Subscribe to Entrepreneur for $5

The Secret To eBay Success

Is it possible to create a profitable business using the online auctioneer?

Opinions expressed by Entrepreneur contributors are their own.

Q: Ihear so much about people who started selling on eBay andeventually turned it into their full-time business. Is it reallypossible to build a profitable business just selling junk oneBay?

A: IfFred Sanford were alive today, I'm sure he'd be earning hisripple money by selling quality junk on eBay. While it's alsotrue that one man's junk is another man's treasure (I havea garage full of treasure to prove this point), your chances ofbuilding a profitable business selling "junk" on eBay (oranywhere else, for that matter) are slim to none.

While there is a lot of junk/treasure for sale on eBay, it istypically sold by individuals who have "I brake for yardsales!" bumper stickers on their cars and not seriousbusinesspeople.

For serious entrepreneurs, however, selling on eBay can be agood way to start a new business if you're willing to put inthe time and energy required to make the business a success. eBayis also a good option for existing businesses to expand their reachby selling online.

Everyone-from small used car dealers to giant companies likeDell Computers-has discovered that eBay is an excellent place tohawk their wares simply due to the huge number of folks who visitthe eBay site on a daily basis. Nowhere else on earth will you findsuch a large pool of potential customers.

Consider these numbers:

  • There are nearly 95 million eBay users who spend $894 persecond.
  • Most eBay sellers are individuals and small businesses who selleverything from porcelain dolls to DVD players to Mercedesconvertibles.
  • Every day, more than 2 million new items are added to the eBaymarketplace, more than 10 million bids are placed, and more than100,000 new people register to buy and sell on eBay.
  • At any given moment, eBay is conducting some 19 millionauctions, divided into more than 45,000 different categories.
  • About 2 million new items are offered for sale every day.
  • One company is grossing more than $5 million per year sellingbrand-new pool tables on eBay. Their eBay store is so profitablethat they've closed their retail location and now sell solelyonline. That's right, they're making $5 million by sellingpool tables-proof that you can sell just about anything on eBay ifyou know how to do it.

Be aware, however, that eBay is no magic bullet. As any eBayPower Seller (a seller who has at least 100 feedback ratings-98percent positive-and maintains at least $1,000 in average grossmonthly sales for three months, amongst other criteria) will tellyou, building a profitable eBay business takes hard work andrequires long hours, and often the financial rewards do not make itworth the effort spent.

When it comes down to the mechanics of it all, running an eBaybusiness is no different than running a brick-and-mortar business.You still have the same considerations regarding product selection,inventory purchasing, product pricing, inventory management, orderprocessing, fulfillment, customer service and so on.

You must also consider the legal and accounting aspects of thebusiness. Just because you're selling online does not mean thatUncle Sam won't expect his piece of the pie. Revenue generatedby an eBay business is just as reportable and taxable as revenuegenerated from a brick-and-mortar store. And if you sell tocustomers within your state, you may also be responsible forcollecting city, county or state sales tax.

One of the biggest obstacles to building a successful eBaybusiness may be the stiffness of the competition. Many sellers sellidentical items, and the price wars often get ugly, but that'sto be expected in a free marketplace, which is exactly what eBayis.

You may be the only store in town that's selling thatone-of-a-kind, custom-made Dale Earnhardt Memorial Bobble HeadAction Figure (Earnhardt fans would string me up if I called it adoll), but do a quick search on eBay and you'll probably find ahundred others just like it.

So, can you build a profitable business selling on eBay?Certainly-thousands of people have done it and so can you. Here area few tips to help get you started:

Sell quality products. Don't sell junk! Leave theknick-knacks and fake leather jackets to the less-informed. Youshould offer only quality products at a fair price.

Research the competition. Once you have your product inmind, don't invest a dime on inventory until you've spentsome time on eBay to see what the competition is doing. If you wantto sell motorcycle helmets, for example, you should look at currentauctions to see how many others are selling similar helmets andwhat prices they are charging. This step is vital since you maydiscover that you can't compete with current sellers on priceor there is simply no market for what you have to offer.

Start slowly. Many people believe that the more itemsthey have for sale on eBay, the better. They will invest thousandsin inventory and spent hundreds on listing fees. (Yes, eBay chargesyou to list items for sale and collects a final fee if the itemsells.) Those are the folks that usually end up with 10,000 Ginsuknives forever in their garage.

Test, Test, Test. A fair portion of eBay auctions resultin no sales, so it's best to test the waters before jumping inwith both feet.

List a few items and see how they sell. If an item doesn'tsell, list it at least twice more. Some items might not sell thefirst time, but may the second or third, then sell steadily fromthen on. If an item gets no bids the first time, consider adjustingyour price or your terms. If an item sells well, keep it in stockand then experiment with another item.

Do your homework. eBay is too broad a subject to becovered fully here, but there are a multitude of books availablethat can help you start an eBay business. In fact, I bet you'llfind most of them for sale at this very moment on eBay.

Tim W. Knox is the founder, president and CEO of foursuccessful technology companies: B2Secure Inc., a Web-based hiring managementsoftware company; Digital Graphiti Inc., a software development company;and Sidebar Systems, a company that creates cutting-edgeconvergence software for broadcast media outlets; and Online Profits4U, an e-business dedicated to helping online entrepreneursstart and prosper from an online, wholesale or drop-shipbusiness.

The opinions expressed in this column are thoseof the author, not of All answers are intended tobe general in nature, without regard to specific geographical areasor circumstances, and should only be relied upon after consultingan appropriate expert, such as an attorney oraccountant.

Entrepreneur Editors' Picks