Explore Your Auctions

Once the domain of small sellers, eBay has become a valued resource for entrepreneurs.
Magazine Contributor
12 min read

This story appears in the January 2003 issue of Entrepreneur. Subscribe »

Fifty million registered users can't all be wrong. EBay is an empire that was built on a foundation of individual sellers and raised up on the back of collectibles and antiques. But if that's all you think eBay is, then you probably haven't entered the terms "pocket PC," "printing labels" or "small business" through its search engine lately. Even the word "yak" reveals over 200 listings.

EBay isn't a cure-all for lagging business sales, and it can be a very involved and time-consuming operation. It's had its share of complaints from small businesses unhappy about fee increases and the site's policies. But eBay is still a valuable tool for many entrepreneurs, offering opportunities, such as a venue for selling excess inventory, that can help your business grow to new heights.

"We are like an e-commerce operating system for the American entrepreneur today," says John Herr, eBay's vice president and general manager. Those are big cybershoes to fill. Join us as we take a stroll around one of the most successful Web sites ever and look at how entrepreneurs of all shapes and sizes can benefit from jumping aboard. Here's a chance to look before you leap.

Bidding On It

Selling on eBay is not for everyone, but the system has proved itself flexible enough to accommodate a variety of entrepreneurs. This is where we meet two very different eBayers: Judy Dunlop and Andrew P. Hortatsos.

Dunlop, 41, is a classic eBayer. The owner of Days Gone By, an antique and collectibles store in Gravenhurst, Ontario, she's used eBay to sell her goods since a friend suggested she try it out in 1998. Gravenhurst is a small bedroom community with a population of 10,000 and a slow summer season. The $30,000 her business reaps from eBay sales annually helps her through the down times--and that amount is growing steadily. "If something doesn't sell on eBay, you throw it in the store" is her philosophy.

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Find out how to discover your eBay niche and other important rules of selling in our eBay Startup Centerfor more information on running your own eBay business.

Hortatsos, 37, president of the CyberMarketing Group, which runs sunglasses retailer ShadeSaver.com, is a modern eBayer. He co-founded the company with his wife, Tracy, 36, in 1998, and they now handle 50 percent of their business on eBay. "It was probably the single most important thing we stumbled upon as far as allowing our business to grow," says Hortatsos. He buys name-brand overstock wares for the sole purpose of selling them on eBay while his online store at ShadeSaver.com is geared toward all the latest styles.

One thing Dunlop and Hortatsos have in common: They both deal in tangible goods. The services arena has never taken off in the auction marketplace. Online auction expert Dennis L. Prince, author of Online Auctions at eBay(Premier Press), has a theory: "It's one thing to inspect goods, but you can't inspect the convolutions of a brain to see if they really know what they're talking about," he says. Tiffany lamps, loose diamonds, real estate and bubble wrap sell. Landscape design or Web site building don't fare so well.

While 50 million registered users is a sea of potential customers, competition for this vast market is intense. Just as you wouldn't open up a comic book store next to an existing comic book store in the real world, you shouldn't place items up for auction if the site is already saturated with similar offerings that aren't selling well. Don't waste your time. Dunlop uses a basic rule when placing her coats, quilts or collectibles up for bid on eBay. "If I [don't think I can] sell it for my opening bid," she says, "then I don't put it on."

Testing the Waters

OK, you think you're ready to sell--what now? Instead of just throwing items up on eBay to see what sticks, research first to evaluate the competition, check pricing and popularity. "We do our due diligence," says Hortatsos. "We know the pricing points for each of the brands we carry, and we know the market." He checks current and closed eBay listings before he lays out money for overstock merchandise. In the rare case that you can't find your item listed, eBay can still provide a good barometer of customer interest. Try running an auction and see what kind of attention it generates. Adding a visitor counter to your listing will give you an idea of how many people stop by for a look. Where else can you test-market a product for under a buck?

EBay is a hotspot for shedding excess inventory that's haunted your shelves for too long. Price-conscious auction buyers love to snag overstock or last-generation items at bargain rates. "Where retail is good is an area we don't really focus on at eBay," says Herr. "Where retail has its pain points and difficult areas is what we're best at." He includes hard-to-find, unique, out-of-stock, returned, refurbished and excess items in that description. If a customer returns a Zip drive to your store with the box open, you can't restock it as new. Consider putting it on eBay instead.

Most entrepreneurs who have found large-scale success on eBay have worked the process deeply into the way they run their business. Clicking the "Sell Your Item" button will bog down any but the occasional user who has just a few auctions to track. If you use it too often, it'll suck your time away faster than a whirlpool. Dunlop keeps a handle on her auctions with a tight inventory-control system and uses AuctionWatch, a popular automated listing tool, to keep her time spent on eBay down to five hours a day. Prince urges entrepreneurs to create a system for the process. Many businesses even dedicate one or more employees solely to dealing with eBay.

Retailing doesn't have to be your main line of business for you to sell on eBay. Anytime you upgrade hardware or equipment, consider auctioning off your old gear. It's better than shoving it into the back of the supplies closet or liquidating it for pennies. This goes for everything from counter-sized hot dog warmers to PCs. Larger items like vending machines will make you think twice about dealing with shipping. One way to deal with this is to list regionally. That way, the transaction can be completed in person.

EBay knows a good thing when it sees it. With the amount of business-to-business sales happening on the site, they're unveiling a B2B auction portal this month. It will still be tied in with the rest of the site's listings, much like eBay Motors is. "We're going to make it easier and more prominent for businesses to find what they're looking for," says Jordan Glazier, director of B2B at eBay. The portal should help address some of the clutter complaints that eBay receives on both ends of the equation: Buyers will have access to an aggregated site of business supplies, and sellers will be able to better target their products.

The Art of Listing
Oh, no--not red text against a screaming green background and an out-of-focus jpeg that takes three minutes to load! There is an art to presenting an eBay listing, and auction-goers have refined their tolerance levels. If your listing isn't well-designed and well-aimed, you're going to lose business.

Rule One: It's all about the keywords. On such a gigantic and unwieldy site, keywords are how buyers find you. Exclamation points and words like "wow" in the auction title won't help. Also beware of abbreviations like "tix" instead of "tickets." Brand names, model numbers and solid descriptions are the way to go.

Rule Two: Keep it clean. You know a well-designed Web page when you see one. It has a clean interface, loads fast and lays out all the relevant (and none of the irrelevant) information in an easy-to-read manner. A concise, accurate description--including all of a product's flaws, minor or major--is a must. Your selling policies, from payment options and shipping to returns, should appear as well.

Rule Three: The picture must be worth the price. Buyers like to see what they're getting. A clear, fast-loading photo is a necessity. Go with multiple photos if they're called for.

A few miscellaneous tidbits: Be sure to list your items in relevant categories. There are a lot of options, so get as close as possible. When you list an auction is also important. Weekend auctions tend to close at higher prices. Don't forget to keep different time zones in mind. After all, few buyers will wait up until 3 a.m. to make that final high bid.

Equipping Yourself

Don't forget about the deals you can get purchasing equipment and other business essentials on eBay. The fastest-growing category on eBay in 2001, for example, was office chairs. You can buy just about anything you need for your business from other businesses on eBay. Copy paper? Check. Pens? Check. Wireless networking gear? Check. Hortatsos takes full advantage by purchasing inkjet supplies and PCs. And those are just office-related items. Everything from used restaurant equipment to pool tables are up there, too.

As a business buyer, you can take full advantage of eBay's partnerships with companies like IBM and Palm, which shuffle overstock and refurbs onto the site. The deals usually aren't stunningly cheap, but you can save a bit over buying through traditional channels. Prince advises buyers to shop smart and walk away if the item isn't in their price range. "I wouldn't get too attached to a laser printer," he says. "It's not like finding your original baby blanket you absolutely have to have." As always, be aware of limited warranty details and the inclusion (or exclusion) of extras like documentation and software.

In the rocky but rustic Canadian Shield region, old harnesses, horns and skulls are scarce. That's why sometimes Dunlop puts a twist on buying for her business on eBay. She shops for items that are hard to find in her neck of the woods, like Western items, which are popular as cabin decor. Rare albums and European items are also on her eBay shopping list. Those products end up fulfilling local customer demand in her brick-and-mortar store.

But eBay is not all paradise. The site usually runs as it's supposed to, but that just makes the occasional wrench in the works more noticeable. A focus on creating reliable technology pretty much cleaned that problem up. One place to keep tabs on eBay problems is at the strongly opinionated Auction Guild.

One current ghost haunting eBay is auction fraud. EBay brass reports only a fraction of 1 percent of auctions is fraudulent. But that still works out to thousands of auctions. Research and common sense may be the best solution to this problem. "Sellers wear their reputations on their sleeves," says Glazier. He encourages buyers to read the feedback left by other eBay users, particularly the negatives. For big-ticket items, you can protect yourself by using an escrow service. The fee is worth the peace of mind.

On the other side of the transaction, Prince sees that most sellers are wise to buyer fraud and set policies from the start to thwart it. Hortatsos has conducted over 50,000 eBay sunglasses auctions and encountered intentional buyer fraud only once. Dunlop, who runs up to 500 auctions per day, has had a similarly smooth experience.

It's had its share of complaints from small businesses unhappy about fee increases and the site's policies. But eBay is still a valuable tool for many entrepreneurs, offering opportunities, such as a venue for selling excess inventory, that can help your business grow to new heights.

Many eBay users, particularly sellers who have been with the site since its early days, find it too cluttered in its current incarnation. The arrival of large, preferred-partner corporations has also been a sore spot. Big companies often view eBay as a way to reach the smaller businesses that fall under their sales radar. That strategy works for both sides. Hortatsos has been with eBay for four years and takes a practical view of the situation. "I view that as a natural progression of the business," he says. "If they're selling what I'm selling, the buyers will come to us in the end because of the personal service."

EBay is a unique e-commerce community. Opportunities abound on both sides of the auction transaction. The site will continue to experience growing pains, but eBay insists it won't lose sight of the people who fueled its rise. "It's the small entrepreneur who is really the spark that ignites the market and builds the community," says Herr. So if you haven't visited eBay lately, surf on over. It won't fit everybody's business plan, but you just might catch yourself exclaiming "Sold to the highest bidder!"

Healthy Thinking
"PowerSeller" is a special designation available for certain sellers who transact at least $1,000 monthly on eBay. PowerSellers also have to maintain certain levels of good customer feedback. Starting this month, a new perk will be available to this upper crust of eBayers: health insurance.

Originally announced last summer, the program has had delays in getting off the ground. Details of the program were slim at press time, but pharmacy, dental and vision coverage wil be included. Qualified entrepreneurs should be able to insure their families as well. As far as we know, you won't have to bid on it.


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