Seller's market: selling on eBay can help you grow your business, but is this site the right marketplace for you?

Entrepreneur, August, 2004 by Melissa Campanelli

EVER CONSIDERED EXPANDING YOUR business by setting up shop on eBay, the world's largest online auction site? If you have, you're not alone. Currently, about 430,000 entrepreneurs tap into San Jose, California-based eBay to sell their wares on a full- or part-time basis. Compare that to a year ago, when it was closer to 150,000.

Why is eBay such a great place to grow your business? For starters, it's relatively inexpensive, especially compared to brick-and-mortar expansion methods. "There's a low capital requirement, you don't have to open a store, and, assuming [you've got] something that's marketable on eBay, you have a chance to turn your inventory really quickly," says Joseph T. Sinclair, author of eBay Business the Smart Way.

You can also reach buyers worldwide. "If you have a brick-and-mortar store, you're limited to how much walk-in traffic you will see every day," says Jim "Griff" Griffith, lead instructor of eBay University, which offers workshops around the country on how to buy and sell on eBay. "But if you're using eBay, that traffic is exponentially increased. There's no barrier geographically."

Selling through eBay can also be better than setting up an online store because of the increased traffic. "It's going to be difficult to drive any appreciable traffic to an individual Web site, especially if you're not a known entity,," says Griff. "However, a regular listing on eBay, depending on what it is, can get a [few] hundred--and sometimes thousands--of hits per day."

One seller who understands the power of eBay is Jesse Nyman, president of Nyman's Jewelry Inc., an eBay seller of free jewelry in Fort Myers, Florida, whose eBay address is nymansjewelryinc. About six years ago, he sold $300 worth of jewelry on eBay. Even though Nyman, 50, says he "put up the worst pictures you can imagine and forgot to put up any ring sizes" he was able to double his money. After that, Nyman decided to focus his time on selling jewelry on eBay--and is still going strong. While he sells jewelry through other channels today--including his own Web site (www.nymansjewelry.com)--he attributes 70 percent of the $1 million he made in sales last year to eBay. One key to his success on the online auction site: Nyman has found a niche selling his products to several overseas jewelry suppliers on a regular basis.

Selling is straightforward. Entrepreneurs post product listings through an auction-style post or a "buy it now" post. Auction-style listings are traditional eBay listings in which the seller sets the starting price, and the highest bidder wins the product. In general, auctions can take one to 10 days; the average is seven. The "buy it now" listing allows sellers to sell the product at a set price.

Before newcomers can be successful at selling items on eBay, the first recommended step is to research the site. "Visit some listings of items that are similar to ones you want to sell," says Griff, who also suggests buying something from the site.

When you do finally list, post clear pictures. Make sure your title--which is what the buyer sees first--includes the type of item, the brand name and the exact model name or number. The description is also critical; it should include as much pertinent information as possible, such as product flaws in the item, and sales and shipping policies. Those policies can specify who pays shipping, and, if it's the buyer, an estimate of what shipping costs will be.

Offering stellar customer service is important for several reasons, including the fact that it means good feedback ratings. These ratings allow eBay buyers and sellers to rate their trading partners. "Positive comments can increase your score by one point every time you get one," says Griff. "A neutral or negative comment, however, can cause your score to go down." Comments are also visible to the public.

So will your products sell well on eBay? Griff lists a few traditional bestsellers: collectibles, computer software and hardware, brand-new clothing, home and garden supplies, industrial equipment, business supplies, wholesale lots, books, DVDS, special events tickets and real estate. However, as Griff points out, no matter what you decide to sell on eBay, your success is partly determined by how well you price it.

"It's important you don't price yourself out of the competition, and that's a big mistake that a lot of new sellers will make," Griff says. "They won't spend time researching what the market value of a particular item is on eBay. You have to know how to price your item to entice people to start bidding."

But that's not the only challenge. Since there are so many sellers on eBay, "it has become very, very, very competitive," says Nyman. In addition, while using eBay can be less expensive than traditional means of growing your business, it's not that cheap: Nyman spends about $45,000 per year in eBay listing and sales fees. (Fees depend on the quantity of items sold.) Then there's the approximately $100 per week Nyman pays for eBay's Selling Manager Pro, which, among other features, lets sellers list multiple items at preprogrammed times; a $70 per month fee for a third-party service for hosting pictures; and credit card and PayPal fees that average 2.5 percent of sales.