I think Ebay is a great site that makes market dynamics transparent, but as for sustaining a business model, it leaves a lot to be desired.
Let me explain why.
Because Ebay is simple to use and very accessible to millions of amateurs, many people think developing an Ebay business is the logical place to start. So they start off by selling the household items that have collected in their basements and garages. The stuff sells and all of a sudden, these people think they are business geniuses. “I made MONEY on EBAY!!!"
The next thing they do is try to find other things to sell on Ebay. They know they must buy at wholesale prices, so they go to their computer and Google “wholesale suppliers” or some similar search.
Now they’re officially “in the game”. By the time this game is over however, they will most likely have lost hundreds if not thousands of dollars and will have pretty much given up on starting their own business.
There are two main reasons that make Ebay one of the most difficult mediums in which to succeed.
1. Competition. Ebay is the one of the largest websites in the world. It attracts millions upon millions of buyers and sellers. Because it’s such a huge marketplace, and you are listing your goods right next to your competition (who sells the exact same item), the buyers do not see much more than price. “Who has the lowest price and a feedback score that looks pretty good? That’s who I’ll buy from!”
Ebay is extremely price driven. And even if you think you have a great source for your product, there are others that will be selling below cost (ie. losing money) due to overstock situations or selling an item as a loss leader.
2. Fraud. What may one day be their downfall, fraud is extremely prevalent on Ebay. Both on the buyer side and seller side, scammers love to use Ebay. It’s anonymous, fast, and there are plenty of potential victims. If you sell on Ebay for any amount of time, you will be contacted in some way by a scammer looking to rip you off. No other business has to deal with fraud on this level.
So even though I sound all doom-and-gloom, you can succeed on Ebay. You just need to use it in the right way.
You will be that much further along when you accept that Ebay now belongs to the very big seller with very deep pockets. Many of these sellers typically have retail brick and mortar stores to accompany their online efforts. So selling general-type merchandise like cameras, dvd players, clothing, jewelry, etc. , is usually a losing proposition.
To succeed, you must be one of two things on Ebay:
1. A niche player.
2. A manufacturer.
Niche player - What I mean here is that you need to focus in on a very select group of consumers.
The first thing you need to do is determine what it is that interests you. Take stock of your hobbies and build your business around them. Why? Because that is what you know. It is what you have a passion for. And because it will keep you interested in your business when the novelty of a new business wears off.
An example of a niche market might be: Gothic style shoes and boots for women. (This is not my interest or hobby, by the way).
Once you have figured out your niche, determine how you will solve a problem they might have.
In our example, these types of shoes and boots are not readily accessible at the local mall. So you will provide them on Ebay!! There will still be competition, but it will be far less competition than for other types of merchandise.
As you start selling and gain more of an understanding of your niche, you will focus even more. Maybe you will stop selling Gothic shoes and concentrate solely on black patent-leather Goth boots. Eventually, you can dominate a niche like this.
Manufacturer - I don’t mean to say that you need to go out and buy a widget making factory. What I mean is that you need to create a product that is unique. Some examples of this type of product would be tie-dyed t-shirts, or personalized children’s coloring books, or some sort of designer dog collar, or you write an e-book or software program.
You get the idea.
Whatever it is, it has to be unique and you have to solve problems. I successfully sold new mobile phones on Ebay for years. But I have given up that business because there are literally hundreds of competitors driving down the price. People can go into many retail stores or shop online and buy an unlocked mobile phone these days. So what problem was I solving? There are a hundred sellers on Ebay selling Motorola mobile phones now. Do you want to be seller #101? Where is the profit in that?
Think niche instead of mass and you will be light years ahead of most new entrepreneurs.
David Fransko, is the American moderator of the world's largest wholesale discussion forum, The Wholesale Forums His blog, The BillyA Blog provides no-nonsense, street-smart tips and advice to those looking to make money online.