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Setting Up a Business on eBay

Should you list items for auction, set up an eBay store, or sell on eBay’s new Express service?
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There are now 1.3 million people worldwide who have made a business out of selling on eBay, claiming eBay as their primary or secondary source of income, according to AC Nielson International, the New York-based market research firm.

So as entrepreneurs consider launching a business on eBay, their first concern should be to figure out how to avoid getting lost in the crowd.

eBay has been going strong since the online auction site was founded in 1995. That means others in the global online marketplace have already had 10 years to figure out how to make a business out of selling on eBay. “It’s definitely a challenge to start an eBay business right now,” says Sucharita Mulpuru, a senior analyst at Forrester Research, of Cambridge, Mass., “because you are coming late to the game.”

The key, says Elizabeth Gaudio, senior executive counsel at the National Federation of Independent Business, is “research, research, research.” One way to do that, she adds, is to just start selling.

There are several ways to sell on eBay. Once you register your business with the site and open a seller’s account, you may want to try some of the following methods.

  • List an item for auction. Adam Galinsky, a professor of economics at The Kellogg School at the University of Pennsylvania, makes a case for setting your opening bid on the low end. Galinsky’s research shows that it entices more people to enter the auction. “Once  they’re in,” he says, “they’re trapped and emotionally invested into checking back and escalating their commitment.”
  • Set a fixed price. The “buy it now” feature on eBay can be used as the sole method of pricing, or as an added option to an auction. Not everyone wants to keep checking back over a period of days to compete over the sale of a pair of socks.
  • Open an eBay Store. You can sell in the auction format or fixed price method. Either way, having your own storefront will help you brand yourself with customers, and hopefully make them repeat customers. Some of the benefits of opening an eBay Store include that you can showcase your listings in a customizable Web format, boost sales with marketing tools and list for longer durations through your store inventory. The store costs $15.95 per month for a basic store, and $49.95 per month to be a featured store.
  • eBay Express. This is relatively new. It’s a special area of eBay’s site that functions more like a traditional ecommerce site, without the auction format. Sellers have to meet certain criteria, like a high positive customer feedback score, before they can participate. It’s like selling on eBay.com but the exception is that payments are made at the point of purchase so sellers don’t have unpaid items while waiting for bidders to forward payments. There is no additional charge to sell on eBay Express for established sellers.

Given that eBay has been around for 10 years, there have already been studies about what sells and how to increase sales. In addition, the folks who have been successful running businesses on eBay have honed the art of making a profit this way and have some good advice. Here are some dos and don’ts to consider when setting up a business on eBay:

Dos:

  • Do include gallery pictures. These are the pictures that pop up by the listing in search results. For 35 cents, it’s money well spent because studies show that buyers are more likely to bid on purchases they can see. As for the other listing enhancements -- everything from featuring your listing at the top of a search request to promotion boxes -- they all come with a fee. “In most instances, they don’t improve your sales,” says Michael Miller, author of Making a Living with Your eBay Business.
  • Do experiment. So says John Morgan, a professor of economics at the Haas Business School at University of California at Berkeley, who researches online auctioning. “Try selling your products in different categories,” Morgan says. “Alter the closing time and date for your auctions. Track what happens. You will see patterns emerge and can learn a lot from that.”
  • Do treat it like a business. The most important piece of advice comes from Miller, who says that it’s important to remember that eBay isn’t just another weekend activity. “If you’re going to run a business on eBay, then treat it like a business -- not a hobby,” he says.

Don’ts:

  • Don’t buy too much inventory. You can avoid this by using a drop shipper, which is a wholesaler that will ship and manage orders directly from their warehouse, even handling returns.
  • Don’t play the trends. The eBay market is too volatile and changes too quickly. Those “Elmo TMX” dolls may be a hot item right now, but you don’t want to have to rework your business plan the day after Christmas. It’s better to find a line of products that work for you and stick with them.

The experts at setting up businesses on eBay say that if you take the right steps and avoid the pitfalls, you’re business is not likely to get lost in that crowd of 1.3 million people who now make a living off of eBay.

Last updated: Oct 1, 2006




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