Can eBay Sellers Still Make Money With Higher eBay Fees and Lower Sell-Through-Rates?
By Skip McGrath
Recent eBay fee increases have not been that high, but
sell-through-rates (STR) are dropping all across eBay which effectively
increases your listing fees as a percentage of total sales.
A falling STR is a recipe for losing money on eBay!
Your STR on eBay is nothing more than the percentage of auctions launched
that resulted in a successful sale. For example, if you listed 40 auctions
in one month and 30 of them resulted in a sale, then your STR is 75% which
is considered very good. Basically any STR over 60% is usually good enough
to make money as long as your gross margin is at least 30%. Of course the
higher your gross margin, the lower your STR can be and still make money.
Figuring your STR is very important to the health of your eBay business. I
get emails from readers all the time that say something like:
Hi Skip Ė I donít know what I am doing wrong. I sold over $3000 on
eBay this month, but I havenít made any money.
When I answer them I usually ask them to count the number of auction
launched and the number that closed successfully. I often see answers that
reveal that their STR is often less than 50%. Think about this a moment: If
only 50% of your auctions close successfully, then you have effectively
doubled your listing fees.
The reasons for falling STRs across the platform are several.
- Increased competition in commodity products and consumer goods.
The more sellers --the fewer sales. As competition pushes down prices only
the large sellers who can buy in volume can cut their prices and still
make a profit. Marginal sellers are forced to keep their prices high and
donít get their minimum bid or reach their reserve. So more and more
products are listed and fewer and fewer result in a sale.
- Fraud on eBay. Despite eBayís efforts, fraud continues to be
present. Although it is much less than media stories would have you think
it does exist and the negative media has increased the perception of
rampant fraud. This has driven buyers from the platform.
- Fakes on eBay. Again, although eBay works hard to police and
remove fake or counterfeit merchandise some still get through. Also again,
media stories about fakes frighten buyers away from the platform.
- The lure of easy money through dropshipping on eBay. There are
now about 6 large companies who offer thousands of products that can be
drop shipped to your eBay buyers after you make a sale. Most of these
companies such as DOBA and Simplex (probably the two most well known) have
thousands of ďmembers,Ē sellers who think drop shipping is the easy road
to profits, trying to sell products on eBay at prices that are equal to or
higher than sellers who buy from real wholesalers are selling at. This
results in thousands of products being listed at ridiculously high prices
that never result in a sale.
- Increase competition from shopping sites such as Amazon and
shopping engines like Froogle, NextTag and Shopping.com. It used to be
that anyone who was already an eBay member automatically went to eBay
first. Now people simply google a product name and get results that allow
them to easily compare prices.
So with all of this, how can eBay sellers still make money on eBay
today? Probably not with consumer or commodity products. This leaves highly
specialized niche products if you are selling new goods and the whole world
on anything used, antique or collectible. Of course if you are a large
seller with the ability to purchase your wholesale goods in large volumes
you can still buy or import goods at margins that will allow you a profit,
but that is outside the reach of many small or work-at-home eBay sellers.
As for drop shipping, this can still be very profitable if, 1) you can find
a very specialized niche to work in, 2) you have a high (>$50) average
selling price and 3) you can source directly from an importer or
manufacturer and not from one of the various membership drop ship sites.
The other route is to sell surplus or liquidation goods. Doing this you are
essentially selling last seasonís or last yearís models of popular consumer
products, but there is a market for those from bargain hunters and you can
source these products for as little as 25% of the original wholesale price.
See below for my ONLY recommended sources for access to manufacturers who
will drop ship and the absolute best source of surplus and liquidation
information, techniques and lists.