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Capitalizing on eBay's Distribution Channel

Debbie Gordon, President and CEO, Snappy Auctions

eBay is fast becoming a valuable marketing resource and distribution channel for individuals and businesses alike. Representing myriad products—from dolls, books, and shoes to airplanes, high-tech medical equipment, and forklifts—eBay has evolved into a vast marketplace of unparalleled capacity. And while, traditionally, the greatest share of eBay users (97 percent) has been savvy buyers, increasingly eBay is regarded as a very smart alternative for sellers seeking to distribute their wares.

Snappy Auctions was built on the premise of connecting those who wish to sell on eBay but lack the time and/or expertise to be successful. About three years ago, we saw the growing “supply” opportunity and began to leverage the capacity of eBay for our clients and their products. Following are some of the lessons we’ve learned along the way.

Today, eBay represents the largest marketplace in the world with 168 million buyers and sellers worldwide reported last year. As such, it offers unmatched market value based on size, consistency, and virtually unlimited potential demand. What began as a small marketplace primarily for individuals selling collectibles and fledgling start-ups, is now a commercial powerhouse representing more than 45,000 different categories with several billions of dollars in business and industrial sales—the fastest growing categories on eBay. In fact, just five or six years ago, collectibles comprised 80 percent of sales. Now they represent only thirteen percent, with the remainder in “practicals.”

eBay is also changing people’s way of thinking about how they purchase things: they now think in terms of being able to liquidate items easily when they are finished with them. It’s no surprise that major corporations have begun to buy and sell on eBay, and their purchasing departments often even have initiatives or mandates to locate used items on eBay.

A major reason for eBay’s continued success is its capacity as a great equalizer. On a per-item or per-sale basis, it costs everyone the same to do business, whether they’re selling high-tech computers or dolls. So sellers are competing solely on price. It is this level playing field that has allowed entrepreneurs to thrive on eBay. Individuals aren’t overpowered by the typical advantages of the big dogs.

And since eBay exposes sellers to the largest population offering the greatest potential reach, it basically does a lot of your marketing for you. eBay drives people to the site through its own efforts, such a keyword search optimization. eBay always turns up high on Google and other engine searches and even pays for sponsored advertising positions to further boost traffic on behalf of its members.

Best of all, selling online is relatively inexpensive with low overhead and low risk. For many entrepreneurs, eBay is their only storefront. It’s an excellent way to test the market, allowing individuals and small businesses to get into e-commerce without the trouble and expense of setting up their own site. As a result, greater numbers of existing e-commerce Web sites are converging onto eBay every day.

But how do entrepreneurial businesses get started? For the inexperienced eBay seller, there are many unknowns. How much is it going to cost? Should small businesses try to market on eBay themselves or have an experienced seller do it for them? What can businesses do to increase their chances for success? What about issues like pricing and shipping?

The first thing businesses should do before listing a product, whether on their own or through a professional seller like Snappy Auctions, is research other similar products on eBay and follow the bidding processes. This will allow you to gauge demand and help you understand what your product is worth. At any given time of the day, the market is changing.

It’s important to be aware of the competitive landscape. Of course the best scenario is a low existing supply with high demand. Look at comparables for similar products and determine if there is a market and, if so, how big it is. The higher the supply, the lower the sale price must be. When determining the best starting price, keep in mind that it will be different from what the product actually ends up selling for. Often, a low starting price is a good strategy for attracting more bidders and ultimately allowing you to sell the product for more.

Once you’ve determined there is a market for your product and set a fair price, you must make your listing as compelling as possible. Include detailed descriptions, search-engine friendly language, and enticing, professional-quality visuals to encourage as many bids as possible.

There are a few factors to consider related to cost. First, sellers will pay two basic fees to eBay—an insertion fee when they list an item, which is based on the starting price (or the fixed price in a non-bid situation), and a final value fee, which is based on a percent of the closing fee when the item sells.

There can be additional fees associated with your listing if you choose to add optional features designed to help increase bid activity and your chances for a successful sale. If the buyer pays through PayPal, an automated pay system similar to using a credit card, there is an additional transaction fee, which is 3 percent of the sale price.

If you choose to use a professional seller, there is a commission paid to that seller for its services. For example, at Snappy Auctions, the commission is 35 percent on sales up to $500; 25 percent of sales above $500 and up to $2,000; and 15 percent of the remaining amount above $2,000. Services include:

  • Pricing/value analysis
  • Complete descriptions with keyword strategies
  • Professional digital photography and editing
  • Responding to all inquiries and questions for all items
  • Electronic invoicing to buyers
  • Payment processing including credit card payments
  • Professional packing of items
  • FedEx-insured shipping and tracking

Although buyers pay for shipping, sellers determine the method used and specify it in their listing. Some methods are better than others, depending on the product, and should be researched thoroughly. For small items under $100, the shipping is automated through eBay using FedEx, UPS, etc. For large items or heavy equipment, you will need to determine the best freight company to use.

As eBay continues to grow, there will be even greater opportunities to buy and sell an increasing array of new and used products. When eBay began in 1995, it would have been difficult to imagine selling the kinds of high-tech products and industrial equipment that are now common items.

Who knows what products will be selling on eBay ten years from now? Remember, the most important factor for success is having a product that is in demand and selling at a price that people are willing to pay. eBay buyers are smart shoppers. They know what’s out there, they know what they want, and they buy it when they find it.

© 2006 Ewing Marion Kauffman Foundation. All rights reserved.

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