Little's Blog Things

Tuesday, March 24, 2009

How Not To Lose Thousands Of Dollars From Your Ebay Business As A Merchant

Did you know that there are winners and loosers at Ebay? These include both buyers and sellers! If you'd like to make money at Ebay and you are new to Ebay, yes you can make money at Ebay. And of course, you can also loose money at Ebay as a seller!

In this article, let me share with you some facts and strategies that you need to be aware as a seller. If you are not aware of these things, remember you could loose a lot of money at Ebay too!

FACT #1: POSTING AN ITEM FOR SALE AT EBAY WILL COST YOU MONEY!

This is certainly true. For every item that you post at Ebay whether as auction or as a fixed price "Buy Now" item, you will pay for the posting costs. Whether the item you have posted will be sold or not, you still have to pay for posting such item at Ebay!

Example, suppose you bought some discounted fantasy knives from a store that went on a closing sale. You have decided to sell these items at Ebay to make money because you thought you bought them at a very low price thus you can make money. When you post each item for sale at Ebay, be sure you have an idea how much it will cost you to post that knife at Ebay plus your capital expense for each knife.

Let us suppose your posting expense will cost you $0.85 and your capital expense for each knife is $15.00. What if you posted that knife with a starting bid of $15.00 and only one customer made a bid at $15.00, definitely you loose on your posting costs!

Remember, it is possible that nobody would bid on your item or probably only one may bid on your item especially if it is not in great demand. So if you have ten fantasy knives to sell at Ebay, and perhaps only 3 of it got sold, while there are seven that did not sell, you will still be required to pay the posting costs even for the seven unsold knives!

Be sure to know the costs and expenses for posting either as an auction or "Buy Now" at Ebay. This includes the final sale charges. You can either integrate these costs into the initial bidding price or to the "Buy Now" price of your item.

FACT #2: CREDIT CARD PROCESSING WITH PAYPAL IS NOT FREE!

Please remember that when you opened an account with Paypal, Paypal will charge you a certain percentage from the total cost of your item sold. Based on the example I have presented at fact #1, if your knife was sold only for $15.00 based on only one bid made, you will also have to pay credit card processing with Paypal which will be based on the final price of the final bid.

Thus, in this example, you will loose money not just on your posting cost, but also on your Paypal credit card processing. Therefore, it is very important that you will also have an idea how much money you also need to recover and integrate into the price of your item.

FACT #3: NOT ALL STARTING LOW BIDS WILL CREATE A BIDDING FRENZY

Yes, you heard it right. Not all starting low bids will create a frenzy of bidding especially if the item you are selling is not in great demand. Let me show you another illustration.

Suppose you bought some very cheap pool cues to be sold at Ebay at a super low prices. Normally, you know these pool cues could sell for $25.00 each at retail stores and you bought each for $10.00 only. But then, they are very cheap that they are not very popular nor in demand. Hoping to create a bidding frenzy, you offered a starting bid of 99 cents.

What if the final price for each auction bid on your pool cues reached no more than $5.00 each, then you loose almost $5.00 on each item. What if you have bought 100 pieces of pool cues to be sold at Ebay, are you willing to loose $500 on those 100 items? Remember, you are here at Ebay to make business, not to gamble. Consider your starting bid appropriately.

FACT #4: SHIPPING AND HANDLING COSTS ARE EXPENSIVE

After the bidding is done, your next step after receiving the payment for the winning bid is to ship the item to your customer. Unless you have received shipping supplies for free, did you consider the price you have to pay for these supplies? How about the shipping expense, did you offer a "Free Shipping" or a reasonable cost of shipping and handling charge?

If you are NOT getting free shipping supplies, remember even the cost of a box to package your sold item can make your profit even a lot smaller. From the example of the pool cue which you bought for $10.00 each, what if one got a final bid of $13.00 and you had to buy a shipping box worth $1.50 for each, would you be content of your profit of $1.50 only? Remember, you still have to pay for the posting costs, Paypal charges, and lastly, the shipping expense.

Please be aware that you can also get some shipping materials for free. UPS and the US Postal Service does provide some FREE shipping boxes. However, you need to buy the bubble wrap and the other packaging materials separately. Take advantage of the free shippping boxes to save on your losses and charge the other shipping and handling costs at reasonable prices.

Unless you are sure to have a very big profit margin on your sale, do not offer FREE SHIPPING if you cannot afford it.

FACT #5: A $1 PROFIT GOAL MAY NOT ALWAYS BE SUFFICIENT FOR YOUR BUSINESS

Some business people would say, "If you made a profit of $1, you are richer by $1". In essense, it is true. But will it be sufficient for your business needs? Let us try to consider something here.
Suppose your goal is only to make a $1 profit on each item that you need to sell (irregardless how small or big they are, or whether they are low priced or high priced item). To be able to reach a sizable $200.00 profit for a one day work would mean that you need to sell 200 pieces of items, right?

Question: Could you package all 200 items alone by yourself throughout the 8-hour period of your day's work? Remember, aside from posting your goods for sale at Ebay which may take some time, packaging 200 items will be a lot of work for you. This would be equivalent to 25 packages to package per hour by you alone. Thus you may not be able to finish your work on time. Plus, you need to bring these items to the post office and perhaps wait in line too!

Would you agree that with the 200 items to package, you may need an extra help as well? To hire an extra help, you will need to pay at least the minimum wage (depending on your state's requirments). Suppose the minimum wage is $7.50 per hour x 8 hours, this will cost you $60 expense per day for labor. That leaves you $140.00 per day.

$60 per day on labor x 5 days work for a week = $300 per week of labor expense.

$300 per week on labor x 4 weeks = $1,200 per month of expense.

What about your other overhead costs such as storage cost or office rent? Don't forget you also have to pay the state and/or federal taxes for your business. Will this strategy of business be sufficient for you? Perhaps this may work for a big company that's doing business at Ebay, but not for a single person doing this business.

On the other hand, what if you have a profit margin of $10 on a medium sized item that you will sell at Ebay. To earn a sizable profit of $200 per day, you need to sell only 20 items for your 8-hour day work period. This translates to packaging only about 2-3 items per hour, therefore you will not need extra help to accomplish your goal. Thus, no extra expense on labor. This avoids you paying $1,200 per month on labor based on the above example.

WHAT TO SELL AT EBAY:

Don't just sell anything at Ebay if you want to be serious in making money. Learn to research which items sell good at Ebay; or which items are in demand. Observe the items that have been sold at Ebay. I have seen certain items that people almost always bid on, such as certain high end antique watches.

If you can identify what those items are, and you know where and how to get those high demand items to be sold at Ebay, this will certainly give you a good business.
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About the Author
VMT Singuillo is a freelance writer. Some of his subjects include home care, Native American flutes, board games and more.

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