in your business dealings, bulk reselling is less than ideal.

Okay, you get the picturebulk reselling requires a big commitment, period. You’re taking a big chance when you buy a lot of anything. Not only do you have to manage all that inventory, you’re betting that you can actually sell it all before the product trends shift. That may not always be possible. But then, for some resellers, it’s the gamble that makes this business fun!

How to Become a Bulk Reseller If bulk reselling sounds good to you, don’t get out your checkbook just yet. First, make sure you have the physical space and systems to cope with an onslaught of not-yet-sold merchandise. If you intend to store all that stuff somewhere in your house, make sure you (and the rest of your family) can really spare the room. If you have to rent additional warehouse space, factor those costs into your business plan. And wherever you decide to put it, make sure you’re up to the task of tracking all those individual items. When you’re making this size of upfront commitment, it pays to do a little research beforehand. You need to identify a product category that is robust, that has a high sell-through rate, and that has some legs. That means searching through recent eBay auctions or investing in an online research tool, such as those offered by Ándale (www.andale.com) or Mpire (www.mpire.com). You’ll want to track sales trends (by category) over time, close rates (the percentage of auctions that end with a successful bid), and final selling prices. Use that information to guide you toward the types of merchandise to purchase. Note Learn more about eBay research in Chapter 2, “Researching Your Business Model.” Then it’s a matter of seeking out the best bargains. Hit all the closeout and liquidation sites, and see what’s available. Bide your time; there’s no reason to jump at the first offer you see. Avoid the temptation to shop by price only. The lowest price isn’t always the best deal; sometimes you’ll have more success selling slightly higher-priced (and more well-known) merchandise. In other words, become a savvy shopper. When it comes to bulk reselling, the better you are as a buyer, the more successful you’ll be as a seller. Seller Spotlight: rosachs There’s money in shoes. Well, not literally inside the shoes, but rather in selling themas eBay seller rosachs knows quite well. Rosachs is Robert O. Sachs, a sellerlocated in Memphis, Tennessee. He sells shoesand lots of themin eBay auctions and via his eBay Store, My Discount Shoe Store (stores.ebay.com/My-Discount-Shoe-Store), shown in Figure 10.1. Figure 10.1. Items for sale at My Discount Shoe Store. [View full size image] Bob got started selling on eBay when his wife started complaining about his growing collection of “stuff.” Like most of us, Bob’s first sales were those items lying around the house that he didn’t really need. When he got into collecting (and buying and selling) limited-edition Pepsi bottles, he was hooked. Today, Bob is a bulk reseller of overstock shoes of all styles and sizes, and as he’ll freely tell you, it’s a hot category. He reached Bronze PowerSeller status after just two months of selling shoes online, and his sales keep going up month after month. (He’s since reached Silver PowerSeller status.) Bob got into the shoe biz as an offshoot of his ongoing Trading Assistant business. He received a call from a gentleman who wanted him to sell some old personal electronics items, and when he went to pick up the merchandise, Bob discovered that the man worked for a shoe wholesaler. One thing led to another, and before long, Bob had signed an agreement to sell this company’s excess stock on eBay. Bob’s been at it for over three years, and he’s now up to $6,000 in monthly sales. What’s unique about Bob’s business is that while he’s selling in bulk, he’s not always buying in bulk. In most cases, he’s actually selling on consignment for the shoe wholesaler. This arrangement relieves Bob of any financial obligation, since he doesn’t have to buy the products he sells. It’s a good example of how many eBay sellers operate under a blend of different business models. Bob does buy some merchandise in bulk, howeverand passes on some, as well. He told me how he once received an offer to buy 144,000 pairs of new overstock shoes from an overseas manufacturer. (That’s a lot of shoes!) Bob had never heard of these particular shoes before, so he did a little research. He found that dozens of these shoes were listed every day on eBay, yet only one or two pairs were sellingand they weren’t bringing the best of prices. Bob did a quick estimate of how many of these shoes he could reasonably expect to sell per week, and discovered that it would take him years to sell off the entire inventory. He passed on the deal. Currently, Bob likes to keep about 600 pairs of shoes running on eBay at any given time, with about 500 of them running in his eBay Store as Good ‘Til Cancelled listings. He lists about 20 or more items per day for auction, and what doesn’t sell is relistedfirst as a fixed-price listing, and then in his eBay Store. He used to use the Buy It Now option for all his auctions, but has recently switched to the Best Offer option, instead; about 25% of his sales come from Best Offer transactions, and another 25% from his eBay Store. What started out as a part-time endeavor is now Bob’s full-time job; in December of 2005 he ceased doing part-time contract programming and became a full-time eBay seller. Here’s what he says about the business: “Everyone thinks that selling on eBay is super easy, and it is if you are only selling a few items to clear out a closet or straighten up the attic. But when you get down to serious dayin, day-out selling, shipping 23 times a week every week, dealing with returns, answering the same questions from buyers over and overit’s a whole ‘nuther ball game! You have to consider how much time you have to work your sales, how much space you have to store your inventory, how to properly price your shipping (boxes, peanuts, and tape aren’t free!), and how to make time to find that next client, who is just as important as your current client.” He advises other potential sellers to “play it smartkeep an eye on your true costs and make sure that what you are paying yourself for the work you do is an acceptable wage.” As he notes, if you work 6070 hours a week at selling (and that isn’t unheard of) and at the end of the week you have only $50 in profit to show for it, something’s not right. Going big-time should mean a big-time payback, or you’re not managing your business right. Given the kind of volume he does, Bob is a big fan of auction automation, eBay Blackthorne Pro in particular. As he says, “you simply cannot grow beyond a hobby status without automation, not anymore. Automation allows you to post with much greater speed, track sales with more accuracy, send emails with more details, and just spend more time doing the things that really need doing, rather than the bookkeeping things that we all know our computers are better at than we are, anyway.” Bob also counsels other sellers to take advantage of all the free resources that eBay offersthe discussion forums, workshops, and the like. I first met Bob on the Seller Central discussion board and can attest to how useful these forums are. And when you visit, say hi to Bob!

Chapter 11. The Retailer Our next eBay business model isn’t for everyone. In fact, not everyone can qualify. That’s because this type of business is a traditional retailer, more or less, selling authorized products on the eBay site. This type of online retailer buys merchandise direct from the manufacturer or authorized wholesaler, just as a traditional bricks-and-mortar retailer does. In fact, many of these eBay sellers are traditional bricks-and-mortar retailers, who supplement their real-world sales with eBay sales. In any case, this type of business requires the establishment of an official selling relationship with the supplier, which then enables you to sell that supplier’s products online.

Becoming an Authorized Dealer

The key part of being an official retailer is finding a supplier who will sell to you as it would any other retailer. That is, you have to become an authorized dealer. This often means signing some sort of dealer agreement, agreeing to meet various terms of sale and distribution, and sometimes agreeing to meet specified sales targets. In other cases, becoming an authorized dealer is no more involved than placing an order. How you become a dealer all depends; every supplier does it a little differently.

Note

One thing you’ll almost certainly need to buy on a retailer basis is a state tax ID or reseller’s license. Learn more in Chapter 5, “Establishing a Legal Business Presence.”

If you’re already set up as an authorized dealer for a bricks-and-mortar business, you’re probably good to go when it comes to eBay sales. Note that I said “probably.” That’s because some manufacturers set limits as to how and where their products can be sold. I know of some musical instruments companies, for example, that prohibit their dealers from advertising their products onlinewhich means no selling on eBay. Other manufacturers will let you sell online but require you to advertise their goods at a set minimum advertised price (MAP). For dealers of these products, that means you can’t use the standard auction process (where you’d be listing the items below the MAP); instead, you have to list your items with a Buy It Now price equal to the MAP and set a reserve price also equal to the MAP. When in doubt, check with your supplier as to what is and isn’t allowed.

If you’re not already set up as a dealer, you have some work to do. First, you need to determine what kinds of products you want to sell. You should do your homework before you make this decision, by finding out which product categories sell best on eBaywhich are hot, and which aren’t. You probably also want to choose a category with which you’re somewhat familiar so that you’re not reinventing any wheels. You don’t want to go into business selling hang gliders if you’ve never flown before in your life!

Note

Learn more about researching eBay sales in Chapter 2, “Researching Your Business Model.”

Next, you have to find a supplier for those productswhich isn’t nearly as easy as it sounds. The first place to start is with the products’ manufacturer. For example, if you want to sell Sony electronics products, you need to contact Sony directly. In some cases, the manufacturer sells direct to dealers. In many other cases, however, the manufacturer uses a two-step distribution process. That is, the manufacturer sells to a distributor who then sells to dealers. If this is the case, you’ll need to contact a distributor for the product you’re interested in selling.

Where do you find manufacturers and distributors? For manufacturers, the best plan of attack is to do a Google search. This should lead you to the manufacturer’s website, where you should be able to find some sort of contact information. Flex your fingers and either send an email or phone the main switchboard and pose your query.

Finding a distributor is often a bit more difficult. I suggest starting with the manufacturer, who will often direct you to the nearest authorized distributor. You can also try Googling, but that’s more problematic, as you (a) don’t know who you’re searching for and (b) often discover that the distributor is a business-to-business operator that doesn’t have a traditional consumer-oriented website. This leads you to more detective work, such as contacting other dealers (either online or in your area) and asking them who they buy from. Going through all these steps is a lot of legwork, but it’s necessary.

Once you’re set up as a dealer, you’re in businessyou can start ordering products and selling on eBay.

Running a Retail Business on eBay

Running an online retail business is, in many ways, like any other type of eBay business. The big difference is that you’re selling pretty much the same items day in and day out, just as a traditional retailer does. This means running dozens (if not hundreds) of identical auctions, which should lead to very efficient operations.

Ordering and Stocking the Product

As with any business, you have to decide which products you want to offer for sale. You can choose a very narrow product mix or offer a wider assortment. You can also vary your mix over time.

Unless your supplier offers drop shipping services, you’ll have to order your merchandise before you start selling. While some suppliers let you buy exactly what you need (including onesies and twosies), many have a minimum order requirement (and sometimes a minimum opening order requirement) that forces you to buy in larger quantities. Plan accordingly.

And while you’re planning, you better start planning your warehousing. If you have to buy in large quantities, you have to put those large quantities someplace. If you have to rent warehouse space, factor this into your costs ahead of time.

Note

Learn more about eBay Stores in Chapter 27, “Opening an eBay Store.”

Also, you need to find out how you’re expected to pay the supplier. Some suppliers let you establish a line of credit, which means you can order merchandise and not have to pay for it for 10 or 20 or 30 days. Other suppliers demand payment up front, others will ship C.O.D. Find out what’s required, and plan your finances accordingly.

Managing the Auction Process

The nice thing about retailing a consistent assortment of merchandise is that you’re running the same auction listings over and over. Shoot one photograph and use it in hundreds of listings; write one description and use it over and over. (In fact, you may be able to use official manufacturer artwork in your listings, which could save you the trouble of shooting your own product photos.)

Since you have a steady product assortment, this is an ideal time to open your own eBay Store. In this instance, your eBay Store functions just like a traditional storefront, letting you sell your merchandise 24/7, regardless of which and how many auction listings you have running. You may even want to launch a non-eBay merchant website, to supplement your eBay-related sales. It all depends on how big you want to grow.

Packing and Shipping

Selling a lot of the same items also has advantages when it comes to packing and shipping. Since you know you’ll be shipping a lot of the same thing, you can order large quantities of boxes and packing supplies and save by buying in bulk. You also should be able to set up a very efficient packing operation, since you’ll get lots of experience packing the items you sell.

Pros and Cons of Official Retailing

Becoming an official retailer has its advantages and its drawbacks. Let’s look at each.

Pros

If you’re thinking of becoming an official retailer, take a look at these good points:

• If you’re already a dealer, you’re ready to go. Augmenting your bricks-and-mortar sales with eBay sales is a good deal. You can increase your sales volume without increasing your rent or advertising expendituresyou just sell more of what you already sell. And since increasing sales means increasing your purchases, you can often buy at lower prices. Assuming your supplier lets you sell online, this is a good deal all around.
• Some customers prefer to buy from an authorized dealer. Let’s face it; not everyone is comfortable buying merchandise from unknown sellers. Some people like buying brand-new merchandise from authorized dealers. You’ll have a better chance selling to these cautious buyers if you have legitimate goods to sell and if you can claim “official” seller status.
• You may be able to get higher prices. Since you’re selling new goods from an official source, you may be able to command higher prices than unauthorized sellers. Some people will pay more for the real deal.
• You’ll have first-line merchandise to sellno closeouts or factory seconds. Selling closeout and liquidated merchandise isn’t for everyone. There’s something special about selling brand-new items, fresh out of the factory-sealed box. If this rings your bell, there’s no other way to go.
• You can develop a very efficient operation. Selling a limited assortment of merchandiseand the same merchandise day-in, day-outleads to a very efficient operation. You can save by bulk-purchasing the necessary boxes, and by getting good at packing and shipping those same items day after day.
• Your supplier may offer drop shipping services. Some suppliers don’t require you to stock their merchandise; they’ll take your order and drop ship directly to your customers. This can be a very good thing, both for cash flow (you don’t pay until you make a sale) and for warehousing (there’s nothing to store).

Official status definitely has its benefits, not the least of which is that you’re somehow more legitimate than the average eBay sellerat least in some customers’ eyes. Being an authorized dealer lets you play with the big boys and (sometimes) command higher prices.

Cons

Official retailing isn’t for everyone. Here are a few reasons why you might want to avoid this sort of authorized reselling:

• Getting set up as an authorized dealer is tough. If becoming an authorized dealer were easy, more sellers would do it. Fact is, it’s notat least, not always. Many manufacturers have stringent requirements for their dealers (in terms of sales volume, location, advertising, and the like), and you might not meet them. Many manufacturers just don’t like dealing with small fry, which is what you are when you’re first starting out. You may have better luck working with a distributor, but it’s still tough. You’ll have to work hard to convince suppliers to accept you as a dealer worth dealing with.
• You may have to live with minimum purchase requirements. Even if you can get set up as an authorized dealer, you still may have to work with a supplier’s minimum order requirements. Do you really want to buy 100 DVD players or a gross of blue jeans? If you’re an authorized dealer, you may have towhich could strain your finances and your storage space. (Plus, are you sure you can sell all those items?)
• There may be limits on how you can sell your merchandise. Some suppliers won’t let you sell online, or they limit the prices you can advertise. Make sure you know the rules before you sign up and that you can live with them.
• You have to compete with other authorized dealers. Now that you’re an authorized dealer, you have to compete against other authorized dealers. Depending on what you’re selling, your competition might include Best Buy and Wal-Mart. Do you really want to play head-to-head with these big boys? (Remembernot all authorized dealers buy at the same price; chances are Best Buy and Wal-Mart are paying a lot less for their merchandise than you are!)
• You have to compete with other unauthorized dealers. If you’re an authorized dealer, you’re buying off the manufacturer’s or distributor’s official price list. Unauthorized sellers might be able to buy similar merchandise for less from liquidators and closeout suppliers, which means that your “official” goods might end up being priced significantly higher than these similar items on eBay. This could drive your pricesand your profit marginslower, or put a big dent in your sales rate. In many categories, eBay is a buyer’s market, wherever the merchandise comes from.

In short, becoming an authorized dealer carries its fair share of limitations. You simply may not be big enough to buy direct from the supplier, or you may not be able to work within that supplier’s rules and regulations. Even worse, you may find your prices getting undercut by black market or liquidated merchandiseand if this happens, there’s little you can do about it. In other words, becoming an authorized dealer doesn’t let you write a blank check, especially when it comes to eBay sales.

How to Become an Official Retailer on eBay As noted earlier in this chapter, the hardest part of the official retailer model is becoming an authorized dealer. When you pursue this model, it’s especially important to do your homework ahead of time, and prepare a detailed business plan. This model is most like that of a traditional business, so you should pattern your business on other businesses in the product category you choose. This advance planning is necessary because this is one business model you can’t just ease into. You have to make big commitments up front, in order to achieve authorized status and make the necessary inventory purchases. With this model you start bigwhich also means you can fail big. Make sure you know what you’re doing before you commit. Seller Spotlight: bobbibopstuff eBay seller bobbibopstuff is a business run by John and Sandi Larson, from Beaverton, Oregon. They’re both in their late 50s and think of themselves as semi-retired. The Larsons began their eBay business when they were downsized from their jobs several years ago; they decided to pursue an independent business again, instead of trying to find new jobs. The Larsons settled on running an eBay business because of the great flexibility in working hours and pace. Today, they use their eBay business and related online store (www.bobbibopstuff.com) to generate income while they work with their church, giving financial advice and training to those in debt. Their online store supplements their eBay Store (stores.ebay.com/BobbiBopStuff), which is shown in Figure 11.1. Figure 11.1. The BobbiBopStuffeBay Store. [View full size image] John and Sandi specialize in selling scrapbooking and craft supplies, stationery, greeting cards, and similar items. Sandi had been a regional manager for a chain of gift and stationery stores, and that experience helped the Larsons to build their eBay business. They do most of their purchasing direct from select manufacturers and distributors. They don’t do any selling through drop shippers, preferring to buy and carry their own inventory. (Their garage is their warehouse.) John notes that he wants to be in full control of their fulfillment process, and this is the only way to do that. The Larsons’ purchasing process consists of reviewing various catalogs and analyzing the business’s sales history. They then make projections of what their product mix should be. It’s a skill John and Sandi learned from their years of owning or managing various retail stores. They tend to place orders of $500 or more, and try to work deals with shipping whenever they can. The Larsons augment their normal inventory by purchasing from several closeout distributors. These contacts are made at the various gift industry trade shows they attend each year. John says he particularly likes the Associated Surplus Dealers/Associated Merchandise Dealers show, held in Las Vegas every August. (You can find out more about the ASD/ASM trade show at www.merchandisegroup.com.) John and Sandi achieved PowerSeller status in the spring of 2004. Today, the Larsons average $2,000 per month in sales over much of the year, with sales increasing to $4,000 per month over the holiday season. Their average sale is in the $8 range, which means they have to work hard to clear a small profit. On the other hand, their sales are consistent and predictable. John offers quite a bit of useful advice to potential sellers: “First, treat your eBay business like a real business. Be serious about making it a success. If you don’t have any business background, check out some books from the library and learn about marketing, customer service, keeping books, and organization. Answer all your mail. Be professional. “Second, buy your products for a great price. Be a frugal shopper. Don’t load up with inventory before testing to see if it will sell. “Third, list, list, list. Customers can’t view or buy anything if the products are not present when they are browsing. Experiment with timing, pricing, wording, and products. “Fourth, do all you can to make your customers happy. Remember that they are the customer and, though not always right, always the customer. Stay in touch with them through frequent email updates. Pack products well and ship them quickly. “Fifth, go the extra mile with your customers. We include an inexpensive free gift with every order. It isn’t much, but we get enough comments that we keep doing it. When you make a mistake (and you will), fess up and tuck in a little something extra for the customer’s trouble. “Sixth, keep track of your inventory. One of my most embarrassing moments is to tell a buyer that I didn’t really have the item in stock that they bought. Don’t run out of best-sellers. Don’t load up on slow sellers. “Finally, work out standard processes for your business. Make an auction template and keep it up-to-date. Decide how many listings you’ll do each day, and do them. Make email templates or get an auction management program to help you stay on top of your communications and shipping. Be organized in your approach to getting things done. Make checklists, use tickler files, and pre-print your forms. Have your shipping materials on hand and organized.” Lots of advice, and all of it good. It’s what’s propelled bobbibopstuff to PowerSeller status, and made John and Sandi successful eBay businesspeople.

Chapter 12. The Manufacturer/Craftsperson Figuring out what kind of eBay business to run is easy if you’re a product manufacturer, or if you make your own art or crafts. Your business revolves around the things you create; you sell what you make. Many artists and craftspeople have found eBay to be an essential channel for selling their works. Before eBay, you were limited to local arts and crafts fairs and the occasional gallery showing. With eBay, you can sell your work 365 days a year and help generate a more steady and consistent income. Plus, your work gets exposure across the entire country (and around the world, if you like), which dramatically broadens your audience. And the more people who see your work, the better. Small manufacturers of all types have also found eBay to be a boon to their business. It’s relatively easy to augment your traditional sales with direct-to-consumer sales on the eBay family of sites. Whether you choose to run traditional auctions or list fixed-price product in an eBay Store, as long as you’re equipped to ship directly to consumers, it costs very little to generate supplemental sales. The marginal cost is small to reach a whole new market for your products.

eBay for Manufacturers Calloway Golf. Dell Computers. HP. JBL, Harmon Kardon, and Infinity. What these manufacturers have in common is that they all sell merchandise on eBay, direct to consumers. And they’re just a few of many; hundreds and thousands of smaller specialty manufacturers have developed eBay businesses that function as supplemental sales channels to their main businesses. If you choose to sell your products on eBay, you have some distribution questions to answer. The chief question, of course, is what kind of products you want to sell on eBaythat is, do you want to sell your entire product line, selected products, or do you want to use eBay as a outlet for your overstock and distressed merchandise? The latter option is one that many of the big boys take; they find eBay a great way to move product that had no outlet previously. In addition, using eBay for closeout product helps to minimize channel conflict, as you’re selling products online that aren’t available (or even wanted by) your traditional retail channels. For example, Dell Financial Services (stores.ebay.com/Dell-Financial-Services) operates an eBay Store that sells refurbished computers that have come off-lease from their corporate clients. As you can see in Figure 12.1, this is a great way for Dell to move these recycled products that it might otherwise have no way to offer to the public. Figure 12.1. The eBay Store of Dell Financial Services, which sells refurbished computer systems. [View full size image] Back to the issue of channel conflict: This is definitely something that most businesses need to address. It’s nice to establish a new stream of sales, but not if it ticks off your established retail partners. The last thing a bricks-and-mortar retailer wants to see is the same product he’s buying from you offered for sale directly from you to the general public; retailers don’t really like competing with their suppliers for business. It’s best if you can find some way to distinguish your eBay sales from the sales you make otherwise. In addition, if you’re going to sell on eBay, you better be set up to ship directly to consumers. Some companies are, some aren’t; don’t assume that the distribution operation you have fine-tuned to service bulk orders to distributors and retailers can also handle one-off orders direct to individuals. Servicing individual consumers isn’t nearly as easy as you might think; not only could you screw up the individual’s orders, shoehorning direct-to-consumer shipments into your warehouse could cause stress to your existing operation. I’m not kidding here; think carefully before you add B2C sales to what was exclusively a B2B operation. That said, selling on eBay has helped many manufacturers, both small and large, move overstock and clearance merchandise and add a nice supplemental revenue stream to their existing businesses. And, of course, if you’re just starting out, there’s no reason not to consider eBay as your primary sales channel. If you do decide to sell on eBay, it’s a good idea to open an eBay Store. Yes, you can use the traditional auction process (perhaps supplemented with Buy It Now listings) to move a lot of merchandise, but you probably have a lot more items in the warehouse than you can list for auction at any given time. Make sure you route a fresh supply of merchandise into your weekly auctions, but then supplement those listings with stock merchandise in your eBay Store. This combination works well for manufacturers in all product categories.

eBay for Artists and Craftspeople

If you’re an artist or if you make your own crafts, you’re also a manufacturer of sorts. Fortunately for you, eBay hosts a thriving arts and crafts community. As you can see in Figure 12.2, eBay’s Art category (art.ebay.com) includes tens of thousands of listings for all kinds of artpaintings, drawings, photographs, sculptures, even digital drawings. And the Crafts category (crafts.ebay.com), shown in Figure 12.3, provides an outlet for just about every type of craft imaginablebasketry, bead art, candles, pottery, crochet, stained glass, embroidery, pillows, macramé, origami, quilting, and more. Whatever you make, there’s a market for it on eBay.

Figure 12.2. eBay’s main Art page.

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Figure 12.3. eBay’s main Crafts page.

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Naturally, before you can sell anything on eBay, you have to make it first. (Unless you’re selling commissioned work, of course.) Finish a painting or a piece of pottery, list it for auction, and see what happens. The more art you create, the more listings you can make. And eBay is a true marketplace; your art will sell for whatever the market will bear.

That said, selling original items is somewhat different from selling other types of items on eBay. For one thing, eBay isn’t really an art gallery, which is what makes the process a tad difficult. That difficulty is eased somewhat when you know the ins and outs of selling artwork online.

Know, however, that you shouldn’t get your hopes up for selling every item you createat least in its initial listing. While some artists achieve high sell-through rates, others sell only about 20% of what they list. It’s important to relist your unsold items and perhaps establish an eBay Store to “park” your previously listed artwork. In this instance, your eBay Store becomes a virtual gallery for your work.

An eBay Store is also a good idea if you have some lower-priced items to sell in addition to your larger pieces. Sometimes a buyer will like your work but not want to splurge for a high-priced piece; having some smaller (and lower-priced) alternatives available in the store might salvage a sale.

You can also show your other work on your eBay About Me page. While you can’t sell from the About Me page, you can display additional pieces to give potential buyers a feel for your style. And if you have a separate website for your work, you can link to it from your About Me page.

Deciding What to Make

The business of selling your arts and crafts on eBay probably isn’t that different from your current working process. You still have to create your pieces, after all. After that, it’s a matter of listing those items for sale on eBay and then following through during the entire auction process.

Note

Learn more about eBay Stores in Chapter 27, “Opening an eBay Store.”

The first step in selling arts and crafts on eBay is determining which of your items to list. As stated previously, eBay isn’t the best forum for selling high-priced original art; true art connoisseurs tend to hang out at galleries, not online. eBay is more about art for the masses, which means that lower-priced, more accessible artwork tends to do better.

You should also think about the packing/shipping factor. If you create two-ton iron sculptures, you have a bit of a shipping issue to deal with. Same thing with overly large paintings or tapestries. It’s a lot easier to ship an 8-by-10-inch piece than it is one four or five times that size.

This is why it pays to do a little research before you sell. Browse around through eBay’s Arts and Crafts categories and see what other artists are offer-ingand, more important, what buyers are buying. Check out their shipping methods and charges, as well as how they offer their items. And definitely spend some time hanging out at the relevant eBay discussion forums (pages.ebay.com/community/boards/), particularly the Art & Artists and Hobbies & Crafts boards. You can learn a lot from the experienced sellers who post there.

Managing the Auction Process

Listing artwork and crafts is pretty much like listing any other item on eBay, with a few caveats. First, a high-quality picture is important. If you’re selling a painting or photograph, consider making a full scan, instead, which will often show more detail than a photograph. In any case, make sure you show potential buyers just what you have to offer.

It’s also important to list your item using the Gallery option. This option places a thumbnail picture of your item, like the ones in Figure 12.4, next to your item title on item listing pages. Pictures are particularly important when you’re selling paintings and other artwork, whether the potential buyer is browsing or searching. Adding the Gallery option costs $0.35, but it’s pretty much a necessity in these categories.

Figure 12.4. Gallery photos on a typical art listing page.

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Note

Unscrupulous sorts can sometimes appropriate your images to use in their own auctions, or to pass off their work as yours. The solution to this problem is to use an image editing program to place some sort of watermark text or image (“This image property of Jane Smith”) over the top of your picture. Picture thieves won’t steal an image with somebody else’s name plastered across the front.

If you’re selling higher-priced artworkor if you think what you’re selling is worth a higher pricethen consider using the reserve price option. This way you can start the bidding at a lower price (always good for attracting bidders) but reserve the right not to sell unless the bidding reaches a higher level.

Once the bidding is underway, the rest of the auction process is pretty straightforward. Remember to contact the winning bidder when the auction ends; then get ready to pack and ship.

Packing and Shipping

As most artists know, shipping large paintings and artwork is particularly troublesomeand often expensive. That’s because this type of item is charged by size, not by weight. You also have to work with very large boxes and lots of wrapping and padding.

Making your own boxes might be necessary if you can’t find large-enough standard boxes to house large pieces of artwork, paintings in particular. It’s even hard to find the right-sized box for some smaller pieces; you need something big but flat, and that’s hard to come by. Fortunately, you can make your own “custom” boxes out of existing packaging, by sandwiching your artwork between a flattened (unopened, unassembled) Priority Mail box. Then insert that first box into a larger flat Priority Mail box and tape the ends. The package may not be pretty, but it gets the job done.

You’ll probably want to offer insurance on everything you shipand maybe include the cost of insurance in your standard shipping/handling charges.

Given that you’re selling unique pieces of art, you can’t just send out the buyer another one if the first one gets lost or damaged in transit; that’s why insurance is important.

Insurance is also important when you’re shipping smaller crafts work, particularly glass, ceramic, or other fragile items. Careful packaging is also necessary. Use lots of tissue paper, bubble wrap, and Styrofoam peanuts, and consider double-boxing your most breakable pieces.

Finally, when you pack up the item to ship, consider including a letter of authenticity with the item. This letter actually adds value to the item and makes for happier customers. (It’s also good advertising for future work!)

Pros and Cons of Selling Your Own Products on eBay

Should you sell the products you make on eBay? This type of business is not for every manufacturer or artist, that’s true. Read on to learn the pros and cons.

Pros for Manufacturers

There are some significant potential benefits for manufacturers selling their products direct to consumers via eBay. These include

• It’s a newnot a replacementsales channel. The bit about eBay supplementing your existing sales also applies if you’re a manufacturer. eBay sales should augment your traditional sales channels, not replace them.
• You’re already in the business of selling your products. If you’re a manufacturer, you already sell your stuff. True, you probably due it with a force of salespeople, but still. Who knows better than you the benefits of the products you selland who better to sell them?
• It’s a way to move merchandise you might not sell otherwise. Manufacturers love eBay as a way to move overstocked, closeout, returned, and damaged merchandise. Think of eBay as the ultimate online outlet store. It’s better than throwing all that old merchandise away!

In short, the biggest plus for any manufacturer selling on eBay is that it’s an addition to your current businessif you do it right.

Cons for Manufacturers

That said, product manufacturers should think twice before establishing eBay as a new sales channel. In particular, consider the following:

• Your products might not be conducive to online consumer sales. Some products sell well online, direct to consumers; some don’t. What you produce might not be a good fit with the eBay marketplace.
• Your business might not be set up for direct-to-consumer sales. If you currently ship large orders to a few accounts, you may not be equipped to handle small orders from a lot of accounts. Do you have the staff on hand to process all these onesie and twosie orders? Is your warehouse equipped to ship small boxes? Do you have arrangements with shipping companies to ship items to residential addresses? Don’t take any of these operations for granted; if you haven’t done it before, it won’t be easy.
• You may generate channel conflict. Retailers don’t want to compete with their suppliers. If you start selling the same products direct to consumers that you formerly sold via two- or three-step distribution, you’re not going to win a lot of friends. You may end up losing more business from your established distribution/retailer partners than you gain from selling direct via eBay.

You have to realize that selling direct to consumers is a much different process than selling to consumers via distributors and retailers. The extra revenue may be enticing, but the costs involvedmonetary and otherwisemay be too steep. And don’t minimize the issue of channel conflict; you don’t want to damage your existing business by opening a new sales channel on eBay. Make sure you think this one completely through before you take the leap.

Pros for Artists and Craftspeople

If you create your own artwork or crafts, what benefits do you get by selling your work on eBay? Here are a few of the things that artists like about this particular type of business:

• You get to sell what you know and love. If you’re an artist, what’s better than getting paid to do what you love? You create your work, you sell it; not a lot of research involved. It’s a nice way to make a living.
• It’s not truly competitive. Unlike most other types of eBay businesses, when you’re selling original artwork and crafts, you’re selling unique itemsso unique that buyers can’t price-shop between you and another artist. Your work is one-of-a-kind, so there’s no direct competition with other artists.
• It increases your exposureand potential future sales. When an artist lists her work on eBay, she’s showing it to millions of potential buyers all across the country. Even if these folks don’t buy anything today, they may buy something tomorrowincluding higher-priced commission work.
• It’s an adjunct to the traditional ways of selling. If you’re already a successful artist, selling on eBay is gravy. It’s a year-round business that sits on top of your existing sales.

In short, if you’ve never sold your products or artwork on eBay, what’s the harm in trying?

Cons for Artists and Craftspeople

Then again, selling your own artwork and crafts on eBay isn’t all milk and honey. Let’s take a quick look at the challenges involved:

• You may be disappointed in the selling prices. Know that artwork doesn’t always command high prices at auction. Original art goes for higher prices than prints, but it’s still a buyer’s market. eBay tends to be more for bargain hunters than art lovers, so reaching a sufficient volume of work will be important.
• eBay is a mass marketnot an art gallery. eBay is not for hoi polloi. Highly stylized, “arty” work doesn’t always sell that well; paintings of cute cats and dogs do. Depending on your style and sensibility, this may not be the best venue for you.
• You may not create enough work to feed your business. If you’re an artist, don’t count on a lot of five-figure sales on eBay. Most eBay artists sell a lot of lower-priced works. If you’re not that fast a worker, you may not be able to create enough pieces to feed a full-time eBay business.
• Packing and shipping artwork is a pain. I mentioned this before, but it bears repeating: Large paintings and heavy crafts pieces do not ship all that easily or cheaply. You may need to get creative on your packing, and make sure you charge enough to cover what could be expensive shipping charges.

For artists and craftspeople, there are some realities you have to face up to. Selling a piece at a local arts fair, where the buyer walks away with it in his hands, is one thing; packing and shipping that same item clear across the country is another. And when you’re selling on eBay, you have to deal with the packing and shipping. If you can’t handle the hassle, it’s not for you.

Selling on eBay also isn’t for you if you think you’re going to get rich quick. While you could (anything is possible…), you are more likely to end up selling a lot of lower-priced items. That isn’t necessarily bad, as long as you didn’t have your expectations set otherwise.

Seller Spotlight: artchick48 Lee Smith is a 53-year-old self-taught artist who lives in Greensboro, North Carolina. After 23 years of working for large corporations, she quit the corporate world in 1995 to focus on her painting. Since 2001, one of the primary outlets for her paintings is eBay. Lee offers both original paintings and prints on eBay, via normal auctions (using the ID artchick48) and through her eBay Store (stores.ebay.com/Lee-Smith-Art), shown in Figure 12.5. When she’s able to work without interruption, she can produce up to 10 original paintings in as many days; realism takes more time, she says, so she may be able to paint two or three realistic works over the same 10-day period. To date she’s sold almost 300 original paintings through eBay, with close to 100% sell-through. Her monthly sales range from $300 (when she’s busy with other projects) to $1,000. Her highest-priced eBay sale was a painting that went for $460. Figure 12.5. Lee Smith’s eBay Store. [View full size image] On eBay, one sale can often lead to multiple sales. Lee recalls one lady who won a small cat painting for $39 and then turned around and purchased another painting from her store for $250. Another customer, a gentleman in assisted living, won a small work for $31, and then shortly after ordered a commission oil portrait of his granddaughter. Another collector of her cat paintings went on to commission a total of eight paintings, one of each of her cats. eBay isn’t the only venue for Lee’s paintings. She has her own website (www.LeeSmithArt.com) and also participates in several local gallery exhibits and weekend shows each year. She has a long-term contract with a North Carolina gallery for designer and corporate works and a consignment contract with a South Carolina gallery that represents her folk art at various art festivals in the Atlanta and Charlotte areas. Lee notes that artist sellers are unique because they create the items they sell; time to produce ample inventory is the number one challenge. “Life gets in the way, sometimes,” she notes. And one can’t ignore the many hours of photography, marketing, packing, and shipping necessary to complete the auction process. She offers the following advice to other artists on eBay: “Research eBay to see if there’s a market for your style of work. Have reasonable expectations according to your circumstances: family obligations, style, medium, and preferred method of working. Some artists may use ‘formula’ or assembly-line methods to produce high volume, or paint 16 hours a day to list 10 to 25 originals per week. Others who have just a few hours a day to create or spend weeks on one work may want to offer prints. As your sales increase, hire out the tedious tasks, the paperwork, accounting, photos, listings, packing, and shipping. The main thing is to be flexible, have patience, and most of all, continue to market your work in other venues.”

Chapter 13. The Trading Assistant Over the past few years, a new type of eBay business has emerged. This type of business exists to sell merchandise for other peoplefolks who are otherwise too busy or too intimidated to run their own eBay auctions. The clients agree to let the business sell their items on eBay on a consignment basis; when the item sells, the business takes a cut of the selling price. You’ve probably seen some of these consignment resellers on eBay or even in your own town. eBay calls these resellers Trading Assistants (TAs); they’re also commonly known as drop-off stores, and they’re becoming a big business.

Selling Other People’s Stuff

The part and parcel of consignment selling is that you’re selling someone else’s merchandise. The owner contracts with you to manage the entire auction process, which you proceed to do. You take possession of the merchandise, research it, photograph it, write up an item description, and create and launch the auction listing. You manage the auction and collect the buyer’s payment when it sells; then you pack it and ship it out to the buyer. You also pay all applicable eBay fees (although you pass them on to the client as part of your fees to him or her). Your client, the owner of the merchandise, doesn’t have to do a thing.

Of course, you get compensated for all this work. Many consignment resellers receive some sort of flat fee up front (in case the item doesn’t sell), as well as a percentage of the final selling price. Most sellers also pass through all the eBay and PayPal fees to the client.

All in all, it’s a nice business model. Particularly nice is that you don’t have any financial outlay to acquire merchandise to resell. You don’t have to buy a thing, other than packing supplies. The result is a business that generates strong cash flow with minimal initial investment. And you’re doing a service for those folks who don’t want to or can’t be troubled by running their own auctions on eBay.

Setting Up Shopand Setting Prices

Setting up a consignment business is as simple as establishing a selling procedure, writing up a contract, and then going out and finding clients. And, as you can imagine, it’s the finding clients bit that’s most difficult.

Create a Consignment Contract

All legitimate consignment resellers should create a contract for their clients to sign. This contract spells out exactly what it is you are and are not responsible for, and clarifies your legal position in terms of ownership of the product.

Note

It goes without saying that you should be familiar with selling on eBay before you dive headfirst into consignment selling. Clients expect you to be the expertso you better have enough experience under your belt before you start charging for your services. This is not a business model for the eBay newbie. (In fact, the higher your feedback rating when you start out, the easier it will be to attract clients.)

Your contract should include the following items:

• The names and contact information for both parties (you and your client)
• The purpose of the contractthat you will offer the items owned by the client for sale on eBay
• A detailed listing of the merchandise to be consigned
• The services you, the reseller, will offerwriting the listing, taking photos, listing the item, managing the auction, handling payment, packing the item, shipping the item, and so on
• Who takes possession of the merchandise during the transaction (typically you) and who retains ownership of the merchandise (typically the client)
• How and when the client can cancel the transaction
• What happens if the item doesn’t sell (relist, return the merchandise to the client, whatever)
• Who handles customer complaints and returns (probably you, but not necessarily)
• Fees

Obviously, both you and your client need to sign this contract before you can begin the selling process.

Set Your Fee Schedule

As a consignment reseller, you make your money from the fees you charge for your services. There are no set guidelines for these fees; you can charge pretty much whatever you want, or whatever the market will bear.

First, consider establishing a flat fee of $5 or $10 for every transaction, in addition to a selling commission. This fee, typically paid up front, ensures that you get paid something whether the item sells or not. It also helps to weed out the riff-raff; if clients have to pay a little up front to get in the game, they might think twice about the salability of what they bring to the table.

If you don’t use a flat fee, consider only selling higher-priced itemssay, items with a minimum bid of $10 or higher. Again, the goal here is to avoid selling lower-priced items, in favor of more-profitable higher-priced merchandise.

As to the selling commission, you’ll find sellers charging anywhere from 10% to 50% of the final selling price. For example, if you charge a 25% commission, your fee is $25 if the item sells for $100.

You might also want to consider offering a sliding fee schedule, with varying percentages for different price points. For example, you might charge a 40% fee for items that sell for less than $50, a 30% fee for items that sell over $500, and a 20% fee for items that sell over $5,000. The goal here is to maximize the dollar amount of your commission; you charge a higher percentage on lower-priced items (which generates a higher dollar fee), and a lower percentage on higher-priced items.

Then you have all the various eBay and PayPal fees to consider. Most consignment sellers pass on these fees to the client, in the form of additional charges. This means that you’ll charge back the client for eBay’s listing and final value fees, plus the PayPal or merchant credit card fees (if any)in addition to your regular commission on the final sales price.

Consider Opening a Drop-Off Location

Many consignment resellers work out of their home. If you go this route, you’ll either have to pick up items from your clients’ homes or have your clients drop off items at your home. While some clients might like this homey touch, others might be a little nervous about dealing with a business that doesn’t look like a business.

A more professional (and more expensive) option is to rent your own retail storefront for merchandise drop-offs. Chances are you’ll attract more clients with a drop-off location, and not only because your signage will provide added visibility; many people will be more comfortable leaving their merchandise at a retail location than at some stranger’s house or apartment. You also get lots of added space to store the consigned merchandise and conduct your business.

The downside of this, of course, is you have additional coststhe rent and utilities for your store, plus signage and the like. And you’ll pay those bills every month, no matter how much auction business you do. But you don’t need a big store, and it doesn’t have to be in a high-rent location. Any type of storefront or office space will do.

Go the Franchise Route

Note

eBay calls a Trading Assistant with a drop-off location a Trading Post. To qualify for official Trading Post status, you must offer a staffed drop-off location with regular hours, have a feedback rating of 500 or higher (with at least 98% positive), and have achieved Platinum PowerSeller status (monthly sales of at least $25,000).

Another option for the consignment reseller, one not available for any other type of eBay business, is to buy into one of the several auction drop-off franchise operations that are starting to bloom. With a franchise you get lots of help getting started; the main office will help you choose a retail site and negotiate your lease, plan your store layout, and market your operation. You’ll also get training and ongoing operations support, plus the value of the franchise name. For all this, you pay a large upfront fee and a percentage of your monthly revenues.

Is a franchise a good idea? Maybe, especially if you’re new to this or generally inexperienced in running a business. Maybe not, if you’re an experienced seller, know how to run a business, and prefer to work for yourself (and keep all the profits yourself). If you’re interested in doing the franchise thing, definitely check out several different franchises, visit a few of the stores, and talk to some of the franchise owners. Know what you’re getting into before you sign that first check.

Some of the more popular eBay drop-off franchises include

• Auction It TODAY (www.auctionittoday.com)
• e-Powersellers (www.e-powersellers.com)
• eAuction Traders (www.eauctiontraders.biz)
• FoundValue (www.foundvalue.com)
• iSold It (www.i-soldit.com)
• NuMarkets (www.numarkets.com), shown in Figure 13.1

Figure 13.1. The home page for the NuMarkets franchise.

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• OrbitDrop (www.orbitdrop.com)
• The Online Outpost (www.theonlineoutpost.com)
• QuikDrop (www.quikdropfranchise.com)
• QuickSELLit (www.quicksellit.com)

Remember, before you enter into any franchise agreement, do your homework: check out the franchisor’s finances and history, talk with other franchisees, and compare franchise fees with other franchises. And it’s worth noting that the franchise route doesn’t come with any guarantees. Of the seven franchises I listed in the first edition of this book, three are no longer in operationand six new ones have sprung up to take their place.

Running a Consignment Business on eBay

Running an eBay consignment business is just like running your own auctionswith the additional responsibility of finding clients who have merchandise they want you to sell. Let’s take a look at what a typical consignment business involves.

Finding Clients

To sell items on consignment, you first have to find some clients. Now, if you have a drop-off location, you can sit behind your counter and wait for your clients to come to you. (Although a little advertising and promotion probably wouldn’t hurt, of course.) If you’re running your consignment business out of your home, however, how do you obtain new clients?

Note

Many consignment sellers try to avoid reselling low-priced items, for the simple reason that there’s not enough money in these transactions to make them worth their while. eBay recommends using a Trading Assistant for items over $50 only; other TAs set their lower limit at $100. Whatever limit you set, you don’t want to waste your time selling a lot of $5 and $10 itemswhen you could be reselling items for $100 or more.

First, you should make your business known to other members of your community. Get some business cards made and pass them outand don’t forget to tack them up on any bulletin board you find. Consider advertising in local newspapers, if the rates are affordable. And remember to talk yourself up to everyone you meetword-of-mouth is often the best promotion.

You’ll probably need to do some targeted hunting for business. Make up some flyers and hand them out to anyone running a garage sale or yard sale; there’s always something left at the end of the sale that you could sell on eBay. Another good source of consignment business is small businesses and manufacturers in your area. Almost every local manufacturer or business has liquidated, refurbished, or returned products it needs to somehow dispose ofand you can help with this problem. You’d be surprised how eager these companies are to get rid of old merchandise just taking up space in their warehouses.

Finally, make sure you’re a registered member of the Trading Assistant program so that you’re listed in eBay’s Trading Assistant Directory. This directory is the way a large number of customers find a Trading Assistant near them.

Advertising Your Business Online

You should advertise your consignment business in all your regular eBay auctions. You can do this by adding eBay’s Trading Assistant button, as shown in Figure 13.2, and linking it back to your eBay Trading Assistant page. To do this, you’ll need to know your Trading Assistant number (found at the end of the URL for your TA listing) and a little bit of HTML. Here’s the code:

[View full width]

<a href="http://contact.ebay.com/ws1/eBayISAPI.dll?TradingAssistant&page=profile&profileId

 =XXXXX">

<img src="http://pics.ebaystatic.com/aw/pics/trading_assistant2_88x33.gif"vspace="5"

 border="0" height="33" width="88">

</a>

Figure 13.2. Add a Trading Assistant button to all your eBay auction listings.

Replace XXXXX with your Trading Assistant number, and the button will be added. Anyone clicking on the button will be taken directly to your eBay TA page.

You can also advertise your TA business on any web page you might have, using eBay’s Trading Assistant logo, shown in Figure 13.3. Just add this code to your web page:

<a href="http://contact.ebay.com/ws1/eBayISAPI.dll?ShowMemberToMemberDetails&member=XXXXX">

<img src="http://pics.ebay.com/aw/pics/tradingAssistant/taLogo_100x100.gif">

</a>

Figure 13.3. Add a Trading Assistant logo to any web page.

Again, replace XXXXX with your Trading Assistant number, so anyone clicking on the logo can go directly to your eBay TA page.

Taking Possession of the Merchandise

When you agree to sell an item for a client, you need to take that item into your possession. You’re in the consignment business, after all; you need to have the item in your possession in order to sell it. Plus, if you don’t have it, you don’t know for sure that it existsor that your client hasn’t disposed of it elsewhere. Remember, it’s your name on the eBay auction; you’ll be held responsible if the item isn’t actually available for sale.

If you’re running your consignment business out of your home, you’ll probably make your initial contact with a client over the phone. One phone call is all it takes to get a feel for the client, find out what he or she wants to sell, and determine whether it’s worth your time. You should also take this opportunity to tell your prospective client about you and your business, discuss fees, and work out any other details. Then, if all goes well on the phone, you can arrange for the client to drop off the merchandiseor for you to pick it up.

While you can try to get all your clients to drop off their items at your home, chances are you’ll have to do some merchandise pickup yourself. Going to a stranger’s home can get a little dicey, so you’ll want to play it as safe as you can. If you have a relative who happens to play football, take him along with you. Otherwise, judge the location carefully, and if you’re at all nervous, arrange to meet the client at a neutral (and safer) location, like a local coffee-house or fast-food joint.

Managing the Auction Process

Once you have the merchandise in your possession, selling it is just like running any auction. You’ll need to do a little research to learn more about the item and determine the appropriate starting price. You’ll also need to photograph the item and write the item listing. There’s nothing special you need to do at this point.

Note

You don’t have to accept everything that your clients want you to sell. It’s okay to turn away goods that you think you’ll have a hard time selling or that you think are worth considerably less than the client doesor that you think may have been obtained illegally.

Packing and Shippingand Settling with the Client

At the end of the auction, you receive payment just as you would with any other auction. (The payment comes to you, not to your client!) Then you pack and ship the item, and get ready to settle things up with your client.

Once you’ve received payment from the buyer, you need to figure your fees and create an invoice for the client. Start with the final selling price, subtract your commission, subtract all the eBay and PayPal fees, and the balance is what you pay the client. If it’s an occasional client, cut a check right then (or within the time frame specified in your contract). If you have an ongoing relationship, you may want to arrange payment for all that client’s auctions at the end of each month.

Pros and Cons of Consignment Selling

eBay consignment selling has become a big business. Why is that, and what possible pitfalls are there?

Pros

The benefits of selling other people’s stuff are numerous. They include

• It’s a big market. As big as eBay is, it could be bigger. Just ask around; lots of people out there would like to sell some of their old junk on eBay, but either don’t know how, are afraid of dealing online, or don’t have the time. All those people are potential customers for a consignment business.
• No upfront costs to buy merchandise. Unlike other business models, you don’t have to buy what you end up selling on eBay. There are zero costs for merchandise acquisitionwhich means you don’t need a lot of cash to get started.
• Big profits for minimal effort. Assuming you charge an average commission of 25% or more on each sale, that’s good money for creating an item listing, packing a box, and driving to the post office. If you can limit your business to higher-priced merchandise (say, $100 or more), that’s at least $25 or so in your pocket for every successful auction you broker, pretty much free and clear. That’s not chump change.
• You’re providing a real service to people. Here’s the part that many consignment sellers really like. You’re helping people who otherwise wouldn’t know what to do with their old stuff. Not only do you help them move their merchandise, you help them generate some cash that they also wouldn’t otherwise have. It’s a real service.
• You won’t get bored. Another thing that many sellers like is the variety of merchandise that comes across the consignment doorstep. There’s always something new and interesting to sell, and since you’re selling across many categories, you’re insulated from potential category downturns.

Sounds like easy money, doesn’t it? Well, it isafter you find your clients, anyway. It’s a true service business, as opposed to an inventory-based or resale business, which all other eBay businesses are.

Cons

Consignment selling, of course, does have its challenges. They include

• There’s plenty of competition. Remember that list of drop-off franchises earlier in the chapter? They’re all potential competition to your consignment businessas are all the other Trading Assistants in your neighborhood, as well as company-owned chains like AuctionDrop (www.auctiondrop.com). And there’s always the chance that even bigger players will get into the market. Circuit City actually tested eBay drop-off services in some of its stores but ultimately decided against it. When something looks like a sure-fire moneymaker, expect lots of folks to jump in.
• It’s a never-ending search for new clients. Part and parcel with increasing competition is the constant search for new clients. You can’t just launch a website and expect potential clients to stumble over it; you’ll need to put in a lot of footwork to build your client base.
• There’s little or no consistency or efficiency. Since you have little control over what your clients will want you to sell, you won’t be able to generate any long-term efficiency in selling or shipping. One client might bring you a Hummel figurine, another might bring you a farm tractor. You need to be prepared to sell anything.
• There may be conflicts between you, the client, and the buyer. When you’re selling someone else’s stuff to a buyer on eBay, you now have a three-way transactionyou, your client, and the buyer. If the buyer has a complaint, it’s easy to see how a lot of finger-pointing could result. You’ll need to spell out who’s responsible for what ahead of time, but even the best of contracts break down when one of the parties is unhappy. You’ll have to figure out a way to deal with such disputes.
• You may need to open a retail storefront. With increased competition, potential clients will tend to gravitate toward those resellers that offer the best serviceswhich, for all practical purposes, means the convenience of dropping off their merchandise for resale. You may be able to operate out of your house for a while, but expect pressure to build for opening a drop-off location.
• You’ll need a lot of storage space. The more business you do, the more client merchandise you’ll need to store. Even if it’s just storing something for a week or two, it’s still space. Where will it all go?

In other words, as good as consignment selling sounds, there’s a lot of work involvedand a lot of things that can go wrong. Before you dive in, make sure you’re prepared for all that’s involved in running what is a very real business.

How to Become an eBay Trading Assistant

All eBay Trading Assistants are consignment sellers, but not all consignment sellers are Trading Assistants. That is, you don’t have to be an official TA to consignment sell on eBay. Nothing in eBay’s rules and regulations prohibits a regular member from reselling merchandise for other people. In fact, if you’re just testing the waters, there’s no real reason to bother with joining the TA program. Test the waters with a few “unofficial” consignment auctions before you decide to launch your own boat.

Once you decide to become a full-blown consignment seller, there’s no reason not to join the TA program. It doesn’t cost you anything, and you get the benefit of being listed in eBay’s Trading Assistants Directorywhich is how many users find TAs to sell their items for them.

Joining the TA program doesn’t have any really stringent requirements. Here’s all that eBay requires:

• You’ve sold at least ten items in the past three months.
• You have a feedback rating of at least 100.
• You have a positive feedback percentage of at least 97%.
• Your eBay account is in good standing.

That’s it. To join up, just go to the Trading Assistant Program hub (pages.ebay.com/tahub/), shown in Figure 13.4, and click the Become a Trading Assistant link. Follow the onscreen instructions and you’ll be ready to go.

Figure 13.4. The home base for all eBay Trading Assistants.

Seller Spotlight: GOing1nceAMC Sally Milo is a 52-year-old eBay Trading Assistant doing business under the GOing1nceAMC ID. She makes her living on eBay selling items on consignment for other individuals and businesses. Originally from Detroit, Sally now lives in Tucson, Arizona. A graphics designer/illustrator by training, she started selling on eBay in 1999, when a coin-collector friend asked her to manage his eBay auctions; Sally had the computer and graphic skills that would be useful in such an endeavor. (She continues to manage her friend’s coin auctions today, under the AzBCC ID.) In March of 2003 Sally and her partner Kyle Bennett set themselves up as eBay Trading Assistant resellers; their eBay Store (stores.ebay.com/GOing1nceAMC) is shown in Figure 13.5. Figure 13.5. The About Me page for GOing1nceAMC. [View full size image] To attract clients, Sally and Kyle started out by going door-to-door to businesses they thought might be potential clients. Of the 18 companies they visited during their first day of cold calling, 8 of them became clients. Sally continues to attract new clients by telling everyone she runs into about her eBay business, and by handing out lots of business cards. She also says that her listing in eBay’s Trading Assistant directory has provided her with several clients. Today, GOing1nceAMC resells a wide variety of items for their consignment customers. They’ve sold things as small as a single fava bean (previously owned by a late Mafia godfather) to as large as a several-ton manufacturing furnace. They have no restrictions on what they’ll accept on consignment, as long as it’s not prohibited by eBay. Like many Trading Assistants, Sally launched her business out of her homealthough by the time you read this, she should have her brand-new drop-off location open. Before she decided to go the storefront route, everything about her business was home-based; her living room was her shipping room and photo studio, a former bedroom was her warehouse, and a former den was her packing materials room. Obviously, having a retail storefront will change all that. Sally and Kyle don’t charge a set-up fee for regular items; bidding begins at $9.99 for a 7-day auction. They also offer a premium plan for higher-priced items, which does have a setup fee ($19.99) and begins bidding at a higher price for a 10-day auction. The bulk of their revenues come from their selling commissions, which start at 40% of the final selling price and operate on a sliding scale from there. In a typical week, GOing1nceAMC will have at least 20 items listed for auction on eBay. They have a very high sell-through rate, selling more than 95% of the items they listalthough some of those items sell upon relisting, rather than during the initial auction period. During the whole of 2005 their sales averaged from $2,000 to $4,000 per month, with sales climbing closer to $10,000 per month toward the end of the year. Sally says that their most memorable sale started when a long-time client asked them to list 11 old decks of playing cards. They priced each deck from $5 to $20. One of the $20 decks was quite nice, she remembers, but they couldn’t dig up any information about them. This particular item ended up in a bidding war among a few bidders, and ultimately sold for $2,575. Needless to say, both Sally and the client were amazed byand quite happy withthe final price. The buyer, a Norwegian card collector, told them that particular deck had not been offered anywhere in nearly 30 years. Sally has the following advice for anyone wanting to start an eBay consignment business: “First, get a good amount of experience selling your own stuffcollectibles you have around your home and nifty items you picked up at the flea market. And buy some stuff from your fellow eBayers to get an idea how sales are handled from the customer’s point of view, and to build up your feedback. Of course, to be a registered eBay TA, you must meet the requirements. Know and act as a professional businessperson!” You can learn more about Sally and Kyle’s consignment business at the GOing 1nce website (www.going1nce.com).

Part 3: Managing Your Day-to-Day Business

14 Purchasing and Managing Your Inventory

15 Automating Item Listing

16 Managing Customer Payments

17 Organizing Your Packing and Shipping

18 Dealing with Customersand Customer Problems

19 Automating Auction Management

Chapter 14. Purchasing and Managing Your InventoryWhile occasional eBay sellers get by selling a few items from time to time, running a successful eBay business involves the selling of large quantities of merchandise, week-in and week-out. To sell that merchandise, you first have to obtain the merchandise, which means finding a steady supply of items to sell. These items become your business’s inventory. Managing your inventory sounds simple on paper. You identify items you want to resell, purchase those items (at as favorable a price as you can negotiate), store those items until they’re sold, and then sell and ship them to your customers. When you run low on inventory, you order more. Hopefully, you don’t order more merchandise than you can actually sell. And hopefully, you can sell your inventory for a higher price than what you paid for itand high enough that you can pay all your other expenses (and make a little profit) from the difference. Sounds simple, but it’s a lot of work. Finding the best supplier is a big challenge, and handling all that inventory takes space and elbow grease. It’s a process that never ends; as soon as you sell some, you have to order more. And the bigger your business gets, the more involved the whole process becomes. This chapter looks at the entire inventory issuehow you find items to sell and how you manage that inventory in the day-to-day running of your business.

Where to Find Merchandise to Resell

When you put together your business plan, you indicated the type of business that you wanted to conduct. If you planned your eBay business around merchandise that you currently own or create yourself, you can skip this section. But if you planned your business around the resale of new or used merchandise, you have to find a source for the items you want to sell.

Sourcing your inventory is one of the toughest tasks for high-volume eBay sellers. While the average eBay seller typically finds items in his or her own home or in garage sales, high-volume sellers have to find a constant supply of new merchandise. In essence, high-volume sellers are resellers because they purchase merchandise from wholesalers or other sources and then resell that merchandise to their customers via eBay auctions.

Where can an individual find a source for merchandise to resell on eBay? There are several options, all of which involve buying items in bulk. That means laying down the cash up front to buy large quantities of items, and then making your money back later, one sale at a time. This is one reason why a budding eBay business needs a source of funding; purchasing your starting inventory can tie up a lot of cash.

Note

Learn more about obtaining funding for your business in Chapter 4, “Evaluating and Arranging Funding.”

Whatever type of merchandise you choose to resell, you should always make sure you’re buying from a reputable supplier. That means passing up those companies that have a website but no published phone number, or a post office box but no physical address. Even better, research the business on the Better Business Bureau website (www.bbb.org), or check the company’s ratings at Dun & Bradstreet Small Business Solutions (smallbusiness.dnb.com) or Hoover’s (www.hoovers.com). You can also pick up the phone and give the company a call; you can tell a lot from a simple conversation.

Another strategy is to go direct to the manufacturer for information (and, sometimes, products). ThomasNet (www.thomasnet.com), the only home of the venerable Thomas Register, is the definitive directory for finding products and companies in the U.S.

Read on to learn about the many different sources of resalable merchandise.

Wholesale Distributors

The way traditional retailers do business is to purchase merchandise from a wholesale distributor. The distributor purchases merchandise direct from the manufacturer, who in many cases doesn’t deal directly with retailers. The distributor, then, is a middleman who provides a variety of services to the retailer, not the least of which is warehousing the large quantities received from the manufacturer.

If you want to be an “official” reseller of many types of products, you’ll have to deal with the products’ authorized distributors. There are thousands of wholesalers out there, most specializing in specific types of merchandise. Most wholesalers are set up to sell in quantity to legitimate retailers, but many also handle smaller orders and smaller buyers, making them ideal for eBay sellers. Many of these distributors operate over the Internet, which makes the process even easier for you.

How do you locate a wholesaler? One way is to attend an industry trade show or conference. Most distributors attend or exhibit at these shows; you can also find out about new products and (sometimes) get special tradeshow pricing. You can also contact the manufacturer directly; most will be glad to direct you to the distributor in your region.

If you live in a major metropolitan area, it may have a trade or merchandising mart where multiple wholesalers may be found. For example, Atlanta’s AmericasMart is home to hundreds of specialized distributors, as is Chicago’s Merchandise Mart. Check with your local chamber of commerce to see what’s available in your area.

Note

You can search for trade shows of interest at the Tradeshow Week magazine website (www.tradeshowweek.com).

In addition, you shouldn’t be afraid to ask other retailers (online or local) for the names of wholesalers they buy from. Most merchants are quite helpful, as long as they don’t perceive you as a direct competitor.

And here’s one advantage of dealing with an official wholesaler: If you do enough business (and your credit rating is strong enough), you may be able to establish credit terms for your purchases. Instead of paying cash on the barrelhead, you may not have to pay until 15, 30, or even 60 days after you receive your merchandise. Check with your wholesaler to see what terms are offered.

Note

Learn more about buying and selling merchandise direct from the manufacturer in Chapter 11, “The Retailer.”

You’ll have to conduct your own search for a wholesaler that specializes in the particular type of merchandise you’re interested in selling. I’ll list a few sites that function as directories or search services of wholesale distributors, but it’s hard to beat a targeted Google search. Just make sure you put the words “wholesale” or “distributor” in your query.

Wholesale411

Wholesale411 (www.wholesale411.com) is one of the best search directories for wholesale and closeout merchandise, period. Wholesalers and liquidators list their merchandise and services on the Wholesale411 site, which then organizes the available merchandise into a variety of product categories, as shown in Figure 14.1. You can also search the site for suppliers of specific types of merchandise.

Figure 14.1. Browse through the categories or search for specific types of wholesalers at Wholesale411.

[View full size image]

goWholesale

The goWholesale site (www.gowholesale.com) helps you find wholesale suppliers of all manner of merchandise, from custom T-shirts to computer parts. You can browse or search for suppliers, and the site contains a lot of links to suppliers who specialize in selling to eBay businesses. (Interestingly, goWholesale provides the search engine behind the Wholesale411 site.)

Buylink

Another place to find vendors of different products is the Buylink site (www.buylink.com). You have to register as a retailer to search the Buylink marketplace (registration is free), but then you can search for specific products or vendors.

Top Wholesale Suppliers.com

When you’re looking for wholesalers, you should also check out Top Wholesaler Suppliers.com (www.topwholesalesuppliers.com). This is a free online wholesalers directory, organized by product category.

Wholesale Central

Wholesale Central (www.wholesalecentral.com) is another leading directory of merchandise wholesalers. You can browse for vendors by category or search for vendors of specific products.

Caution

With so many legitimate wholesaler directories on the web, you want to avoid those scam artists that offer to sell you a “guaranteed” directory (in a book or on CD) of wholesalers or dropshippers. More often than not, you’ll pay your money and receive a several-years-old listing of sitesnot all of them reputable, and many of whom have since gone out of business. You shouldn’t have to pay for information that’s available for free on the Web in a much more current form.

WholesaleQuest

Yet another wholesale marketplaces for eBay resellers is WholesaleQuest (www.wholesalequest.com). You can browse through suppliers by product category or search for suppliers of specific types of merchandise.

Merchandise Liquidators

Liquidators are companies that purchase surplus items from other businesses, in bulk. These items might be closeouts, factory seconds, customer returns, or overstocked itemsproducts the manufacturer made too many of and needs to get rid of. Liquidators help manufacturers and retailers dispose of this unwanted merchandise to the secondary market.

Note

Learn more about buying and selling closeout merchandise in Chapter 10, “The Bulk Reseller.”

Just as liquidators purchase their inventory in bulk, you also buy from them in bulk. That means buying 10 or 20 or 100 units of a particular item. You get a good price for buying in quantity, of course, which is part of the appeal. You also have to manage that large inventoryand inventory storage can be both a lot of work and somewhat costly, especially if you don’t have a large (and currently empty) garage or basement.

When you buy surplus merchandise, check the warranty terms. Unlike the new merchandise you purchase from traditional wholesalers, most liquidators sell their goods “as is.” That means if it’s bad, you have to eat itunless you also sell your goods with no warranty to your eBay customers.

Know, however, that just because you can buy bulk merchandise cheap doesn’t make it a good deal. Remember, there’s probably a reason why an item is being liquidated. It may be last year’s model, it may be factory seconds, it may be used or returned, or it may just be something that no one wanted to buy. If it didn’t sell well originally, there’s no guarantee that it will sell well (at a lower price, of course) in an eBay auction.

That said, here’s a short list of liquidators that can supply you with merchandise for your eBay auctions.

Liquidation.com

Liquidation.com (www.liquidation.com) is one of the largest and most reputable online liquidation services. The Liquidation.com website, shown in Figure 14.2, offers a steady stream of surplus, closeout, and returned merchandise in a variety of categories, from clothing and consumer electronics to construction supplies and vehicles.

Figure 14.2. Buy surplus items in bulk at Liquidation.com.

[View full size image]

What kind of merchandise are we talking about? How about a lot of 11,000 socks, or 45 radar detectors, or 100 20GB hard drives, or 2,000 belly ringsjust for a start. Pricing is pretty good, if you can take the quantities. For example, those hard drives went for just $14.25 apiece at a total lot price of $1,425. Assuming you can resell them on eBay for $30 or more, that’s a pretty good deal. The key is to pick an item that you know you can move in bulk over a period of weeks or months.

Note that Liquidation.com actually serves as a middleman between sellers (the original manufacturer or retailer) and buyers (you). Goods are sold in an online auction format, so you’ll find yourself bidding on items just as you would in an eBay auction. All auctions start at $100, with no reserve. You can even pay for your merchandise with PayPal.

#1 Accessory.com

The #1 Accesory.com site (www.1accessory.com) specializes in wholesale jewelry and fashion accessories. You can find both individual items and larger lots.

Note

Unlike eBay auctions, Liquidation. com doesn’t allow sniping. If there’s a last-minute bid, the auction is extended by three minutes to enable all interested bidders to respond.

America’s Best Closeouts

What you find at America’s Best Closeouts (www.abcloseouts.com) is bulk quantities of used, second-hand, and recycled clothing. They’re an especially good source of jeans in large lots.

American Merchandise Liquidators

American Merchandise Liquidators (www.amlinc.com) handles closeouts, overstocks, customer returns, and salvaged merchandise in a variety of categories, including clothing, furniture, toys, tools, and other general merchandise.

AmeriSurplus

AmeriSurplus (www.amerisurplus.com) sells salvage merchandise by the pallet from a warehouse in South Carolina. Products offered include automotive supplies, groceries, small appliances and electronics, sporting goods, and toys.

Apparel Overstock.com

Apparel Overstock.com (www.appareloverstock.com) specializes in wholesale brand name and designer clothing for men, women, and children. You can find quantities of similar merchandise from the same manufacturer, or mixed lots containing a variety of sizes, colors, and styles.

Bid4Assets

Bid4Assets (www.bid4assets.com) is an online auction site offering merchandise obtained from bankruptcies, private companies, and the government. This site offers primarily high-ticket items, including artwork, computer equipment, jewelry, vehicles, and even real estate. The items offered are typically single quantity, not bulk.

Bookliquidator.com

Bookliquidator.com (www.bookliquidator.com) is an excellent source for used and vintage books. The site also offers dropshipping services for its customers.

eBay Merchandise.com

eBay Merchandise (www.ebaymerchandise.com), while not affiliated in any way with the eBay site, offers closeouts, overstocks, returned merchandise, and similar items for sale to eBay sellers. Items can be purchased by the piece, the pallet, the lot, or the truckload; products in a variety of categories are available, from automotive goods to toys.

Luxury Brands

Luxury Brands (www.luxurybrandsllc.com) offers higher-end surplus merchandise than you find at other sites. Items include luxury branded European clothing, accessories, and gift items. Even though this is surplus merchandise, you might recognize some of the brandsincluding Giorgio Armani, Ralph Lauren Polo, Givenchy, Gucci, and Burberry. The company purchases large mixed parcels of European merchandise, typically end-of-season merchandise, and then imports it for sale in the U.S. You can purchase products in lots of 10, 25, 50, 100, and so on.

Overstock.com

Overstock.com (www.overstock.com) offers surplus merchandise from a variety of manufacturers. The company sells single quantities of closeout merchandise through its normal website but offers larger discounts (and discounted shipping costs) when you buy multiple quantities through the Club O section of its site.

Salvage Closeouts

Salvage Closeouts (www.salvagecloseouts.com) offers liquidated merchandise and department store closeouts in a wide variety of categories, from Apparel and Appliances to Tools and Toys. It also offers a variety of pallet and truck-load specials, and has a special eBay Specials category.

Surplus.net

Surplus.net (www.surplus.net) aggregates merchandise from hundreds of different liquidators. It’s also one of the portal sites for the Internet Marketing Association of Surplus Dealers (IMASD), an organization of closeout suppliers.

TDW Closeouts

TDW Closeouts (www.tdwcloseouts.com) is another distributor of department store returns and closeout merchandise. It offers liquidated, salvage, overstock, and surplus items in a variety of categories, from Apparel to Toys.

Other Sources of Merchandise

If you’re less interested in bulk and more interested in variety, there are a few other sources that can supply you with merchandise for your eBay auctions. I’ll list some of the more popular ones next.

Note

Learn more about buying and selling used merchandise from garage sales and flea markets in Chapter 8, “The Second-Hand Reseller.”

Garage Sales

Many eBay sellers got their start by reselling merchandise they picked up at local garage/yard/tag/rummage sales. While this can certainly be a source of merchandise, it may not be a consistently reliable source for all high-volume sellers, for a number of reasons. First, the merchandise you buy isn’t limited to a specific category, and it’s tough to deal with such a large variety of items. Second, it’s not a guaranteed supply; you might stumble across a great deal one week but then go dry the next. Finally, this source looks to be getting tapped in some areas, as more people choose to sell their old stuff on eBay rather than putting it out in their front yards. Take a gander, but don’t be disappointed if this source doesn’t pan out.

Flea Markets

Flea markets offer similar merchandise to what you find in garage sales, although you can sometimes find surplus items in bulk. If you keep your eyes peeled, you might find the occasional bargain that can supply your eBay auctions for an extended period of time.

Estate Sales/Auctions

Not to be insensitive, but dead people provide some of the best deals you can find. Estate sales and auctions are the equivalent of raiding somebody else’s garage or attic for old stuff to sell. Check out the weekly estate sales and auctions in your area, be prepared to buy in quantity, and see what turns up.

Traditional Auctions

Real-world auctions (not the eBay kind) remain a good source of inventory for many eBay sellers. Many auctions feature large lots or bulk quantities, which are perfect for ongoing eBay sales. Make sure you inspect the merchandise before the auction, and don’t get caught in a bidding frenzy. Set your maximum price beforehand, and don’t exceed it. The Internet Auction List Auction

Calendar keeps a list of ongoing auction events by date and location. Check out the website at www.internetauctionlist.com.

Vintage and Used Retailers

You can often pick up some decent collectible merchandise at your local “vintage” or used merchandise retaileralthough you may have to haggle a little to get down to a decent price. The big drawback is that you’re typically buying onesies and twosies; this isn’t a good source for large lots.

Thrift Stores

Think Goodwill, Salvation Army, and similar stores here. You can sometimes find decent merchandise at low costand help out a nonprofit organization, to boot. This approach has the same drawback as buying from a vintage retailer, however; large lots are rare. And many eBay sellers report that the major thrift stores have raised their pries to more closely match the going rate on eBay, so finding a good deal could become more difficult over time.

Pawn Shops

You can’t overlook the traditional pawn shop. There are always interesting items to be found, often at a bargain price. Ask about merchandise that’s been sitting on their shelves for awhile, and then offer a bulk buyout or perhaps even a consignment deal.

Dollar Stores

Dollar stores or “big lot” retailers are surprisingly good sources of eBay-ready merchandise. Most of these retailers carry overruns and closeouts at attractive prices. You can often pick up items here quite cheapand enough of them to feed your auction activity for a while. Some of the larger dollar-store chains include 99¢ Only (www.99only.com) and Family Dollar Stores (www.familydollar.com). The Big Lots chain even has a special website for wholesale buyers, located at www.biglotswholesale.com; it’s worth checking out.

Warehouse Clubs

You’d be surprised what deals you can find at your local Sam’s Club (www.samsclub.com) or Costco (www.costco.com). Buy something cheap enough here, and it’s not too hard to resell that item at a decent markup on eBay. (Plus, Sam’s Club holds its own online auctions that sometimes offer good bargains for the savvy eBay seller.) Just remember that the clubs’ product mix is continually changing, so you’ll need to visit often to find the latest deals.

Closeout Sales

You don’t have to shop at a cheap retailer to find a good deal. Many mainline merchants offer terrific deals at the end of a season or when it’s time to get in next year’s merchandise. If you can get enough good stuff at a closeout price, you have a good starting inventory for your eBay sales.

Going-Out-of-Business Sales

Even better, look for a merchant flying the white flag of surrender. When a retailer is going out of business and says “everything must go,” that means bargains are yours to be hadand don’t be afraid to make a lower-priced deal, if you can.

Ándale Suppliers

If you’re not sure where to find specific types of merchandise, you’re in luck. Ándale Suppliers (www.andale.com) is a free service that helps you find suppliers of various types of merchandise for resale. It does a good job of matching resellers with suppliers, by keeping a big database of both.

When you sign up for Ándale Suppliers (it’s free, remember), you start by filling out a buyer profile. Select the categories of merchandise in which you’re interested, and Ándale Suppliers will automatically match you with suppliers who match your criteria. You can choose to receive your leads by email or on the Ándale site itself. Each lead listing includes the supplier’s location and eBay feedback rating, so you can judge its trustworthiness.

Note

You can find Ándale Suppliers on the Ándale site under the Research Tools tab.

eBay

This leads us to the final place to look for items to sell on eBayeBay itself! Yes, it’s possible to make money buying something on eBay and then turning around and selling it to someone else on eBay at a later date. The key is timing. Remember, you have to buy low and sell high, which means getting in at the start of a trend. Being successful at this approach is possiblealthough it takes a lot of hard work, and not a little skill.

One way to find goods for resale is to use eBay’s search feature. Make sure you include the words “case,” “closeout,” “lot,” or “surplus” in your query.

Another option is to go directly to eBay’s Wholesale Lots category (pages.ebay.com/catindex/catwholesale.html). As you can see in Figure 14.3, this page lists eBay auctions of surplus merchandise in almost all of eBay’s major categories. Just click through to bid on merchandise ideally suited for resale.

Figure 14.3. Sourcing surplus merchandise on eBay’s Wholesale Lots page.

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Managing Your Inventory Levels

Once you find a source for merchandise, you now have the challenge of managing your newfound inventory. That means determining how much to buy and when to reorder.

Ordering the Right Quantity

Establishing how much merchandise to order is tough, especially when you’re first starting out. The problem is amplified when a supplier requires you to order large quantities of an item, or if you need to order a large quantity to qualify for a larger discount. It’s tempting to shoot the moon to get the best possible price, but that’s sometimes a dangerous strategy. It’s also problematic if your storage space is at a premium; you certainly don’t want to order more stuff than you have room for!

The best strategy is to research similar auctions on eBay, as discussed in Chapter 2, “Researching Your Business Model,” and make an educated guess as to how many items you can sell in a typical week. Multiply that number by four and round off a little to come up with a conservative estimate of your first month’s sales. That’s because when you’re first starting out, keeping a month’s worth of inventory on hand is a safe way to go. If your guess is off by 50% either way, you’re still okay; you’ll either have two weeks’ or two months’ worth of inventory on hand, either of which you can comfortably handle. If, on the other hand, you order two months’ worth of inventory and you’re off by 50%, you’re either out of stock in a week or stuck with four months’ worth of stuffneither of which is terribly desirable.

Note

When you’re dealing with a commodity product for resale, it’s better to order too few than too many. If your business is an overnight success, you can always order more.

In addition, when you place an order for a large quantity of merchandise, you need to make sure that there is a sufficient long-term demand for that product. Fads and fashions change over time. Don’t order six months’ worth of inventory if the current fad looks to burn itself out in three. It may be more prudent to pay a higher per-item price for a lower quantity than risk not selling a substantial portion of a larger-quantity order. (And rememberyou have to store all those items somewhere.)

And it’s worth repeating that when it comes to ordering inventory, you shouldn’t bite off more than you can chew. Paying a higher price for a smaller quantity is better than getting stuck with a garage full of unsold merchandise!

Managing Your Reorders

Note

Don’t wait until your inventory drops to zero to reorderyou’ll be stuck with nothing to sell, and no income coming in. Better to reorder before you run out so that your auctions can continue uninterrupted.

Once you start selling, you need to keep track of how much inventory you have on hand. That’s where your inventory management system (see Chapter 6, “Setting Up a Recordkeeping System”) comes into play. You have to subtract every item you sell from the quantity you initially had on hand. When your inventory drops to a specified level, it’s time to reorder more. Of course, this situation poses two questions: At what level should you set your reorder point, and what quantity should you reorder?

To the first question, your reorder point should be based on how long it takes you to receive any order you place from your supplier. For example, if your supplier ships within a week of your order, you can safely set your reorder point at a week’s worth of inventory. Let’s say you’re selling 20 units per week, and your supplier reliably ships within a week of your order. Set your system to alert you when your inventory drops to 20 units. Place your reorder immediately, and you’ll have your new stock arrive just as the last of your old stock runs out.

Note

When you’re factoring the cost of your merchandise, don’t forget to include warehousing costs. This might be zero if everything fits in your garage (and you don’t mind parking outside) but could add up if you have to rent a storage bin or warehouse. You might think that large-quantity discount is worth-whileuntil you have to pay through the nose to store all those boxes somewhere.

Naturally, if your supplier ships more slowly, you should set your reorder point higher. Let’s say your supplier takes two weeks to fill an order. If you’re selling 20 units a week, you should set your reorder point at 40 unitstwo weeks’ worth of inventory.

As to how much you should reorder, the answer depends on how many units you’re selling per week, how long you expect sales to stay at this rate, how much inventory you feel comfortable with, and what discounts are available for larger orders. If you’re fairly confident that sales will continue at current levels for the next two months, and you get an extra discount for larger quantities, go ahead and order two months’ worth. (Assuming you have the space to store it, of course.) On the other hand, if you think sales will slow (because of changing fashions, or seasonal trends, or whatever), don’t go out on a limborder another few weeks’ or at most a month’s supply. Order the quantity you feel comfortable withyou’re the one who has to assume the risk.

Deciding to Drop Ship

This is as good a place as any to discuss the issue of drop shipping. This is the practice of selling an item that you don’t physically have in stock. You make the sale (via eBay) and then notify your supplier of the purchase. Your supplier then drop ships the merchandise directly to your customer, billing you in the process.

While not all distributors offer drop ship services, many do. Check with your wholesaler to see what services are available, or check out this short list of popular drop shippers and drop ship directories:

• 123DropShip.com (www.123dropship.com)
• Doba (www.doba.com)
• MegaGoods.com (www.megagoods.com)
• The Shipper (www.theshipper.com)
• Worldwide Brands, Inc. (www.worldwidebrands.com)

In addition, Wholesale411, eBay Merchandise, and the other wholesaler directories listed previously often note whether a particular wholesaler drop ships or not.

While drop shipping might sound attractive from an inventory management standpoint (you have none to manage), it might not always be the best deal for your customersespecially if your supplier isn’t always a speedy shipper. Remember, your customers hold you responsible for shipping the products they purchase, and if a drop shipment isn’t prompt, you are the one who’ll get the complaints (and the negative feedback). If, for whatever reason (like being temporarily out of stock), your supplier drops the ball and never ships the merchandise, you’re on the hook. If this happens too often, you could get the boot from eBay.

So when you’re researching drop shipping services, keep a few things in mind. Make sure you understand all the charges you’ll have to pay over and above the cost of the item. Some drop shippers charge a larger shipping fee to cover the actual costs of drop shipping, while others charge a separate handling fee for the same reason. Some charge a flat, often excessive amount for shipping, while others calculate shipping based on the delivery ZIP code. (While a variable shipping fee might sound best, you won’t know how much you’ll be charged for shipping until after the factwhich makes it difficult to pass on this charge to your buyers.)

Finally, make sure you have access to accurate inventory levels (necessary before you decide to post an eBay listing) and that you’re provided with tracking information for all items shipped. Given that you have no real control over the fulfillment of a drop-shipped sale, it’s important to at least have as much information as possible about the shipment.

Chapter 15. Automating Item Listing

Occasional eBay sellers get by using eBay’s standard Sell Your Item listing process, which you access by clicking the Sell link at the top of any eBay page. For the high-volume seller, however, this is an extremely time-consuming way to post your auction items. Going through that cumbersome procedure for a dozen or more items at a time isn’t very appealing; trust me.

A better solution for high-volume sellers is to use a bulk listing program or service. These tools let you create a large number of item listings in advance and even reuse saved listingsgreat if you run multiple auctions for similar items. You then schedule your auctions to launch at the time of your choosing, and you’re done with it.

A number of these bulk listing tools are available; I’ll discuss some of the most popular ones next. Which ones should you choose? That’s entirely up to you, of course; they all offer many of the same functions. One of the big differences is price; they range in cost from free (eBay Turbo Lister) to 25 cents or more per listingand some even charge a final value fee on top of that! Fortunately, most of these services provide free trials, so you can try them out before you commit. Pick the tool that works best for you, with a cost you can live with. Rememberall these individual fees can really take a cut out of your profits, so make sure you factor the costs into your overall financial plan.

Note

If you prefer to create your listings one at a time, eBay’s standard Sell Your Item pages will probably do the job, no additional tools necessary. I cover standard listing creation in my companion book, Absolute Beginner’s Guide to eBay, 4th Edition (Que, 2006). Turn there for step-by-step instructions for creating basic auction listings.

eBay Turbo Lister

eBay offers its own bulk listing software, called eBay Turbo Lister. To download the Turbo Lister software, go to pages.ebay.com/turbo_lister/. The program is free, and there are no monthly subscription feeswhich makes it the program of choice for cost-conscious sellers.

Turbo Lister lets you create your item listings offline, at your leisure. (It also offers HTML-based templates you can use to spruce up your item listingsalthough they are pretty much the same templates found in the Listing Designer section of the Sell Your Item page.) Then, when you’re ready, it uploads all your listings at once, with the click of a button. Creating multiple auctions couldn’t be easier.

Creating a Listing

The Turbo Lister software is quite easy to use. It uses a series of forms to request information about your listings, as well as a WYSIWYG editor for creating great-looking listings.

You start out not by creating a listing, but rather by creating a new inventory item, complete with item listing, as shown in Figure 15.1. Turbo Lister lets you utilize the templates in eBay’s Listing Designerfor a 10-cent fee, of course.

Figure 15.1. Designing a new item listing with Turbo Lister.

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Once you’ve completed this process, the item is added to your item inventory. To view the items you’ve added to your inventory, click the Item Inventory tab. This screen lists all the items you’ve created; from here you can edit, delete, and create duplicate itemsas well as choose which individual listings you want to upload to the eBay site.

Uploading Your Listings

When you have an item that you want to list on eBay, select the item on the Item Inventory tab and click the Add to Upload button. You can see all the items in your upload queue by clicking the Listings Waiting to Upload tab. As you can see in Figure 15.2, this page shows all items waiting to be uploaded. While they’re waiting, you can calculate listing fees and change the start time for any specific auction.

Figure 15.2. Items waiting to be uploaded with Turbo Lister.

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Uploading your pending auctions is as easy as clicking the Upload All to eBay button. Listings set to start immediately do so, and items with a future start time are sent to eBay’s Pending Listings section. These auctions will go live at the time(s) you previously scheduled.

Note

The Blackthorne Basic and Pro programs used to be called eBay Seller’s Assistant Basic and Pro. Although, before that, they were originally known as Blackthorne (after the name of the company that created the programs, which eBay subsequently acquired)so the return to the Blackthorne name is a familiar one to long-time users.

eBay’s Other Listing ProgramsBlackthorne Basic and Blackthorne Pro

Turbo Lister isn’t the only listing software that eBay offers. Many experienced sellers swear by eBay’s Blackthorne Basic (pages.ebay.com/blackthorne/basic.html) and Blackthorne Pro (pages.ebay.com/blackthorne/pro.html) programs. Both programs let you create listings offline and then upload them in bulk to the eBay site. You also get fancy listing templates and a variety of post-auction management toolsincluding customer email templates. (Figure 15.3 shows the main Blackthorne Basic screen.)

Figure 15.3. Another official bulk listing solutioneBay’s Blackthorne Basic program.

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You pay for both programs on a monthly subscription basis. Blackthorne Basic costs $9.99/month, and the more fully featured Blackthorne Pro runs $24.99/month. For that higher price, Blackthorne Pro provides a variety of business reports, automated email and feedback, the ability to print invoices and labels, and all manner of inventory management features.

Tip

When you’re choosing among Turbo Lister and Blackthorne Basic or Pro, remember that Turbo Lister is freebut the Blackthorne programs offer inventory management features that Turbo ListeÁndale Lister

If you’ve read this far in this book, you already know that I’m a fan of Ándale’s various auction tools. Ándale Lister is the company’s primary bulk listing tool, and I like it too.

Ándale Lister, shown in Figure 15.4, lets you create good-looking listings, using a variety of professionally created ad templates. You create your ads in bulk and then upload them according to your designated timetable. (You can even program a series of listings to launch on a regularly occurring scheduleor until your inventory runs out.)

Figure 15.4. The Ándale Lister bulk listing service.

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Like most of the other third-party bulk listing tools (but unlike eBay Turbo Lister), Ándale Lister isn’t free. Table 15.1 details Ándale’s rather complex fee schedule for this service.

Table 15.1. Ándale Lister Fees
Monthly Fee	Listings Included	Each Additional Listing
$7.50	40	$0.30
$16.95	110	$0.20
$33.95	275	$0.18
$56.95	550	$0.15
$89.95	1,100	$0.12
$149.95	2,750	$0.10
$224.95	5,600	$0.08

Ándale also offers its Ádale Lister Pro program for sellers that do larger volumes. This service provides complete business management, so you can track your sales, manage your inventory, print invoices, synchronize your data with QuickBooks, and even arrange shipping direct from your PC.

Auction Hawk Auction Hawk (www.auctionhawk.com) is a web-based auction listing/management service with quite affordable pricing. The site offers various tools in its main service, including built-in listing creation, image hosting, end-of-auction checkout with automated winning-bidder email, bulk feedback posting, and profit-and-loss reporting. The site’s primary listing-creation tool is the 1-Page Lister, shown in Figure 15.5. As the name implies, it uses a single form-based page to create your eBay auction listings. More important, 1-Page Lister lets you use choose from over 2,000 pro-series templates, or use your own image backgrounds for your listings. You can also include up to 50 of your other listings in a scrolling cross-promotion gallery. Figure 15.5. Bulk listing with Auction Hawk’s 1-Page Lister. [View full size image] Auction Hawk offers a five-level flat pricing scheme, as detailed in Table 15.2. Table 15.2. Auction Hawk Fees Level Monthly Fee Number of Listings Included Basic $12.99 110 Power $21.99 250 Preferred $29.99 550 Professional $44.99 1,100 Unlimited $89.99 Unlimited

Auctiva

Auctiva (www.auctiva.com) offers a variety of different auction listing/management services, all of which are completely free of charge. Free is good, which explains Auctiva’s newfound popularity among eBay sellers.

Auctiva’s One-Page Listing Tool, shown in Figure 15.6, lets you choose from hundreds of pre-designed templates. The templates are pretty basic, similar to what you get with eBay’s Listing Designer, but they’re free.

Figure 15.6. Auctiva’s free One-Page Listing Tool.

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ChannelAdvisor

ChannelAdvisor (www.channeladvisor.com) offers a variety of auction and retail management toolsmost of which are targeted at larger online merchants. The service you want to look at is ChannelAdvisor Pro, which is a surprisingly easy-to-use collection of auction management tools. The package is quite reasonably priced at a flat fee of just $29.95 per month.

With ChannelAdvisor Pro you can choose from a variety of pre-designed templates or write your own HTML. You also get delayed scheduling, image hosting, and the other expected listing-creation features.

inkFrog

inkFrog (www.inkfrog.com) is a cute name for some heavy-duty web-based auction management services. The one we’re interested in is the Lister and Scheduler, shown in Figure 15.7, which lets you create your own custom-built auction listings, based on a variety of pre-designed templates. You also get bulk listing, delayed auction launching, free image hosting, and a cross-promotion tool. Pricing for everything is just $9.95 per month, no matter how many listings you create.

Figure 15.7. The iLister listing tool from inkFrog.

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Note

inkFrog recently merged with the former SpareDollar site. All of SpareDollar’s services are now part of the inkFrog service.

Vendio Sales Manager Vendio Sales Manager (www.vendio.com) is one of the top two third-party auction creation services, with more than 125,000 current users. Vendio offers a variety of auction management tools on its site; Sales Manager lets you create sophisticated eBay listings in advance and then upload them in bulk. You can actually choose from two versions of Sales Manager. Sales Manager Merchandising Edition is designed for sellers who sell a lot of unique items; Sales Manager Inventory Edition is designed for sellers who sell multiple quantities of similar items. Both versions let you create listings based on pre-designed templates (and customized with your own HTML). Whichever version you choose, the pricing is the same, using a combination of monthly fee, per-item listing fee, and per-item final value fee. It’s all a little complicated, especially when you consider that Vendio offers both variable rate and flat rate plans. Table 15.3 details Vendio’s pricing. Table 15.3. Vendio Sales Manager Fees Plan Monthly Fee Listing Fee Final Value Fee Pay as You Go Plan None ($2.95 monthly minimum) $0.12 1.25% Variable Rate Premium Plan $14.95 $0.06 1% Variable Rate Power Plan $34.95 none 1.25% Flat Rate Premium Plan $14.95 $0.22 None Flat Rate Power Plan $39.95 $0.12 None Annual Listing Plan $250 (yearly) $0.06 None Don’t ask me which of these plans is the best deal. It all depends on how many listings you intend to make each month and how you like to be charged. My advice is to start with the Standard Plan to see if you like the service and then upgrade to one of the other plans as appropriate.

Other Bulk Listing Options I’ve covered the major bulk listing programs and servicesbut they’re just the tip of the iceberg. Lots of other companies offer bulk listing tools; you can see a larger list on the Listing Management page of eBay’s Solutions Directory (solutions.ebay.com). As you can see, you have lots of choices when it comes to choosing a bulk listing tool. Don’t assume that the most expensive tools are the bestor that the most affordable ones lack features. Most of these tools are offered with some sort of preview plan, so take advantage of the offer and give ‘em a trial run!

Chapter 16. Managing Customer Payments

How do you like to get paid? That’s an important question when it comes to your eBay business, and you have a variety of options.

When you’re selling on eBay, you can choose to accept any of a number of different types of payment from your customers. This may seem like an easy decision, but each type of payment needs to be handled differently on your end. You need to choose those payment options that work best for your eBay business.

Evaluating Different Payment Options As any businessperson will tell you, not all dollars are the same. A dollar paid by one method might actually cost you more (or be more risky) than a dollar by another method. And you definitely want to minimize your costs, especially when they’re taken directly from what you’re paid. Fortunately, eBay doesn’t force you to use any one payment method. For example, you can limit your payments to credit cards only; there’s no law that says you have to accept cash or checks. So you can pick and choose which payment methods you’ll acceptjust as long as you specify this up front in your item listings. Of course, the more payment options you offer, the more potential buyers you’ll attract. Still, some methods are better than others for different types of sellers. What are the pros and cons of the various types of payment? Take a look at Table 16.1. Table 16.1. Pros and Cons of Common Methods of Payment Payment Method Pros Cons Cash Fast payment, no hassles Unattractive to buyers; hard to track C.O.D. Cash payment High noncompletion rate; lots of paperwork; not sanctioned by eBay Personal check Convenient for buyers Slow; have to wait to clear Money order/cashier’s check Faster than personal checks, almost like cash Hassle for buyers Credit cards/PayPal Fast payment, buyers like it Fees involved For what it’s worth, most buyers today accept money orders, cashier’s checks, and credit cards (via PayPal). Some buyers also accept personal checks, just as some buyers don’t accept credit cards (they don’t like the fees). I find that 80% or more of all my sales are paid for via credit card (using PayPal), making this method far and away the most popular among buyers. If you don’t accept credit cards, you run the risk of significantly limiting your business. Note What do you do when a nearby buyer wants to come by and pick up the item personally, rather than shipping via normal means? There’s nothing wrong with this, as long as you get a verifiable payment. That means asking the buyer to bring cash, money order, or cashier’s checkor to pay via PayPal before he or she arrives. Definitely do not let someone pick up an item and pay via personal check! Let’s look at each of these payment methods separately. Cash As a seller, you certainly won’t object to opening up an envelope and finding a few crisp new bills inside. Unfortunately, sending cash through the mail is not one of the smartest things a buyer can do; cash is too easily ripped off and virtually untraceable. You can ask for cash payment (not that you should, of course), but unless the selling price is extremely low (under $5), don’t expect buyers to comply. One other thing: Cash is hard to keep track ofeven for extremely organized sellers. There’s no paper trail, and it’s tempting to take any cash you receive and just stuff it in your wallet. If you do receive a cash payment, try your best to treat it like a money order or cashier’s check, at least in terms of how you track it. The bottom line: If it’s bad for your customers, it’s bad for you too. You should probably discourage payment by cash. C.O.D. Cash on delivery (C.O.D.) sounds good on paper. You ship the item, with the stipulation that the deliveryman (or woman) collect payment when the item is delivered. There are problems with this method, however. What happens if the buyer isn’t home when the delivery is made? What if the buyer is at home but doesn’t have the cash? What if the buyer refuses to payand rejects the shipment? I’ve heard stories of up to 25% of all C.O.D. orders being refused, for one reason or another. Even worse, C.O.D. service often comes with a high fee from the carrierand it’s a fee that you, the seller, have to pay. The additional fee alone rules out C.O.D. for many sellers. Then there’s the fact that you don’t get your money until after the item is delivered. The delay in your getting your cash reduces the appeal considerably. All things considered, it’s easy to see why few eBay sellers offer C.O.D. paymentand why eBay has quit offering it as a default payment option. The problems with this payment method tend to outweigh the benefits, and I can’t recommend it. Personal Checks One of the most common forms of payment is the personal check. Many buyers like paying by check because it’s convenient, and because checks can be tracked (or even cancelled) if problems arise with the seller. As a seller, you should like personal checks a little less because they’re not instant money. When you deposit a check in your bank, you’re not depositing cash. That $100 check doesn’t turn into $100 cash until it tracks back through the financial system, from your bank back to the buyer’s bank, and the funds are both verified and transferred. That can take some time, typically 10 business days or so. Note If you accept personal checks, it’s a good business practice to state in your eBay listing how long you’ll wait before shipping an item paid for by personal check. Better to warn the buyer up front than receive a complaining email afterward. Because some buyers prefer paying by check, you should probably be prepared to handle this payment method. When you receive a check, deposit it as soon as possiblebut do not ship the merchandise. Wait until the check clears the bank (two weeks if you want to be safelonger for checks on non-U.S. banks) before you ship the item. If, after that period of time, the check hasn’t bounced, it’s okay to proceed with shipment. If you are on the bad end of a bounced check, all hope is not lost. The first thing to do is get in touch with your bank and ask it to resubmit the check in question. Maybe the buyer was just temporarily out of funds. Maybe the bank made a mistake. Whatever. In at least half the cases, bounced checks unbounce when they’re resubmitted. Whether you resubmit the check or not, you should definitely email the buyer and let him or her know what happened. At the very least, you’ll want the buyer to reimburse you for any bad check fees your bank charged you. The buyer might also be able to provide another form of payment to get things moving again. (Credit cards are niceas are money orders.) Money Orders and Cashier’s Checks Money orders and cashier’s checks are, to sellers, almost as good as cash. You can cash a money order immediately, without waiting for funds to clear, and have cash in your hand. When you receive a money order or cashier’s check, deposit it and then ship the auction item. There’s no need to hold the item. Note If a check bounces, the depositor (you) will likely be assessed a fee from your bank. (Of course, the writer of the bad check will also have a fee to paybut that’s not your problem.) If the buyer who wrote the check offers to make good on the payment, make sure he or she reimburses you for your bad check fee, over and above the final auction pricepreferably via a different form of payment. The only bad thing about money orders and cashier’s checks is that you have to wait for them to arrive. Even if the buyer puts payment in the mail the very next day, you’ll still wait anywhere from three to five days after the auction to receive payment. Still, there’s not a lot to dislike about this method of paymentit’s hard to get burned with either a money order or cashier’s check. Note Beware a common scam where a buyer sends you a money order or cashier’s check for an amount larger than the purchase price and then asks you to send funds for the difference. Don’t fall for this. Accept payment for the amount of the purchase only! There’s also the (extremely slight) possibility that you can receive a bad cashier’s check. To be precise, a cashier’s check or money order isn’t exactly the same as cash; your bank still needs to be reimbursed by the issuing institution, and if this doesn’t happen, the cashier’s check/money order will bouncealthough this is highly unlikely. Be particularly careful of money orders or cashier’s checks drawn on foreign banks or issued by unfamiliar institutions. When in doubt, hold the merchandise and ask your bank to verify that the payment is good. Credit Cards Until just a few years ago, if you wanted to accept credit card payment for your auction items, you had to be a big-time retailer, complete with merchant account and bank-supplied charge card terminal. This limited the number of sellers who could accept credit card payment, which probably cut down on potential bidders because many buyers like the convenience and relative safety of paying by credit card. Today, however, there are options available that enable you to accept credit card payments for your auction items. First, several financial institutions provide merchant credit card accounts for smaller retailers, as we’ll discuss later in this chapter. Second, you have PayPalan online payment service that lets any auction seller easily accept credit card payments, with little or no setup hassle. PayPal works by accepting credit card payments from your customers and then sending you a check or depositing funds directly in your bank account for that amountminus PayPal’s fee, of course. Any time you accept a credit card, with either a merchant account or PayPal, you are charged a feetypically several percentage points of however much the buyer pays. When you consider that you have to pay eBay’s listing fee and final value fee, paying another few points for the convenience of accepting credit cards can really sock it to a small selleror anyone selling a low-priced item. You should definitely research the payment service’s fees before you sign up. We’ll look at credit cards in more detail in the “Accepting Credit Card Payments via PayPal” section, later in this chapter. Escrow Services A final payment option, used primarily in higher-priced auctions, is the use of an escrow service. An escrow service is a company that acts as a neutral third party between you and the buyer, holding the buyer’s money until the buyer receives the purchased merchandise. You get paid only when the buyer is satisfied, which is good protection for the buyerbut delays you receiving your money. Here’s how a typical escrow transaction works. Either during or just after the end of an auction, you and the buyer contact each other and agree to use an escrow service. The buyer sends payment (by check, money order, cashier’s check, or credit card) to the escrow service; thenafter the payment is approvedthe escrow service notifies you and instructs you to ship the item. After the buyer receives the item, verifies its acceptability, and notifies the escrow service that all is hunky-dory, the escrow service pays you. The escrow service’s fees can be split between the two parties, but are more typically paid by the buyer. Fees differ widely from service to service. For what it’s worth, eBay recommends that customers use an escrow service when the transaction is over $500 and the seller doesn’t accept credit card or PayPal payments. So, if you accept credit card payments (via PayPal or otherwise), you shouldn’t have to bother with escrow. If you do find yourself in a situation that calls for an escrow service, eBay recommends Escrow.com (www.escrow.com). If you choose to use another escrow company, make sure that it’s bonded and legitimate; there are some phony escrow companies operating on the Internet that you need to watch out for.

Accepting Credit Card Payments via PayPal

As you might expect, there’s no big preparation necessary to accept payment by cash, check, or money order. Accepting credit cards is another issue. Fortunately, you have a couple of options available to youthe most popular being the PayPal service, which can handle all your credit card transactions.

Note

PayPal also lets buyers pay via electronic check and funds withdrawn from their checking or savings accountsalthough most buyers use it to pay via credit card.

Setting Up a PayPal Account

PayPal (www.paypal.com), shown in Figure 16.1, serves as the middleman for your credit card transactions. The buyer pays PayPal via credit card, PayPal handles all the credit card paperwork, and then PayPal sends a check to you (or deposits funds in your checking account). PayPal service accepts payments by American Express, Discover, MasterCard, and Visaand, although it’s primarily a U.S.-based service, it also accepts payments to or from more than 55 countries.

Figure 16.1. Use PayPal to accept credit card payments from your customers.

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Before you can use PayPal as a seller, you must sign up for PayPal membership. You do this by going to the PayPal website, clicking the Sign Up link, and then following the onscreen instructions to complete your registration.

You can choose from three different types of PayPal accounts:

• A Personal account is for eBay buyers only, not for sellers. You can send payments via credit card and electronic withdrawal and receive payments via “electronic cash,” but you can’t receive payments made via credit card.
• A Premier account is a type of personal account that works better for small business owners and individual sellers. With a Premier account, you can accept both credit card and noncredit card payments (for a fee). You sign up for Premier status by checking the appropriate option on the Personal Account Sign Up page.
• A Business account is necessary if you’re receiving a high volume of payments. With this type of account, you can do business under a corporate or group name and use multiple logins.

Most eBay sellers sign up for a Premier account. If your sales volume rises high enough, PayPal will automatically switch you to a Business membership.

Paying for PayPal

There is no charge for becoming a PayPal memberalthough there are fees for actually using the service. Even though PayPal is owned by eBay, the fees you pay to PayPal are separate from the fees you pay to eBay. Note that PayPal doesn’t charge the buyer any fees; instead, it charges you, the seller, a fee based on the amount of money transferred.

This last point is important. PayPal charges fees based on the total amount of money paid, not on the selling price of the item. That means if a $10 item has a $5 shipping/handling cost, the buyer pays PayPal a total of $15and PayPal bases its fee on that $15 payment. So you need to factor your PayPal fees on the total of item price plus shipping costs.

PayPal’s fees range from 1.9% to 2.9%, depending on your monthly sales volume. Table 16.1 presents PayPal’s fee schedule as of August 2006.

Table 16.1. PayPal Transaction Fees (U.S.)
Monthly Sales	Transaction Fee
$0-$3,000.00	2.9%
$3,000.01-$10,000.00	2.5%
$10,000.01-$100,000.00	2.2%
>$100,000.00	1.9%

You’re also charged a flat $0.30 per transaction, regardless of your sales volume. All fees are deducted from your account with every transaction.

Activating PayPal in Your Auction Listings

The easiest way to accept PayPal payments in your eBay auctions is to choose the PayPal option when you’re creating an item listing. This is as simple as checking the PayPal box and entering your PayPal ID on the Sell Your Item page.

When you choose this option, a PayPal payments section is added to your item listing, as shown in Figure 16.2. PayPal will also appear as a payment option on your post-auction item listing page and in eBay’s end-of-auction email to the winning bidder. Most third-party checkout tools will also recognize and accept PayPal payments.

Figure 16.2. This seller accepts PayPal payments.

Collecting PayPal Payments

A buyer can make a PayPal payment in a number of ways. He or she can respond to the PayPal link embedded in the end-of-auction email received from eBay, click the PayPal button in the closed item listing, select the PayPal option when accessing the eBay checkout page, or pay directly from the PayPal website.

When a buyer makes a PayPal payment, those funds are immediately transferred to your PayPal account, and you receive an email notification of the payment. This email will include all the information you need to link it to a specific auction and ship the item to the buyer.

In most cases, the buyer’s payments come into your account free and clear, ready to be withdrawn from your checking account. The primary exception to this are payments made via eCheck, where a buyer pays PayPal from his or her personal checking account. Because PayPal has to wait until the “electronic check” clears to receive its funds, you can’t be paid until then, either. PayPal will send you an email when an electronic payment clears.

Withdrawing PayPal Funds

You have to manually withdraw the funds due to you from PayPal; no automatic payment option is available. You can let your funds build up in your PayPal account, or you can choose (at any time) to withdraw all or part of your funds.

You have the option of okaying an electronic withdrawal directly to your checking account (no charge; takes three to four business days) or requesting a check for the requested amount ($1.50 charge; takes one to two weeks). Just click the Withdraw tab (from the Overview tab) and click the appropriate text link.

Note

PayPal also offers a variety of auction management tools, including the ability to generate invoices and print mailing labels with prepaid postage. See the PayPal site for more information.

Alternatives to PayPal

Not all sellers like PayPal. Some dislike the (perceived) high transaction fees; some dislike the way PayPal operates; some simply don’t like being locked into yet another service owned by eBay. Fortunately, there are alternatives.

BidPay

Many sellers now accept payments by BidPay (www.bidpay.com). BidPay shown in Figure 16.3, is an alternative to PayPal that also lets buyers pay via credit card. In fact, BidPay operates a lot like PayPal, with a slightly lower 2.5% transaction rateplus a slightly higher 50-cent per-transaction fee.

Figure 16.3. An alternative to PayPalBidPay, by Western Union.

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Google Checkout

Here’s a PayPal alternative that isn’t really an alternative. Google Checkout is an online payment service that lets retailers accept credit card payment for their sales, just like PayPal does. It’s even lower priced than PayPal, with a transaction fee of 2.0% (versus PayPal’s 2.9%) and a per-transaction fee of 20 cents (versus PayPal’s 30 cents).

Note

BidPay was formerly known as Western Union Auction Payments. You shouldn’t confuse this service with a Western Union wire transfer, a method of payment that is frequently (mis)used by scam sellers, particularly those selling outside the U.S.

Given these substantially lower rates, you’d think that Google Checkout would be a great alternative for eBay sellers. Alas, eBay won’t let you accept Google Checkout for your auction payment. (eBay owns PayPal, remember, and may not be inclined to endorse a competitor.) While this situation may change in the future, right now Google Checkout simply isn’t an option for your eBay listings.

Merchant Credit Card Account

If you’re a high-volume seller, you may be able to get a lower per-transaction rate than that offered by PayPal by signing up for a merchant credit card account from a traditional banking or financial institution.

However, there are a few issues around establishing this type of traditional merchant credit card account. First, it’s more hassle than signing up for PayPal; you may have to submit various business documentation and possibly have your own credit checked. Second, getting everything up and running may also be more involved than simply plugging into the PayPal system. And finally, upfront or monthly fees may be involved.

Note

Setup fees for a merchant account can range from $25 to $400 or more, and there’s probably some sort of minimum transaction amount that you must maintain each month. Some services also make you purchase expensive software or credit card terminals. Since these fees vary so much, make sure you shop around before you commit.

That said, if you can save half a point or more on every credit card transaction, it may be worthwhileif your credit card volume is high enough. Most merchant credit card services have rates in the 2% to 2.5% range, which beats PayPal’s standard 2.9% ratebut is no better than PayPal’s rates for high-volume sellers. Still, many eBay sellers prefer to handle their credit card processing directly, without having to rely on the PayPal service.

If you’re interested in establishing a merchant credit card account, here are some services that specialize in providing credit card services to online merchants:

• Cardservice International (www.expandyourbusiness.com)
• Chase Paymentech Solutions (www.paymentech.com)
• Charge.com (www.charge.com)
• CreditCardProcessor.com (www.creditcardprocessor.com)
• Fast Merchant Account (www.fast-merchant-account.com)
• Merchant Accounts Express (www.merchantexpress.com)
• Monster Merchant Account (www.monstermerchantaccount.com)
• ProPay (www.propay.com)
• Total Merchant Services (www.merchant-account-4u.com)

And here’s another place to check outyour local wholesale club. That’s right, both Costco and Sam’s Club offer merchant credit card processing to their business members, at affordable rates.

For example, Costco offers credit card accounts to its Executive members through Nova Information Systems. Costco waives the $25 setup fee and offers a discount rate of just under 2%. (Of course, the Executive membership itself costs $100, so you’ll need to factor that in, as well.) See the Costco website (www.costco.com) or call 888-474-0500 for more details.

Oh, and when you inquire, ask about all applicable fees. In particular, check on software integration fees, monthly virtual terminal fees, and the like. You may also have to hit monthly minimums or pay an additional fee. Bottom linesounds like a good deal, but check the fine print before you sign up!

Chapter 17. Organizing Your Packing and Shipping

One of the most labor-intensive parts of the entire eBay business process is packing the merchandise you’ve sold and getting it ready to ship. This is where smart eBay businesspeople really shine, by learning how to streamline their packing/shipping operations.

We discussed packing supplies back in Chapter 7, “Organizing Your Home Office”; you should review the advice in that chapter about setting up your in-home packing center. Assuming you have your packing center set up and ready to go, this chapter focuses on the mechanics of packing and shippingand how you can become as efficient as possible at both.

Choosing a Shipping Method

You have a number of choices when it comes to shipping your package. You can use the various services offered by the U.S. Postal Service (First Class mail, Priority Mail, Express Mail, Media Mail, and so on) or any of the services offered by competing carriers, such as UPS or FedEx. You can deal directly with any shipping service, or you can use a local shipping store to handle the ship-pingand even the packingfor you. (Know, however, that having another company do your work for you will cost youwhich means it’s preferable to deal directly with your shipping service of choice.)

Which service should you use? That’s a good question, but not always an easy one to answer. Ultimately, you have to strike a compromise between cost, convenience, and speed. Pick the cheapest method possible, and customers will gripe when they don’t receive their merchandise in a timely manner. Pick the fastest method possible, and customers will gripe that they’re paying too much for shipping/handling. (You also may turn away potential buyers with your high shipping/handling fees.) As I said, you need to strike a balanceand also choose a shipper that is easy for you to deal with.

And here’s what makes the decision particularly difficult. Once you start checking around, you’ll find that shipping rates vary wildly from one service to anotherand I mean wildly. For example, the costs for shipping a two-pound box from New York to Los Angeles range from around $2 (USPS Media Mail) to more than $45 (UPS Next Day Air and FedEx Priority Overnight). That’s a big difference.

This variation in shipping costs is yet another good reason to standardize the type of merchandise you sell in your eBay auctions. If you sell only one or two types of items, you can easily calculate your shipping fees ahead of timeand know that they’ll stay constant from auction to auction. If you’re selling a wide variety of items, calculating shipping for all those different items becomes extremely time-consuming. (Standardizing the merchandise you sell also helps when buying your packing boxes; you have to buy only one or two types of boxes, instead of having to keep a wide variety of packaging on hand.)

Note

To compare shipping costs for a variety of services on a single web page, check out iShip (www.iship.com). This site not only lets you compare shipping costs, but also provides tracking services for all major carriers.

Of course, cost isn’t the only factor you want to consider. You also want to compare how long it takes the package to arrive, what kind of track record the shipping service has, and how convenient it is for you to use. If you have to drive 20 miles to get to a UPS office but you have a post office just down the street, that might offset a slightly higher cost for Priority Mail.

Note

You may need to factor weather conditions into which type of shipping you choose. If it’s summertime and you’re shipping something that might melt in extreme heat (like an old vinyl LP), pick the fastest shipping method possible.

The main thing to keep in mind is that you want to, as much as possible, settle on a single shipper and method of shipping for your eBay auctions. The last thing you want to do is to make trips to multiple shipping stations each day, and deal with a myriad number of packing boxes and shipping instructions. Standardize on a single shipper and method, and you’ll make your shipping “department” much more efficient. Don’t, and you’ll waste a lot of time unnecessarily.

We’ll look at each of the major shipping services separately, but with a decided emphasis on the U.S. Postal Servicewhich is the shipper of choice for a majority of eBay businesses.

U.S. Postal Service

The United States Postal Service (USPS) is used by almost all eBay sellers, for at least some of their shipping needs. Dealing with the Postal Service is convenient, as most sellers have a post office within a short driving distance, and it is set up to easily handle the shipping of small items from individuals.

Note

The cost to ship a particular package is based on a combination of weight, size, and distance. The heavier an item is and the farther it has to go (and the faster you need to get it to where it’s going), the more it costs. And when you’re factoring package size, you’ll need to measure the length of the package and add it to the girth. (Length is the longest side of the package; girth is the distance all the way around the package at its widest point perpendicular to the length.)

The Postal Service offers several different shipping options:

• Priority Mail. This is the preferred shipping method for a majority of eBay sellers, big and small. Pricing is generally quite reasonable, and if you’re shipping out a small item that can fit in one of the flat-rate envelopes, you can quote a simple rate of $4.05 (as of August 2006), anywhere in the nation. Service is typically in the one-to-three day range, andas you learned in Chapter 7 the postal service has lots of free Priority Mail shipping boxes you can use. You can also print out your own Priority Mail shipping labels and postage, direct from either eBay or the USPS websitewhich we’ll discuss in the “Printing Labels with Prepaid Postage” section, later in this chapter.
• Express Mail. This is a less-used option, primarily because of its high costconsiderably more expensive than Priority Mail. Express Mail is the Postal Service’s fastest service, offering guaranteed next-day delivery 365 days a year, including weekends and holidays. Merchandise is automatically insured up to $100.
• First Class Mail. This is an option if your item fits into a standardsized envelope or small box. It also provides the benefit of shipping directly from your mailbox, without necessitating a trip to the post officeassuming you can figure out the correct postage yourself. Delivery is similar to Priority Mailtypically three days or less. If your item is relatively small, First Class can cost somewhat less than Priority Mail.
• Parcel Post. This used to be known as the “slow” USPS service for larger packages, but it’s gotten faster of lateand it’s priced much lower than Priority Mail. Still, shipping something Parcel Post from coast to coast might take seven to nine days, as opposed to Priority Mail’s two (or three) days.
• Media Mail. This is a hidden treasure. Media Mail is what USPS used to call “book rate,” and can be used to ship books, DVDs, videotapes, compact discs, and other printed and prerecorded “media.” The rates are much cheaper than Priority Mail, especially when you’re shipping heavy items, and delivery times are somewhere between First Class and Parcel Posttypically less than a week. This is a good, low-cost way to ship many popular items; it’s especially good for heavier media items, such as books and CD/DVD boxed sets.

Note

You can’t use Media Mail to ship every type of printed material. The service is reserved for publications without advertisingso you can’t use it to ship magazines, newspapers, or comic books.

You can find out more about USPS shipping at the USPS website, located at www.usps.com. You can also access the USPS Domestic Calculator (postcalc.usps.gov) to calculate postage for all levels of service.

FedEx

FedEx is probably the fastest shipping service, but it can also be the most costly. FedEx tends to target the business market (which can afford its higher rates), so it isn’t widely used for auction or retail shippingwith one significant exception: FedEx Ground.

FedEx Ground is a terrific choice when you’re shipping out larger items. It’s designed for bigger and/or heavier packages, and its rates are well below similar services offered by the Postal Service and UPS. I use FedEx Ground to ship DVD players and various audio equipment, and it’s extremely cost effective. For example, FedEx charges almost $5 less than Priority Mail to ship a five-pound item from coast to coast. That’s a big savings!

FedEx is also a convenient choice for many sellers, especially since you can now ship from any Kinkos location. (The stores are now called FedEx Kinkos, by the way.) You can find out more about FedEx shipping at its website, located at www.fedex.com, and can access the company’s rate finder directly at www.fedex.com/us/rates/.

UPS

While UPS is a little pricey for small, lightweight items, it’s a good option for shipping larger or heavier packages. UPS offers a variety of shipping options, including standard UPS Ground, Next Day Air, Next Day Air Saver, and 2nd Day Air.

Note

Less-experienced or occasional sellers might choose to do their packing and shipping through a professional shipping store, such as The UPS Store (www.theupsstore.com) or FedEx Kinkos (www.fedexkinkos.com). Because of the high fees these stores charge, this really isn’t a good option for high-volume sellers. Still, you might want to go this route if you have the occasional large or overly fragile item to ship.

You can find out more about UPS ship-pingand access a rate calculatorat the UPS website, located at www.ups.com.

Other Shipping Companies

USPS, UPS, and FedEx are the three most popular shipping services in the U.S.; they’re not the only services available, however. Among the other services available are DHL (www.dhl.com) and Purolator Courier (www.purolator.com).

Calculating Shipping and Handling Fees

One of my earlier pieces of advice was that you should include all the details about shipping and handling (how much and who pays) up front in your item listing. While this is a good idea, how do you figure shipping costs before you know where the item is going?

Working with Flat Fees

The solution is easy if you’re shipping something small and light. Figure the shipping costs from your location to either coast, and either use the highest cost or an average of the two costs. When the shipping is low to begin with, if you’re off a dollar one way or another, it’s not a big thing.

Flat fees are also easy if you’re using one of the postal service’s flat-rate Priority Mail packages. You can choose from three now: the long-established $4.05 flat-rate envelope and two different sizes of $8.10 flat-rate boxes. With these flat-rate packages, anything you can fit insideno matter what the weightships anywhere in the U.S. for that flat rate. This option certainly makes it easy to calculate your shipping charges.

If you’re shipping a larger or heavier item, however, charging a flat rate is less feasible. That’s because the rates vary significantly by distance. A ten-pound item might cost under $10 to ship in-state, but cost twice that to ship coast-to-coast. It’s hard to come up with an average that doesn’t either hit you hard in the pocketbook or dramatically overcharge your customer.

Working with Variable Fees via eBay’s Shipping Calculator

When you’re shipping larger and heavier items, your best option is to state that buyers will pay the actual shipping cost based on location, which will be calculated at the conclusion of the auction. You can make this work by using eBay’s Shipping Calculator.

The Shipping Calculator, shown in Figure 17.1, is a great tool; it lets buyers enter their ZIP code on the auction listing page and then calculates the actual shipping cost, based on the shipping service you selected. (You can also choose to have the Shipping Calculator add a predetermined handling charge for each shipment, which we’ll discuss in a minute.) When a buyer checks out at the end of the auction (or chooses to pay via PayPal), he or she also uses the Shipping Calculator to automatically add shipping/handling fees to the total.

Figure 17.1. Add eBay’s Shipping Calculator to your item listings so buyers can automatically determine shipping and handling fees.

You activate the Shipping Calculator when you create a new item listing, by selecting Calculated from the pull-down list in the Shipping section (shown in Figure 17.2). Select or enter a package size, the estimated weight, your preferred shipping service(s), and other necessary information, and you’re ready to go.

Figure 17.2. Activating eBay’s Shipping Calculator from the Create Your Listing page.

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Since the Shipping Calculator can be added to your item listings free of charge, there’s no reason not to use itespecially because it greatly simplifies the task of calculating exact shipping charges to your customers.

Determining the Handling Charge

Aside from the pure shipping costs, you should consider adding a handling charge to the shipping fees your customers pay. After all, you need to be sure that you’re compensated for any special materials you have to purchase to package the itemlabels, boxes, Styrofoam peanuts, and so forth. That doesn’t mean you charge one buyer for an entire roll of tape, but maybe you add a few pennies to your shipping charge for these sorts of packaging consumables. And if you have to purchase a special box or envelope to ship an item, you should definitely include that cost in your shipping charge. (This argues for planning your shipping before placing your item listingwhich is always a good idea.)

Note

Some end-of-auction checkout tools automatically combine multiple auctions for a single shipping fee. Others don’t, which means you might have to manually manipulate these fees to your customers.

So you should have no compunction against “padding” your shipping fees with an additional handling charge. In fact, eBay’s Shipping Calculator lets you add a separate handling charge to its calculations. It’s an accepted part of doing business online.

Combining Items for Shipping

If you have multiple items for sale, there is every possibility that a single buyer will purchase more than one item. If that happens, you don’t always need to pack two or more separate boxes for that buyer; you can often pack all the items purchased in a single box, which will reduce shipping costs. You should pass on that savings to your customer, in the form of a combined ship-ping/handling fee for all items purchased. If you’re inflexible in adjusting your shipping/handling for multiple purchases, you’re ripping people offand will lose customers for it.

Packing Your Items

Packing your merchandise is a lot of work. Let’s look at what’s involved in packing an item so that it arrives at its destination intactbut doesn’t cost you an arm and a leg to get there.

Picking the Right Shipping Container

It’s important to choose the right type of shipping container for a particular item. First, you have to decide whether to use a box or an envelope. If you have a very large item to ship, the choice is easy. But what if you have something smaller and flatter, such as a baseball card or a coin? Your choice should be determined by the fragility of your item. If the item can bend or break, choose a box; if not, an envelope is probably a safe choice.

Whichever you choose, pick a container that’s large enough to hold your item without the need to force it in or bend it in an inappropriate fashion. Also, make sure that the box has enough extra room to insert cushioning material.

On the other hand, the container shouldn’t be so big as to leave room for the item to bounce around. Also, you pay for size and for weight; you don’t want to pay to ship anything bigger or heavier than it needs to be.

If you’re shipping a breakable or bendable item in an envelope, consider using a bubble-pack envelope or reinforcing the envelope with pieces of cardboard. This is especially vital if your item shouldn’t be bent or folded.

If you’re shipping in a box, make sure it’s made of heavy, corrugated cardboard and has its flaps intact. Thinner boxessuch as shoe boxes or gift boxessimply aren’t strong enough for shipping. When packing a box, never exceed the maximum gross weight for the box, which is usually printed on the bottom flap.

Although there are bunches of different-sized boxes available, sometimes you need something somewhere inbetween this size and that size box. When you face this situation, you have two choices.

First, you can take a larger box and cut it down. That means cutting through each corner of the box to make it shorter and then cutting off the ends of the flaps accordingly. Sometimes it’s difficult to fold unscored flaps, so you may want to make your own scores by slicing a knife (shallowly) where you want to bend the box closed. (Also, many mailing centers have their own folding machines that you can use to create custom-sized boxesat a cost.)

Second, you can combine two smaller boxes. If your box is 16″ long and your item is 20″, just take two boxes and insert the open end of one inside the open end of the other. You’ll need to use sufficient packing tape to keep the boxes from sliding apart, but you’ll have created a box custom-sized for the item you’re shipping.

Note

Use the combination box technique judiciously; it can significantly increase the weight of the packageand thus your shipping costs.

How to Pack

How do you pack your box?

Don’t just drop your item in an empty box. You need to position the item toward the center of the box, away from the bottom, sides, and top, and surround it with cushioning material. Professional shippers use Styrofoam peanuts, and lots of them; another option is to use crumpled-up old newspapers. Know, however, that peanuts are much lighter than newspaper. Since weight is a factor in how much you’ll pay for shipping, anything you can do to lighten the weight of your package is important. Because peanuts costwell, peanuts, they’re the cushioning material of choice.

If you’re shipping several items in the same box, be sure to wrap each one separately (in separate smaller boxes, if you can) and provide enough cushioning to prevent movement and to keep the items from rubbing against each other. Not only should items be separated from each other in the box, but they should also be separated from the corners and sides of the box to prevent damage if the box is bumped or dropped.

The previous point argues for another techniquedouble boxing especially fragile items such as glass or ceramic items. That means packing the item tightly in a smaller, form-fitting box and then placing that box inside a slightly larger, shock-absorbing boxwith at least 3″ of cushioning material between the boxes.

If your item has any protruding parts, cover them with extra padding or cardboard. And be careful with the bubble wrap. Although it’s great to wrap around objects with flat sides, this kind of wrap can actually damage more fragile figurines or items with lots of little pieces and parts sticking out. If the bubble wrap is too tight, it can snap off any appendages during rough handling.

When you’re packing an item, watch the weight. Have a postal scale at your packing counter, and weigh the itemshipping container and allduring the packing process. With Priority Mail, the difference between shipping a one-pound package and a one-pound, one-ounce package is as much as $1.90, depending on where it’s going. Finding some way to cut that extra ounce of packing material can save almost two bucks in shipping costs!

Note

Make sure you include the weight of the box and the cushioning material when you weigh your item for shipment. A big box with lots of crumpled paper can easily add a half-pound or more to your item’s weightexcess weight you’ll have to pay for.

After you think you’re done packing, gently shake the box. If nothing moves, it’s ready to be sealed. If you can hear or feel things rattling around inside, however, it’s time to add more cushioning material. (If you can shake it, they can break it!)

How to Seal the Package

After your box is packed, it’s time to seal it. A strong seal is essential, so always use tape that is designed for shipping. Make sure you securely seal the center seams at both the top and the bottom of the box. Cover all other seams with tape, and be sure not to leave any loose tape or open areas that could snag on machinery.

Note

Don’t use wrapping paper, string, masking tape, or cellophane tape to seal your package.

You should use sealing tape designed for shipping, such as pressure-sensitive tape, nylon-reinforced Kraft paper tape, glass-reinforced pressure-sensitive tape, or water-activated paper tape. Whichever tape you use, the wider and heavier, the better. Reinforced is always better than non-reinforced.

One last thing: If you plan to insure your package, leave an untaped area on the cardboard where your postal clerk can stamp “Insured.” (Ink doesn’t adhere well to tape.)

How to Create the Perfect Label

You’ve packed the box. You’ve sealed the box. Now it’s time for the label.

Addressing the Label

The best-packed box won’t go anywhere if you get the label wrong. For fast and efficient delivery, you need to create a label that can be both clearly read and clearly understood. And it goes without saying that the address information needs to be accurate and completepartial addresses just don’t cut it.

To create the perfect label, you need to write, type, or use your computer to print the address as neatly as possible. You should also use complete address information, including all street suffixesDr., Ave., St., Blvd., and so on. And make sure to include the recipient’s apartment or suite number (if applicable). Naturally, you should use the proper two-letter state abbreviation, and the correct ZIP codeand, when possible, the four-digit ZIP+4 add-on.

Note

Don’t know the ZIP code for the address you’re shipping to? Then look it up at the U.S. Postal Service’s ZIP Code Finder at www.usps.com/zip4/.

Choosing the Right Label

For most purposes, you can’t beat the standard 4″[.dotmath]6″ blank white label. There’s a reason it’s such a great workhorse: Anything smaller is tough to work with, and anything larger just leaves a lot of wasted space. You can purchase these labels at any office supply store, on eBay, or even get free versions (for Priority Mail shipping) at your local post office. And if you want to splurge, you can have labels preprinted with your business name and return address.

Note

You can also purchase or create your own return address labels, to use in conjunction with your main shipping labels. It’s easy enough to print out a full page of smallish labels in Microsoft Word; most printing firms (such as Kinkos) can also do up a roll of addresses labels for a nominal charge. If you don’t use a preprinted label, you’ll want to hand-print your return address on the shipping container or use some sort of return address label.

If you use computer-generated labels, you can program your label-making program (or Microsoft Word) to include your return address when it prints the label. This is a good (and lower-cost) alternative to using preprinted labels. There are several dedicated label-printing programs on the market. These programs work with just about any standard-issue major-manufacturer blank labels.

The most popular label-making programs include

• Avery Wizard and DesignPro (www.avery.com)
• PrimaSoft Label Printer (www.primasoft.com/lb.htm)
• Visual Labels (www.rkssoftware.com/visuallabels/overview.html)

Many eBay sellers prefer to use a separate label printer, as opposed to their standard computer printer. A label printer does just what you think it does; it prints labels (one at a time), and nothing but labels. Most label printers come with their own label-creation software, so all you have to do is purchase the proper rolls of labels.

Attaching the Label

After you’ve created the delivery label, place it on the top (not the side) of the box. To avoid confusion, place only one address label on the box. If using a packing slip, place it on the same surface of the box as the address label. Do not place the label over a seam or closure or on top of sealing tape.

Note

Some auction management tools also have label printing functions although many of these services print extremely generic labels that might not suit your tastes.

To avoid ink smudges and rain smears, place a strip of clear packing tape over the address label. (Except if your label includes a bar codenever tape over a bar code!) And if you’re reusing a box for shipping, remove or cross out all old address labels or markings on the box.

And here’s one last tip: Make a duplicate of your shipping label and stick it inside the box, before you seal it. This way if the original shipping label gets torn off or destroyed, anyone opening the box can read the duplicate label and figure out where the box is supposed to go.

Note

You can also print prepaid postage labels using the USPS’ Click-N-Ship service (www.usps.com/shipping/label.htm). This is a good choice if you’re printing labels for non-eBay items.

Printing Labels with Prepaid Postage

If you’re shipping via the U.S. Postal Service, you can print labels on your home printer directly from eBay/PayPal. You can choose to print plain labels or labels with prepaid postage. Print the latter, and you can save yourself a trip to the post office!

You can access eBay’s label-printing function from your closed auction page. Click the Print Shipping Label button, and (after a quick logon page) you’re taken to a Print Your Label page on the PayPal site. As you can see in Figure 17.3, you can choose to ship via Priority Mail, Express Mail, Parcel Post, Media Mail, or First Class Mail; you can even choose to purchase insurance with your order. Fill in the appropriate information, and click the Continue button to view a confirmation page. From there you can authorize payment (from your PayPal account) and print the label on your own printer. Just affix the label to your package and drop it in the mail; no need to visit the post office. (And if you do visit the post office, there’s no need to stand in line; just drop off your prepaid packages in the handy drop box, or leave them on the nearest counter.)

Figure 17.3. Printing prepaid postage labels from PayPal.

[View full size image]

There are several advantages for printing your own postage via eBayin addition to the no-standing-in-line thing. When you print a prepaid label, your buyer is automatically notified (via email) that the package has shipped. Even better, you get Delivery Confirmation included at no extra charge. Plus, if you use eBay Selling Manager, your shipping/tracking information is integrated into your transaction listing and the status is automatically updated. Finally, if you’re making international shipments via the USPS, the custom forms are combined with the shipping label; you don’t have to hand-write them or re-enter the information at the USPS site to print the custom forms separately.

The only issue I have with eBay’s prepaid postage labels is that you have to enter the information and print the labels one at a time. This is fine if you only have a few packages to ship, but very time-consuming if you’re a high-volume shipper. For higher-volume applications, better options are the services offered by Stamps.com (www.stamps.com) and Endicia Internet Postage (www.endicia.com). Both these sites let you print sheets of prepaid postage labels from your desktop printer, without having to go to the post office. Check them out for more details.

Shipping Insurance

If you’re shipping a moderately expensive item (over $50, let’s say), it might be worth the trouble to offer insurance to the buyer. It’s relatively easy (on the Sell Your Item page) to give the buyer the option of buying insuranceor just do it yourself and include the costs in your normal shipping/handling fee.

The U.S. Postal Service charges $1.35 to insure items up to $50, or $2.30 for items between $50 and $100. UPS includes $100 worth of insurance in its basic rates; additional insurance can be purchased for additional cost.

You can also arrange shipping insurance via a third-party firm. Universal Parcel Insurance Coverage (www.u-pic.com) provides insurance for packages shipped via the USPS, UPS, FedEx, and other carriers. There are two advantages to using U-PIC for your shipping insurance: It’s cheaper than carrier-provided insurance, and you can do it all from your home computer. (The big disadvantage is that it doesn’t integrate into your auction checkout or automated end-of-auction emails.)

As to pricing, U-PIC charges $1.00 per $100 of insurance for domestic USPS orders (including delivery confirmation), considerably less than what the Postal Service charges. (U-PIC’s rates vary by carrier.) If you insure a lot of items, it’s worth checking out.

Tracking and Confirmation

If you think the package might be lost in transit, you can always avail yourself of the tracking services provided by UPS, FedEx, and other major carriers. These services typically provide tracking numbers for all packages shipped. In most cases, you can track your package by entering the package’s tracking number into the carrier’s website.

The one major shipping service that doesn’t offer tracking (by default) is the U.S. Postal Service. What you can get from the Postal Service (at a cost of from $0.50 to $0.60, depending on the type of mail) is its Delivery Confirmation service. USPS confirmation, however, does not confirm that an actual person received the package; it only confirms that the mail carrier delivered the package. (Stuck it in the mailbox, that isor in many instances, left it on the porch.)

You can opt for Delivery Confirmation when you ship your item from your local post office, or have it included free if you print your own labels from eBay/PayPal or with the Click-N-Save service. You can also purchase USPS delivery confirmation forms in bulk from ShipperTools.com (www.shippertools.com). ShipperTools.com uses the official USPS delivery confirmation system and lets you print an unlimited number of confirmation forms for just $6.95 a month.

If you want a signature confirmation on a USPS shipment, you need to send your item with the certified mail option. Certified mail requires the recipient to sign on delivery and costs $2.40. This is a preferred option if you’re shipping something extremely valuable.

Streamlining the Packing and Shipping Process

One of the most important things you can do to make your eBay business more efficient is to streamline the entire process of packing and shipping your merchandise. If you find yourself in the routine of schlepping down to the post office every day, loaded down with armfuls of packages, you’re not doing it right. Read on to learn how to be a more efficient shipper.

Setting a Packing/Shipping Schedule

The first thing you want to do is get yourself out of the “do everything right now” syndrome. Novice eBay sellers hover over their computer screens or mail boxes, waiting for payments to come in. As soon as that payment arrives, they rush to send out a confirmation email, print an invoice, and pack the merchandise. Then they hop in the car and drive as fast as possible to the post office, stand in line, and ship the thing out.

Wrong, wrong, wrong.

You should not put yourself at the mercy of your customers. Instead, you should work your customer sales into your routine.

That means, of course, that you have to establish a routinea schedule that you follow for all your packing and shipping. If your sales volume is low and your time free, it’s okay to pack and ship once a day. But do it at the same time each day, on an appropriate schedule. If your mail arrives around noon, for example, set 2:00 p.m. as your packing/shipping time; that gives you time to process all payments received in that day’s mail. When 2:00 p.m. rolls around, gather all the orders that are ready to go and start packing. When you’re donearound 3:00 p.m., let’s sayyou head down to the post office with your daily delivery.

You don’t have to ship every day, however. Many high-volume eBay sellers ship only a few days out of the week so that they’re not wasting time traveling to the post office every day. You may choose to ship all your packages on Monday, Wednesday, and Friday, for exampleor maybe just Tuesday and Friday. Whatever days you choose, you let your paid orders build up until your scheduled shipping day and then get your shipping done all at once.

Creating a Packing Assembly Line

When it comes to packing your items, it pays to have the process down to a science. Have all your boxes and packing material lined up and ready to go so that you can run each item through the “assembly line.” Wrap, pack, cushion, seal, and labelthat’s the routine. And the more uniform the items you sell, the more automated this procedure can become.

What you don’t want is to have your routine interrupted. That means not running out of tape or peanuts or having to rush out and purchase a special box just for that one special item. (Which is yet another reason, of course, to standardize the items you sell.) The smoother the process (and the fewer interruptions), the faster you can get everything packed and ready to ship.

Getting It There

When it comes to shipping your items, be prepared. If you use the U.S. Postal Service for shipping, try to time your visits so that you don’t have to stand in long lines. That means