Earning money with eBay, where’s the margin?
So a friend of mine recently mentioned that he wanted to get into eBay as he heard it’s a really good way to earn money online (him along with rest of world). So at a basic level what most people on eBay are doing is buying stuff locally and then selling it nationwide with the hope 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 the site/system already built. All you have to do is upload the details of your products and they handle the rest (all technical stuff). You don’t have to worry about building your own site and taking credit cards and all that involves.
- They provide the customers. Ok so you can advertise your eBay listing on your own site or in other places but most of the sales are going to come from people browsing eBay and finding what you have to offer. Don’t underestimate this bit because attracting customers is one of the hardest things to do online, there’s a lot of competition out there.
- Trust rating/system. If you have a new site it’s really hard to get people to trust you and even harder to get them to hand over credit card details, after all you could be anyone! EBay provides a great system for customers to view the history of a seller and what other customers thought of them. It’s a great system that allows small sellers to compete with the big retailers. I will trust a small seller with over 1000 positive reviews over a big retailer any day, they have much more to loose by providing bad service.
So on the face of it earning money with eBay should be easy right? Well not really actually, even with all these benefits the margin on selling stuff on eBay is terrible. For a start you have all these little costs that eat into your profit:
- Listing fees
- Final value fees
- Payment processing fees (PayPal/visa etc)
Don’t forget you still have to post whatever it is to the person, the whole thing seems like a massive headache to me so far. Here’s the biggest problem though, the margin you can make on most items is really low, around 5% – 10%. I know there’s lots of stories about people becoming millionaires via eBay but it seems to me the only way to do it would be sourcing a product that’s not readily available in a local market and adding a big margin. If you’re trying to compete with 100 other people selling the exact same thing you’re going to be haggling with other sellers to see who can do it £1 cheaper.
To me the eBay idea is great if you really don’t have a clue at all about the online world and you just want them to handle everything from the website to the marketing. But realise they are going to take a big chunk of whatever you earn for doing this. Also realise that they directly list all of your competitors right beside you every time someone searches for what you’re 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 just see how much easier it would be to do all of that stuff myself:
- Out of the box ecommerce solution like oscommerce
- Take payment with PayPal (no need for merchant account I think?)
- Some proper marketing of your site with SEO and PPC
The last point is probably a little over simplified but it is possible to do with time and effort. Once your there though and your generating your own sales on your own products you will realise how much bigger your margins are going to be.
So that’s all I have on the eBay thing, I have a feeling my friend is probably going to just plough ahead anyway, he’s stubborn when it comes to money like other people I know 
