Make Money With eBay, Where Is The Margin?
So a friend of mine recently mentioned that he wanted to get into eBay because he heard it was a really good way to make money online (him with the rest of the world). So at a basic level, most people on eBay buy products locally and then sell them all over the country in the hopes of making a profit. This in itself isn’t a revolutionary concept, but there are a few key things eBay does really well:
They have already built the site / system. All you have to do is upload your product details and they’ll take care of the rest (all technicalities). You don’t have to worry about creating your own site, accepting credit cards and all that entails.
They supply the customers. Ok so you can advertise your eBay listing on your own site or elsewhere, but most of the sales will come from people browsing eBay and finding what you have to offer. Don’t underestimate this because attracting customers is one of the hardest things to do online, there is a lot of competition out there.
Rating / trust system. If you have a new site its really hard to get people to trust you and even harder to get them to give you your credit card details, after all, you could be anyone! EBay provides a great system for customers to view a seller’s history and what other customers have said about them. It’s a great system that allows small sellers to compete with large retailers. I will trust a small seller with over 1000 positive reviews of a large retailer every day they have a lot more to lose by providing bad service.
So at first glance, making money with eBay should be easy, right? In fact, not really, even with all of these advantages, the eBay selling margin is terrible. For starters, you have all these little costs that eat away at your profit:
Final Value Fee
Payment processing fees (PayPal / visa, etc.)
Remember you still have to post anything to the person, it all seems like a huge puzzle to me so far. Here is the biggest problem, the margin you can make on most items is really low, between 5% and 10%. I know there are a lot of stories of people becoming millionaires through eBay, but it seems to me that the only way to do that would be to find a product that is not readily available in a local market and add a large margin. If you try to compete with 100 other people who are selling the exact same thing, you are going to haggle with other sellers to see who can do it £ 1 cheaper.
For me, the idea of eBay is great if you really have no idea what the online world is like and just want them to handle everything from website to marketing. But be aware that they are going to take a big chunk of what you earn to do this. Also be aware that they directly list all of your competitors right next to you whenever someone searches for what you are selling, eBay doesn’t care about your business on an individual basis, only the collective success of their site.
The problem for someone like me when I look at eBay is that I see how much easier it would be to do all of this on my own:
Out-of-the-box ecommerce solution like oscommerce
Accept payment with PayPal (no need for a merchant account I think?)
Good marketing of your site with SEO and PPC
The last point is probably a bit oversimplified but it can be done with time and effort. Once you are there and generate your own sales on your own products, you will realize how much greater your margins will be.
This is all I have on eBay, I have a feeling my friend is probably going to move on anyway, he is stubborn when it comes to money like other people I know .