Start an eBay Business

Learn the basics of advanced eBay use, from choosing a product tomaking a profit.

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Almost everyone has bought or sold something on eBay. After all, at any given moment, there are 113 million listings on the eBay site. No wonder eBay averages over a billion dollars a quarter in profits. And thousands of entrepreneurs have grown from occasional eBay users into eBay businesses -- at least 724,000 people in the U.S. rely on eBay for either their primary or secondary source of income. You, too, can turn your eBay hobby into a great business opportunity. Read on for tips on what to sell, making the sale, and keeping track of your costs.

Before You Begin: The eBasics

If you want to get started as an eBay entrepreneur, you're going to have to have a few key items:

Computer. Just about any computer that can get you on the Internet -- PC, Mac, or Linux -- will work fine for eBay, but you'll be most efficient with a computer manufactured within the past three or four years.

Broadband connection. There's no way around it. eBay buyers and sellers need a broadband connection (also known as a "high speed" connection). Some eBay members operate with dial-up modems, but for a business, dial-up is too slow to process a meaningful number of sales.

eBay membership. You must be an eBay member (with your own unique eBay ID) in order to buy or sell, but the good news is that eBay membership is free.

Digital camera or scanner. You will need digital pictures of the merchandise you are selling.

Something to sell. For information about tracking down suitable merchandise, read "What to Sell" below.

Shipping supplies. Bubble wrap, anyone? You'll need packing material, mailing envelopes, and whatever else is required to guarantee safe delivery of your merchandise. Your shipping performance is a crucial aspect of your reputation in the eBay community.

Credit (or merchant) card account and PayPal membership. Most eBay members consider essential both PayPal membership and the ability to accept credit cards from buyers. Buyers feel safer and prefer to work with sellers who have credit card and PayPal capacity.

What to Sell

Your best strategy is to combine something you know or like with something that will sell. For example, if you're familiar with auto repair, then you may want to concentrate on selling hard-to-find Fiat parts or accessories. Whatever you choose to sell, successful selling requires monitoring, patience, and flexibility.

What Are People Buying on eBay?

How do you know what will sell? The good news is that eBay has plenty of research available so you can find out exactly what people are buying (and lots of other sales-related information). The not-so-good news is that everyone else can get that information, too, which sometimes makes it difficult to outsmart your fellow sellers.

Where to Find Merchandise

eBay Sellers find merchandise everywhere, literally. Here are five of the most common sources:

  • Wholesale lots and liquidations. These are bulk sales of similar or related items -- for example, a laptop manufacturer selling a lot of 200 of last year's model.
  • Local and regional sources. It may seem obvious, but bargains are still found in garage and yard sales, church rummage sales, estate sales, moving sales, charity fundraisers, local auctions, municipal and federal auctions, flea markets, and similar events.
  • Wholesalers and distributors. You can try buying, as a regular retail store would, from wholesalers.
  • Manufacturers and trade shows. If you can establish a relationship directly with a manufacturer, you'll often get the best deals possible, because you cut out middlemen -- distributors and wholesalers.

Becoming an eBay Pro

If you're considering starting an eBay business, you are probably already familiar with the basics of the process: you list an item, there's some bidding, and the highest bidder wins. However, to turn your eBay doings from a hobby into a business, you have to raise the level of your game, from attention-grabbing listings to keeping track of financials. Here's an overview of these key aspects of an eBay business. 

Making the Sale

At the most basic level, when you list an item for sale on eBay as a business, you'll want to be as professional as possible:

A good title. Since more than 90% of eBay buyers search by title, it is essential that your title contains the same terms (or "keywords") used by searching buyers. You can get the scoop on this by looking at the titles of listings for products like yours that were successfully sold.

A truthful and appealing description. The description must include all the information a buyer would want to know -- for instance, size, style, model, and condition. Good writing counts for a lot here, so be exciting but clear and, whatever else you do, use spell check.

Accurate photos. Whatever you sell, buyers rely on an image (and they may be suspicious if they don't see one). Though it's key that the photograph reveal the item's condition, beyond that you can and should get artistic: make sure the item is well lit and the photo you post is cropped in close to really show off your item.

Reasonable terms and conditions. Buyers really don't like it if you sell an item cheap and then apply outrageous shipping and handling charges, and eBay has rules about what's reasonable in this respect. You should also decide before you post whether you'll allow returns and what your policy will be.

By preparing these elements ahead of time you can effectively compete as an eBay business.

Making a Profit

There are four kinds of costs you need to keep in mind when calculating the financial feasibility of an eBay business.

Your "cost of goods." When buying (or making) merchandise, keep track of all your costs. This is not simply the item price you pay for goods but rather the total cost of acquiring the goods, including things like shipping.

eBay fees. You must pay eBay fees for posting and selling an item. First, there is an insertion fee, based which eBay features you employ, like Buy-It-Now pricing or adding a subtitle to your posting. Second, there are Final Value Fees (FVF), which are based on the final sale price and range from 1.5% to 8.75%.

Payment services fees. If you maintain a Premier or Business account with PayPal, which you must have in order to receive more than $500 a month in revenue, you must pay fees in order to receive payments. Personal PayPal accounts are free but cannot receive credit card payments.

Shipping fees. Fees for shipping an item, such as UPS, USPS, or FedEx charges, are typically passed on to the buyer and included within the final transaction fee, but if you don't estimate them accurately you may find yourself eating the difference between your charge to the customer and the carrier's charge to you.

Rules, Disputes, and Feedback

eBay is a community with rules. Violators of these rules may find their listings canceled, account privileges limited or suspended, or PowerSeller status revoked. When disputes arise between buyers and sellers -- typically over a winning bidder's failure to pay for an item, a seller's failure to deliver an item, or the state of an item when delivered -- eBay and PayPal provide various means of resolving the disputes and providing compensation. Additionally, the eBay feedback system, although not perfect, allows buyers to rate sellers. (Changes instituted in 2008 prevent sellers from leaving negative feedback about buyers.) For more information, see Nolo's article Resolving eBay Disputes.

To learn more about eBay rules and strategies, get The eBay Business Start-Up Kit , by Richard Stim (Nolo).

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