A falling STR is a recipe for losing money on eBay!
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.
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 – I don’t know what I am doing wrong. I sold over $3000 on eBay this month, but I haven’t 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 don’t 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 eBay’s 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 “members,” 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 season’s or last year’s 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.
- You can’t make money with general dropship companies. Learn to access actual manufacturers and imnporters who drop ship for eBay
WorldWide Brands OneSource is the only drop ship information provider who will connect you with real manufacturers.
- eBay PowerSeller Chad Maslek shows you how, what, when and where to access liquidation and surplus products
This is absolutely the best source of information to access this profitable segment of eBay.