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Starting an ebay business

Last updated: 10 May 2022

Thousands of entrepreneurs across the country start businesses using eBay, the online auction site, and its potential is phenomenal. Traders are attracted by the knowledge that in the UK people spend more time on eBay than on any other website and view 3.5 million items listed every day. With little more than a computer, printer and internet connection, companies can access the estimated 135 million eBay users including 10 million in the UK. Even the Canadian police have got in on the act and use it to auction off seized property. Is eBay for you and if so how do you use it to maximise your business potential?

An eBay business, like any other, requires a lot of effort and careful planning to succeed. Whether you are looking to boost an existing business or set up on eBay for the first time, you have options to consider. You can either go down the traditional route and sell to the highest bidder or set up a dedicated shop. You might decide to opt for both. The most successful entrepreneurs create a balanced inventory of auction and shop items and cross reference them to help drive traffic to their shop. You can either set a minimum price bid and a reserve or give your items ‘’buy it now’ status where goods are sold like an ordinary shop instead of auctioned. This allows you to sell a line continuously.

Set up in 1995 by Pierre Omidyar in response to his wife’s desire to add to her collection of sweet dispensers, eBay is now one of the most widely recognised websites in the world. It works in a similar way to a normal auction, with bids going up in increments (proxy bidding) and the winning bidder getting the item. Sellers pay a small listing fee to auction their item for a number of days (normally seven); buyers can then bid as many times as they wish. The winning bidder then sends payment to the seller and the seller sends the item to the buyer. Every bid is a legal contract, which means you cannot easily back out once you have made the bid and once you have secured the item you must pay for it and the seller must send it if they take payment.

The bid price does not include postage costs unless clearly stated, and the seller should give postage costs, which will depend on the weight of the item. Payment can be cheque, bank transfer, cash on delivery or through electronic payment systems. The main form of electronic payment is PayPal, which eBay owns and which allows you to make and receive payments using a credit or debit card for a small fee. This is safer and quicker than other forms of payment and allows for international payments. The buyer simply registers with PayPal and uses a credit card to put a certain amount in the PayPal account, which he/she then sends to the seller as payment for the item. The seller receives the money which they can then use for their own payments or withdraw it to their bank account or card (for a small fee).You can also use Fastpay and Nochex, but only in the UK.

To protect users from bad payers and sellers eBay operates a feedback system, but it is far from perfect. After each transaction, the buyer and seller can leave either a positive, negative or neutral comment for the other person. Looking at feedback history helps determine whether they are likely to be trustworthy or not, but it is still open to abuse. You must maintain good feedback from buyers with good, quick service otherwise it will be impossible to run the business: people will not bid for items from someone with negative feedback.


Why invest in an eBay shop?

Thousands of businesses use eBay shops, from worldwide computer companies to individual sole traders. Entrepreneurs generate full time businesses by buying products cheaply from other sources and selling them for a profit on eBay. If you sell a large number of items it is a fairly cheap way to create a presence and a company image. Unlike a bricks and mortar shop which has to rely on passing trade and marketing eBay provides a global market without the overheads. And it is a terrific way for ordinary shops to increase potential business.

An eBay shop is relatively easy to set up and provides a list of all your auctions, acting as a type of shop window for visitors so they only see your products. A shop makes your business look more professional – customise it with attractive layout and company logo, but keep it simple. You pay a monthly fee for the shop and any items you auction are added to the shopping list at no extra cost (a small charge is paid to add buy-it-now auctions). A basic shop arrangement can be around £10 a month, although you can have more to have your shop promoted on the main pages of eBay.

Having a dedicated shop page allows you to promote all of your eBay sales from other websites or offline marketing. You can provide a link (or address) that goes directly to your shop, bringing potential bidders to all your auctions. Find out how much it will cost to post your items in the UK and worldwide and include these costs in your listings. This gets more bids and avoids subsequent questions. When you sell and receive payment then sent the items. Once delivery is complete you invite the buyer to give you feedback which builds your reputation as a good seller. Good feedback is crucial to success.

If you already have a computer and broadband, the running costs are the seller fees on each item. For most items you pay a small fee for the listing (depending on the price of the item) and a final value fee, which is a set percentage of the final bidding price. (The percentage is lower for higher priced items.) Other potential running costs include any highlight or featured listing costs, as well as the cost of an eBay shop and any marketing you do.

EBay gives you the opportunity to sell absolutely anything all over world. Hundreds or even thousand of products can be sold at the same time. If you are organised enough to run large numbers of auctions as well as shops, and have the knowledge and ability to sell products that return a profit, the potential income is massive.


Using eBay to boost an established business

Whether your business is new or old, big or small, you should consider how eBay can boost profits. Even if you run a local shop you can use the website to bring potential customers from far and wide. If you have excess stock or unsold products you can probably sell them cheaply online, even if the margins aren’t terrific. Likewise you can use eBay to clear damaged stock. Again, the products will shift if they are cheap enough, and you will reduce clutter. Some stock you may have may have a limited lifespan (fashion items, food, seasonal products etc.) and eBay can help you get rid of it fast before the price drops further.

Another useful function of eBay is to use it to research new ideas and trends without spending anything. If there are similar products to yours then keep an eye on them, see what sells, what doesn’t, evaluate feedback and generally gain valuable knowledge of what shifts quickly and what hangs around.

Use eBay to test new stock before buying in bulk. You can sell a few items, evaluating how interested bidders are, and how quickly they sell. This removes some of the uncertainty of buying an untested product. If products sell well, you can go ahead and invest, if not drop the idea and move on to something else. eBay can also be used to arrive at a retail selling price for items. Start the price low and see how the bidders react. Use the higher bidder prices as a guideline to retail selling.

Help increase sales by paying for bold text, small pictures and different coloured bars. Such minor changes make your auction stand out and will attract more bidders and increase sales.

Consider also paying a small fee for featured listings, to put your auction at the top of a particular category. Homepage listing will promote your auction to the front page of eBay, but costs money. They may only be worth using on larger items where you can recoup the money in the extra bids you attract.

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