Building EBay Businesses

Scot Wingo, author of eBay Strategies: 10 Proven Methods to Maximize Your eBay Business, answered reader questions about the online marketplace. Wingo is president and chief executive of ChannelAdvisor, an eBay consulting service.

Washington Post columnist Leslie Walker served as host.

A transcript follows.

Submit your questions and comments: Join Leslie and Scot for a live online discussion on Thursday, Sept. 9 at 1 p.m ET.

Editor's Note: Washingtonpost.com moderators retain editorial control over Live Online discussions and choose the most relevant questions for guests and hosts; guests and hosts can decline to answer questions.

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Leslie Walker: Hello and a warm welcome to Scot Wingo and everyone else out there. We are chatting today about eBay, the Internet auction site. Please send us your questions.

Scot, let's start with your high-level take on what's happening at eBay, which is about a decade old now. Some say there's such a glut of stuff for sale there--and so many dealers trying to hawk their wares--that it's getting tough for anyone to start a new eBay business.

What's your view?

Scot Wingo: Hi Leslie,

eBay just celebrated their 9th anniversary and as the marketplace has grown, so has the competition.

The downside of eBay is there is very little barrier to entry. Therefore the competition is fierce. In fact, I would say it's very Darwinian - sellers either get bigger, better and smarter or they basically go out of business.

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Vienna, Va.: Everyone I know who uses eBay has been ripped off. Do you think the fraud problem is getting better or worse??

Scot Wingo: Fraud is definitely a concern for eBay and everyone involved in the community.

eBay has a team of over 800 folks in "trust and safety" that are always on the lookout for bad guys.

eBay has also introduced some new protections like paypal buyer protection that increases the security for the buyer.

I think the problem is about the same as a %, but the numbers on ebay are going up rapidly so the absolute number of people that experience fraud goes up unfortunately.

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Bethesda, Md.: How does someone go about finding stuff to sell on eBay? Say you wanted to sell DVDs--how do buy them at wholesale and who do you contact to start a DVD eBay business? Any tips appreciated!

Scot Wingo: In the book I highlight many sources of products. First ebay has some wholesale categories, but as you can imagine they are pretty picked over and not great deals.

Secondarily, there are more niche sites like liquidation.com that sell bulk liquidation items that may be of interest.

Many retailers also have somewhat private sales of excess goods. For example, compusa has a b2b wholesale auction of their own.

As for DVDs, many people start by calling the distributors and asking for some of their distressed inventory/older titles, and then grow from there.

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D.C.: What are some things that do NOT sell well on eBay?

Scot Wingo: Some examples of things that do not sell well on ebay:

1. Brand new goods - In the book, I talk about the product lifecycle and how the best things for ebay, or the eBay Sweet Spots" are items that are towards the end of their lifecycle. For example, a brand new digital camera will sell on eBay, but at a substantial discount so you won't make any profit.

However if you had a digital camera that wasn't the latest and greatest you picked up on a store clearance, that would sell on ebay and probably make a profit.

The exception to this rule is brand new "hot" products. For example, IPOD mini's still sell above list on ebay because there is more demand than supply - ebay is great in those situations, but that product is obviously harder to come by.

2. Items that are less than $5 and weigh more than 50-75 pounds (unless people can pick them up) typically don't do well on eBay or in ecommerce in general. The exception to the $5 rule is if people are going to buy 5-10 of the items, then it makes sense because the buyer can spread the cost of shipping over many items.

For example, we have a seller that sells these charms for italian bracelets for $1, but each customer orders on average 30-50 so it ends up making sense.

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Fairfax, Virginia: Can you recommend other books that I may find useful in buying and selling things on eBay?

Leslie Walker: For beginners, I recommend Marsha Collier's "eBay for Dummies." She lectures at eBay's training seminars and has bought and sold on eBay for many years. Jim Griffith's "The Official eBay Bible" is also a great primer. He was eBay's first customer service rep. and knows eBay from the inside.

For advanced sellers, Scot Wingo's book, "eBay Strategies" is the best I have read, because it offers case studies with inside data about many established eBay businesses.

Scot Wingo: Good suggestions Leslie - I would also not that Marsha has a new book called "eBay Timesaving Techniques for Dummies" that I would recommend as well.

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Arlington, VA: I've got a whole warehouse full of odd stuff, old stuff, antiques, family and household items, tools, etc. dating back to the late 1800s.

Would it be practical and generate more revenue for me to try to sell each of these items, one at a time, over eBay, box and ship them, rather than hold an estate sale or auction on-site only?

Thank you.

Scot Wingo: YES! The beauty of eBay is you will be able to put those items in front of 110 MILLION buyers vs. if you have a local estate auction you would get hundreds of potential buyers.

There is more effort (taking pictures, posting to ebay, shipping) than you would have with an estate sale, but I'd estimate you will get 50-300% and possibly more for the items by selling the on ebay.

If you aren't up to the task of doing all the work, eBay has something called Trading Assistants (TA's)which are savvy sellers that will help you sell items on ebay for a % of sales. Much like auctioneers or companies that will run an estate sale. The average for a TA is 30%.

So if you can increase your sales by worse-case 50% minus the 30%, you're still ahead 20%. I think the upside is much more though.

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Washington, D.C.: What is the hardest part about starting an eBay business? After it's started, what are the hardest challenges to running it?

Scot Wingo: Usually the hardest part is just getting started. I'd recommend picking a category of items to sell based from an interest you have: cars, sports, TV/movies, whatever.

Once you get started, you need to get familiar with how the whole cycle works:

1. sourcing

2. posting

3. collecting funds

4. shipping

5. go to step 1.

Once you get the hang of it, the best eBay businesses optimize each step of the process.

once you have steps 2-4 optimized, the biggest value add you have in the business is sourcing and posting - those two things will drive your business rapidly vs. over-focusing on more logistical issues.

Each one of these steps has it's own challenges, some folks do well on the logistics and have a harder time with the sourcing. Others are the reverse.

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Germantown, MD: How much money can someone really make selling stuff on ebay? Are people doing this as a full time job? If so, how does someone decide what items to sell?

Scot Wingo: Over 430,000 people make a living off of eBay so yes, people do well with it.

It's NOT a get rich scheme though. The people that do well are working VERY hard and running real businesses with employees, rent, vendors, suppliers and all of the complexity that comes with that.

However, I know folks that sell close to $1m/month on eBay and do very well for themselves also.

As far as what items to sell, I would say start with something you know and/or are interested in. Once you get the hang of that you can move into different categories that may be more profitable to you.

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Burlington, Mass.: What is the most dependable source to locate wholesale suppliers and dropshippers?

Scot Wingo: You have ebay's wholesale area, liquidation.com and places like that - but everyone knows about that.

What I would recommend is to go ahead and start selling something. Let's say it's auto parts (could be anything).

At first you source from distributors and maybe some local retailers or a Big Lots or something like that.

Once the business gets large enough ($2k-5k/m) then you can start looking for better sources by working your way up the "supply chain". For example, call the manufacturers of a couple of your best sellers and tell them you are interested in placing a bulk order. They will either send you to a distributor or may talk about direct.

If you can go direct to the manufacturer, then you will get great discounts. Then as you grow, your discounts will get larger and larger.

I also know many sellers that source their goods from manufacturers in china - the items are typically made next to name-brand items, but the ebay sellers buy them unbranded and sell them for significant discounts profitably on ebay.

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Greenbelt, Md.: Are the auction snipers successful? I was outbid several times in the last minute.

Scot Wingo: I'm a big user of auction snipers - I use them to buy everything on ebay because I got tired of being sniped myself.

I've tried many and my favorite so far is esnipe.com

This brings up an interesting theoretical discussion I have with sellers all the time:

Many sellers believe that a $1 no-reserve auction determines the market price for goods on eBay.

I disagree because ebay has the hard "closing time" you don't get in a real world auction, buyers know they will get a better deal if the snipe.

Once you have enough of your buyers doing that vs. bidding, now you are selling your goods for below market price because the bidders have leveraged this ebay behavior to get a lower price.

What do you folks think about that?

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Chicago: Do you think that competition can develop for the market that Ebay serves? As a user of Ebay, I have felt that they have become less responsive to their users. An example of this is that it used to be that if one had dealings with a dishonest seller, one could call them up and they would take action. Now, they no longer have a help line and one cannot even complain by email and get a noncomputer generated reply.

Scot Wingo: Hi Chicago,

It's a good question, many have tried and all have failed. Some people believe that eBay has such a "virtuous cycle" (buyers bring sellers,seller bring buyers, etc.) that nobody can compete with them. I'm not sure I buy into that to be honest with you - buyers will go where the great products and deals are. Sellers are pretty flexible too.

We're seeing Amazon step in with some interesting offerings and many sellers are now creating their own ecommerce and promoting it with google/overture (paid search) as economically or better than eBay fees so that's actually competition in a sense. If google ends up with all the same products listed, then maybe you don't need ebay?

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Bronx, N.Y.: What are some of the best selling products in the under $50 dollar price range.

Robert Walerstein

Scot Wingo: Hi Robert,

The best sellers under $50 are:

1. collectibles

2. DVDs/CDs

3. Books

4. some jewelry (trinkets, charms, etc.)

5. and I'd have to say last but not least cell phone accessories - we see TONS of those sell for an ASP of $5-10

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Crofton, MD: Hi Leslie & Scot.
I am interested in "trust" services like SquareTrade, BuySAFE, BBBOnline, etc.... Is one better than the other? Do they do the same thing? Can they help a seller stand out in the tough eBay market? Any other suggestions?

Kim

Leslie Walker: I don't think the services you mentioned do the same thing, but they all speak to improving trust between buyer and seller. I do believe sellers who offer some escrow or "trust" services will fare better, especially with high-end merchandise. eBay offers advice on these issues in its "security center": http://pages.ebay.com/securitycenter

Scot, thoughts about which are the most useful?

Scot Wingo: Hi Kim,

Each of the services has a different approach to adding more "trust" to the transaction and it largely depends on what you're selling, etc.

In general:

1. Buysafe - I'm a huge fan of this offering, for those of you that aren't familiar, basically this lets the seller "bond" the transaction. You're probably familiar that if you have a plumber come do work for you, or landscaper, etc. you ask if they are bonded.

A bond is a surety bond provided by an insurance company that protects the transaction. So if the plumber floods your house, they step in and make everything right.

Buysafe brings this concept to ebay. The idea is if your auction/item is bonded, then the buyer will pay more because they know that no matter what happens, the insurance company will take care of them.

buysafe uses The Hartford for that.

2. Squaretrade is more of a service that does some checking on the seller and if a problem arises provides online arbitration for the buyer/seller. This is ok, but I don't think it gets buyers to feel as safe as buysafe does.

3. BBBonline is more of a seal that says, the BBB did some due diligence on the seller.

Escrows have been a source for much fraud over the last year and we've seen a strong pull back from that type of thing. There are great escrow services out there, but unfortunately many of the scams were fake escrow services so they are perceived to be risky.

Scot

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Leslie Walker: Many people are afraid to leave negative feedback on eBay because they may get retaliatory feedback from that person. Has this weakened eBay's feedback system? How do you advise eBay buyers and sellers to deal with retaliatory feedback--or the fear of getting it?

Scot Wingo: Hi Leslie,

Yes the retaliatory negative is a big problem on eBay. From a seller's perspective I usually suggest sellers not get in the habit of leaving negatives either first or in retaliation. Mostly sellers are unhappy because of a deadbeat bidder and eBay has other tools outside of feedback for dealing with those (UPI fee recovery, bidderblock, etc.) so neg's are a blunt instrument there.

eBay did recently introduce mutual feedback removal. So some sellers have a policy of always retaliating against a buyer and then send an email saying the seller will mutually remove if the buyer does to get both removed. The buyers will usually do this because buyer feedback tends to be much lower than seller and one negative can be pretty bad to their % rating.

I'd prefer to see sellers hold a much higher standard and if they get a negative, not respond with a negative, but with great customer service.

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Long Beach, Calif.: I have one major problem with EBAY, and I am curious as to how you would suggest dealing with it. My problem is that when I received a moldy book, the woman gave me negative feedback after I gave her one. How can Ebay allow a person to give me a negative simply because I can't pick up her book without gagging?

thanks

Scot Wingo: Hi this is the retaliatory feedback problem.

Yes this is a problem, the seller should give you a refund. In fact, some sellers on ebay use the feedback system as a way out of guaranteeing what they sell you basically.

I'm a big proponent of "no risk bidding" - give customers a money back guarantee and build a real business vs. making money off selling people moldy books.

In your specific situation I would recommend contacting the seller and asking if they would like to mutually withdraw the negative. Also you could file a claim with eBay and/or paypal if you paid with paypal.

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Marblehead, MA: Mr. Wingo:

Once an eBay seller grows and gets to be pretty serious about his/her business, and decides to go into it full-time, what's the most typical mistake or pitfall they run into? How do you avoid it?

Thanks.

Scot Wingo: Most sellers will chug along and then they will hit a speed bump around 2-10k/m (depends on their average selling price, etc).

That speed bump can be any one or combo of things:

1. logistics - your shipping "system" breaks down because you hit a certain number of items.

2. profits decrease - usually this is caused by businesses that run everything at $1 with no reserve ($NR). In these businesses everything goes well until you hit a point where you have saturated the market and effectively start competing with yourself for buyers.

The average sales price comes down and you can flip to unprofitable sales very quickly. If you aren't monitoring the business very closely, it may take you time to realize this and you can burn through some funds pretty quickly.

The book has detailed examples on this problem and some solutions.

3. competition - you may have 3-6 months of smooth sailing and then a new competitor comes into the market selling the same item(s) as you, but for a lower price that really rocks the boat.

There are some more, but those are the big 3

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Arlington, Va.: What do you think of eBay's idea to trash their successful book-selling site, Half.com? EBay tried to get all their Half sellers to open stores on eBay. Of course, you don't have to pay to list on Half, but you do on eBay. Books just don't sell on eBay like they do on Half. At least, the expensive ones don't. It seems that everything eBay takes over, it ruins, from Paypal to Half. Next comes Craig's List, I suppose. How many billions do Meg and Pierre need to live on, for goodness sake?

Leslie Walker: For folks who don't know the background, Half.com was a marketplace for second-hand books and CDs that eBay bought a few years ago and has been slowly trying to integrate into eBay, with an eye to eventually discontinuing Half.com as a standalone service. Half.com is especially popular with sellers because they pay no upfront listing fees, as they do at eBay. Scot, what's your take on Half.com?

Scot Wingo: Hello in Arlington,

After acquiring half.com, ebay had a problem on their hands because half.com wasn't able to expand out of books music and video like I think ebay thought they would be able to.

Three years later, ebay DID grow out of just collectibles (there are 12 $1b categories like cars, jewelry, computers, etc.) and had this small site they had to support that sold very little books music and videos.

But there was a group of sellers that LOVED half because of the ease of posting, no listing fees, etc.

ebay made the hard choice of closing half.com as a separate site and trying to merge in some of the things sellers' loved into the core of ebay's book/music/video/game categories.

This is called pre-filled items where you just enter a UPC/ISBN and ebay will spit out the listing for you.

They also approximate the fee structure with eBay stores.

But alas, most of the half.com sellers don't seem happy with those efforts and are leaving for amazon and other places from what I can tell.

And I'm not sure how many billions Meg/Pierre need, but they're still going!

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Fall River, MA: I've been an eBay seller for sometime and I have found it a great way to clear clutter and generate income. However, I am stalled whenever there is a problem or a concern. All the contacts I can find are email and they are not always the most complete (the answers do not always match the question). I am a powerseller, is there any way to talk to a customer rep live?

Scot Wingo: As a powerseller, you should get a "rep" to talk to. Additionally our sellers have had good luck with the live chat feature that ebay has been using. You can ask those folks seller questions.

Another great place for answers is the "ebay groups" (under community on the ebay.com homepage) - here you will find packs of sellers either in your area, category, or powerseller tier that can answer questions better than most folks at eBay :-)

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Leslie Walker: Scot, I noticed you said over 430,000 people make a living on eBay. I was surprised at "eBay Live" (the site's annual convention) this summer to hear eBay exec say that the number of people who "make a living" on eBay actually includes dealers who sell there as an adjunct to their offline store or retail operation (including a Web site.) To my way of thinking, someone running a jewelry store in Boca Raton who sells 10 percent of their merchandise on eBay isn't making their living there. That definition used by eBay probably includes many thousands of established merchants who sell a small amount of stuff on eBay, no?

What I'm wondering is if you really think that many people are earning a living on eBay.

Scot Wingo: Hi Leslie,

You are right, ebay has set the definition of "makes a living on ebay" and since all they really know about you are your sales and other metrics, I believe the build the definition off that.

So I would guess they define it as someone that sells $5k/month+ on eBay. This is how the retail operation folks, as well as individuals, small biz get pulled into that number.

What it doesn't count though is a business doing 300k that may have 10 employees. I think ebay UNDER counts that one by 9 people. So maybe it all comes out in the wash.

Would you count the 10 employees as making a living on ebay or is that 1?

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Lewes, Delaware: I find that people overcharge their shipping costs to increase their profit. It is irritating to pay someone $5 for shipping only to receive the package with a $1.50 postmark.

Do you agree?

Scot Wingo: Some sellers do use this as one of their sources of profit. Another reason they do it is ebay does not make a % off the shipping costs so you could have an extreme example of someone selling a $100 item for $1 with a $99 shipping and ebay would get fees on the $1 and not the $99 shipping.

Luckily buyers are pretty smart about this and after 1-2 transactions add the shipping and item value together to determine what they will bid/buy.

There have been rumors for years that ebay would move to more of a half.com shipping mechanism where the seller had to work within defined ebay ranges.

I think ebay should just show it as part of the price when you do searches and whatnot so as a buyer you don't have to spend so much time figuring it out and adding, etc..

In your example, $5 isn't too bad given the seller may self-insure, have to pay for packing materials and shipping and handling costs.

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San Francisco, CA: I live in the Bay Area and see signs for "drop off" locations for consumers (like AuctionDrop) for items to be sold on eBay. Are a lot of consumers using these locations? Is this a trading assistant like you mentioned earlier? Is this a big business (selling for consumers)? Thanks!

Leslie Walker: Scot, could you also comment on the economics of these drop-off services? Some of our readers in Washington want to know how much commission eBay consignment services typically take.

Scot Wingo: FYI - most of them charge 30% of sales NOT including ebay fees (another 5-10%).

I'm not a huge fan of the drop-off businesses from a "business owner" or franchisee perspective. The problem is you can't control what comes in the door.

So most of these places set up a "floor" of $50 - the item has to be worth that before they will sell it.

The other side of the coin is this is a convenience business. For a $300 item, are you willing to pay $100 for someone to sell that on eBay? You could buy your own digital camera and figure out ebay for 3hrs for that kind of $.

So I think the business goes from "sell anything on ebay" to: sell anything from $50-300 in value on eBay.

That's limits the world a fair amount.

The consumer adoption hasn't been that high. For example, postnet launched in 13 of their locations and they have 17 items live on ebay right now (postnet is the seller ID).

Imagine if you had to pay retail rent on 30% of 17 * $300?

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Leslie Walker: Here's a follow-up comment from a reader in Washington, D.C.:

Washington, D.C.: Half.com sounded like real competition to the profit model of eBay. Commission revenues only when an item sells seems like a good way to assure that everyone can participate in the seller's market.

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Leslie Walker: You took issue with sellers who think a $1, no-reserve auction is a good way to determine the market price on eBay. You seem to be saying that because people "snipe" or wait until the last minute to bid, setting the opening price low can lead to a below-market sale price because so many bidders wait until the last minute, that there isn't time to let the bidding drive up the price to its true market level.

The counter-argument, of course, is that starting the price low gives a psychological boost to bidders who don't snipe--and there are plenty of those--to join the bidding, because they think they may get a bargain. Have you done studies or seen research that suggests which of these two forces is stronger?

Scot Wingo: We have and the answer is... it depends.

For items that are rarer and harder to find you'll do better with $1NR - because people won't want to lose.

For items that are more commodities (or when you do a search on ebay there are more than 50 of them for sale), you are better of with a mixed approach:

1. Some $1NR to build excitement and drive traffic

2. Some BIN to catch the folks that don't win the $1NR

3. Some FP for items that you may have in quantity and save on listing fees.

4. Some store listings for items that are add-ons or things that people that find you may be interested, but that don't sell well enough as auctions or BINs to justify the higher listing fees.

This holistic approach is much safer and higher margin than a pure $1NR approach.

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Raleigh, NC: What is your opinion on using Yahoo!; and/or Amazon for auctions versus eBay? Can you please elaborate on the major pros and cons?

Scot Wingo: Unfortunately Amazon/Yahoo auctions are not viable ebay alternatives.

However Amazon has something called the marketplace (you may know it as "I have one of these to sell") that does very well in the book/music/video/game categories and 'ok' in others.

Yahoo has paid-search (overture.com) and Yahoo shopping, which if you have ecommerce (and you should by the way if you are serious about this - it's not that expensive) are great ways to sell your items outside of eBay.

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Leslie Walker: We are running out of time for today, folks.

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Scot Wingo: Thanks to everyone for coming to the chat today and thanks Leslie for hosting this.

I'd like to leave everyone with some tidbits from the book:

1. Strategic methodology for doing well on eBay:

Think about the 5 P's:

Product

Price

Promotion

Placement

Performance

2. Here are a couple of strategies from the book that can help you significantly grow your eBay business:

* Leverage second chance offers

* Focus on your auction titles - use all 55 chars and be descriptive (avoid ebay slang)

* Build your ebay brand!

Thanks again and happy selling!

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Leslie Walker: That wraps it up for today. Thanks to everyone for participating and a huge thanks to Scot Wingo for sharing his insights into eBay.

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