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Overcoming the Obstacles

Eager to get your business on eBay up and running? Here's how to clear these 9 common hurdles to runaway success.
April 1, 2007
URL: http://www.entrepreneur.com/article/176264

Believe it or not, most of today's Titanium and Platinum-level eBay Power-Sellers were once small-time operators. Although they generate hundreds of thousands--even millions--of dollars in sales each year now, many of them started as one-person businesses, often listing individual items from their attics or basements.

Why are some eBay sellers able to achieve PowerSeller status while others struggle to be profitable? The difference is in how they tackle the obstacles every eBay seller faces. Those who face the challenges head-on ultimately create high-volume ventures, while those who don't generally hit a sales plateau beyond which they simply can't move.

Andrew Fullmer, eBay top seller account manager who consults with the largest sellers of technology, and Elizabeth Ferguson, eBay top seller account manager who consults with Trading Assistants, witness the struggle every day. From their experience working with hundreds of sellers at all levels, they have identified nine obstacles that frequently stand in the way of major success on eBay. Overcoming them leads to higher sales and higher profitability.

1. Product Sourcing
Finding products to sell in quantity is the most common obstacle, according to both Fullmer and Ferguson. "People start with what they have in their wardrobe," says Ferguson, but they have no experience setting up and selling in an online store. While selling off articles of designer clothing you've grown tired of is a great way to clear out your closet and generate a little cash, once your closet is bare, you need to investigate new sources of merchandise.

First, you need to decide what you're going to sell, says Fullmer. What will you offer, and where will you buy it for resale? Locating a reputable manufacturer, distributor or wholesaler who can supply all you need is a sizable obstacle.

Ferguson recommends attending industry trade shows to identify suppliers or, rather than having to invest in inventory for resale, becoming a Trading Assistant so you can charge a commission for selling other people's castoffs. To be included in the Trading Assistant Directory and have access to Trading Assistant marketing materials, you must have: 1) sold at least 10 items during the previous three months; 2) a feedback score of 100 or higher; 3) 97 percent positive feedback or higher; and 4) an eBay account in good standing. Members interested in registering as a Trading Assistant can learn more by visiting www.ebay.com/ta.

2. Knowing What You Sell
Another related obstacle is product knowledge. "Choose something you're knowledgeable in. Don't sell technology products if you have no background in technology," advises Ferguson. "If you know nothing about a product other than that it's popular, that's not a great place to start." Yet Ferguson says she finds many sellers in this situation--"someone who's currently selling Barbies but who's considering switching to computers."

If you have an interest or background in Barbie dolls, for example, it would be wiser to branch out into selling toys than to enter an entirely new, unfamiliar market. Or if you're selling designer clothing, branch out into shoes or handbags. By staying focused on a particular merchandise category, you can develop an expertise that will make listing and pricing easier, not to mention making higher-volume selling possible.

John Stack, 55, CEO of Peach Trader Inc. (eBay User ID: acitydiscount) in Atlanta, has sold used restaurant equipment since 1973 and began selling on eBay in 1999. A Titanium PowerSeller today, which means he generates at least $150,000 in sales each month, Stack expanded his business into new restaurant equipment a few years ago, sticking with what he knows well.

3. Volume Selling
By the same token, becoming a successful seller on eBay also requires volume--more products for sale and more sales. While gaining experience selling single items you no longer want is an excellent way to learn eBay's ins and outs, unless you're specializing in a particular category--china, children's clothing or MP3 players, for example--"it will be difficult to get to the next level," says Fullmer. "You need to focus on volume."

Limiting your focus to one or two product categories enables you to more quickly list the items for sale, have the appropriate-size shipping containers on-hand and be more profitable because you know your basic costs.

4. Inventory Management
Understanding how eBay works and what tools are available to assist you in doing more business is important for long-term success, says Fullmer. And one of the most important aspects of running your business on eBay is effective inventory management.

A case in point is Saberpoint (eBay User ID: saberpoint), based in New York City, which sells cell phones and accessories. The company turned to eBay as a means of selling outdated stock, starting with 10 to 20 pieces a day at first, says partner Ken Engel, 47. But that number quickly accelerated as Engel and his business partner, Ajay Bhumitra, 50, struggled to keep up with demand. Sales climbed to $300,000 in the first four months, creating a whole new set of challenges.

"We faced a lot of problems [early on] because we never expected [the merchandise] to sell so well," Engel says. For starters, Saberpoint was using a retail system to manage its inventory, but it wasn't set up for online sales. So the partners wrote their own inventory management software to be sure it would meet all their needs.

That inventory management system generates a report each morning listing sales levels and inventory projections for the next three days, based on current demand. "That tells us what we need to buy," explains Engel. So if a certain cell phone model has been selling at a rate of 50 per day and Saberpoint has 50 in its inventory, Engel and his team know they need to buy 150 phones to meet current levels of demand for the next three days (50 phones per day multiplied by three days). Accurately matching a supply of merchandise to constantly changing demand levels is tricky and, for larger sellers, couldn't be done without inventory management software.

For companies not interested in or willing to write their own software, there are several inventory management programs currently available through eBay, listed under "Selling Tools" on the eBay Site Map. Also found in the "Selling Tools" section is a link to the eBay Solutions Directory, which provides information on services from third-party companies that allow sellers additional resources to further manage their business growth. Examples of such third parties are ChannelAdvisor, Channel Velocity, Infopia, Kyozou, Marketworks and Vendio.

5. Familiarity with eBay's Trust and Safety Policies
To protect both buyers and sellers, eBay has well-defined policies regarding what items can and cannot be sold on the site. Sellers should become very familiar with which items are forbidden so as to avoid investing in merchandise that cannot be listed for sale.

Some types of products are illegal, such as merchandise made from endangered species, while others may be legal to own but are not permitted to be sold on eBay, such as guns. And others may be listed on eBay, but only if the seller meets certain criteria, as in the case of the new PlayStation 3 systems released in 2006--sellers could list them for sale as long as they had a certain level of positive feedback and had the item in hand.

From time to time, National Products Sales Inc. (eBay User ID: nps), based in Salt Lake City, is affected by these policies, although the company doesn't necessarily disagree with them. NPS was founded in 1969 by Kelly Farmer to create a retail market for misdirected, unclaimed or damaged freight from shipping and transportation companies.

Because the company frequently buys merchandise secondhand, it doesn't always know which products are authentic and which are not, explains Brad Auernig, 28, who manages the company's eBay sales. To avoid posting listings for items that are prohibited on eBay, the company takes the time to authenticate brand-name items it has acquired. Before listing an item, says Auernig, "we do a lot of research on our own."

6. Research
In addition to researching what types of products are on eBay's prohibited list, which you can find by searching for the phrase "prohibited items" in the "Help" section of the site, research what prices products like yours are selling for, says Ferguson.

Knowing what price merchandise is selling for helps you know what to buy, and for how much, in order to make money on eBay. Other facts to research include which keywords buyers are using to get to your products. Are there other terms you're not currently including in your listing titles that your competitors are? Use as many different terms as you can to attract the largest number of potential buyers.

One of the best resources to research pricing and popular products is eBay's own Hot List, which is available in Seller Central and details which products in each major eBay category are selling best. Seller Central can be found by clicking on the "Sell" tab on top of any eBay page and scrolling to the footer for the link. You can also do a Completed Listings search from the "Advanced Search" page on eBay to see how much items sold for in the past two weeks. For a much more extensive look at recently completed listings, you can use eBay Marketplace Research, which allows you to look for products sold on eBay up to 90 days ago.

7. Confidence in the Marketplace
Just as eBay has policies and procedures in place to build trust within its community (such as the feedback system), sellers also have to have confidence that the market can determine the price for an item.

Stack, for instance, was initially skeptical that restaurant equipment listed for a fraction of its true value would ultimately sell at a profit, so when he posted his first items--250 commercial coffee makers--for sale on eBay, he used a Reserve Price of about $150. They didn't sell. So he tried again, this time listing the coffee makers for a starting bid of $25. They sold like hot cakes, most for $150 to $200. "I needed confidence in the marketplace," says Stack. "Now I let the customer set the price." That means 95 percent of his used items are listed with a 99 cent starting bid.

Surprisingly, starting a listing at 99 cents generally yields better results than listing an item at a higher opening bid, even when the item is quite valuable. Stack remembers a huge walk-in cooler worth at least $10,000 that he decided to sell on eBay a few years ago. For two months, he listed it at $10,000, believing that was a reasonable price, yet he had no takers. Finally, he relisted it with a starting bid of 99 cents, and 10 days later it sold for $10,000.

However, a 99 cent starting bid shouldn't necessarily be your rule of thumb, says Ken Vilkin, 44, owner of Blue Moon Coins (eBay User ID: bluemooncoins) in Vancouver, Washington. Vilkin, who is a Titanium PowerSeller, recommends sellers test different price points. Especially with niche products, you may find you can keep your prices higher than your competition and still do well, he says. "[Competitors] tell us we get a lot more for the same coins than they're able to get."

8. General Business Knowledge
Although you certainly don't need an MBA to succeed on eBay, Fullmer has found that a basic understanding of financial management and reporting can be extremely helpful. Being able to calculate your total costs and know whether you're profitable or not can help keep you out of financial trouble. One way you can do this is with Sales Reports, a free tool offered to eBay sellers to track weekly and monthly sales trends.

"We pride ourselves on our strong financial department," says Engel. "We are extremely margin-conscious"--so much so that Saberpoint uses a number of resources to monitor what the market will bear. One of the company's favorites for tracking the average selling price of various cell phones on eBay is HammerTap, which helps Saberpoint calculate the average daily selling price (to know which days are potentially more profitable for listing items) and the conversion rate for all its listings (that is, the percentage of all listings that ended in a sale).

Many entrepreneurs can export such sales data into small-business accounting software, such as QuickBooks (which is supported on eBay through Accounting Assistant) or Microsoft Small Business Accounting, to better understand which products are profitable and which are not, says Engel. Another tool that can integrate eBay sales data and combine it with other selling platforms such as brick-and-mortar locations is KeepMore.net. KeepMore is a simple-to-use online solution that keeps track of your income and expenses. Use of tools like this can help sellers know and understand their complete bottom line for all avenues of selling product.

At Saberpoint, sales have grown more than 350 percent in the past year, suggesting that keeping a careful eye on the bottom line really does pay off.

9. Automation
A rudimentary understanding of how eBay works will get you pretty far, but getting to the next level--where you're making more money and having to invest less time and energy--requires that you automate as many processes as possible.

Once you begin ramping up the number of items you're selling, "make the most of your momentum," says Vilkin. He advises you to streamline the shipping process so you can get more done in less time--and make more money.

Make It Easy
Online automation tools can help jump-start your business on eBay.
eBay Blackthorne: An all-in-one listing, management and tracking tool. Subscribe to the basic version for just $9.99 a month.

eBay Marketplace Research: Before you list an item, know what it's currently selling for and what it has sold for in the past. Pay as little as $2.99 for short-term access.

eBay Selling Manager: Quickly track and manage multiple listings. After a 30-day free trial, it's $4.99 a month (free with an eBay Store).

eBay Selling Manager Pro: Create auto-list and relist rules. It's $15.99 a month (free for Featured and Anchored Store subscribers).

eBay Stores: Set up an eBay Store, where you can sell fixed-price merchandise, for as little as $15.95 a month.

eBay Turbo Lister: List items in bulk, rather than one at a time, using this free alternative to the "Sell Your Item" form.

HammerTap: A third-party tool for researching selling prices on eBay. The company currently offers a free 10-day trial.

ProStores: Create your own e-commerce store.