In 2002, former Marine Steven Holt’s life took a turn as he settled down in Denison, Iowa.
Holt, working at the time for a home warranty firm, bought his first PC. To justify the purchase, he and his wife, Crystal, decided to sell a few things on eBay. After taking a course at eBay University, the San Jose, Calif., company’s training course for prospective entrepreneurs, Holt hooked up with a distributor and began selling DVDs.
Soon he quit his day job to run his eBay storefront as inventory ate up the entire first floor of their home and their backyard, which they converted into a storage area. Six years later, the venture has blossomed into two companies, Movie Magic USA and GameVille USA. The businesses, which have storefronts on eBay, employ two full-timer workers and take up a 1,500 square-foot facility.
Timing and customer service
Holt declined to go into details, but said he makes a profit in the six-figure range on the venture even though the margin on DVDs has been halved since 2002. (He says he makes up the difference in increased volume.) “If I had to boil it down to one thing, it would be customer service,” Holt says of his success.
That and timing. Six years ago was arguably a better time to get into this sort of business. You’d think that by now almost every market niche would be exploited by would-be entrepreneurs hosting virtual storefronts on eBay, Amazon.com, and Yahoo!, to name a few. Not surprisingly, those companies say there’s still a lot of business to go around.
“The Horatio Alger story is not uncommon on eBay,” said Jim Griffith, dean of eBay Education. Nevertheless, Griffith concedes that starting a business on eBay was easier a few years ago. “There are still niches to be explored, but the market is not as wide open as more and more sellers have joined in.” Griffith says that many sellers get frustrated and pull up stakes, creating new opportunities.
EBay no longer hosts eBay University, but instead has a program called eBay Education Specialist in which active sellers on the site coach others. Griffith says such specialists are “allowed to charge” and fees range depending on the level of service required.
Otherwise, Griffith suggests starting with one item and going through the process of fielding offers and selling it to get an introduction to eBay’s system. “The biggest obstacles are for those who jump in with 100 items,” he says. “That’s when you get overwhelmed.”
How the storefronts stack up
After that, would-be entrepreneurs can buy an online storefront. Monthly fees on eBay for those range from $14.95 to $500. The latter price is for an anchor store, which gives users greater access to eBay’s traffic. The company recommends anchor stores for those who sell more than 500 items or $5,000 in sales per month. In addition, eBay takes an upfront insertion fee, which ranges from 5 cents to $4.80 and then the company takes a 5-8 percent cut (called a “final value fee.”)
But eBay’s not the only option anymore. Yahoo! charges $39.95 a month for an e-commerce storefront and takes a 1.5 percent transaction fee (a $50 setup fee is also required.)
Amazon offers a program called WebStore by Amazon in which the company charges $59.99 per month and takes a 7 percent commission on gross merchandise sales. “The commission on sales is one flat commission rate which incorporates a number of services, including all credit card and transaction processing fees, website hosting, fraud management, traffic driving through natural search, and access to site merchandising tools,” says rep Kay Kinton.