Let the Bidding Begin

An eBay business could be your entry to the online marketplace. Find out how to get started today.
Magazine Contributor
13 min read

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

In 1995, when Pierre Omidyar introduced an online business venue that was essentially a virtual garage sale with auction pricing, no one knew a retailing revolution was about to occur.

That site became known as eBay, and it's hard to find someone today who hasn't at least heard of the popular online auction company. On any given day on the site, an estimated 12 million new and used items are available, 1.7 million new listings are posted, and sales totaling some $40 million take place. And all it takes to get your share of that market, which is worth nearly $15 billion annually, is a computer, a modem, a digital camera or scanner, and something to sell.

What's important to understand from the start is that eBay is a sales channel that you can use exclusively or in addition to selling through a retail operation, mail order catalog, independent Web site or network of direct salespeople. You decide the type of business you want to have, what type of merchandise you're going to sell and how you're going to operate.

To sell on eBay, you'll pay a listing fee to post your merchandise and a final value fee (a small percentage of the sale price) when the item sells. To get a full explanation of eBay fees, check the eBay site.

What Can You Sell on eBay?
Deciding what to sell on eBay can be particularly challenging because your options are virtually limitless. Some of the more popular categories of items are cars, computers, consumer electronics, books, movies, music, sports items, collectibles, clothing and accessories.

Though eBay is a popular place for the sale of used items--ranging from high-dollar antiques to pieces of secondhand junk--it's also a good venue for brand-new, up-to-the-minute merchandise of all types and in all price ranges. Nona M. Cunane, 30, started out selling antiques on eBay in 1998. She did well, but decided she really wanted to work with a product she enjoyed more and that was easier to ship. So Cunane launched Stylebug.com, an online business that specializes in high-end designer clothing for women. Her Bear, Delaware, company does about $800,000 per year in sales--half of that on eBay.

Adam Ginsberg, 35, was already selling billiard tables in his retail store in Los Angeles when he auctioned one on eBay on a lark. It sold, so he put up another one. Within a year, he had closed his retail store and was selling exclusively on eBay under the name Zbilliards. This year, he predicts his eBay sales will hit $15 million.

David Schultz, 27, learned about eBay when his former boss asked him to study ways to sell merchandise online. Schultz launched IEPVisions in Orlando, Florida, in 2000 to sell baby and children's furniture primarily on eBay; he expects 2003 sales to reach between $2.2 million and $2.8 million.

Can you duplicate the success of these entrepreneurs? They all say sure--as long as you choose the right product line and apply sound business practices to your operation. As you take the first step of deciding what to sell on eBay, keep these points in mind:

  • The right product: Don't choose a product based on potential profits alone; be sure it's something you'll enjoy selling.
  • Cost and sale price: How much will the item cost you, and how much can you reasonably expect to sell it for?
  • Availability: Is the merchandise you need readily available, or will you risk having to deal with supply problems?
  • Storage: Do you have room to store the merchandise?
  • Packing and shipping: Consider what's involved in packing and shipping the merchandise. Even though the buyer typically pays the shipping costs, think about your labor, time and potential breakage.
  • Seasonal issues: Will the item sell year-round, or will it be subject to seasonal fluctuations?
Online Exclusive
Visit our eBay Start-Up Center to read an excerpt from our new business guide, How to Start an eBay Business, and to find out more about how to get in on the online auction revolution.

eBay does place some restrictions on what can be sold on the site and provides a detailed list of forbidden and questionable items. Essentially, eBay prohibits the sale of items that are illegal, fraudulent or harmful in any way; that might cause injury or damage; or that might infringe on someone's trademark or copyright. Users are responsible for ensuring their items are acceptable. If you do post an item for sale that is prohibited, eBay will notify you and terminate the listing.

If you buy from wholesalers, choose them carefully. You'll see plenty of ads on the Internet for liquidators, closeout sources, distributors and wholesalers--but, Schultz points out, keep in mind that everyone else has access to those same resources. "You need to find your niche," he says. The best approach is to decide what you're going to sell, then look for a source for it. Of course, you should always deal with reputable suppliers who provide quality merchandise and top-notch service.

How Do You Sell on eBay

eBay is not a one-size-fits-all site--you can choose among several different types of auctions and fixed-priced ways to sell your merchandise. In a basic eBay auction, you post your item with a starting price (the amount at which bidding starts) and wait for bidders to drive the price up. You are then obligated to sell to the highest bidder when the auction closes.

You can also set a reserve price, which is a hidden minimum price that is the lowest amount you're willing to accept. Buyers are not shown what the reserve price is, and if it is not met, you are not obligated to sell the item.

eBay offers a "Buy It Now" feature that gives bidders the option to buy your item immediately for a set price. Or you can choose a fixed-price listing, which simply puts the item up for sale at a set price, with no bidding allowed.

If you have two or more identical items for sale, you can post them in the same auction by using a Dutch (or multiple-item) auction. In addition, eBay offers restricted-access auctions, which can be used for a variety of reasons, but primarily to make it easy for buyers and sellers to find or avoid adult-only merchandise.

In addition to auctions, you can also set up your own eBay store, which will allow you to sell auction and fixed-price merchandise from your special location on eBay. You'll pay a monthly fee based on the level of store services you want, plus additional fees for items listed and sold.

The Technical Side of eBay
eBay has evolved into one of the most user-friendly sites on the Internet. Getting set up as a user is a simple process that you can complete in just a few minutes. You'll be required to provide your name, address, e-mail and telephone number, as well as a credit card number and your checking account information. eBay uses this information to confirm your identity--which protects the integrity of its operation--and to collect auction fees. If your contact information changes, be sure to notify eBay immediately.

You must register in order to buy or sell on eBay, but you can browse around the site without registering. Before you do any business on eBay, be sure to take some time to get to know the site. Set aside several hours to get online and browse around, study listings, read the help pages, understand the various tools and how you can use them, check out the forums, and get comfortable with how the site works.

Once your business is up and running, you'll probably want to consider using supplemental auction management software, which will save time and money, make you more efficient, and improve the level of customer service you offer.

Post With the Most
With more than 61 million registered users, eBay offers a huge field of prospective customers for your business. But don't just throw up an auction and expect to get top dollar without any effort. Some tips for marketing your eBay listings include:
  • Grab your customers' attention with a sharp headline. You get 45 characters for your headline; make each one count. Your headline should clearly indicate what you're auctioning.
  • Write great descriptions. Take the time to compose complete descriptions that fully describe the item and your sales terms. Think about what you like about the item and would want to know about it, and put that in your description.
  • Post high-quality photographs. eBay customers can't see or touch your featured item. The picture is all they have to go on, so be sure to make it sharp and clear, with a neutral, uncluttered background that doesn't distract from the image.
  • Use eBay's tools. eBay offers a vast array of handy tools to make your auctions stand out. Consider using highlighted and bolded text in the headline, adding a gallery photograph (that appears next to your listing in search results), marking your item as a gift, or designating your auction as a featured auction. eBay charges fees for these and other promotional tools, so keep the costs in mind as you decide which ones to use.

Customer Service the eBay Way

Providing top-notch customer service is an essential element to successful eBay selling. "Everything on eBay is about total customer service," explains Ginsberg. He has three full-time employees who answer e-mail and phone calls from his customers.

"You can't just respond to an e-mail two days later or ship a week later," says Cunane. Whenever her customers ask a question about a garment or sizing, they want an answer fast-and if they don't get it, they probably won't bid on the item. But when your customers are happy with the service, they'll likely buy items from you again. "Make the buyer feel like they're involved in the whole process," Cunane advises. "Answer e-mail quickly, ship within two days of receiving payment and send them a tracking number."

Schultz agrees. "Customer service is your [top] priority, and it's going to take more time than you think," he explains. "For every auction you put up, you're probably going to get at least two e-mails that have to be answered personally."

If you see a pattern in the questions, consider addressing those issues in your listings or on your "About Me" page--a free service eBay offers to sellers to post information about themselves and their operations--or in your eBay store, if you have one. In addition, Schultz recommends developing standard responses that you can cut and paste into e-mails to speed up your answers.

If you don't stay on top of customer service, you risk getting negative feedback--and feedback is your eBay reputation. In every transaction, the buyer and seller have the opportunity to leave a comment, and you can check a user's feedback rating before you decide whether to do business with that person.

Unfortunately, notes Ginsberg, you will have customers who will threaten to leave negative feedback if you don't do what they want--even if they are being unreasonable. Most of the time, he meets their demands because "the customer is always right."

Life as an eBay Seller
eBay sellers agree that this is an exciting and fun way to do business. Cunane says a huge benefit to selling on eBay is that your image depends on how you present yourself and serve your customers--not on how large or small your company is. "It's a level playing field," she says.

Start off by buying a few things, then start selling, posting just one or two auctions at a time until you're comfortable with how the process works. You'll make mistakes, especially in the beginning, but if you learn from them, they'll be worth the cost.

Even when you do everything right, not all your auctions will be profitable. According to Schultz, "It's kind of like playing baseball. You don't hit them all."

Be prepared to take a loss on some transactions, especially on inventory that's been sitting around too long. "We don't always sell things for a profit," says Cunane. "Sometimes we move things for a loss just to get rid of them."

Keep in mind that eBay is ever-changing. As the economy cycles, you'll experience changes in pricing and demand. And as more and more people start operating on eBay, the competition will increase, and prices may decline slightly (which is great when you're buying, but not when you're selling). "Just like in the offline world, sellers have to adjust and make changes to stay in business and be successful," explains eBay's Kevin Pursglove.

If you plan to make selling on eBay a full-time business, expect to work hard. "Being a seller on eBay is not an easy job," Pursglove says. "Those first couple of years are very long hours, very few holidays, very few days off. But most people find the experience very rewarding."

Don't be intimated by the sheer size of the operation, and keep in mind that eBay has reached less than 4 percent of its potential market--which means there is plenty of room for you. So find your eBay niche, get online and watch your business grow.

The Shipping News
Before you put an item up for sale on eBay, know what is going to be involved in shipping it--how it needs to be packed, which carriers can handle it, and anything else that might affect the overall service you provide. Prompt shipping is an important part of good eBay customer service. Your goal should be to ship within two days of receiving payment. Let your customers know by e-mail when their merchandise has been shipped, and give them a tracking number.

Even though it's typical for eBay buyers to pay for shipping, you still need to accurately calculate shipping costs and add that to the total amount the buyer pays. Underestimating cuts into your profits; overestimating will irritate your customers. Invest in a good set of scales, and use the online rate calculators provided by the major carriers (FedEx, UPS and the United States Postal Service).

Be sure to pack the merchandise carefully, and include a copy of your shipping label or an invoice with the customer's name and address on the inside in case the outside label is damaged in transit. Additional shipping tips and sources of materials can be found on the eBay Web site.

To learn more about setting up your own shipping system, read "Shipping and Handling Essentials" and "Mailing Equipment."

Jacquelyn Lynn is a writer whose husband has threatened to nail down items he doesn't want her selling on eBay.


More from Entrepreneur

Our Franchise Advisors will guide you through the entire franchising process, for FREE!
  1. Book a one-on-one session with a Franchise Advisor
  2. Take a survey about your needs & goals
  3. Find your ideal franchise
  4. Learn about that franchise
  5. Meet the franchisor
  6. Receive the best business resources
Entrepreneur Insider members enjoy exclusive access to business resources for just $5/mo:
  • Premium articles, videos, and webinars
  • An ad-free experience
  • A weekly newsletter
  • Bonus: A FREE 1-year Entrepreneur magazine subscription delivered directly to you
Discover a better way to hire freelancers. From business to marketing, sales, finance, design, technology, and more, we have the freelancers you need to tackle your most important work and projects, on-demand.

Latest on Entrepreneur