Expert: Marvinator - 4/18/2004

Question
hi there,

i've been an ebay member for the past couple of years and have since used the web-site for personal purchases mainly. (in australia)
however, being a student and funds rather short i would like to start a shop on ebay myself, selling fragrances for women. what i had in mind is to buy items on ebay and resell them for about 20 - 25% more than the intital price i paid for. i am also currently keeping track of popular items; recording the relevant details such as start-ending price, and number of bids in order to get a better idea of what is in demand and how much people are willing to pay for products.
my question to you is, what is the best way of going about ensuring a profitable sale at the end of the bid and what would be the most time efficient way to obtain fragrances, as i estimate the "buy and resell" period to be 3 to 4 weeks on average.

thank you for your help.
kind regards,

jamie  

Answer
Your endeavor has a few bugs to work out, not the least of which is the fact that many of your sales will be outside your country.  Perhaps we can break this down into several parts. (For the sake of arguements, all my monetary figurings are done in US$.)

1)  Ensuring a Profitable Sale:  This is a good point of discussion regardless of what you sell.  To begin with, the general accepted rule of thumb is to never set an opening price (opening bid) at any level where you would not make a profit at that point.  It works like this.  If you buy an item for $1 and sell it for $1, you've made no profit - especially when you work in Ebay fees (as wellas possible Paypal fees) which means you lose money.  So, if your fees are say as an example 25¢ for Ebay fees and perhaps another 15¢ for Paypal fees then your percieved break even point is $1.40. Following the above rule of thumb, your opening bid should be $1.40.  At this price, you are not LOSING money.  

The correlary concept is that many items will receive two or more bids, driving the price up - hopefully above your break even point.  This then becomes the question you must answer for youself (after doing some market research).  Would it be better to start low (below the break even point) and let bids climb above the break even point or set the opening price at the break even point and hope that bidding/pricing goes even higher?  Every Ebay seller goes through this hard decision.  There is no hard and fast answer for every item.  And, there is no hard and fast answer for every seller.  

2) The most efficient way to obtain product.  This is a question that will be best answered by your product search.  If you plan to place orders at the time when you get sales, this can cause a problem.  There is no supplier in the world that will guarantee you that any product in their line will be always available at anytime of the year.  You could end up with a sale or two for which you will be unable to supply product in a timely manner.  In addition, Ebay rules state that you must deliver product in under 30 days.  

Add to this the fact that most buyers will want their item shipped out at the point of purchase (or point of payment) and you're going to tell them they have to wait 3-4 weeks before you even have the item in hand?  You can see the problems arising already.  In addition, if you're considering adding delivery problems to your description "items will be shipped 28 days after receipt of payment" or the famous "Allow 6 weeks for delivery", then you should expect a lower bid ratio.

3) Lastly, I must make mention of your distance from your target audience.  Though Ebay is worldwide, the bulk of bidders are in the continental United States.  This means higher delivery costs.  When you add these costs to your bid price, you begin to see the problems in getting people to bid.  A person may buy an item for $10.00 which may seem like a good price, but to actually GET the item in hand they have to spend additionally on shipping.  Now this means that their $10 item will cost them more, and in YOUR case, twice as much as someone already operating in the states.  

I'm not trying to tell you not to open a store, far from it.  I'm trying to point out the obstacles which lay ahead for an entreprenuer in your situation.  I hope I've at least caused you to add more to your research.