Expert: Marvinator - 5/22/2005

Question
Hello,

Can one really make money selling in auction sites?

Ive set up a Paypal account and am considering using Chris Malta's drop ship directory to establish relationships with suppliers and selling those items on eBay.  This I want to do as a start and see if I can make a profit on eBay.  Is this feasible?

How do you determine what to sell?  Can you sell in bulk?  How do I find Drop Shippers on my own? Do you need a tax id to establish relationships with suppliers?

Thx,

Ricardo

Answer
You ask several questions so let me take this one step at a time.

Your first question is miss-worded, if I read you right.  What you really want to know is "Can you MAKE A LIVING" by selling on auctions sites.  Can you quit the day job and join the multitudes that work out of their home.  The answer is Yes, and NO.   This is going to get long and involved, so get a cup of coffee and let's get into it.

First and foremost, what most people see about Ebay and Auctions sites is the people that have been profiled on 60 Minutes, or the local news. These people have several new shiny cars and a brand new house (or two)  full of product and they hire people to ship out hundreds of packages daily and make thousands of dollars for only  a few minutes of on line time.  To this I say "BULL HOCKEY".   I live with a person who works Ebay full time.  She works Monday through Friday setting up auctions and running her business, 16-18 hours a day.  On Saturday she is out looking for product to sell.  On Sunday she spends half the day in shipping and email.  It is MORE than a full time business and the sooner people knew this the better off they'd be.  And the next question is "Does she make a living?"  And the answer is yes, but only because she's been doing it long enough to have a clientele and a business that is set and running.  

Now, there ARE those who make money on Ebay, but they are far and few between.  Most of Ebay's multitudes are "Mom & Pop" operations which sell crafts, used clothing and collectibles to supplement an income.  The others, the real merchants, sell full time through the sale of large (HUGE) numbers of auctions and selling a product which can be purchased cheaply and sold cheaply.  Remember, Ebay is a Buyer's market.  The buyer sets the ultimate price.  The more you can sell BELOW what your competitors sell, then the more you can make money.  This is the entire basis of understanding Ebay as a business.

Take an example of a man who makes a mere $30,000 a year.  This, for the home business person, must be considered your PROFIT, not gross.  That means you must sell enough to generate $2500 a month PROFIT.  How much does that mean daily?  Ok, suppose you have a product which you can purchase for $5.  If you sell this item at auction, and make $10 your profit will only be $3 (don't forget selling fees and payment processing fees).  This means that you must sell over 850 of these items each and every month! That's almost 30 a day of this one item and we haven't even considered taxes or overhead.  

Let's examine now the fact that there are businesses making money.  What these guys have that the average seller does not, is backing.  Most have a brick and mortar location (a retail or wholesale location which gives them buying power and other income when times are tough at eBay) and also have the history of product.  This means they have a product which will sell, day in and day out every day. They sell a wide variety of products and can afford to sell it cheaper than their competition.  

CAN YOU make money?  Yes.  But can you make a LIVING at it? Indications are NO.  Only you can make that determination.  What I would say from the outset, 'Don't quit your day job - until you are already making enough to replace that income.'

Now, let's answer the next part of your questions.  DROP SHIPPING.

Personally I dislike drop shippers.  The first reason is that you are at their mercy.  Most will charge you for a list of contacts which may or may not pan out.  Consider the fact that they have already sold this list to HUNDREDS of others.  This means that you are selling the same things as HUNDREDS of other Ebay merchants and you all buy for the same amount. How can you undercut the competition if you are all buying at the same price?  

Consider also the fact that you may have this scenario happen several times. You place an item for auction and - Hey, it sells!  Woo HOO!  You collect the money and contact the company for the item to be drop shipped.  Oh but wait. The Drop Shipper is out of stock (too many others selling the same things) and it is on back order.  Now, the company is well within its rules by telling you it's on backorder, and you just have to wait.  It could come in tomorrow, or next week or next MONTH, but you (and your customer) just have to wait.  Do you think your customer will want to wait or will want a refund?  Let's not even get into the fact that according to both Ebay and the Federal Trade Commission you should not auction off any product which you cannot ship within 30 days.  What happens to your reputation now?  (And this scenario is happening time and time again on Ebay right now!)

NEXT: DETERMINING WHAT TO SELL

People come to me all the time with that one question - looking for a clue to the one item that will make them rich on Ebay.  The problem is that there is no cut and dried answer.  What sells well for one may be a total disaster for another.  In addition, consider this: If there is one item that sells well, and could make someone rich, do you really expect to be handed this information on a silver platter?   The age of making it rich on eBay may be quickly fading as the number of new sellers wanting the same thing grows.  

The one thing I can tell new sellers is that you have to sell what you know.  If you know a bit about Depression glass, then I'd say that's your area to sell.  If, however, you don't know the difference between Mayfair and Cabbage Rose, then you're going to have trouble with those items. Everyone knows a bit about something.  You need to assess your own abilities and your own knowledge areas to find those items with which you will do best.

As a way of explanation, I know of one woman who is good at tatting. It's a very old form of knitting which uses a "shuttle" and creates the most incredible lace.  She is very good at it and decided to write up a booklet on tatting and sell it. She does very good with her book, though she's not getting rich.  My point is that she worked with her own knowledge base.  If she had tried to sell photo equipment, she probably wouldn't have made a dime.  

Here is another story.  A 14 year old I know loves Barbie (the doll from Mattel).  She played with them growing up and when she got to babysitting age, she started in buying the collector dolls. With her moms' help she wanted to be able to sell Barbies that she found in the thrift stores.  It was her knowledge of the doll and its recent history which allowed her to scan a box of dolls and know which ones were older and more valuable.  In addition, she would read anything she could find in print or on the internet which would give her more information on the doll.  At 14 she has already made enough for her first year in college. Ebay is filled with stories like that, of people taking a hobby or interest and finding a way to make money at it.  Are they rich? No, but they are making money.  AND that is the key to Ebay. Make money.  

So my suggestion to you is to assess your own abilities, interests, hobbies and history and find that area where you know enough to get started.  Got a hobby making fishing lures?  What about time spent with Dad at the hardware stores?  ANYTHING can be turned into a proper product base so long as you know what you know and turn it properly.  

I hope I haven't bored you with all this and I hope I haven't scared you out of eBay entirely.  What I try to do is to educate people to the pitfalls and problems so that you are prepared WELL in advance of their happening.  If you feel more attuned to the challenges rather than just the income, then I've done my job.  

I also know it's a lot to take in.  Please feel free to come back and I will be happy to answer any other questions which may arise in your continuing endeavor on Ebay.