THE EBAY SELLER'S NEWS, JUNE 2005, VOLUME 5, ISSUE #7

An independent monthly newsletter for
professional eBay sellers

by: Skip McGrath

Musings

Karen and I have just returned from a trip to Barcelona and the UK. Boy --air travel really sucks these days (pardon the blunt language). Flying on a bankrupt airline such as United doesn't make it any better. The employees have basically given up on any attempt to provide anything more than the minimum amount of service and the economy section of the plane is a joke. There is so little room it is virtually impossible to even eat your meal --which may be a blessing in disguise given the quality of the food.

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We are getting into high gear preparing for this year's eBay Live. Karen and I will be exhibiting in Booth 1417. The dates are June 23-25 in San Jose, CA. If you plan to attend --and I strongly recommend you do, please drop by and see us. Karen will be in the booth most of the time, but I may be away from the booth periodically. eBay has asked me to participate in a couple of panel discussions. But, other than that I should be working in the booth as well.

PESA --The Professional eBay Seller's Alliance is once again sponsoring a charity auction and has asked me to be the auctioneer. The proceeds from this year's event will be donated to helping children stay safe online. The charitable recipient is NetSmartz (www.netsmartz.org), a joint program of the National Center for Missing and Exploited Children, and the Boys and Girls Clubs of America.

About two weeks ago I sent out a notice of a teleseminar for Seller's Voice. We had the seminar on Tuesday, May 24th. About 200 of you listened in. If you would like to hear the seminar, but couldn't attend, you can listen to it any time by clicking HERE.

Last month I told you about a new wholesale sourcing site, Alibaba.com. They will be exhibiting at eBay Live in San Jose this year. Besides exhibiting, Alibaba is giving away several thousand (and yes, I said several thousand) MP3 players. They are also having a drawing for several free sourcing trips to China. To claim your MP3 player and enter the drawing for one of the four trips, just visit the Alibaba free cocktail reception in the Presidential Suite of either the Marriott or Hilton hotels that are connected to the convention center. The receptions will be held each day, June 23-25 from 12 Noon to 2:00 PM.

I have spent some time surfing the Alibaba site. It is a real mixture of products. Some of the categories include apparel & fashion, automotive, electronics, gifts & crafts, health & beauty, small appliances, toys and almost every type of gadget you can think of.

Many of the manufacturers listed on Alibaba only sell in larger quantities, but if you take the time to keep looking there are plenty of sellers who will also sell in smaller quantities. If you find a product where the seller is only offering a large quantity, say 1,000 each, take a minute to email the seller and ask if they will sell in a smaller quantity. Often they will agree to this if you agree to pay a slightly higher price.There are also many sellers selling in smaller quantities but you may have to spend a while hunting for them. Having said that, the hunt is worth the effort. I spent an hour on the site a couple of days ago and found several products that would realize a 50% or better margin on eBay. You can also post leads on the site where you tell the various sellers what you are looking for and they will contact you with offers.

Does the world need another auction management service? I wouldn't have thought so, but there is a new player on the scene --Mpire, who will announce their system at eBay Live. Mpire will offer most of the features of a robust auction management system similar to the functions you can now get with companies such as Vendio, Andale or Marketworks. One difference is they have added a consignment module for trading assistants --something that is long overdue in the market. Here you can set commission rates for each consignor, view sales by consignor, track the progress of those sales and know at any moment how much you own your consignors.

What else is different about Mpire? We'll have wait and see until they announce at eBay Live. If you are reading this after eBay Live, just click on the link and you can see a demonstration. After I return from eBay Live, I will spend some time with the tools and write up a complete evaluation on Mpire in the August issue. One other thing about Mpire, it was designed by eBay users. To date, over 200 eBay members have contributed to Mpire's system design.

eBay Live has really grown. I remember the first year in Anaheim. There were about 15 exhibitors and something like 5000 people attended over the three days. This year eBay will have over 75 exhibitors and they are expecting up to 14,000 people. If you are a serious eBay seller, and can afford the trip, the event will be well worth your time. Here is a link where you can find information on hotels and local transportation.

IN THIS ISSUE

1. EBAY TRADING ASSISTANTS --MOVE UP MARKET FOR PROFITS
2. TESTIMONIAL CONTEST
3. INSURING YOUR EBAY BUSINESS
4. MASTER THE BASICS FOR SUCCESS
5. IS THERE LIFE BEYOND EBAY? - Part I
6. EXPLORE EBAY SELLER CENTRAL FOR GREAT INFORMATION AND TOOLS
7. NEW WHOLESALE SOURCES FOR JUNE 2005

Let's get started with this month's issue.

1. EBAY TRADING ASSISTANTS --MOVE UP MARKET FOR PROFITS

Just as I was sitting down to work on this month's newsletter, I received an email from one of my readers who is struggling with her eBay consignment business. Her email stated that most weeks she clears about $200 after expenses and only made $500 in her best week so far. She was wondering what she was doing wrong. She also asked if buying my book, How To Start & Run an eBay Consignment Business would help. It was easy to answer her questions. One of the most important bits of information I stress in my book is "don't get stuck selling low-value products."

The average eBay Trading Assistant is stuck in a rut of selling single items for individual consignors. If you advertise and promote your business to individuals and families in your community they will bring you the type of items a family sells. Yes, you might occasionally find someone with an expensive diamond ring or art glass vase that you can sell for $1,000 or more --but most days you will be selling a guitar for $100, or a fishing reel for $75 --or perhaps a collection of Elvis plates for $200. If you are making a 30% commission before fees, and paying eBay and PayPal fees that average 6% of sales, you will net about 24% on your Gross Merchandise Sales (GMS). This is before advertising, gas, ISP fees and other expenses. If you sell $1,500 worth of merchandise a week you would gross approximately $360 before these other expenses. If your average sale was $60 you would have to find, photograph and list 25 items ($1.500 / $60 = 25) to realize this margin. This doesn't make sense --and is a major reason that I am not a fan of the eBay drop-off store model being pushed by a lot of franchise companies today.

If you have a great store in a great location, you can do much higher volumes than in my example above, but you still have to run hundreds of auctions a week to realize higher margins. And --now you have the expenses of rent, insurance, employees, etc. At an average price of $60 you would have to run 70 auctions a week to gross $4,200 --which would result in a gross margin of $1,000 a week. Seventy auctions is not a lot of auctions to run --thousands of eBay sellers run that and more. But finding 70 people each week with something saleable and taking the time to deal with these people is the challenge. So what is the answer? Should I just forget about this consignment business idea? No --I think the eBay consignment business is the perfect business model. But you just have to move up market.

By "up market" I mean you have to start selling either higher value goods, or large quantities of lower value goods from one supplier. The biggest mistake eBay Trading Assistants make is looking for lower cost individual items to sell when the same amount of effort could find higher-value items to sell. To find these items you have to reach out to the business community where you live. Used construction equipment and farm equipment is one of the biggest sellers on eBay. The average sale for one of these items can be $10,000 or more. Companies sell used printing presses, digital telephone systems, large lots of used computers, office equipment and office cubicles and furniture. Doctors and dentists sell their used medical equipment when they upgrade to new stuff. Retail stores routinely sell surplus merchandise to liquidation dealers for far less money than they could realize if you sold their goods on eBay for them.

If you look at the Business & Industrial Category on eBay you will see thousands of used (and new) items selling in hundreds of sub-categories. In every city in America there is a restaurant that goes out of business every week. Used restaurant equipment is one of the biggest sellers on eBay --some sellers who specialize in just this one category realize GMS of over $1,000,000 a year.

If you spend some time looking at the Business & Industrial category you will get some ideas of the kinds of products available from small and large businesses in your community. Make a plan to network with bankers and lawyers as they know which companies are going in and out of business, and who is financing new equipment. Join your local chamber of commerce so you can network with the local business people and let them know what you do for a living. If you spend the same amount of time looking for a $10,000 item to sell and only sell one of them that you spend looking for dozens of $100 items you will come out way ahead in the end.

2. TESTIMONIAL CONTEST

This year at eBay Live we are running a drawing for readers who sign up for a subscription to our newsletter. I thought that was a little unfair to those of you who can't attend and have been loyal readers --some of you for over five years. I am about to revamp my web site and update the sales letters for my various books. When you sell information products one of the best strategies is to include real testimonials from real customers. So here goes: If you send me a testimonial that I use (I can use up to about 20 total) you will get two benefits. You can select a FREE copy of any of my books --AND each testimonial that I use will qualify for a drawing for a Table Top Photo Studio --value $294.00. I have about 30,000 readers out there and I don't want my email program swamped --so I have set up a special yahoo address to receive the testimonial submissions.

Please send your testimonials to: ebaysellersnews@yahoo.com

What makes a good testimonial? First of all it should be truthful and credible. Please don't make up testimonials. Next the testimonial should show a clear benefit you received by reading this newsletter or from purchasing one of my books. "The Complete eBay Marketing System is an awesome book" is a nice testimonial but it doesn't show a benefit. Something such as " Skip's Book, The Complete eBay Marketing System laid out a system that I used to triple my eBay business within two months," shows a clear benefit that someone can identify with.

The contest will end on June 30th -Reader testimonials are always welcome, but If you are reading this newsletter after June 30th, the contest will be over.

3. INSURING YOUR EBAY BUSINESS

How much money do you have invested in your eBay business? Computers, printers, fax machine, digital camera, product inventory, etc.

Could you sustain the financial hit if they were lost to fire, water damage or burglary? Most people do not realize it, but your home owners policy excludes items stored at home that are used in your business. If you lost a computer to a break-in, you could probably have it covered as it is your personal computer. But we have three computers, a copy machine, fax machine, two printers and several thousand dollars of inventory at any given time. Besides, my insurance broker knows me and knows that I run a business out of the home. If we had a loss, I could never get away claiming the items were all personal.

Another issue is liability. If you make a product (craft product for example) and it injures someone, then you can be sued. If you have a consignment business and someone delivers a product to your home and they are injured in a fall, this would not be covered by your homeowners policy unless you had a business liability rider. (If you are a consignment seller working from your home you should always pick up the products you are going to sell to avoid this potential liability.)

Power Seller Tip
If you earn at least $25,000 a year from your eBay Business, there are a lot of advantages to incorporating or forming an LLC (Limited Liability Corp.) Beside the tax advantages, a corporation can shield your personal assets (car, home, retirement funds, etc.) from liability.

Fortunately many homeowner policies have riders available to cover home businesses. These can be very inexpensive –as little as $50-$100 a year. There is also a policy available from the RLI Insurance company of Peoria called the In-Home Business Insurance Program. This program costs as little as $150 a year and provides both property casualty (theft, fire, etc), liability (someone hurt on your property) and loss of business income.

In California, there is another company that offers a home based insurance product:from Barricks Insurance. Another option is available to AARP members (you need to be over 50 to join) through the Hartford Insurance Co.

Consignment selling is more problematic. This is a far different proposition and although there are solutions available, at the moment none of them are great. The problem with consignment selling is that you need to insure property that does not belong to you. In the law this is called a bailment. Other examples of a bailment are a dry cleaner or a parking lot. They do not own the goods that need to be insured but they are responsible for them.

If you speak with independent business insurance brokers, there are commercial insurance products available that will cover a consignment business operated out of the home. I am not going to mention the companies here, because it varies from state to state. (Anything I recommend, may not be available in your state).

An “independent” broker is someone who sells multiple lines of insurance from several companies. If a broker is affiliated with State Farm, Allstate, Metropolitan and so on, they will usually only sell that one line of insurance and they are very limited in other lines they are permitted to carry. Notice that I said you need to speak with “business insurance” brokers. Your local small independent broker may not have access to a large number of commercial insurers. Small town insurance brokers tend to specialize in personal lines and only carry a limited line of small business solutions. If you are shopping for insurance for your consignment business, you may need to contact a number of brokers before you find a solution. If you live in a small town, it may pay to travel to the nearest medium or large sized city to find a broker that can handle your needs.

4. MASTER THE BASICS FOR SUCCESS

When I presented the Seller's Voice teleseminar, I focused on the subject of mastering the basics for success. Since only a couple hundred of you were on the seminar, I thought it would also be a good topic to cover in this month's newsletter. What are the basics? The first basic skill to master is finding the right product to sell. Here is my checklist for selecting products to sell on eBay:

If the product is priced (estimated final-value) under $100, I must be able to sell it with at least a 40% gross margin. For higher -priced products the margin can be less --but never less than 20%.
Competition should be minimal. Some competition is OK, but you don't want to sell a product that dozens --or even hundreds, of other sellers are also offering.
Supply should be limited. Supply and Demand are huge factors on eBay. If there is a large supply of the product on eBay it will tend to drive down the prices.
I have a dependable source of continuing supply
There are no repair or quality issues with the product
The product has the potential to upsell or cross sell to other --additional products. (i.e. If I am selling bird houses I can also sell bird feeders).

The next important skill is to master the art of actually launching an auction. This includes:

Writing compelling, keyword-rich headlines
Writing complete, informative and attractive descriptions that include benefits --not just features.
Taking and using good photographs

I often get emails from readers or buyers of my books asking me to take a look at their auctions because they are not getting sales. If the prouct is not the issue, the problem is usually a poorly written headline or description or bad photos. I recently looked at an auction for a lady who had purchased a wholesale lot of Ralph Lauren Polo Shirts. She laid the shirts on her dining room table and photographed them. When I looked closely at the photo I could see her dinner dishes still on the table and the kitchen trash can was in the background.

Probably the next most important skill is to set up and write practical yet friendly shipping, payment and return policies. I am simply amazed at some of the polices I see in eBay auctions and the language sellers use to state them. Some of them are worse than the notices you see going through airport security.

This is a very short overview of some of the material I cover in The Complete eBay Marketing System.
This informtion is so important to your success each of these topics gets its own detailed chapter.

5. IS THERE LIFE BEYOND EBAY? - Part I

Although eBay is still the 500 pound gorilla in the online auction marketplace, there are other auction companies that do quite a lot of business. eBay has more competition today and it is growing. While others write about the online auction industry, I have always carved out a niche for myself by specializing in eBay. Yet I cannot ignore the success of these other companies. I am not abandoning my specialty, but I thougt it would be useful for my readers if I explored some of the other successful venues. So each month, I will look at a different company. This month I am starting with Bid4Assets.

eBay has seen a lot of competition, but Bid4Assets has been one of the more successful. Bid4Assets specializes in higher value goods and real estate. They are also used by many counties and the US Marshal's Service to sell siezed properties. Bid4Assets has an excellent reputation among sellers of high-value items such as real estate, rare coins and stamps, high-priced jewelry art and expensive antiques.

Bid4Assets has an interesting fee structure. Like eBay they charge a listing fee, but unlike eBay's sliding scale Bid4Assets charges a flat $5.00 listing fee. They also charge a final value fee, however, Bid4Assets gives you the option to charge a Buyer's Premium up to 10%. A buyers premium is a fee that is passed on to the buyer to cover the seller's costs associated with an auction. In addition to the winning bid amount of an item, a seller may charge a fee, ranging from 1% to 10%, to the buyer (there is no charge to add a buyer's premium). The Buyer's Premium feature can be selected in the sell an asset process and will be displayed in the auction listing. Bid4Assets $5.00 listing fee includes free image hosting, thumbnail photo, 'BuyNow' option, extended auction durations, adding a reserve price and the buyer's premium if selected. That is very competitive with eBay. Their final value fees are higher than eBay's but you do have the option to recover some or all of your fee through the Buyer's premium.

Bid4Assets may be the best venue to reach serious, upscale, competitive buyers looking for unique, high-value items such as real estate, jewelry, artwork, timeshares, collectibles, luxury vehicles, computer equipment, sports memorabilia, financial instruments and more. Bid4Assets claims an average sell-through rate of 66% which is far higher than eBay receives on high-value items. Bid4Assets may be a place to give your high-priced items better exposure, more bidding activity and higher prices. The U.S. Marshals Service, various government agencies and private sellers have been selling on Bid4assets for years with great success.

Next month we will take a look at Overstock.com auctions.

6. EXPLORE EBAY SELLER CENTRAL FOR GREAT INFORMATION AND TOOLS

eBay Seller Central is a very useful sub-site on eBay that is little known by eBay sellers. Some of the information is quite basic while other data is for advanced sellers. Actually there is something for everyone here. One of the best features is the ability to find the top searches for any given category. First click on the Category Tips link on the left of the page. This will bring up three selections:

Merchandiseing Calendar: Gives advance notice of upcoming seasonal promotions and learn about which items will be spotlighted on the eBay home page.
Hot Items By Category : This is a report you can download to discover which categories and products are hot, bid to item ratios are high and demand is outpacing supply.
eBay Pulse: This is where you can track trends, hot picks, and other useful information including: top searches, most watched items, and little known eBay facts.

Another useful section in Seller Central is Best Practices. eBay has collected a list of best practices from their largest powersellers and condensed them into an advice column that includes advice on pricing, research, shipping, seller formats and promotions.

Finally the Advanced Selling tab links you to a lot of resources and information that includes international selling information, becoming a trading assistant, opening an eBay store, eBay sales reports, the eBay Keywords Program and the eBay Solutions Directory.

7. NEW WHOLESALE SOURCES FOR JUNE 2005

As always, our own Auction Seller's Wholesale Search Engine is a great place to start looking for eBay-friendly wholesale suppliers. And, as mentioned above in Musings, be sure to also check out Alibaba.com

If you are on your way to eBay Live and can pass through Vegas, The Dollar Store Expo is a wholesale trade show for low-cost merchandise you often find in dollar stores (Don't laugh, I met a lady earlier this year who made over $50,000 buying stuff at dollar stores and reselling them on eBay.) The expo is the place where you can buy the products wholesale at the same prices the dollar stores pay. Las Vega Convention Center, June 22-23. For gifts and general merchandise, the ASD/AMD Trade show is held in Vegas August 14-18 and features over 3000 vendors selling fashion, jewelry, gifts, home decor, and more. This is one of the largest wholesale trade shows in the country. Info at www.merchandisegroup.com.

Here is a cell phone deal with residual income you can sell on eBay. Omobile-pcs provides phones and pre-paid calling plans tthat you can sell and re-sell.

You know those "best of" song collections by old country stars that you see advertised on late night TV, you can buy the collection CDs of singers like Porter Wagoner, Mel Street, David Allen Coe, Merle Haggard and others from Gusto King Records. No web site, but call them at 800-251-4040 for a catalog. They also carry Rock, comedy, pop and other artists.

TransAm Wholesale in El Paso, Tx sells overstock and minor seconds of famous brand jeans at great prices (example, Guess Jeans at $11.50 pair & Wrangler women's stretch jeans for $7.50 pair). You can also access them Here.

Allstate Liquidation features high-end clothing shelf-pulls and overstock items from Macy’s and Bloomingdales –No customer returns. You can buy name brand clothing items for as little as $2 or $3 per item.

American Top Leather, Inc. is your source for the better quality leather riding togs and accessories. They actually break their products down by quality categories of Good, Better and Best --each with their own price range.

Trademark Poker sells remanufactured slot machines, and a complete line of Poker chips, tables and supplies.

One step down from the major brand names is Red Tag Clothing. Great stuff –good prices and they carry the hard-to-find plus sizes that are such big sellers on eBay.

Topper International sells brand name fashion and accessories. They currently have a large quantity of Gucci, Ralph Lauren and Dior sunglasses.

.Evolve Corp sells candles, incense and unique gifts from New Hampshire.

AE Wholesale sells gifts and collectibles with no minimums, no membership or sign-up requirements. Great selection of stuff.

That's it for this month. See you next month if I don't see you at eBay Live !!!

Skip McGrath