Running a small business on eBay

Ordinary people are making big profits using the online auction house.
 
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  • Updated:26 Feb 2008
 

01 .Is it for you?

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In brief

  • More than 52,700 Australians are gaining their primary or secondary income through selling on eBay.
  • When trading on eBay, protect yourself by watching out for spam emails, dodgy shipping addresses and too-good-to-be-true offers.
  • From 21 May 2008, sellers have to offer eBay's PayPal service on all listings on eBay.com.au

Please note: this information was current as of February 2008 but is still a useful guide to today's market.


A global marketplace

More and more Australians are turning their eBay ventures into successful businesses.

According to 2006 ACNielsen research, there are more than 52,700 professional eBay sellers in Australia gaining their primary or secondary income through the site. So whether you’re keen to flex your entrepreneurial muscles or would simply like to supplement your income, opportunities are there for taking.

While there are several other popular online auction sites including Oztion.com.au, auctionbidz.com.au and bidsell.com.au, eBay has become the largest online marketplace globally. There are more than five million eBay members in Australia, with just as many visitors to the site each month.

But before you decide to leave your day job to make the most of the online auction boom, there are several important factors to consider. And as with any marketplace, beware of scammers targeting inexperienced buyers and sellers.

Most seasoned eBayers will tell you the majority of online punters are honest — but it’s a good idea to watch out for spam emails, dodgy shipping addresses and too-good-to-be-true offers, so your eBay experience can stay a safe and hopefully profitable one.

Who should sell?

From stay-at-home mums ('mumtreprenuers') to full-time professionals, eBay sellers come from all walks of life.

You can list your first item for as little as 30 cents and the only overheads to pay are the cost of a digital camera and a good internet connection.

Many people over the age of 55 are turning to eBay as a way of supplementing pension payments or as an alternative to early retirement.

For late business boomers who’ve discovered a knack for online retailing, eBay can be a place to experiment without having to invest in expensive overheads or risk retirement savings.

A common bit of feedback about eBay is that you can enjoy what you’re doing and make money at it. Some sellers see it a creative outlet allowing them to pursue hobbies such as antique collecting, connecting up with a community of aficionados around the world.

Deciding what to sell

As with any retail venture, you’ll need a sound business plan. Deciding how much time you’d like to commit and choosing the right products is a good place to start. In general, the more time you’ve got to put in, the better the return.

For inspiration, eBay pulse (pulse.ebay.com.au) gives you a snapshot of the most popular search items on the site. For example, at the time of writing, the top three search words on Australian eBay are: ipod, caravan and GPS.

eBay recommends starting with a few low-value items at first to get a feel of the selling process. Newcomers are also encouraged to try buying several items before they begin selling to help gain some feedback on the auction site. This feedback is then used to create an online profile complete with reputation. Most buyers may be nervous about dealing with a seller without any transaction history or positive reputation.

If you’re still stuck for ideas, finding a niche may be the way to go. Focus on what interests you, or products you’re already familiar with. Many small business owners are now using eBay to promote their products and expanding the reach of their bricks-and-mortar shop.

 
 

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Creating an account

There are free courses and online tutorials to help sellers find their way around eBay on the site itself — but here are our tips.

  • First you need to register with eBay before buying or selling anything. You can follow the prompts and click on 'sell' on any page to create a seller’s account. Once there, you’ll need to choose a user ID, a password and provide your email address.
  • Choose a secure password to protect yourself against identity theft — pick one of at least eight characters, use a combination of letters, numbers, and symbols and avoid common passwords such as your user ID or your email address.
  • You'll also be asked to submit personal details such as your mailing address and your credit card details to verify your identity — these won’t be misused by eBay, and no other eBay users can get access to them without your permission.
  • When you’ve created a seller's account, you can choose to use credit or debit card to pay sellers' fees or you can set up an alternative payment option — the site will take you through these options.

Listing your wares

Before you start, research listings of similar items to the ones you’re selling. This will give you an idea of how much people are selling their items at, what format they use (auction or fixed price), what details to include in your item description and what category or categories to list your items in.

As a rule of thumb, always take well-lit photographs that let the potential buyer get a good look at the item. Avoid background clutter that can distract buyers and include as much detail as possible in your description.

One experienced seller suggests taking photos as if there were no descriptions and writing descriptions as if there were no photos. When it comes to online browsing, first impressions count — they’re often the only chance you get to grab the buyer’s attention.

If there are any flaws or missing parts in your product, mention it in your listing description. Sellers have an obligation to provide a true representation of the item for sale. Many customers don’t mind the odd chip or stain, because they might be getting the goods at a bargain price. Buyers will know exactly what to expect and you won’t risk negative feedback — which can gravely affect your selling reputation

Prices and payments

When it comes to setting the right starting price, eBay displays a 90-day history of sold items, so potential sellers can check how much similar items were selling for.

If you’re selling a high-value product — for example, a prized antique — consider getting a professional valuation. Auction houses can often do it for free.

From 21 May 2008, all eBay sellers will be required to offer eBay's PayPal service on their listings on ebay.com.au. The new changes also means buyers will no longer have the option to pay via money orders or direct bank deposits from 17 June 2008. The only payment options will be through PayPal (which accepts bank deposits, Visa or Mastercard payments) or by cash-on-delivery.

eBay argues the main reason behind the move is to reduce the risk of fraud and the number of potential disputes. It also notes that many people already prefer to use eBay's Paypal payment system (www.paypal.com) because it allows you to trade with other buyers and sellers without having to pass on your bank or credit card details. The payment is also directly deposited into your account, substantially cutting down processing time.

However, for all its convenience, Paypal does charge sellers a fairly hefty fee. It varies depending on your Paypal account and the method of payment, but personal account holders can pay up to 3.4 percent of the selling price plus $0.30 for domestic transactions and 4.4 percent plus a small flat fee (depending on the currency) for overseas transactions.

Getting feedback

Building up your reputation is key to succeeding on eBay. It’s measured by a feedback system, where buyers and sellers leave comments on each other’s profiles, based on their satisfaction with the transactions.

To ensure the best feedback, always respond to buyer’s enquiries swiftly and deliver your product promptly once payments have been confirmed.

However, a downside to the feedback system is that from May 2008, sellers will no longer be able to leave negative or neutral feedback for buyers. This is an action on eBay’s part in response to concerns that sellers will leave negative feedbacks to buyers who rated them negatively for their service or products.

While this might leave limited avenues for sellers to report dodgy buyer behaviour, at the same time, sellers will be given an increased ‘block bidder list’ capacity to stop any suspicious buyers from bidding for their products.

There are lots of other features on eBay to maximise your sales potential. You can put ads on the homepage and use the 'featured listing' option so that they stay on the top of any particular category at any one time — or consider having an eBay shopfront to promote all your products at an added cost.

If you’re selling many items at once, try using a function called 'turbo lister'. It allows you to create listings in bulk for faster uploading.

Many sellers also find it useful to have listing tools with automated features that might help you manage your inventory, send out emails or check what time of the day they get the best auction results — these can be found on the eBay site at ebay.com.au/education.

Traps to avoid

One of the biggest dangers on eBay and Paypal is identity theft. Fraudsters may attempt to obtain passwords and account details with emails that claim to be from eBay or Paypal and use them to hijack members’ accounts.

To avoid losses arising from selling or buying from hijacked accounts, never deal with any user you've met through eBay who attempts to trade with you outside the eBay system. This includes emails from dodgy online suppliers who may sell you counterfeit goods or have nothing to sell at all.

A single mistake can be costly if you sell high-value goods and the buyer turns out to be a fraudster. This is because any payments made from a hijacked account can be reversed and taken back from the seller (charge-back) if a transaction is proved to be fraudulent. This can occur weeks after the goods have already been shipped out.

While eBay claims the chances of charge backs are very small, there are signs to watch out for to identify hijacked accounts:

  • Be cautious if a buyer’s registered address is different from their delivery address (for example, an Australian member requiring goods to be shipped to Nigeria).
  • Check the buyer’s feedback. A low or negative history of feedback indicates they may have had prior problems with other sellers.
  • Look at what the buyer has been buying and the types of items they usually buy. A fraudulent buyer may have purchased an unusually large amount of goods in a short time.

Recently, eBay representatives acknowledged the need for better seller protection and told CHOICE that it has launched a new program in February 2008 that will reimburse the seller in the event that charge-backs arise.

To qualify for the reimbursements, sellers will need to provide sufficient evidence (such as using registered post and insurance) to prove that the transaction has been completed following proper eBay procedures.

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