Your eBay Inventory Inventory management can make or break your eBay biz. Stay successful with these inventory storage and tracking tips.

Editor's note: This article is excerpted from Make Big Profits on eBay.

A strong appeal of selling on eBay and elsewhere online is thelow cost and flexibility of operating in a virtual world. But ifyou sell merchandise, whether or not you have a brick-and-mortarretail operation, you need a place to store your merchandise andyou'll need to track your inventory.

Storing Your Inventory

Unless you use a drop-shipper, you need space to securely storeyour products. How much space you need depends, of course, on whatyou're selling and the amount of inventory you keep on hand.It's also helpful if your storage area is roomy enough tofunction as a packing and shipping station. Your optionsinclude:

• Space in your home. If you are homebased and yourmerchandise doesn't take up a lot of room, you may haveadequate storage space in your home. Designate a large closet or aroom for your products. Many homebased eBay sellers work from theirgarages. For example, Karen Kelley (eBay User ID: thepinkboutique)has turned her garage into a small warehouse that accommodatesthousands of pieces of merchandise. Seasonal items are kept inmarked boxes until it's time to bring them out; garments readyto be auctioned hang on racks.

• Self-storage facilities. You can rent space equivalentto anything from a large closet to an extra garage at aself-storage facility. Many offer options ranging fromair-conditioned space, indoor access, loading docks, and more. Someoperators will accept deliveries on your behalf if you can't bethere to sign for them yourself. Self-storage is a great option fora homebased business that needs a little extra space or even aretailer who wants storage at a lower price than at a commerciallocation. The self-storage industry is rapidly expanding andextremely competitive, so shop around before you make adecision.

• Commercial warehouse space. If you maintain a sizeableinventory and your items tend to be heavy, you may need acommercial warehouse facility with a shipping dock. You'll findthis type of commercial space in industrial (light and heavy) parksand mixed-use commercial areas. Some offer only warehouse space;others have small offices and even showrooms adjacent to thewarehouse. Gary Neubert (eBay User ID: gatorpack) has a5,000-square-foot warehouse with a loading dock. After they closedtheir retail shop, Ron and Sheri Walker (eBay User ID:beansantiques) turned their building into what they call an"eBay factory" with a computer room, storage areas, andpacking stations.

• Public (commercial) storage. A viable option to your owncommercial space is a public warehouse. Public warehousingcompanies can essentially function as your shipping department. Inaddition to storage, their services include pick and packoperations, packaging, and labeling, and they will arrange forshipping on the carrier you specify. Public warehousing prices arebased on usage--you only pay for the space and labor you use.Contract warehousing is similar in terms of services, but you payfees whether or not you use space and services. Find publicwarehouse companies in your local telephone directory or through aninternet search.

Remember that the more storage space you have, the easier it isto purchase off-season inventory that you hold until the time isright to sell. However, always remember to calculate storage costsinto your cost of selling those items.

Whatever space you have designated for storage needs to beproperly equipped and functional. You'll likely need sturdyshelves for boxes or bins, rods for hanging items, and a table touse for packing and labeling. Assign specific areas for items"to be listed," "listed," "sold, waitingfor payment," and "ready to pack and ship."

Your storage facility's environment should be appropriatefor your products. If your merchandise is temperature sensitive,make sure you use an air-conditioned facility. It should be dry,free of insects and other pests, and free of household odors suchas cigarette smoke and pets.

Tracking Your Inventory

Do you know how Sam Walton became the world's mostsuccessful retailer? It wasn't because of a clever name, snazzylogo, creative ads, sharp frontline people, or even low prices--itwas because of the company's superior inventory management.Business students in colleges and universities around the worldstudy Wal-Mart's system, and smart companies copy it. Your owninventory management system doesn't have to be as high-tech orcomplex, but it does have to be as serious.

At any given moment, you need to know what you have on hand,what you've purchased that's on the way, what you need tobuy, what's up for auction, what's available in your eBaystore and on your website, what's been sold, and what'sbeen shipped.

For small, low-volume sellers, a simple index card system orspreadsheet will be sufficient. Serious eBay sellers track thisinformation electronically. Most auction management softwarepackages include inventory tracking.

In addition to keeping track of the information, you also needto consider the physical flow of your inventory. At eBay drop-offfranchise QuikDrop, items move systematically through the store.After an item is accepted at the front counter, it goes to thephoto area. Once it's photographed and the listing is written,it's moved to the area designated for items currently up forauction. When the auction closes, it's moved to the sold rack(or to the return-to-customer area if it didn't sell) untilpayment is received; then it goes to the shipping rack for packingand shipping.

Set up a system that works for the type of merchandiseyou're selling and that will allow you to be as efficient aspossible.

Your inventory tracking system should tell you what'sselling well--and what isn't. When items have overstayed theirwelcome in your warehouse, be creative about moving them out, evenif you take a loss. For example, if Kathy Logan (eBay User ID:rosie_peachstate), who sells craft supply products, has a productthat isn't selling well, she will make something with it, andinclude a photo of that item in her auction listing to givepotential buyers a better idea of what they can do with it. You canalso put together groups of items and sell them in a single lotwith a low starting bid, or offer a free bonus to the winningbidder. If you can't manage to sell it, donate it tocharity--do whatever you have to do to free up your storage spaceand your cash for more products, even if it sometimes means takinga loss.