My first year as an eBay entrepreneur
This year I made just over $6,000 in profit from my new eBay store, Shining-Star-Suits. It's important for anyone who is considering selling on eBay to know what kind of income they can expect. Many eBay sellers close shop after liquidating their inventory at a loss. I see the pattern over and over, a seller buys inventory at a low price but does not have access to market information that shows whether they will earn a profit or lose their investment.
I sell in the Clothing, Shoes and Accessories (CSA) category. In terms of the number of listings, this is the second largest category on eBay next to Collectibles. On November 25, 2005, there were 2.4 million auctions for Collectibles and 2.2 million auctions for CSA. My research shows there are at least 16,000 power sellers in CSA using professional selling tools such as Vendio and Seller Sourcebook. Forrester Research, Inc. projects "(US) Online consumer auction sales will reach $65 billion by 2010, accounting for nearly one-fifth of all online retail sales." I believe this is 80 to 100% growth for eBay US Gross Merchandise Sales (GMS). They did $42B GMS world-wide last year.
Also from Forrester, "Online retail sales, which we define as B2C sales of goods including auctions and travel, will grow from $172 billion in 2005 to $329 billion in 2010. Both consumers and sellers continue to stoke the eCommerce fires. As consumers increase shopping-related activities and sellers compete to innovate and keep them engaged, online sales will enjoy a solid 14% compound annual growth rate (CAGR) over the next five years."
That's great - Now what should I sell?
It's really a question of "What do people want to buy?" I knew I wanted to sell professional women's clothes because I could understand the needs of the buyer (me). In February, I experimented with dresses, suits and casual wear. I had so many hits on the suit that it was obvious that I should sell women's suits. I tried to research the market in depth using tools from eBay Market Research companies, but the results were so generalized that they were of no use. So I created my own tool called Market Sweet Spots w/ a break-even cost of inventory calculator. I manually built it in Excel and retrieved the data from eBay's search - > completed listings tools. This tool protects me from making bad decisions on inventory. More on this tool in a later blog.
How much can I make?
Again, I had to create my own tool in Excel in order to view of the competitive landscape of the suits market. I looked at the number of suits the top sellers were selling and projected my profits. My market is pretty small - there were only $5,000 in total sales on the best week of November with an average price of $78 per suit. So I my tool projects an annual salary range of $6,000 to $12,000 for 2006. This is based on my $30 average profit per suit after all fees.
Why do some sellers do so much better than others?
Now this is the fun part. Some sellers have the ability to consistently sell at much higher prices and success rates than others selling the exact same product. How? They offer superior services AND they effectively communicate their value to the buyer. I call this yes power. And it's whole 'nother blog.