eBay Wholesale Sourcing Issue

The eBay Seller's News, March 6, 2008, Volume 8, No. 5

Learn How To Sell More on eBay with The Newsletter for Professional
eBay Sellers by: Skip McGrath

In This Issue:

Musings

Wholesale Sourcing at The ASD/AMD Trade Show
Selling Low-value VS. High-value Items on eBay
Can eBay Get Back to Growing Again?
How Many PowerSellers Are Affected by the DSR Fee Discount?
eBay Best Match Search Engine Rolls Out This Week
New eBay Wholesale Sources for March 2008

"Success is a lousy teacher. It seduces people into thinking they can't lose." ~ Bill Gates

This is our semi-annual Wholesale Sourcing Issue. Karen and I just returned from Las Vegas where we participated in the Wholesale Sourcing Summit, a two-day seminar for eBay and small website sellers. We also attended the ASD/AMD Wholesale Trade Show –the largest wholesale show in the country, if not the world. There were several thousand exhibitors in three different exhibit halls. (Click here if you would like to see some snap shots we took at the show)

By my calculations, Karen and I walked about 12 miles total in the Mandalay Bay convention center and The Sands Convention Center. We never made it to the Jewelry show at the Mirage. I understand that one was a little smaller with only about 400 exhibitors.

After touring the show we dropped into the Internet Merchant's Association (IMA) meeting where Jim Ambach, eBay VP of Seller Experience, gave a presentation to about 100 experienced eBay sellers and IMA members. Jim spent a little over an hour explaining eBay's recent policy changes.

I must say, Jim did an excellent job. He was a really brave guy. At previous eBay presentations, the eBay speaker usually has a few helpers to turn to, but Jim stood up there all alone like a fighter pilot flying through flak.

This was also one of the first times since the new policies were announced that I felt someone was talking with us instead of talking at us. Jim was very open and honest about the problems the new policies have caused sellers and admitted they weren't perfect solutions. He also inferred that the new policies are not set in stone and it is likely that eBay will refine and update some of the policies over the next few weeks and months. I really hope eBay keeps using Jim Ambach in future seller communications as he really understands eBay from a seller's point of view and relates very well to them.

I also spoke with Jim privately after the meeting and he definitely gave me the impression that sellers do have eBay's attention and they are working hard to listen to them. I left the meeting with the distinct impression that eBay will not be retrenching on any of the new policies but there will be tweaks to the policies including fee changes in some categories, refinements to the DSR ranking policy and perhaps even the new feedback rules. These won't happen right away. In his presentation Jim indicated that eBay is watching the data points, and will be measuring actual results on listing volume, listing success rates and buyer complaints and behavior over the coming months to assess what changes are needed.

Jim's presentation was at a meeting of the Internet Merchant's Association (IMA). This is an excellent group for eBay sellers and small Internet sellers. Unlike other associations that only represent the really large Titanium eBay sellers, the IMA represents the needs of all sellers including many small and medium eBay and website sellers. And they are a Non-Profit organization as well. If you sell on eBay or form an ecommerce website, I strongly recommend you join this group. It will pay back your membership cost many times over.

I saw firsthand that they have a lot of clout with eBay. In addition to representing your interests, and being a channel where they can communicate your issues to eBay, Yahoo, Google and others, the IMA urges their members to help each other out with advice and provides links to educational services and eBay selling tools.

The large sellers who are members share their knowledge and help the small sellers grow their businesses. Basic membership is $129 per year. The chance to post questions and get advice from top PowerSellers and ecommerce merchants is worth the total cost of your investment –the rest is a bonus. This is an investment that will give you a good return if you take advantage of what they have to offer.

When you sign up, the form will ask who recommended you. These folks were very nice to me at the IMA event and I would like to let them know I recommended them. IMA pays a small referral fee if you put my name in, but any referral I receive from them, I will be donating to the Support the Troops Phone Card Program.

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

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1. Wholesale Sourcing at The ASD/AMD Trade Show

This is one of the largest wholesale trade shows in the country and both one of the best and the worst at the same time. If you like to sell very low-cost items (what some people refer to as cheap junk), this category represents about 2/3rds of the show vendors. So if you like to sell low value items (see my next article) you will be in heaven. But if you sell higher-value items as I do (and as I recommend you do) it is still a very worthwhile show, but it takes some patience to find these vendors as they are hidden among the others.

The show is huge and covers acres of ground and you better have comfortable walking shoes as you will be walking for several miles if you truly want to see everything. But believe me it is worth it! We would walk past dozens of cheap junk sellers –seemingly one after the other and then bang, there would be a booth with really great products and we even found several really unique things I hadn't seen before.

The other thing we discovered were dozens of wholesale source vendors that didn't have websites. That may sound like a negative, but it isn't. I love it when I find a vendor who isn't on the web because it means my competition will most likely not find them. These small specialized companies are often the way to find exclusive and really unique products that few others have.

I collected hundreds of source and product brochures and catalogs. I have put several of the sources I found in the New Wholesale Sources section at the end of this newsletter but I will be putting many more in my member's site for those of you who have purchased either The Complete eBay Marketing System or The Wholesale Buyers System. One of these is the authorized distributor for Sony refurbished and remanufactured electronics and an authorized source for both closeout and refurbished power tools from major manufacturers like DeWalt, Skil and Porter Cable plus many others.

I am not keeping all the good stuff for my members though; I think you will find some really good sources in this article. But, in the interest of full disclosure, I did find two wholesale sources that I am keeping to myself. I made an exclusive drop shipping deal with one of them, and the other one has a product that fits perfectly in one of my niches. If you want to see what they are, wait a few weeks and look at my eBay auctions.

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2. Selling Low-value VS. High-value Items on eBay

I gave several presentations at the Wholesale Sourcing Summit in Las Vegas, but the one I got the most positive feedback on was the topic of "should I sell low or high priced items on eBay." The presentation was about an hour long and if you want to see the whole thing then join us for the next Wholesale Summit in Las Vegas in August. But I will try and summarize it for you here.

I always hate to get into math in a newsletter, but this is where you really need to understand the numbers. Typically a low value (low-price) item will have a high profit margin such as 60% or even more. For example if you sell a $10 item at a 60% margin, you make $6.00 on each sale. But if you do the math, you will realize that you have to sell 500 items per month to make $3000 before your other expenses. Now if you sell a $120 item and realize a 30% margin, you will make $36.00 on each sale, --But you only have to sell 84 items a month at this price to make $3000 before your other expenses.

In both cases you make $3000 a month. But in the low-cost example you would have to list probably about 800 auctions to sell 500 items. You would have to pack and ship 500 boxes, exchange email with 500 buyers, handle some percentage of "problem" customers (10% ?). You would have to buy and store the packing and shipping material for 500 items a month and so on.

Now this is a fairly simple example and the full issue is a little more complicated than that (which is why you should attend the next seminar), but I think you get the basic point. In reality most sellers sell in a range of product price points, but if you want to be profitable as a home-based seller, you need to work on finding and selling products with higher price points unless you want to invest in warehouse space, employees and the other costs associated with being a high-volume merchant.

Your own business model will be individual to you. In my case we do sell some items in the $19 to $30 range, but they typically make up about 10% of our sales and I use about ½ of them as upsell items so I can often ship them in the same box. Our other items are priced from $60 to $350, and we have a couple of things we sell in the $600-$700 range. Your situation will be different, but give some thought to finding product to raise your average selling price and you will make more money with less time and money invested.

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3. Can eBay Get Back to Growing Again?

eBay announced financial results recently and gave some guidance to the investment community that said their growth would be slowing, but they thought they could continue to grow at a 12% to14% rate in gross merchandise sales. A lot of newspaper articles panned eBay and the boards were alive with forecasts of eBay's doom, but the news wasn't all that bad when you really look at the numbers.

It is very natural that eBay's growth would slow from a 30% to 40% annual rate to about 14%. eBay is now a mature company. Remember the rule of 72. You divide the growth rate into the number 72 and it tells you how long it will take to double in size.

So at 30% eBay would double in size every 2.4 years. This means that if eBay could continue that growth rate, in 7.2 years it would double 3 times. If that were possible eBay would grow from a 50 Billion a year to $100B, then $100B to $200B, then $200B to $400 Billion a year in sales. At $400 Billion eBay would be larger than all the major online selling sites combined. That is hardly likely.

So 12% to 14% growth is quite reasonable. At 12%, eBay would double in size every 5 years. The real issue is can eBay maintain 12% growth? If they can do that, as an eBay seller, I will be very happy.

I would really like to see eBay's strategy to do this. So far, I am not convinced and I think the jury is still out. But I am willing to be a little patient. Basically eBay is in a rebuilding/turnaround mode and that will take some time. It would help though if they would reach out to sellers a bit more. If eBay would start talking with us instead of talking at us, we sellers can be part of the solution instead of sitting on the sidelines waiting for the next shoe to drop.

There have been thousands of critical posts on the boards and thousands of sellers participated in the recent boycott. But mixed in with all of that I saw literally hundreds of good ideas and suggestions from sellers that have merit and could benefit both eBay and all members (buyers and sellers) in the long run.

When you listen to what eBay is saying, they claim to be listening. Although I think they really think they are listening, the management types inside eBay really can't see our point of view. My wife, Karen, was on the boards and saw some of eBay's replies. After reading them she said, "I have an extra chair right here next to me. I really wish eBay would send someone out and just spend one day sitting here to see what we really do every day. See the issues we confront, how we communicate with buyers, the shipping and payment issues we deal with and so on." It made me think of the old saying that "you have to walk a mile in someone else's shoes before you really understand where they are coming from."

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4. How Many PowerSellers Are Affected by the DSR Fee Discount?

During Jim Ambach's talk to the IMA he cited some interesting statistics that reveal how eBay chose the fee discount levels in the new DSR policy.

80% of all PowerSellers have a DSR score of 4.5 or higher. This is important because a score of 4.5 is needed to rank higher in the new best match search and to stay off of eBay's radar as a "bad seller."
60% of all PowerSellers have a DSR score of 4.6 or higher. This means that about 60% of all PowerSellers will get the 5% fee discount if they keep their same level of service.
15% of all PowerSellers have a DSR score of 4.8 or higher. These sellers will receive the maximum 15% fee discount.

These are very interesting numbers. eBay compiled these by looking at the statistics since the DSR program was initiated last year. The last number (15% at 4.8) doesn't surprise me. I suspected it would be in that range, but I am a little surprised at how many are above 4.5. If you listen to the griping on the eBay message boards you would think this was affecting a huge number of sellers which just doesn't seem to the case.

I clicked on some of the links to sellers who had posted complaints and in almost every case their DSR score was well over 4.5, with some of them at 4.8 or better. Do I like the DSR system? NO I don't. But, I think this may be a case of sellers overreacting. Although we don't really have a choice, I am going to be patient and see how it plays out.

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5. eBay Best Match Search Engine Rolls Out This Week

The Best Match search feature is another very controversial feature that eBay will release later this week. This one does worry me. I have been playing with the beta version of the Best Match and even though I have a high DSR and highly positive feedback, a lot of my listings are not coming up as well as they do in the current search. Currently the default search setting is Time, Ending soonest. Buyers will still be able to select this from the drop down box, but going forward the default search will be Best Match.

The idea is that eBay looks at the trend of what the buyer has purchased in the past and uses that information to select items that are the best match for the current item they are searching for. For new buyers, this may be useful, but for seasoned eBay buyers, the general consensus is that it's annoying and frustrating. They know what they are searching for, and how to find it. They don't really want eBay interfering. And there are other criteria that eBay looks at for best match including your DSR score and if you have had any disputes or negative or neutral feedback in the past 30 days or a higher than 5% customer dissatisfaction rating.

eBay will not announce exactly how the algorithm finds matches but they have released some general information. I have posted a more in-depth article in my blog at blog.skipmcgrath.com and you can read the full announcement from eBay at this link:
http://www2.ebay.com/aw/core/200803031059312.html

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6. New eBay Wholesale Sources for March 2008

We found some great sources at the ASD/AMD trade show. Some of the sources don't have websites which is actually a good thing, because most of your competitors will never find them.

As I pointed out in the article above, there were hundreds of vendors offering low-price items. These are problematic for eBay but could be great if you are a flea market dealer. If you are looking for a broad supplier of low-priced goods, check out Kole Imports. They sell a wide variety of dollar store merchandise in dozens of categories. Two others who sell low cost merchandise are Four Seasons and Regent General Merchandise.

One of the nicest guys we met at the show was Amin Jivraj from a company called Showcase, The best of TV and More. He did a very nice favor for my wife at the show without even being asked.

Showcase is an As Seen On TV wholesale supplier, but are very unique in several ways. First of all they have plenty of higher priced items –not just the low-cost stuff. And they have a drop ship program for eBay sellers. But best of all, this company owns 41 ASOT stores in Canada. This gives them buying power and they can see what sells. They can buy in huge quantities so they can mark up their wholesale cost to make money but still undersell the other suppliers. And most importantly, they have an excellent quality control program. They thoroughly test their products before importing them. When you go to Showcase, the prices you will see are retail. Scroll to the bottom of the page and click on the link to their wholesale program. Once you fill out the form, they will contact you with wholesale info and their drop ship program.

European Army Surplus sells military surplus items from several European countries including trendy clothing items. They also sell non-surplus outdoor items. Another big wholesale surplus dealer (in fact they claim to be the largest in the world) is Sturm. Unfortunately Sturm does not have a website but you can fax or email them to get a catalog and price list. Their fax number is 770-386-6654 and the email is sturm@sturm-miltec.com. Be sure and refer to the ASD/AMD tradeshow when you request a catalog as they did have some show specials you might get.

Another large wholesale surplus dealer is Fox Outdoor Products. In addition to surplus they also carry a wide range of outdoor products including tents, camping supplier, hiking boots and gear and much more.

Omaha Distributing sells a great line of tools including power tools both name brand and off brand.

Gehr Industries sells a really unique product call Glo Cords. They have both home and travel models. These are extension cords with surge protectors that glow when they are on. No website, email them at carlt@gehr.com.

eXtreme Toy Zone sells a very nice line of remote controlled toys.

Phoenix Toys sells several lines of collectible and model cars.

Dicapac is a small manufacturer of excellent quality underwater cases for digital cameras. This is a really well-designed product and very price competitive with the hard cases from the large photo dealers. They are located in China, but they have warehoused product here in the US so you don't have to import.

NST Motors sells motor scooters, ATVs, snowmobiles, helmets and lots of related stuff.

The Flipo Group sells a really unique line of solar power garden lights and home décor LED light powered items. They also have some wonderful pet products including leash lights and pet blinkers.

Garden SunLight is another solar company with a great line of home and garden solar products. Contact them and ask for the CD that shows all of their products.

Wantech International sells a nice line of gas powered firepits and free-standing indoor fireplaces.

Direct Connection sells a very nice line of decorative items related to wine and other bar products. They have a really wonderful wine cooler they are closing out at a great price. I am not sure if it's in their catalog, but ask them about it.

Sidelines International is a distributor for Victornox (Swiss Army) knives, Zippo lighters and Burago collectible models.

Lastly, The Bergamot Company has over 4500 licensed NFL, NBA and NCAA and NASCAR products –and they will drop ship. Here is their contact information: