This content was uploaded by our users and we assume good faith they have the permission to share this book. If you own the copyright to this book and it is wrongfully on our website, we offer a simple DMCA procedure to remove your content from our site. Start by pressing the button below!
Other Books by Joseph T. Sinclair eBay the Smart Way®, Fourth Edition eBay Motors the Smart Way® eBay Global the Smart Way® Building Your eBay Traffic the Smart Way® eBay Photography the Smart Way® eBay Inventory the Smart Way®
eBay Business the Smart Way® Maximize Your Profits on the Web’s #1 Auction Site Third Edition
Joseph T. Sinclair
American Management Association New York • Atlanta • Brussels • Chicago • Mexico City • San Francisco Shanghai • Tokyo • Toronto • Washington, D.C.
Special discounts on bulk quantities of AMACOM books are available to corporations, professional associations, and other organizations. For details, contact Special Sales Department, AMACOM, a division of American Management Association, 1601 Broadway, New York, NY 10019. Tel.: 212-903-8316. Fax: 212-903-8083. Web site: www.amacombooks.org This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional service. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. Library of Congress Cataloging-in-Publication Data Sinclair, Joseph T.
To my grandfather, Albert L. Hoener, Jr., and grandmother, Margaret Zoe Lorene Fellabaum Hoener, together the light of my life in my early years in Michigan
This page intentionally left blank
Contents Acknowledgments ........................................................................ xix
I. Introducing eBay Business .................................................1 1. Introduction ................................................................................3
Who Should Read This Book? ............................................. 6 eBay’s Place ............................................................................ 8 eBay’s Competition .............................................................. 10 You’re in Business Now ...................................................... 11 Customer Service ................................................................. 11 Find Your Niche .................................................................. 11 Be Prepared to Work ............................................................ 12 State of Retail ........................................................................ 13 Call to Action ........................................................................ 14
II. Getting Started ................................................................21 VII
VIII
CONTENTS
2. Setting Yourself Up Legally ......................................................23
Sole Proprietorship ...............................................................23 Partnership ............................................................................27 Corporations .........................................................................31 Hybrid Business Forms .......................................................34 Virtual Businesses ................................................................34 And Then You Grow ...........................................................35 Taxation ................................................................................36 Resources ...............................................................................36 Conclusion ............................................................................38 3. Business Details .......................................................................39
Sales Tax License .................................................................39 Business License ...................................................................42 Regulations ...........................................................................42 Employees .............................................................................43 Independent Contractors .....................................................43 Insurance ...............................................................................47 Bank Accounts ......................................................................48 Tax Number .........................................................................48 Merchant Credit Card Account ..........................................49 Trademarks ...........................................................................49 Accounting ............................................................................50 Branding ...............................................................................51 Inspiration .............................................................................57 Resources ...............................................................................59 4. Equipment, Supplies, and Space .............................................61
Hardware ..............................................................................61 Software .................................................................................63 Internet Access ......................................................................64
CONTENTS
Home Router ........................................................................ 65 Long Distance Service ......................................................... 66 Business Machines ............................................................... 68 Office Furniture ................................................................... 69 Office Supplies ..................................................................... 70 Office Premises ..................................................................... 70 Storage, Packing, and Shipping .......................................... 70 Home Office Tax Deduction .............................................. 71 Inexpensive Home Office .................................................... 72 On the Road .......................................................................... 74 5. Borrowing Money ......................................................................77
Business Plan ........................................................................ 77 Savings .................................................................................. 80 Credit Cards ......................................................................... 80 Relatives ................................................................................ 82 Angels .................................................................................... 82 Banks ..................................................................................... 82 Other Lending Sources ....................................................... 87 Lenders for eBay Businesses ............................................... 90 Resources ............................................................................... 90 6. Amnesty for Criminals Like You ................................................91
The Case ............................................................................... 91 The Situation ........................................................................ 93 The Agreement ..................................................................... 96 The Reality............................................................................ 99 Pandora’s Box ..................................................................... 104 Summary ............................................................................. 105
III. Conducting Business ....................................................107
IX
X
CONTENTS
7. Selling on eBay .......................................................................109
Types of Auctions ...............................................................109 Listing an Auction ..............................................................112 Taboo Items ........................................................................120 Illicit Practices ....................................................................124 Your Marketplace ...............................................................125 Passive Endeavor ................................................................125 Text-Box and Banner Advertising on eBay .....................126 Power Sellers ......................................................................127 The Heart of the Matter ....................................................127 8. Auction Details ......................................................................129
Advertising ..........................................................................129 Placement ............................................................................139 Timing ................................................................................139 Valuation .............................................................................142 Linking ................................................................................142 About Me ............................................................................142 Final Details .......................................................................143 Where the Work Is .............................................................144 9. Photography ...........................................................................145
Taking Photographs ..........................................................145 Digital Cameras .................................................................152 Image Services ....................................................................154 10. Using Image Software .........................................................159
The Digital Darkroom .......................................................160 Image Editing .....................................................................161 File Formats ........................................................................166 Summary .............................................................................167 11. Pricing ..................................................................................169
CONTENTS
Prices ................................................................................... 170 eBay Research ..................................................................... 170 Online Research ................................................................. 171 Analytic Research ............................................................... 173 Offline Research ................................................................. 174 Appraisers ........................................................................... 174 Trial and Error ...................................................................176 Selling Strategy ...................................................................177 12. Special Auctions ...................................................................179
Special Section Auctions ...................................................180 Separate Auctions ............................................................... 181 The Reality .......................................................................... 187 Non-eBay Marketplaces .................................................... 187 13. Fulfillment ............................................................................191
Drop Shipping .................................................................... 191 Normal Operations ............................................................ 193 The Digital Goal ................................................................ 214 14. Receiving Payment ...............................................................217
Merchant Credit Card Account ........................................ 217 If You Can't Get a Merchant Account ............................. 220 Money Orders and Cashier's Checks ............................... 221 Checks ................................................................................. 224 Online Payment Services .................................................. 225 Cash on Delivery (COD) .................................................. 227 Bidding Qualification ........................................................ 227 Don’t Sell on Credit ...........................................................227 What Should You Do? ...................................................... 229 15. Finding Inventory ..................................................................231
XI
XII
CONTENTS
Basics ...................................................................................231 Hot Tip ...............................................................................245 Go for It! .............................................................................245
IV. Handling the Unpleasant ..............................................247 16. Dealing with Buyer Fraud .....................................................249
Equipment ..........................................................................265 Software ...............................................................................270 Passwords ............................................................................274 Accounts ..............................................................................276 Social Engineering .............................................................279 Free Email ..........................................................................281 Safe Transactions ...............................................................282 Case Study ..........................................................................282 Backups ...............................................................................284 Counterfeits ........................................................................287 Disaster Plan .......................................................................288 Security Checklist ...............................................................288 Summary .............................................................................290
V. Making It Work ..............................................................291 18. Software Features ................................................................293
Selling ..................................................................................332 Buying to Sell ..................................................................... 339 Buying ................................................................................. 341 Merged Markets ................................................................. 341 New Yankee Traders in Force .......................................... 342 23. Customer Service .................................................................345
Bonding ...............................................................................351 Square Trade ......................................................................352 Authentication Services .....................................................352 Returns ................................................................................353 Communication .................................................................353 Full Information .................................................................353 Software ...............................................................................354 Offline Customer Service ..................................................354 Experiment .........................................................................354 Know Your Customers ......................................................355 Not Just This or That ........................................................356
VI. Operating Smart ...........................................................357 24. Storefronts ............................................................................359
What Is a Storefront?......................................................... 359 Informal eBay Storefront ...................................................361 eBay Stores...........................................................................362 An eBay Business ...............................................................367 Marketing ............................................................................369 Website ................................................................................371 eCommerce Software .........................................................373 Bonding to eBay .................................................................377 About Me Webpage ............................................................378 eBay’s Hidden Market .......................................................379 Summary .............................................................................384 25. Determining Your Profit ........................................................387
How Are You Doing? ........................................................387 Expenses ..............................................................................392 Profit ....................................................................................395
CONTENTS
Your Time As a Resource .................................................. 395 Summary ............................................................................. 398 26. Developing a Strategy ..........................................................399
Building a Product Profit Model ...................................... 399 Finding Inventory .............................................................. 404 Commodity Products ......................................................... 407 Value-Added Products ....................................................... 412 Time .................................................................................... 416 Not the Same ...................................................................... 416 27. Education ..............................................................................417
eBay University .................................................................. 418 Books About eBay .............................................................. 419 College Extension Courses ............................................... 419 eBay Audios ........................................................................ 419 eBay Videos ......................................................................... 419 eBay WBT Tutorials .......................................................... 420 Business Seminars .............................................................. 420 Business Books ...................................................................421 Web Development Tutorials ............................................. 421 Web Development Books .................................................. 421 Community ........................................................................ 422 eBay Live ............................................................................. 422 Summary ............................................................................. 424
VII. Other eBay Business ...................................................425 28. Selling Services on eBay ......................................................427
Advertising .......................................................................... 428 What to Sell? ...................................................................... 429 Strategy ................................................................................ 434
XV
XVI
CONTENTS
Elance ..................................................................................436 Buying Services on Elance ................................................440 Summary .............................................................................440 29. Integrating eBay with Offline Retail .....................................441
Trial .....................................................................................441 Combined Accounting .......................................................442 A Special Business ..............................................................444 Customer Service ...............................................................444 Summary .............................................................................445 30. Using eBay for Marketing .....................................................447
Compared to What? ...........................................................447 The Plan .............................................................................448 Other Businesses ................................................................451 Summary .............................................................................453 31. Consignment Selling and Other Businesses ........................455
Consignment ......................................................................456 Other Businesses ................................................................461 Use Elance ..........................................................................463 32. Buying on eBay .....................................................................465
Normal Buying ...................................................................465 Buying for Your Business ..................................................465 Organizing Your Buying ...................................................469 Guarantee ...........................................................................473 Services ................................................................................473 Software ...............................................................................474 We Have Stories .................................................................474 33. Marketing Media ...................................................................475
Blog ......................................................................................475
CONTENTS
Podcasting ........................................................................... 479 Summary ............................................................................. 481 Appendix I The Top 10 Tips for Beginning an eBay Business ....483 Appendix II The Top 12 Tips for Seasoned eBay Businesses .....485 Appendix III The Top 9 Tips for Business Buyers .......................487 Appendix IV Cross-Promotion Example .....................................489 Appendix V HTML Tutorial .........................................................491
Defining a Webpage .......................................................... 493 Markups Alphabetically ..................................................... 495 Anchors and Hyperlinks .................................................... 518 Example Webpage ............................................................. 519 Viewing the Webpage Source ........................................... 520 eBay HTML ....................................................................... 521 Summary ............................................................................. 522 Index ...........................................................................................523
XVII
This page intentionally left blank
Acknowledgments My thanks to Charlie Craft, real estate and business entrepreneur and ex-tax attorney, who brainstormed with me exactly what eBay businesspeople need to know about legal and business basics to get off to a good start. Thanks to my agent, Carole McClendon at Waterside Productions, who does a great job, and to the folks at AMACOM. And I don’t want to overlook the people at eBay who continue to do an admirable job of creating a great new marketplace and expanding it globally. Good work folks! Thanks also to the people working at the many vendors that serve the eBay industry and provide products, services, and software that help eBay retailers sell on eBay. The breadth of their innovation is always a surprise and an inspriation. And thanks to my wife Lani, daughter Brook, and son Tommy, who are supportive—and sometimes even for-
XIX
XX
ACKNOWLEDGMENTS giving—during the huge effort it takes to write a book. Finally, hats off to the many eBay entrepreneurs, who each day are setting the commercial trends for the new century, many of whom have contributed indirectly if not directly to this book. Thanks.
I Introducing eBay Business
This page intentionally left blank
1 Introduction This book focuses on selling on eBay as a profit-making enterprise for an individual, family, or small business. eBay is a dynamic new marketplace that’s here to stay. With over 181 million registered members already, it continues to grow. From the first edition of eBay the Smart Way in 1999, I compared eBay to the stock and commodities exchanges when everyone else was comparing eBay to local flea markets. The fact is that today it is clear eBay is as much a cornerstone of American business as the New York Stock Exchange. According to eBay CEO Meg Whitman, the Wall Street Journal finally recognized eBay as an important marketplace by calling eBay an institution just before the eBay Live conference in June 2004. But more importantly, eBay is a democratic level playing field for individual entrepreneurs. eBay is no longer just for collectibles, garage sales, and flea markets. eBay also accommodates the sale of both new merchandise and fixed-price items; collectibles have shrunk to less than 6 percent of eBay’s volume. In 2005, eBay’s sales volume was $45 billion.This puts it in sixth place among US retailers after Walmart, Home Depot, Kroger, Costco, and Target. It is likely to overtake Costco and Target in 2006 to secure fourth place.
3
4
EBAY BUSINESS THE SMART WAY
The following are some statistics gathered from the annual eBay Live! conferences, eBay’s annual reports, and other sources. eBay growth in registered users (beginning of the first quarter of each year): 2001 30 million 2002 46 million 2003 62 million 2004 95 million 2005 135 million 2006 181 million (200 million by summer) Additional statistics culled from my own eBay books show the number of items for sale each week (including the latest figure): Jul 1999 2,400,000 items for sale in 1,600 categories Jan 2001 5,000,000 items for sale in 4,000 categories Feb 2003 12,000,000 items for sale in 18,000 categories June 2004 21,000,000 items for sale in 45,000 categories June 2005 50,000,000 items for sale in 80,000 categories (The 2005 figure for categories is my estimate.) The leading sales categories for eBay (figures in billions of dollars annualized from second quarter 2004 – see below) are: Motors 9.8 Consumer electronics 2.5 Computers 2.4 Clothing 2.2 Books/movies/music 2.1 Sports 2.0 Home and garden 1.6
CHAPTER 1 INTRODUCTION
5
Collectibles 1.4 Toys 1.3 Jewelry 1.2 Cameras 1.1 Business and industrial 1.1 eBay Statistics At one time, eBay published statistics on its home page. It cut back the volume of statistics and then finally quit publishing statistics on its home page altogether. Now it publishes some statistics at its annual eBay Live conference in June, but you can find most statistics published in the eBay quarterly and annual reports. The statistics are more general, less detailed, and cover fewer categories. In other words, eBay doesn’t want its competitors to know exactly how it’s doing. That makes it difficult for me to provide current performance data to compare to historical data. Statistics published by third parties (including me) about eBay are only estimates and are prone to error.
This book covers the business basics of selling on eBay, such as deciding the form of your business, getting assistance from people without hiring them as employees, avoiding undue risk and liability, borrowing money, and getting a sales tax license (very useful). Moreover, the book also shows you how to do inexpensively with Web services what formerly occupied several employees, such as inventory control, accounting, auction tracking, shipping, and customer service. Also included is practical information on finding inventory, being fee conscious, selling effectively on eBay, building your eBay reputation, operating securely, creating your own eBay Store, establishing merchant credit card status, and developing a strategy for profitability. Interesting Information About 30 percent of eBay sales are at a fixed price (Buy It Now). About 75 percent of buyer payments are through PayPal. And Pay Pal now has 100 million accounts, more accounts than American Express, a
6
EBAY BUSINESS THE SMART WAY
milestone achievement for an online financial service.
This book covers everything you need to know to get off to a quick but low-risk start selling merchandise on eBay. It’s a timesaver that enables you to focus more on your particular retail business and less on researching the process of starting and operating a business. The book also offers business buyers a few tips, such as how to buy equipment and even bulk supplies on eBay. Purchasing on eBay is a great way to cut your capital investment as well as reduce your operating expenses. The book even gives an overview of eBay-related businesses. But when all is said and done, this book is primarily for sellers (retailers) who want to dedicate themselves to a business on eBay. How Many Full-Timers? How many people are selling full time on eBay? The exact number is impossible to ascertain. eBay reported the figure as 1.3 million sellers (summer 2006) who sell either full time or as a substantial sideline retail business. That’s about one in every 154 members. eBay reported the number of eBay Stores (in US) at the beginning of 2006 to be 383,000. The important thing to keep in mind is that eBay is just into its second decade. You can still get in on the ground floor. Look again at the growing numbers in the statistics!
Who Should Read This Book? If you’re a casual eBay seller, this book probably won’t amuse you, and you’re better off with a basic eBay book. Indeed, this book assumes that you’ve already read a basic eBay book or otherwise learned most of the basics. You won’t find many detailed step-by-step instructions here for doing your digital tasks. For the basics, read my other book, eBay the Smart Way, Fourth Edition. It has sold quite well, which I take to mean that it has been useful to many people. Those readers who have read prior editions of the Smart Way series of eBay books will notice that we have moved information between books as we have expand the series. eBay the Smart Way This is now the basic book. Originally it
CHAPTER 1 INTRODUCTION
7
contained eBay business information as well as basic information, but in the Fourth Edition it covers only the basics. Basic information is the cornerstone of eBay success. Don’t consider operating a business on eBay without mastering the basics. eBay Business the Smart Way This book (the one you’re reading now) provides extensive practical information for those who want to start an eBay retail business. In the First Edition, it contained marketing information. After the Second Edition much of the marketing information was moved into Building Your eBay Traffic the Smart Way, a marketing book. In the First and Second editions this book contained information on finding inventory to sell on eBay. For this Third Edition, that information migrated to a new book, eBay Inventory the Smart Way, in which it is greatly expanded. eBay Global the Smart Way A book that covers selling to consumers in other countries and importing inventory from abroad to sell on eBay US. For many products, you can increase sales by 30 percent or more just by taking part in global ecommerce. This book helps you do that. Co-author Ron Ubels is a well-known customs broker in Canada with almost 30 years experience in international trade. Building Your eBay Traffic the Smart Way This book covers revving up your eBay business not only on eBay but also on Froogle and other online marketplaces. You can reach more potential customers for little additional effort or expense. Why not? eBay Product Photography the Smart Way Good photographs increase sales. With a little coaching you can take great photographs of items. Perhaps more importantly, you can take photographs quickly and efficiently using inexpensive equipment. Coauthor Stan Livingston has been a product photographer for about 40 years. eBay Inventory the Smart Way This is a book covering not only sources of inventory but also how the manufacturing, wholesale-
8
EBAY BUSINESS THE SMART WAY
ing, and retailing structure can work to the benefit of eBay retailers. The goal of the book is to instruct how to find inventory more easily, efficiently, and at lower wholesale prices. Co-author Jeremy Hanks has many years experience in the wholesaleing business and is a founder of Doba, a company providing services to eBay retailers. eBay Motors the Smart Way This is a specialty book for those who want to buy or sell vehicles. It even includes four chapters for automobile dealers. Co-author Don Spillane was the finance manager at an Acura dealership.
Naturally, the book you’re now reading builds on the basics covered in eBay the Smart Way. I have tried not to repeat much, although some ideas and information are so crucial to success that they bear repeating. Changes eBay changes gradually rather than claiming a new version annually or at other intervals. The policies get more complex. The rules get stricter. And eBay devises many new features, some of which replace the old. In my opinion, this is a good trend. eBay is maturing as an institution. (For instance, it has grown from 130 employees in September 1998 when I attended eBay’s third birthday party in San Jose to 11,600 at the beginning of 2006.) But the changes make it necessary for you to review eBay policies and rules occasionally in order to keep up to date and stay alert for the introduction of new features. A book cannot do that for you.
eBay’s Place I originally wrote a very extensive section attempting to prove a point. When I read it, it seemed to be a well-reasoned but much too lengthy
CHAPTER 1 INTRODUCTION
9
sleeping pill. So, I will save you the somnolence and simply state my point. When you have a product or service to sell, that’s only half the story. The other half is marketing and selling.
Another way of stating this is that about 50 percent of the money or effort spent on any product or service represents the seller’s cost of marketing and selling that product or service. This applies to manufacturers, wholesalers, retailers, publishers, attorneys, auto transmission repair services, pest control services, and you name it. Marketing and selling is a huge cost component in the cost of doing business, any business. As Chapter 24 explains, it’s no different for ecommerce websites. But it is different for eBay!
How Does eBay Fit In? eBay provides inexpensive, efficient, and convenient marketing and selling. Don’t want to pay that traditional 50 percent for marketing? eBay may be your economical answer. Let’s look at several possible business models. 1. eBay Only Seller You sell only on eBay. Your marketing cost is the fees you pay to eBay and the effort and money you spend on creating your auction ads. You have pinpointed your market. Only those who are interested in your product or service will look at your auctions. Those who look at your auctions (potential bidders) are exactly the people you want to reach. They are self-selected. And there is the greatest number possible of them because eBay is such a huge market—and is in fact the largest market. 2. Sell on eBay and Also on Your eCommerce Website You have an ecommerce website where you sell your product or service and you also sell on eBay. Well, it generally costs just as much to market on the Web as it does off the Web. So, your ecommerce website probably won’t save you marketing and selling expenses. But your sales on eBay will save you marketing expense for that portion of your sales that’s on eBay. Thus, eBay can’t reduce your marketing expense for all sales, but it can add to your website sales with a minimal increase in marketing overhead.
10
EBAY BUSINESS THE SMART WAY
3. Sell on eBay and Also Offline You have a physical location where you sell your product, and you also sell on eBay. This is similar to operating an ecommerce website. You will save on your marketing expense only for that portion of your sales that are eBay sales. Consequently, eBay can’t reduce your marketing and selling expense for your local sales, but it can add sales with little additional marketing overhead.
The Great Equalizer eBay is the great equalizer in that it puts you on an even playing field with other manufacturers, wholesalers, retailers, and individuals. The cost of marketing is so low in the eBay electronic marketplace that you can potentially compete with anyone. In other words, you don’t have to spend thousands of dollars on marketing, advertising, promotions, and salespeople to make sales on eBay. Anyone can potentially make sales on eBay. It’s the new democratic marketplace. The big guys don’t have an advantage. Additionally, abundant capital is not necessary for success. This situation presents a classic opportunity for those who want to work hard to build a business with sweat equity and a minimal investment.
The eBay Advantage eBay provides you with a means of reducing your marketing costs to the point where you can potentially compete effectively with any competitors. You can beat the 50 percent marketing and selling cost rule for traditional manufacturing, wholesaling, retailing, and services business models. With the addition of just-in-time inventory control and short selling cycles (covered in Chapter 13), you can take advantage of a powerful business model.
eBay’s Competition eBay has never had competitors in regard to online auctions. It’s true that Yahoo and Amazon tried to challenge it in the late 1990s, but they were spectacularly unsuccessful. Today eBay’s primary competition is Google-Froogle, and to a lesser extent, Yahoo stores and Amazon Associates.
CHAPTER 1 INTRODUCTION
11
You’re in Business Now Many people are so successful in person-to-person buying and selling on eBay that they decide to make a career out of it. That’s great! They’re off to a good start. Nonetheless, things change when one decides to stake one’s future and one’s income on an eBay business. You’re in business now. It’s no longer a game, a pastime, a hobby, or a sideline. It’s your new career. And it’s a business not much different than any other business, offline or online. You need to start thinking like a businessperson, particularly like a savvy retailer. Your focus needs to change from being self-centric to customer-centric. If your focus is customer-centric already, that’s great! If not, you need to learn about customer service. You need to understand that some of eBay members’ most cherished retail practices amount to poor customer service. You need to do better.
Customer Service One bias of this book is that customer service is all-important. Why? Because it’s the biggest trend in business today, both offline and online. It increases sales and retains customers. It’s expected online where buyers can’t talk face-to-face with sales clerks or fondle the merchandise. It’s expected on eBay. And too many immature or arrogant sellers on eBay think it’s an impediment to profits; they set a poor example for you. Customer service is many things. It’s providing alternative means of payment. It’s quick shipping. It’s presenting an auction ad with complete information. It’s answering questions in a timely manner. It’s also many things online yet to be invented. It’s whatever provides convenience to buyers and instills confidence in their purchase decisions. Customer service is your job. But we’re getting a little ahead of ourselves here. Before you can provide customer service, you need to find some customers. For many readers, the best way to get some customers is to find a selling niche on eBay.
Find Your Niche Another bias of this book is that you need to find your niche (a spe-
12
EBAY BUSINESS THE SMART WAY
cialty). Selling anything and everything on eBay is an approach that works only for a few wheeling and dealing entrepreneurs. Most readers will find their retailing success in a niche that they can systematically exploit for sales. For some it will be an opportunistic niche where they can make money for a few months or a few years and then move on to another niche. For others it will be a niche where they can add value to the products they sell and stay in business indefinitely. You need to decide what you want to do. This book will help you decide and then help you achieve business success. I wrote this book to help you avoid jumping into activities that will contribute little to your business profit and to help you focus on those activities that will prove profitable. If you’re starting to get the idea that with new business models, customer service, and establishing a niche there might be a little more to starting an eBay business than meets the eye, you could be right. It’s starting to look like work.
Be Prepared to Work Operating a business on eBay is work. In most cases, it’s very hard work. I’m always amazed by those who think eBay is a pot of gold they just need to tap into and relax and enjoy the torrent of carats that comes gushing out. They’ve obviously never sold merchandise on eBay systematically with the intent to make worthwhile profits over the long term. If you think eBay is a relaxed vacation, guess again. What eBay offers is a well-proven opportunity to operate your own business profitably at home or even while you travel. Just to name a few of the ingredients for success, it takes: • Intelligent planning • Finding a niche • Mastering a series of learning curves ranging from business law to merchandise marketing • Determination and persistence • Commitment • A home office
CHAPTER 1 INTRODUCTION
13
• Some operating capital Don’t underestimate the amount of work you will have to put in. Books Can Help A book can help. It condenses a lot of information into a reasonably small space and gives you leads to other information not included in these pages. Don’t try to do it by yourself. Use this book or another like it. Also buy a basic eBay book such as eBay the Smart Way, Fourth Edition for reference. If you don’t like my basic book, buy one like it. There’s more to an eBay business than you think.
Will your labor be justified and lead to something worthwhile? The retail business can be financially rewarding as well as professionally fulfilling. Then too, your timing couldn’t be better getting into retailing on this day, in this medium (the Web), and as a part of this highly tuned online market we know as eBay.
State of Retail The general state of retail today offline seems to be in decline. In many cases, retail clerks are paid minimum wages and are not well trained. There are too few available in most stores for customers to turn to conveniently for help. Often clerks can offer little help when a customer has a question about merchandise. Merchandise goes on the shelves without being marked with a price as if no one cares whether a frying pan costs $9 or $29. Notice, all these complaints relate to customer service. Retail establishments that do provide good customer service are considered unique. What an opportunity for online retailers! As a matter of fact, my wife declared after Christmas 2002 that for Christmas 2003 she would do all her shopping online. Well, she didn’t do it all, but she certainly increased her online Christmas purchases for Christmas 2003 and thereafter. I’m ahead of her. I haven’t been Christmas shopping offline for seven years and in fact, purchased many of my Christmas presents on eBay over the years. In addition, most of what I buy for my business and even personal use (except groceries) I buy online. Over half of that I buy on eBay.
14
EBAY BUSINESS THE SMART WAY
The Dark Side of Shopping Did you see the Amazon.com television commercial during the 2002 Christmas season? Being originally from the Midwest, I could appreciate it. It shows a man walking searchingly in a parking lot on a dark day with a few inches of snow on the ground. The man obviously cannot remember where he parked his car. He carries a huge load of Christmas presents. One present drops into the snow. He continues looking for his car without noticing the missing present. Then the message of the television commercial pops up on the screen: Amazon.com and you’re done. Amazon.com in this television commercial represents not only Amazon.com but all online shopping . Hence, you can see how eBay enables you to compete with the malls.
eCommerce will experience steady upward growth in the years ahead as it has in the past. That puts eBay, as well as you and your business, on a track to success. This is where the action is in the new century.
Call to Action The prior section makes a good ending to this introductory chapter. Nonetheless, I would rather end the chapter with a call to action. You can’t really know much until you step to the firing line and take a shot at eBay retailing. Sell something at retail, that is, conduct a trial sales effort. This is an essential step for an experienced seller as well as for a novice. You may decide based on your experience in this initial trial selling period that serious eBay retailing is not for you. Therefore, I don’t advocate that you get set up to handle a lot of retail sales initially. That comes later. Do a trial first. Should you run a trial, you have to be organized, and you have to handle your sales immediately and efficiently. Otherwise your reputation will suffer—from negative feedback—and your retailing experience will become a regrettable one. This book leaves it to you to get organized for this initial experiment. There’s no reason to learn and use anyone else’s system for this trial period. Simply use a pen and paper system. Keep all your pen and paper records together in one place that you find handy to access. Your
CHAPTER 1 INTRODUCTION
15
system should cover the following: • Inventory management • Auction ad management • Auction submittal management • Follow-up management • Payment management • Fulfillment (shipping and handling) management • Customer service management (e.g., customer communication management) Later, after your initial trial, should you decide to continue your eBay retailing, you will need to begin using an auction management service (see Chapter 19). It could be a third-party service such as Andale or eBay’s own service. But for the trial, put together your own system using the above list to guide you. Actually, creating your own system will help you more intelligently choose a digital system later.
Volume For a trustworthy retail experience (experiment), you have to do some volume selling. However, hold it to a low roar. Don’t try to sell five pallets of baseball caps, one dozen per day, coming out of the gate. Keep your selling effort to something manageable given the auction management system you have invented. This is just an experiment to determine whether it’s worth your while to go further and invest the time, energy, and money to put your eBay retailing on an efficient digital system. The more volume you experience, the more likely it is that your provisional pen and paper auction management system will be overloaded. Don’t let this happen. If you lose track of what you’re doing—very easy to do—your customer service will suffer, and you will surely get some negative feedback. Take things slowly during your trial period. What can you learn from your voluminous effort? The essential thing you need to learn is whether there’s enough potential sales volume to sustain your proposed retail business on eBay.
16
EBAY BUSINESS THE SMART WAY
Experiment You should not get the idea from this book that you need to try selling one item once or twice and if it doesn’t work, give up your effort. Rather, you need to experiment. If you don’t get any sales, you have to change something: Price eBay buyers typically look for bargains. If you can’t sell at a price low enough to motivate buyers, you will have a lot of trouble being successful on eBay. That doesn’t mean, however, that you need start with your lowest possible reserve price. Start high and work your way down. See what works. Ad Copy The Web is an informational medium, which makes it more similar to mail order promotion than to magazine advertising. That is, you have to provide plenty of information to potential buyers. Try different approaches to writing the information. More is usually better. Photographs are a must, even when the only thing that it makes sense to photograph is the product’s box. Model When selling products, some product models (e.g., Sony TG50) are more popular than others even when they are almost identical. If you choose the wrong model, success may be out of reach. Experiment. Shipping and Handling Arrangements It appears that some eBay sellers give away items at wholesale prices and make a profit on shipping and handling. This irritates buyers. Make your shipping and handling reasonable. Compare alternatives and offer a costeffective (to buyers) method. Try including shipping and handling in the price (i.e., free shipping and handling). Payment Methods A common mistake for retailers is to use a payment method that’s convenient to themselves. Think of your customers instead. Use payment methods that make buying convenient for potential buyers. There are several popular ways to accept payment. I recommend that if you don’t use all of them, at least experiment with each of them until you find cause to reject any one of them.
CHAPTER 1 INTRODUCTION
17
If you get easy sales, you need to evaluate what you’re doing: Price If your sales go very well, you might want to try raising your price (reserve price) to find the point where sales drop off. Sustainability If your sales go well, you have to ask yourself, Is this sales program sustainable? Can I get the products in the numbers I need from wholesalers and delivered on time? Can I continue to get the products at the wholesale price I need to be profitable? How easy will it be for someone to duplicate my sales effort? It’s a rare eBay business that is sustained by only one item. In most cases, but not all, there will be at least a small number of related items that you will sell in your eBay retailing business. You need to experiment with selling each one of them. Unique Markets Oddly enough, each item, no matter how similar to another item, has its own market. For instance, originally there were two kinds of memory for digital cameras, CompactFlash cards and SmartMedia cards. When I purchased a memory module on eBay, I naturally bought the wrong kind for my new Fuji Fine Pix in February 2001. I tried to return the CompactFlash card to the seller for an exchange. The seller refused and indicated that he sold only CompactFlash cards and could not make an exchange for a SmartMedia card. When I investigated further, I discovered that the seller monopolized the eBay sales of CompactFlash cards while another seller monopolized the eBay sales of SmartMedia cards. The dynamics of these memory micromarkets were different enough to have different markets and monopolies. Consequently, I bought a SmartMedia card from the other seller and sold my mispurchased CompactFlash card on eBay easily for a $10 loss. What are the lessons for retailers here? The first lesson is that each item has its own market. Don’t assume that similar items will produce the same sales results. You may have the market to yourself for one item and face an aggressive competitor for a similar item or even total disinterest from buyers for a similar item. The second lesson is that you will want to sell similar items to take advantage of eBay’s potential. The person who sold me the CompactFlash card could have provided bet-
18
EBAY BUSINESS THE SMART WAY
ter customer service, not to mention making potential additional sales, if he could have provided me with an exchange. Note that if you check the digital camera memory card market on eBay today, you will the find market dynamics much different than described above.
But don’t get carried away. If you have 225 items you want to sell, you don’t have to experiment with each before deciding that eBay will be a good or bad venue for your retail business. Do some spot checks; that is, do some representative selling with a reasonable number of items. You will not get definitive results, but it’s the best you can do under the circumstances without undergoing an unwieldy trial selling effort.
Price eBay is like any other business. Price alone does not determine sales volume. Price and customer service are the primary determinants, but there are others. Experiment with a variety of things, not just price. For instance, changing the advertising copy in your auction ads may do wonders to improve your sales (see Chapter 8).
Let Your Brain Do the Walking How often have you heard that someone started out selling one type of item with limited success but in the process discovered that selling a completely unrelated type of item was very profitable? That might happen to you on eBay. Keep an open mind. You may discover that the type of item you want to sell on eBay will not constitute a profitable business for a variety of reasons. Nonetheless, by putting yourself on the firing line, you may discover one or more niches that no one else has found or to which no one else is selling as well as you can. Thus, it may pay off not to keep your brain in a straitjacket. Keep alert, and watch for opportunities. Find out what your competitors are doing. And research your markets well, both offline and online. There is another important consideration here. eBay provides a level playing field for everyone. That means that you can potentially compete effectively against major manufacturers and retailers, such as B&H Photo, a huge camera retailer, now actively selling camera equipment on eBay. That’s what makes eBay a fabulous opportunity
CHAPTER 1 INTRODUCTION
19
without normal bounds. Without a huge capital investment, you can potentially compete successfully as a retailer against the big retailers in any niche where you see an opportunity. Be a Buyer When you buy items, particularly items about which you have some expertise, you can spot voids in the market that may indicate a niche market opportunity. Curiously enough, if you’re an eBay retailer, it pays to be an eBay buyer too.
What is being said here? Don’t conduct just a few experiments in your trial retailing effort and call it quits if they fail. Experiment a lot until you find something that works. Then go after the profitable niche you have found.
What Do You Want to Do? A trial selling period will often reveal to you what you want to do and what you don’t want to do. For instance, some people don’t mind doing the fulfillment chores such as packaging and shipping. It gives them a tangible sense of accomplishment. Others would rather do almost anything else than package products every day and deal with the US Postal Service. Pay attention during your trial period. When you get into your full-fledged retailing operation, you’re unlikely to have the time to do everything. Delegate the tasks you don’t want to do to your spouse, your children, employees, or independent contractors.
Marketing Study If you were to open a bricks and mortar retail store, you would want to do a marketing study first. That’s the smart way to start a retail business. And marketing studies, usually done by an industry expert, tend to be expensive. For eBay, your trial selling period is your marketing study. In fact, it’s the best of all marketing studies. It’s an actual trial selling operation. And you can do it yourself. You don’t need an industry expert. What makes this possible and cost-effective is that eBay is a virtual market. It exists only online. It doesn’t take a huge investment to operate in a virtual environment.
20
EBAY BUSINESS THE SMART WAY
Take a hint from the market study concept. Conduct your trial sales as objectively (scientifically) as possible. Keep notes and records and accumulate statistics so that when you’re ready to evaluate what you’ve done, you won’t have to rely on your memory completely. Don’t try to make your study complicated, but also don’t make it so easy that you miss valuable market information. To supplement what you’ve determined from your trial, try the research programs covered in Chapter 11. One or another of them will be very helpful to you.
When the Time Comes You’ve completed your trial, and your selling has been successful. Now you’re ready to commit yourself to a retail course of action on eBay that’s profitable. This is not the time to keep the auction management system you have created, particularly if it’s a pen and paper system as recommended above. Bite the bullet and subscribe to an auction management service (to be used via the Web). It’s something of a learning curve and it’s money out of your pocket, but it’s the only sensible way to conduct eBay business. eBay offers its own auction management services, and vendors such as Andale also offer great auction management services (see Chapters 18 and 19). Further Information Keep in touch after you’ve accomplished something substantial or unique in an eBay business, I’d like to hear from you. Email me at [email protected]. (Put EBAY READER in the subject line so I can find your email in the sea of daily SPAM.) Perhaps I’ll be able to use your story (without revealing your trade secrets) in a future edition of this book. Also, visit BaysideBusiness.com and BaysideBusiness.com/blog, dedicated to eBay, retailing for further information relevant to this book.
This book was written to be easy to read and understand, but it isn’t meant for dummies. It’s for those who want to learn to conduct a retail business on eBay the smart way. Good luck with your eBay business!
II Getting Started
This page intentionally left blank
2 Setting Yourself Up Legally You don’t think much about your legal form of business after you start selling on eBay until you start listening to your friends and relatives. “Be sure to incorporate.” “A partnership is the best way to go.” “Take advantage of special corporations to save tax.” There’s no end to this free advice. The fact is that you’re probably better off just doing business yourself until you start acquiring a lot of employees and creditors. But let’s get a general overview so that you know where you stand. This chapter is for those who are beginning their eBay retail businesses or who are small. Once you grow large, the issues regarding forms of business will be considerably different from what is outlined in this chapter.
Sole Proprietorship You’re the proprietor (owner) of your business. When you own it alone, you are the sole proprietor. Thus, the term “sole proprietorship” is used as the name for a one-person business. It’s simple. The income belongs to you. The expenses are yours. The profit (or loss) is yours. You file income tax for your business under your own name. Many people elect to be sole proprietors but do business under a spe23
24
EBAY BUSINESS THE SMART WAY
cial name, usually a name designed to attract business. This is normally called an assumed name, fictitious name, alias, or a dba (doing business as). To make it legal, you need to record (file) an assumed name affidavit (or whatever it’s called in your state) in your county. This requires filling out a standard affidavit form available from the county, having it notarized, and publishing the affidavit in a local newspaper several times. If sole proprietor John Harrison of Redding, California, operates a retail business selling boys’ clothing on eBay under the name Fontleroy Factory, he needs to file an assumed name affidavit in Shasta County. The brand name he builds is Fontleroy Factory, not John Harrison. People will know his business as Fontleroy Factory, not as John Harrison. People will make out checks for purchases to Fontleroy Factory, not to John Harrison. A bank will not allow John to deposit or cash the checks to Fontleroy Factory unless he opens an account under the name Fontleroy Factory. A bank will not allow John to open such an account without John first providing the bank with a copy of his duly recorded assumed name affidavit.
Advantages of Filing You and your name are official and legal once filed. Occasionally, someone or some company will ask you for a copy of your assumed name affidavit, and you should have it ready to give to them. If you don’t have it, you may be forced to get it before you can sell your business, borrow money, or get an account with a bank or a vendor (wholesaler). Assumed names are unique in each county. If someone else records your assumed name in your county before you do, you will have to switch to another name or get into a legal dispute.
Disadvantages of Filing When you record and publish an assumed name affidavit, it’s public information. Your city is likely to ask you to get a business license and perhaps pay a municipal tax. You will be inundated by vendors, who want to sell you everything for your business. You may even be visited by city inspectors responsible for regulating who knows what! And every time you change counties or change names, you will have to
CHAPTER 2 SETTING YOURSELF UP LEGALLY
25
refile. How can you get around filing an assumed name affidavit? First, choose a name that no one else is likely to use. For instance, John Harrison’s choice, Fontleroy Factory, is not one that’s likely to be chosen by someone else in Shasta County; that is, no one is likely to steal it. If you’re worried about someone stealing it, trademark it. Second, do an end run around the bank. Have a rubber stamp made that states your assumed name (e.g., Fontleroy Factory). Endorse your incoming checks with that stamp. Then endorse the checks with another stamp that has your name, the words “For Deposit Only,” and your personal bank account number. Deposit only via an ATM (automated teller machine). For instance, for John Harrison the first stamp would read: Fontleroy Factory
The second stamp would read: For Deposit Only 4879341807 John Harrison
When endorsing, you use the second stamp (second endorsement) below the first stamp (first endorsement). With this technique you do not need to open a separate business checking account. You can keep it simple. Or, even if you want to keep a separate bank account for your business (good idea for bookkeeping purposes), you can still open it under your own name. Avoid Tellers If you try using the two-stamp system for a deposit made through a teller, you may run into trouble, even though it’s perfectly legal. Keep in mind also that every bank is different. Indeed, two branches of the same bank may operate differently. The two-stamp technique may not work everywhere.
If a vendor asks for the assumed name affidavit that you don’t have (because you haven’t filed it), stalling the request might work. They want to do business with you and may eventually forget about the assumed name affidavit.
26
EBAY BUSINESS THE SMART WAY
Why Not to File The prior subsection provided you several methods to avoid problems you will face by not filing an assumed name affidavit. I do not necessarily recommend that you don’t file. You will do well to choose a business name that will promote your business, file an assumed name affidavit, get a business license from your city, and pay any municipal tax. (For an eBay business, any municipal tax will likely be minimal.) That makes you legal and is the best practice. In fact, there may be some penalties in your state for not doing so. The reality is, though, that many small businesses choose not to file assumed name affidavits. The following discussion indicates some reasons why. Filing might be impractical when you are a one-person entrepreneur working at home who operates several businesses at once. For example, I know someone who operates about five home businesses (all Internet-related), each under an assumed name, but has filed only one assumed-name affidavit. If you attempt to get a business license, you may find that your home is not zoned properly for your business, and you face a potentially difficult situation. This is one of the primary reasons people fail to apply for a business license. There are two considerations to keep in mind here. First, if your business poses no danger to the neighbors nor any detriment to the neighborhood, you might find it in your best interest to avoid getting a license. It’s not unusual for a person to feel justified that what he or she does in their own home is their own business. Second, if your business is dangerous to neighbors, contributes to the deterioration of the neighborhood, or otherwise causes problems for neighbors, you may not be able to justify conducting your business at home. You will need to find another location for your business. Restrictive Covenants Most residential zoning allows home businesses within certain guidelines. However, restrictive covenants (in your subdivision) may forbid home businesses even where the zoning law permits them.
CHAPTER 2 SETTING YOURSELF UP LEGALLY
27
Another reason to avoid filing an assumed name affidavit is that filing one seems to have little relevance to doing business on eBay. The laws governing how business is done were developed in the nineteenth and early twentieth centuries and seem a little quaint now for online businesses. Certainly filing an assumed name affidavit in your county isn’t going to put anyone outside your county on notice of your business, and 99.9 percent of your eBay customers and vendors are going to be outside of your county. Indeed, most of your customers will likely be outside of your state! Your Own Name Of course, if you do business in your own name, you do not have to file an assumed name affidavit. It’s not a bad idea to operate under your own name for a while until you develop a complete eBay business strategy. At that point you need to come up with a business name and start building your brand. But until then, you won’t have to worry about filing an assumed name affidavit.
Trademarks The federal trademark statutes have little to do with filing assumed names. Filing an assumed name affidavit does not necessarily give your assumed name trademark protection nor does it protect you against someone outside your county who has trademark rights to use the name exclusively. Read more about trademarks in Chapter 3.
Income Taxation As a sole proprietor, you file your income tax return as a person. Your Social Security number is your tax identification number. Since you are not employed by anyone, and no one is withholding FICA from your income, you need to file quarterly tax returns and pay the estimated tax.
Partnership A partnership without a partnership agreement is like an airplane with a weak airframe. You know that those wings are going to drop off sooner rather than later, and the plane is going to drop out of the sky like a stone. Just don’t do it! Don’t get entangled with someone else in
28
EBAY BUSINESS THE SMART WAY
business without a written partnership agreement.
Trust On the other hand, some of the best business partnerships have no written agreement. They are based on the trust that each partner will be fair to the other. If trust proves to work well, it is usually not something that grows out of meeting someone and discussing your business aspirations with him. It builds over years based on some kind of business relationship between you and the other person. In other words, a long courtship is usually more durable than love at first sight. Trust should be based not only on shared ideas and aspirations, but also on shared values and shared experience. In addition, partners should have complementary business skills. In a retail business, a person who has management skills and a person who has marketing skills may make good partners. However, a person with marketing experience probably should not partner with a person who has similar skills.
Whether You Think So or Not When you embark on an undefined business venture with someone else, you are partners whether you think so or not. You have a partnership without a written agreement. You may have a verbal agreement or an implied agreement, but such agreements are still legal. They’re just much more foggy than written agreements.
Documents You can have the longest and best partnership agreement ever written, but lack of trust will make your partnership business stressful and potentially unworkable. So, trust is important even when you use a written partnership agreement. Most people will find themselves in a trust relationship with a potential business partner that is comfortable but not one of absolute trust. In such cases, a written partnership agreement will help hold the business together. If nothing else, it should clearly define the partnership relationship for most routine business purposes and enable the partners to do business in confidence. It should also cover special situations such as the death of a partner or the withdrawal of a partner from the partnership. It doesn’t necessarily have to be long or complex.
CHAPTER 2 SETTING YOURSELF UP LEGALLY
29
Partnership agreements are normally drafted by an attorney who can also educate you regarding the legal and tax effects of operating a partnership. However, you may find the confidence to write your own agreement by using a book on partnerships such as one published by Nolo Press (see Resources section at end of chapter).
Responsibility You are responsible for your partner. Suppose your partner gets in his car to do an errand for the partnership. He has an auto accident (his fault) in which the other driver is severely injured. The partnership is responsible. Let’s say the claim of the injured party is $300,000, and your partner’s auto insurance covers only $100,000. The partnership is responsible for the remaining $200,000. If your partner can’t (or won’t) pay it, you will have to pay it. Auto accidents are probably the most common liability risks for eBay retailing partnerships. Here are some questions to ask. Does your auto insurance cover business uses of an auto? Does your partner have such coverage? Do you have adequate coverage? Does your partner? Do you list your partner as a named insured on your policy? Does your partner do the same for you? The answer to all should be yes. Insurance is essential to limit liability and keep things under control in a partnership, but it takes consultation with a business insurance agent to make intelligent use of insurance. Regardless of whether you use a written partnership agreement for your partnership, you must at least get proper and adequate insurance coverage. Otherwise you may have more liability than you anticipated.
Partnership Employees When you become partners, you and your partner become employees of the partnership. The only way to avoid this arrangement is to have each partner be an independent contractor supplying services or products to the partnership under an arm’s length written contract. This can be an awkward arrangement. But having employees also creates substantial concerns, as Chapter 3 explains in detail.
30
EBAY BUSINESS THE SMART WAY
Avoiding Partnerships One way to avoid becoming partners with someone inadvertently is to carefully define every business relationship you have with someone else. For instance, suppose you and a wholesaler decide to cooperate to create sales on eBay. You are going to carry on a vigorous eBay auctioning campaign, and the wholesaler is going to ship the inventory to you (stored in your garage), expecting no payment from you until after you sell the merchandise on eBay (no time period defined). This sounds more like a partnership than a traditional wholesaler-retailer relationship. What can you do to avoid an inadvertent (implied) partnership, as in this case? Make sure the vendor sends you invoices for all inventory received. Have the purchase agreement briefly stated on the invoice. Typically a vendor wants payment within 30 days. Setting the payment period to 90 days might achieve the effect intended by the parties without leaving the payment period undefined. If not sold within 90 days, the right to send back the inventory within the next 30 days without obligation might also help achieve the effect intended without leaving the arrangement vague. With the agreement stated on the vendor’s invoices and with the arrangements more specifically defined, it will be difficult for anyone to claim that you and the wholesaler are partners. Define Your Relationship It is especially important to define your legal relationship with people who will do some work for you. You don't want them to be partners inadvertently, and you may not want them to be employees either (see Chapter 3). Usually you can just define the relationship by signing a simple agreement and conducting business with paperwork that indicates a specific relationship such as vendor-retailer or retailer-independent contractor.
Income Taxes A partnership must file a tax return. It is just an information return, however, and a partnership pays no income tax. All the income passes through to the individual partners who declare the income on their personal income tax returns. Still, your partnership must have a fed-
CHAPTER 2 SETTING YOURSELF UP LEGALLY
31
eral, Employer Identification Number (EIN) for filing.
Corporations It seems to me that most people incorporate their business because they think it’s impressive to have a corporation. After all, you get to be president. For business today, however, it probably matters a lot less than you think, at least as long as your business is small. If you are going to incorporate, you should have specific reasons for doing so. The two primary reasons for incorporating are to limit your liability and to sell stock. It turns out that neither of these reasons is compelling for most small businesses.
Limited Liability You need to be concerned with liability in regard to creditors. This is where being incorporated can help. You also need to be concerned with limited liability due to negligence. Creditors If your corporate business gets in trouble financially, you will not have personal liability to its creditors. The corporation owes the bills. Many wholesalers and other vendors will not ask you to sign personally for inventory ordered, particularly for small orders. They will, however, rely on the corporation’s credit rating to extend credit in the first place. If you don’t have established business credit, you may have to make payment in advance. Some wholesalers will extend your corporation credit but not without your personal guarantee. If you make payment in advance for your inventory or if you have to personally guarantee payment for your inventory purchased on credit, the limited liability provided by a corporation doesn’t provide you any benefit. Many small businesses borrow from a bank to raise the operating capital that they use to purchase inventory. Try having your corporation borrow money from your bank without you signing personally. Very unlikely.
32
EBAY BUSINESS THE SMART WAY
Creditors Do you really need protection from creditors as an eBay business? Keep in mind that if you operate properly on eBay, you get a quick turnover. That means you don’t hold your inventory very long. Auctions are ten days at the most. Consequently, you don’t need as much operating capital (or credit) as a traditional offline retailer that has to keep inventory on the shelves for many months before selling it. If the market for your products suddenly dries up, you shouldn’t have six months of inventory in stock that you can’t sell. Three or four weeks of inventory should be plenty for any eBay business. Thus, you face your lack of sales sooner, and your potential losses are much less. This is not to say that as you grow you should ignore your liability to creditors. Rather it is to point out two considerations. First, you may not need as much protection against insolvency as traditional retailers as long as you stay small. Second, you can control your turnover rate easier than a traditional retailer, and you can certainly keep it higher than most traditional retailers. So long as you have a reasonable profit margin, it’s hard to get insolvent on eBay because the potentially high inventory turnover rate for an eBay business protects you.
Negligence Liability for negligence is a different matter. If you injure another person in an auto accident (your fault) while driving on corporate business, both the corporation and you are liable for damages. There’s no liability protection for you in this case. However, if an employee of your corporation causes an accident, the corporation will be liable, but you won’t necessarily be personally liable. As a small business, you may be better off limiting your exposure to negligence liability with insurance rather than incorporating.
Selling Stock Selling stock in your corporation to raise capital for your business is essentially illegal without a substantial disclosure statement written by an expensive securities attorney. That limits you to selling stock only to close friends and relatives who will not sue you in the case of a total loss (or report you to the Securities and Exchange Commission or the US District Attorney). Also consider that when you sell stock, you
CHAPTER 2 SETTING YOURSELF UP LEGALLY
33
don’t have to pay interest on the money raised, but you are selling an ownership interest in your business. If you can borrow money to get started instead of selling stock, you are probably better off, especially if the business is successful.
Disadvantages When you incorporate, you have to file incorporation documents normally drafted by an attorney. In addition, you need to hold annual meetings and keep minutes usually drafted by an attorney. This can be more expensive than any benefits of incorporation are worth. Also, be aware of the state annual corporate fee. In most states the fee is nominal. In California, however, there is a minimum corporate income tax of $800 per year. That would pay a lot of eBay fees. You may be able to incorporate yourself and hold your own annual meetings (see Nolo Press in Resources at the end of the chapter). However, the incorporation laws are different in every state, and you will need instructions for your specific state.
Income Taxes A corporation pays income tax. If dividends are paid to stockholders, the individual stockholders pay income tax on the dividends. This is double taxation to be avoided at all costs. The way to avoid this is to take all the profit out of your corporation in expenses each year so that it doesn’t show a profit for income tax purposes (has no net income). The most popular way to do this if you are a corporate employee is to pay yourself a bonus at the end of the year. If instead you are an independent contractor who contracts to do work for the corporation, you will have to figure out some clever and legal way to pay yourself a bonus at the end of the year. Subchapter S Corporation The IRS does allow certain small corporations to elect to be taxed as partnerships, in effect. The corporate profit is not taxed but passes through to the stockholders.
Your corporation must have a federal Employer Identification Number (EIN).
34
EBAY BUSINESS THE SMART WAY
Hybrid Business Forms In the last twenty years or so, many states have passed statutes creating hybrid forms of business that offer a combination of benefits from both partnerships and corporations. Some have even gone so far as to enable you to design your own form of business, in effect. You will probably want to wait until you have considerable business success behind you before you consider one of these custom-designed legal forms of doing business, such as a limited liability company (LLC). But canned (standard) LLCs are simple and therefore feasible for start-ups.
Virtual Businesses A virtual business is not a legal form. It is essentially a business carried on by persons who are not in the same location and who communicate routinely by electronic means. Virtual businesses predate the rise of the Internet. People simply communicated by telephone. The inexpensive communication provided by the Internet (e.g., email) together with low long distance telephone rates, though, has made virtual business much more popular than ever. In addition, the Web provides a location for a virtual business. The business website is the business location. For instance, an attorney who works in a home office and has a legal secretary in a home office two miles away is a virtual business. In the past, the attorney would communicate with the secretary via telephone, fax, and mail. Today they would most likely communicate by telephone, fax, email, and document file transfers (attached to email) via the Internet. The legal business might also have a website to give the law practice more substance. If you think this a bizarre example, you might be surprised to learn that there are thousands of attorneys with national practices (e.g., patent law) who do just this, often living in resort places such as Hilton Head, Vail, Sedona, or Maui. In any event, the idea of a virtual business should have a great deal of appeal to you. After all, you are already likely to be well tuned into the virtual world with your eBay business. One way to build your retailing organization is to have workers who work in their own locations. You don’t have to pay the overhead for a physical location for anyone who
CHAPTER 2 SETTING YOURSELF UP LEGALLY
35
works for you, and the routine communication via telephone or email is inexpensive. Indeed, the capability to attach digital documents to email messages makes virtual businesses very practical. For instance, you might have a partner in Paris who identifies unusual French products likely to sell well in the American market on eBay. Your French partner arranges to buy wholesale in Paris, takes possession of the inventory, and ships items from Paris to your eBay auction winners. Or, you might have an independent contractor (person) storing your inventory in his garage. Each day you email him your eBay winning bidders, and he ships your products to the winners. There are thousands of possibilities. Use Common Sense Although virtual retail organizations might be a good idea, don’t follow the virtual idea blindly. Sometimes a traditional business arrangement can work better and more inexpensively than a virtual one.
And Then You Grow As mentioned in the opening of the chapter, this chapter is for beginners and eBay businesses that are small. Once you reach a certain size, things change. Partnerships, corporations, and other business forms do offer certain advantages for larger businesses. Some are tax advantages, some are liability advantages, and some are operational advantages. When you find yourself thinking that the California corporation minimum income tax ($800 per year) seems like a pittance and you can see some solid benefits from incorporating, it might be time for you to start seriously considering a corporation for your eBay business. Don’t rush into a more complex business form, however. There are thousands of sole proprietors who each have sales in the millions, make profits in the tens or hundreds of thousands of dollars, and who operate very simple businesses. They like it that way. Why would anyone avoid becoming a large successful business (ripe to be incorporated) if they had the opportunity to do so in an eBay business? For one thing, risk normally increases with size. There’s
36
EBAY BUSINESS THE SMART WAY
simply more at stake: more inventory, more overhead, more employees, more creditors, bigger loans, and more problems. For many people it’s a better business strategy to stay small yet increase one’s income by selling higher-priced goods or initiating more efficient operations.
Taxation Most tax considerations for small business focus primarily on federal income taxation. The federal tax law is quite complicated. Each legal business form has different tax benefits and disadvantages. Most choices regarding business forms, which are heavily influenced by tax considerations, are usually discussed with a lawyer, certified public accountant (CPA), or other tax advisor. Even a basic discussion of tax law, however, is way beyond the scope of this book. Most opportunities for tax savings come once your business has grown to a substantial income and multiple employees. Until then, you won’t miss much by remaining a sole proprietor. In addition to federal income taxes, you also pay self-employment taxes (Social Security) as a sole proprietor. Also, don’t forget state income taxes if your state has an income tax. Consult a local CPA, lawyer, or other tax expert regarding the taxes you need to pay. Or you might try a service like KeepMore (http://keepmore.net) to assist you with your tax-saving efforts.
Resources A detailed discussion of business forms may be found in many of the books published by Nolo Press—for ordinary people, not attorneys. Visit the Nolo website at: http://www.nolo.com Nolo’s Small Business Start-Up Kit is a good place to start. Nolo has books on a wide range of legal topics that will help you with whatever form of business you choose. The books are downloadable as ebooks right from the website. You can find Nolo Press books in most bookstores too. Nolo also offers legal kits for various small business matters. Commerce Clearing House (CCH), a legal publisher, offers a special website for small businesses at:
CHAPTER 2 SETTING YOURSELF UP LEGALLY
37
http://www.toolkit.cch.com It’s the Business Owner’s Toolkit for nonlawyers and provides many downloadable legal forms you can use to get your business set up. Another resource is the MyLawyer website, which sells a set of legal documents for business and makes it easy to fill in the blanks. Check it out at: http://www.mylawyer.com FindLaw for Business provides legal articles covering a wide range of business topics and offers legal services as well. It includes an attorney directory. You can use it at: http://biz.findlaw.com At Business.gov you can get basic information for small businesses at a website sponsored by a variety of government agencies, including the Small Business Administration. It also provides links to useful legal resources. Go to: http://www.business.gov A website for home businesspeople PowerHomeBiz has a lot of useful free information for small businesses. It’s a good place to hang out in your spare moments. http://www.powerhomebiz.com Services for filing corporations and other business forms abound. Here are just a few: Sutton Law Center (http://sutlaw.com) LegalZoom (http://legalzoom.com) BizFilings (http://bizfilings.com) Useful basic books include the following: Small Time Operator, Bernard B. Kamoroff, CPA, Bell Springs Publishing, Willits, California, 2002. The Small Business Legal Guide, 2nd ed., Lynne Ann Frasier, Esq., Sourcebooks, Naperville, Illinois, 1998.
38
EBAY BUSINESS THE SMART WAY
Conclusion Everyone, every situation, every product, and every market is different. There is no right answer as to which business form to adopt for your eBay business. You might have a compelling reason to incorporate immediately even though your eBay business is small, has few creditors, and no employees. But most eBay retailers who have small businesses are probably best off remaining sole proprietors until their businesses grow large.
3 Business Details The topics in this chapter are not an all-inclusive list of things you need to know to be in business for yourself. But the chapter does cover the basics and probably includes some things you didn’t think of.
Sales Tax License This is a license issued by your state to authorize you to collect sales tax on everything you sell in your state. With the license goes a periodic obligation to account for the funds you have collected and deposit the funds with the state. Some states may require a security deposit as a condition of issuing the license. Other Names A sales tax license goes by various names, such as resale license, sales tax certificate, seller’s permit, or reseller’s permit. Find out what it is in your state.
The license gives you the right to buy goods from wholesalers without paying sales tax. You collect the sales tax from the end user of the goods, your customer. Wholesalers will ask for your sales tax number
39
40
EBAY BUSINESS THE SMART WAY
(license number) when they sell you merchandise. You only need to collect sales tax on items you sell to buyers inside your state. When you sell to a buyer out of state, they don’t have to pay sales tax (but see Chapter 6). The American Institute of Certified Public Accountants provides a list of URLs for the sales tax authority of each state (http://www.aicpa.org/ yellow/yptstax.htm). It’s a good starting point to find information for your state.
Do You Have Choice? Can you sell on eBay without getting a sales tax license and without collecting sales tax? Sure. If you refuse to sell to anyone in your state, you don’t need a sales tax license. But if you routinely sell to customers in your state, you will violate the law if you do not collect sales tax. States Without Sales Tax Alaska, Delaware, Montana, New Hampshire, and Oregon are the five states that do not have a sales tax.
Most people who do a garage sale on eBay don’t collect sales tax. In other words, those who sell stuff they’ve collected in their garage and thereafter quit selling don’t bother to get a sales tax license. They may be violating the law (depending on exemptions), but they are not conducting an ongoing business. Don’t look at such examples to determine what you should or shouldn’t do. If you operate an ongoing retail business on eBay, you must collect sales tax on sales to customers in your state and pass it along to the state.
Report and Deposit on Time Most small businesses that get into trouble with the state tax authorities do so because they did not file their periodic reports and make their periodic sales tax deposits. Don’t let this happen to you. Once you get behind, it often becomes very difficult to catch up. File your reports on time and make your deposits on time. As you can imagine, having a sales tax license has a certain bureaucratic responsibility to it.
CHAPTER 3 BUSINESS DETAILS
41
Your Passport to Success Your sales tax license is your passport to the world of wholesaling. Wholesalers must collect sales tax on everything they sell unless they sell it for resale to a business holding a sales tax license. Consequently, wholesalers are always concerned that they deal with businesses (or people) holding sales tax licenses. Employer Identification Number (EIN) Wholesalers may also require your EIN if you’re a partnership or corporation or your Social Security number (tax identification number) if you’re a sole proprietor.
This provides you with a great benefit. When you get a sales tax license, you are de facto considered a legitimate retailer by wholesalers. This is an easy way to gain instant creditability. It doesn’t mean that all wholesalers will do business with you, but many will. Many trade shows require that you present your sales tax license to gain admission. Other trade shows give you preferential treatment if you present your sales tax license. The attitude of the trade shows is reflected throughout the business world. A sales tax license will open a lot of doors for you. You might even consider putting your sales tax license number on your business card. If that doesn’t appeal to you, use two sets of cards, one with the license number and one without. The same goes for stationery and other business documents you send to wholesalers. Costco If you have a sales tax license, you can buy from Costco without paying sales tax on what you buy—so long as what you buy is for resale. This is true also of other warehouse wholesale/retail stores like Costco.
State Use Tax If you buy business assets (not for resale) out of state and do not pay sales tax to the state where you made the purchase, you probably owe your own state a use tax equivalent to your state’s sales tax.
42
EBAY BUSINESS THE SMART WAY
Sales Tax in Other States You may have to pay sales tax on your sales in other states too. Read Chapter 6 for information on this impending requirement. The threat is looming now, and it may affect you.
Business License Most municipalities will require that you get a business license, even for a home business. It’s a way to identify a business and to collect any municipal taxes. Even the license fee itself may be a significant source of income for some municipalities. When you file an assumed name affidavit, it alerts municipal authorities that you have a business. If you operate a business in a physical retail location in your locale, you will become knowledgeable about local taxation just by talking with other businesspeople. Sooner or later the municipal authorities will come to you if you do not get a business license and pay municipal taxes due, if any. If you sell only on eBay, operate out of your home, and don’t attend Rotary Club meetings, you are not as likely to know or understand the byways of local business taxation. Municipal authorities are unlikely to find you, particularly if you do not file an assumed name affidavit or get a business license. Clearly, these local business considerations are irrelevant to you in doing business on eBay. Nonetheless, you are obligated by law to follow the municipal regulations and pay any municipal fees and taxes. See the section on sole proprietorship in Chapter 2 for more information on conducting business from home.
Regulations Depending on what you sell, you may be required to meet local, state, or federal laws and regulations or obtain special licenses. The scope of such is so wide that it will take a book written for your state just to alert you to some of the laws and regulations you may have to follow. If you have any suspicion that you might need a special license, contact the proper governmental authority.
CHAPTER 3 BUSINESS DETAILS
43
Employees If you are successful selling on eBay, sooner or later you will need other people to work for you. Hiring employees subjects you to a huge set of new responsibilities. Just the paperwork to do your payroll— even for one employee—is enough to discourage you. Be aware that employees cost more than their wages. You must contribute to their benefits, withhold taxes, and pay workers’ compensation insurance. For instance, suppose you hire a person (as an employee) to process eBay auction sales for you from his home. He slips in his home office, falls down, and severely injures his knee. It’s your responsibility. He was injured on the job. Or, suppose you want to fire an employee because you just caught a huge mistake he made, which will cost you a fortune. Can you do it? How can you do it? What are the employee’s rights? (Yes, employees do have rights.) You take on a lot of potential liability when you hire employees. The employment or human relations (HR) laws are vast and complex. Small businesses are exempt from many of them, but they still provide insane complexities that will often require a lawyer to sort out. Be advised that hiring employees is a last resort that you should put off as long as possible. But what other choice do you have?
Independent Contractors Until you are prosperous enough to take on the responsibilities of having employees, use independent contractors instead. What is an independent contractor? It’s someone in business for himself who provides services to you.
Guidelines When you have someone work for you as an independent contractor, the IRS becomes suspicious, thinking you are trying to avoid paying withholding taxes. Therefore, there are guidelines that tell when a work provider is an employee or independent contractor. Some of the guidelines follow: • Do you provide benefits to the worker in addition to payment?
44
EBAY BUSINESS THE SMART WAY
• • • • •
Do you provide on-the-job training? Does the worker use your tools and supplies? Does the worker follow a schedule set by you? Does the worker work on your premises? Do you tell the worker how to do the job rather what must be accomplished? • Does the worker supervise your other workers? • Can the worker quit at any time without liability? • Does the worker get paid without submitting business invoices? • Does the worker work only for you and no one else doing the same work? If the answer to any of these questions is yes, you have a potential problem. See the IRS guidelines and Form SS-8 for further detail. What’s the worst that can happen? First, the IRS can and will claim your worker is an employee and collect income tax withholding payments going back to the date of the first work. Second, the worker could get injured on the job, but worker’s compensation insurance wouldn’t cover the injury, because the worker wasn’t an employee and you didn’t pay worker’s compensation insurance premiums. Yet, you could be liable for the injury. Tailor your worker relationships so that they meet the guidelines, keeping in mind that this matter needs further investigation and more detail than this book covers. Always insist that independent contractors bill you with invoices that look business-like. It’s best if they have a business name different from their own, too (e.g., Johnson Packaging Service instead of Robert G. Johnson). Independent contractors usually have their own business cards, stationery, equipment, tools, business bank accounts and the like. Always make payment to a business name, not a person. Can You Help? Can you set someone up as an independent contractor? Go lightly here. You can tell them how independent contractors operate. You can
CHAPTER 3 BUSINESS DETAILS
45
even tell them that you only work with independent contractors. But don’t assist them to become independent contractors, and don’t hire them on the condition that they become independent contractors. If you inspire someone to become an independent contractor to do work for you, encourage him to get other customers. Make referrals, if necessary, even to your competitors.
Contracts Always have a written contract with each independent contractor. It doesn’t have to be complex or long, but it should show that you are contracting with the person to get something accomplished for a specific payment. It should not recite how or when the independent contractor shall do the work (although deadlines are permissible) or what he shall use to get the job done (although engineering specifications for quality in products and materials are permissible). A true independent contractor does the work specified in the contract. If not, you can bring a claim for damages. On the other hand, an employee can quit any time without liability. Fulfillment Example Suppose you contract with the guy down the street who has a big garage to do your fulfillment for you. He is to store your inventory, package your products, and ship the products to your customers. If he’s an independent contractor, he can set up the garage and the fulfillment processes any way he desires, he can work when he wants, and he must buy his own packaging materials and equipment. You can set quality (engineering) specifications for packaging, deadlines for shipping, and the means of communication (telephone, email), but you can’t run the fulfillment business through him. You need to have a short written contract with him that shows the relationship between you and him. If You Don’t Have a Contract Without a contract, you’re inviting a legal action. You might ask yourself, Who will ever question the relationship? Who will ever know? You and the other person are on good terms and have a complete understanding of the independent nature of the work relationship.
46
EBAY BUSINESS THE SMART WAY
Unfortunately, it’s usually the other person who instigates the legal action. For example, the other person doesn’t pay income taxes. The IRS eventually catches up with him. He says, “Oh, dear. I thought the eBay retailer [you] was withholding payroll taxes.” Then the IRS comes after you. Yes, it happens a lot this way. Or, the other person gets injured while working but has no health or disability insurance. So, he applies for workers’ compensation only to find that you have no worker’s compensation insurance because you have no employees. Then, he sues you claiming to be an employee. Yes, this happens too. Consequently, a contract is your best defense against an independent contractor being reclassified as an employee. But a contract by itself is not the sole determining factor. It’s necessary also to make sure you follow the guidelines that determine the relationship.
Delegating Here’s a list of some things you might delegate to someone else (e.g., an independent contractor): • Fulfillment • Bookkeeping (making accounting entries) • Data entry • Shooting photographs • Creating auction ads • Auction management • Customer follow-up • Customer service • Web development (if you have a website) And there are some things you probably will do better yourself when starting rather than delegate: • Buying at wholesale • Pricing • Accounting (reviewing the books) • Reporting (making business sense out of your accounting)
Insurance Most traditional business entities (e.g., corporations) are designed to rearrange liabilities to suit special business purposes. These are important considerations for large businesses. For small businesses, they are much less important. Still, you have to deal with your business liabilities. An incomplete list of liabilities follows: • To the public • To employees • To physically injured persons • To financially injured persons • To customers The best way to get your liabilities under control initially is by purchasing insurance, not by agonizing over which business entity to use. Keep in mind that even business entities need insurance. You should start by getting business coverage for your car (or truck). Otherwise, should you have an accident while driving for your business, your insurance company may not cover you. Business coverage for automobiles shouldn’t cost much more so long as you’re not using your car a great deal for business. Sit down with a business insurance agent and discuss what coverage you need for your business. Every business is different. If your insurance agent isn’t familiar with business matters, you may need to find another. When you’re in business, you’re a bigger target with potentially more people gunning for you than when you’re a private person. Insurance is your best protection. Keep It Simple Although different business entities offer different protections in regard
48
EBAY BUSINESS THE SMART WAY
to liability, they also offer different legalities in regard to many other business concerns. Liability is not the only concern. Thus, if you can protect yourself from liability with insurance, and the other legalities are of no concern to you, remaining a sole practitioner may be your least complicated and least expensive way to be in business.
Bank Accounts The best practice is to run your business out of a bank account separate from your personal bank account. If you’re a sole proprietor, it doesn’t matter for tax purposes whether you do so or not, but a separate bank account makes your accounting easier. The bank will require an assumed name affidavit to open your business bank account. (See the section on sole proprietorship in Chapter 2 for a discussion of using a bank account in your name only, without providing an assumed-name affidavit.) If you’re a partnership, the partnership bank account should be separate from any of the partners and should probably require more than one signature on the checks. Because you have to answer to your partner, you cannot indiscriminately shift funds back and forth between your personal account and your partnership account. If you are incorporated, the bank will require a corporate resolution to open a bank account. Because corporations are owned by and taxed separately from stockholders, you cannot indiscriminately shift funds back and forth between your personal account and your corporate account. It could be fatal for income tax purposes. This is an inconvenient disadvantage for a one-person business that’s incorporated.
Tax Number As a business, you need to get a tax number from the IRS and begin filing tax returns when due. • If you are a sole proprietor, your tax number will be your Social Security number, and you will file your personal tax return as you normally do. In other words, your business is not a separate taxable entity. • A partnership requires a federal Employer Identification Number (EIN) and files an information tax return, while the individual
CHAPTER 3 BUSINESS DETAILS
49
partners each files his or her own personal tax return. • A corporation requires a federal Employer Identification Number and files a corporate tax return. Individual stockholders each file a personal tax return. Don’t put this off. Get set up to file your tax returns and pay your taxes regularly and on time. When you’re an employee, filing a tax return is usually reasonably easy, straightforward, and done once a year. When you’re running your own business, it’s more complicated and takes more time, effort, and resources. And you need to do it quarterly (estimated tax). It’s easy to put off this unpleasant chore. Almost every small business falls behind on their taxes sooner or later (not necessarily for the lack of money to pay the taxes). It can create very unpleasant situations with both the IRS and state taxing authorities.
Merchant Credit Card Account If you want to accept credit cards for payment, you need to get a merchant credit card account. Unless you have good credit, this may be difficult to do. See Chapter 14 for more on merchant accounts and alternatives you might use.
Trademarks A trademark can be a graphic (image), a phrase, or a name. You acquire the rights to it by using it. Ultimately the federal trademark regulations will govern, assuming you do business across the country (as you will with an eBay business). After using your trademark, you need to file a trademark application with the US Patent & Trademark Office ($375 fee). Getting a trademark is a long but worthwhile process. Being awarded a trademark will give you an exclusive right to use your graphic, phrase, or name within your industry and will help you protect your brand. Don’t use a trademark that someone else is using. Technically, you may be able to get the use of it eventually (trademarks are awarded only for use in specific industries), but it’s not worth the risk of trademark violation. Instead, find a unique trademark. You can do a trademark search online at the US Patent and Trademark Office website: http://www.uspto.gov
50
EBAY BUSINESS THE SMART WAY
Accounting You can run your personal life out of a checkbook when you’re an employee. When you’re in business for yourself, you need something more.
Quicken You should start using accounting software such as Intuit’s Quicken or a comparable program. As you grow larger, you will want to graduate into using accounting software designed for business such as QuickBooks, QuickBooks Pro, or QuickBooks Premier, Intuit’s advanced accounting software intended for small businesses. You will probably need an accountant or bookkeeper to help you get set up and understand accounting procedures. Learning to use accounting software will help you to understand accounting too. You can’t do everything forever when you become a successful eBay retailer. One of the first tasks usually delegated in a small business is the bookkeeping. That’s something to keep in mind as you grow. Accounting isn’t just about money. It’s about accounting for business assets, inventory, orders, customers, and the like. These should be integrated into your accounting of funds. It makes running a business easier, more efficient, and less expensive. Fortunately, inexpensive auction management software is available to do this; see Chapter 19. Chart of Accounts One of your first accounting tasks is to set up a chart of accounts. Your bookkeeper or accountant can do this for you. You might even be able to find a chart of accounts to fit your business somewhere on the Web and use it as your own. Each business has a unique chart of accounts. See a sample chart of accounts for a typical small business at the Small Business Notes website http://www.smallbusinessnotes.com/operating/ finmgmt/financialstmts/cofa.html.
Manual Accounting You can keep your books manually. That was done for a long time before computers came along. It seems like it’s less expensive. After all, Quicken or comparable programs cost almost $50 and take time to
CHAPTER 3 BUSINESS DETAILS
51
learn how to use. Why not just record everything on paper? Don’t fall into the trap of thinking this way. Accounting software will save you a huge amount of time and effort worth considerably more than the small amount you pay for the software. It will also provide you with a certain amount of accounting coaching (usually provided in the software documentation) for which you would otherwise have to pay a bookkeeper or accountant.
Annual Checkup At least once a year, you need to have an accounting expert go over your books (essentially an audit). If you do your own bookkeeping, this checkup is to set things straight and to either make or review your income tax calculations. If you have a bookkeeper do your books, the accounting expert’s review (or audit) is done to make sure your financial records are in order. The accounting expert should be a Certified Public Accountant (CPA) or someone with comparable credentials and government licensing. You need to arrange your annual review (or audit) well ahead of when you need it (probably at tax time like everyone else). It’s least expensive to establish your relationship with an accounting expert long before you need the services. Embezzlement Embezzlement in small businesses is much more common than most businesspeople realize. Most businesses are reluctant to report or seek prosecution of embezzlers, and most embezzlers are therefore repeat offenders. It’s outrageous. Keep this in mind if you have an employee, bookkeeper, or bookkeeping service do your books. An audit more often than annually is certainly not overkill. A surprise audit may turn out to be your best friend.
Branding For the purposes of most beginning eBay businesses, branding is the same as marketing. It is the marketing process of building a brand. This comes up in this chapter because it requires some practical ground work to be done (regarding names) on the front end rather
52
EBAY BUSINESS THE SMART WAY
than down the road. Early atention to branding will save you time, effort, and expense later.
What Brand? Branding takes resources and focus. You don’t have the time and resources in a starting business to brand your items (assuming they’re unbranded) unless you have just a few products. Consequently, most eBay businesses will attempt to brand their business name; and that makes sense.
What Is Branding? Branding is what you do to promote your business name. If you can promote your name well enough to gain recognition from your customers, you have established a brand. Here are some ideas for building your brand: 1. Know the market. 2. Keep your products and your sales effort up to date. 3. Provide outstanding value. 4. Use customer service to generate customer loyalty. 5. Pursue excellence. 6. Build brand recognition through advertising (online and offline), public relations, and marketing. 7. Leverage your marketing via eBay. eBay is quite conscious of eBay businesses needing to build their brands and gives them every opportunity to do so on eBay.
Brand Action What can you do to create your brand? You certainly can’t do as much as national companies, which build national brands with millions of dollars in advertising and promotion. You probably can’t even get your customers on eBay to remember your brand. But if you can get your customers to recognize your brand when they see it as they’re looking on eBay to buy the type of merchandise you sell, you’ve done about as much as you can do.
CHAPTER 3 BUSINESS DETAILS
53
People are bombarded with thousands of brand names every week. In other words, they probably won’t look for your brand when they need an item. However, when a customer returns to buy another item of the same kind later, you want them at least to remember your brand when they see it as they go through the list of eBay items. That is, you want them to recognize it. On the other hand, if you’re selling items that people buy on regular basis, your customers will come back to you on eBay just as they will anywhere else. That makes developing a good brand an important part of your business effort. Not all retail sales get repeat business within a reasonable time (e.g., digital cameras), but many do get business regularly (e.g., photofinishing). People buy digital cameras probably every two to four years. But the same people may have their digital photographs printed by a photofinisher an average of once a month. If you sell digital cameras on eBay, a strong brand may not be important to success. If you provide a service via eBay that enables customers to upload their digital photograph files to you regularly for you to send them high-quality prints via snail mail, you will need a strong brand for repeat business. How do you build a brand? Simple Name Pick a simple assumed name. Would you buy a beverage named Caramel-Colored Sucrose Carbonated Water from the Caramel-Colored Sucrose Water Bottling and Processing Corporation? Would you buy a Coca-Cola? Even Coca-Cola is not simple enough. Would you buy a Coke? Keep it simple. The name should be understandable so customers can recognize it; that is, remember it when they see it. If your brand is Elechron, who’s going to recognize it? If it’s ElegantClocks, it’s at least understandable. If you are selling in a niche, the name should address the niche. For example, if you’re selling nice clocks, a name like ElegantClocks gets right to the point. A name like Sathutral Trading Company doesn’t say anything about what you’re selling. The name should be easy to spell and pronounce. No one is going to have trouble with ElegantClocks. But how do you spell or pronounce
54
EBAY BUSINESS THE SMART WAY
Elechron or Sathutral? If you don’t sell in a niche but sell anything you can get at wholesale, use a name that reflects that fact. How about Auction Emporium? Certainly eBay Emporium would be better, but you would get an ugly letter from eBay’s attorney. Uniform Name Keep your name uniform throughout your business operation. Your name should be the same for your: • Assumed name or legal name • Trademark • Internet domain name • Website • Email address • eBay ID • eBay Store • Advertising • Letterhead • Business cards • Telephone directory entry • AOL ID • MSN ID • Yahoo ID • Legal and quasi-legal documents • Everything else Don’t be sloppy and operate under more than one name. And do put your name (brand) on everything. Now You Know Now you know why the discussion of branding goes in this early chapter. One of the first things you do when you start a business is choose a
CHAPTER 3 BUSINESS DETAILS
55
name. It’s important that you choose a name that’s available as a domain name and as an eBay ID, one that hasn’t yet been trademarked. If you do business on AOL, Yahoo, or MSN, your name needs to be available for those portals as well. It’s a lot of work to figure out a name that works everywhere these days. The brand starts here. Not eBay You don’t want to use “eBay” in the name of your business. If you do, sooner or later you’ll hear from eBay’s lawyers. Still, you might use eBay in a subtitle on your stationary, cards, or advertisements. Example: ElegantClocks – Selling Clocks on eBay Since 2002.
Logo Don’t worry about getting a logo and all the other trappings of a national brand. You don’t have the resources to make a logo stick. Just use your business name consistently. If you insist on having a logo, just use a specific typeface to make it. Remember that Coca-Cola and Coke are just typeface logos. The CocaCola is a little bit fancy. The Coke is plain and straightforward. You can easily make a typeface logo. You can use a typeface in an image editor to create a logo. You can make the typeface any color with any color background (or a transparent background) and give your name a drop-shadow or some other simple enhancement.
Advertising Advertising is the traditional means of building a brand. You can’t afford the millions of dollars it takes to build a brand off the Web. On the Web, the primary way to advertise is to put banners on other websites directing potential customers to your website. This is expensive too. The only way to find out if it’s cost-effective is to try it.
56
EBAY BUSINESS THE SMART WAY
You can try Google Adwords and limit your advertising expenditure. If you need advertising, this is certainly worth a try. But without your own website (or eBay Store) to which to direct potential customers, banner or Adword advertising doesn’t make much sense. Cross-Selling Use the Andale Gallery (see Chapters 19 and 24) or the eBay Stores Cross-Promotion device and other cross-selling techniques to build your brand and your sales. These are excellent techniques and are readily available. It works best when the items are related. If the items are not related, cross-selling is not likely to work well. For instance, when you’re selling leatherworking products, cross-selling to stereo speakers isn’t going to be very productive. But cross-selling to leather dyes will probably increase sales. Continuous Visibility You have to have continuous visibility to have a brand. If you go to buy soft drinks in a supermarket and Coke isn’t on the shelves, the Coke brand is seriously diminished. For your eBay business, you need to have plenty of auctions going all the time. You have to have high visibility on eBay. If you’re not there, bidders can’t recognize you. Customer Service And the winning brand builder is… Our old friend customer service! This is the best way to build your brand. This is where your focus needs to be. Without good customer service, you can’t build a brand on eBay—or anywhere else. With good customer service you can build a brand over an extended period. It takes a while, but it boosts sales. Don’t confuse good sales with building a brand. A brand is about plenty of repeat sales and referrals. It is your customers coming back again and again and telling their friends and relatives about you. Good customer service is a major component of effective branding. If All Else Fails If all else fails, read the manual. That is, read a book on branding. Branding is a hot topic in business today as well as a hot topic in online business. There are many current books on branding. Try:
CHAPTER 3 BUSINESS DETAILS
57
Brain Tattoos, Karen Post (The Branding Diva), AMACOM, 2004. Did you notice that Ms. Post has branded herself? The Branding Diva And then there is Stan Slap who spoke at eBay Live in New Orleans. His topic: Do Something About Your Brand Before It Does Something About You. He claims to be writing a book. But you don’t have to wait for it. Go to his website (http://www.slapworld.com) and buy one of the media products he sells. And what was his eBay Live presentation all about? A strong thread of customer service ran through it.
Inspiration Starting a business is a long haul and a lot of hard work. Sometimes it’s difficult to stay up and stay enthusiastic, particularly when you work at home alone. That’s why motivation—or more specifically selfmotivation—is such a popular topic for books, magazine articles, seminars, videos, audio tapes, CDs, and even organizations. Motivational media is close at hand if you care to partake. And I recommend incorporating it into your business life. Unfortunately, much motivational media is mediocre, or at best entertaining with no afterlife. Yet it involves the emotions so much that it is highly personal. What I might like and recommend to you may not suit you at all, and vice versa. So, I’m not going to recommend anything specific. Nonetheless, I encourage you to look for and find something that will inspire you in your business activities. The question is, What to look for? Here’s what to ask yourself: 1. Is it just motivation for motivation’s sake? If so, it will wear off quickly. 2. Does it incorporate any information that’s specifically relevant to retail selling or to business in general? If not, you may not find it useful in cheerfully sustaining your eBay retail business activities. 3. Will it leave you with valuable new personal or business skills?
58
EBAY BUSINESS THE SMART WAY
If not, its motivational qualities will probably not stay with you. 4. Can business information (acquiring business knowledge) by itself be motivational? It can if presented in an enthusiastic manner in a way that’s easy to understand. Indeed, properly presented, business information can be a significant inspiration. 5. Can any motivational presentation for retail businesspeople be ultimately valuable without a moral gestalt? I don’t think so. The retail business is an honorable business that goes back to the beginning of civilization. It is based on serving others—providing to others what they need and want. Retailers who are honest and fair and who provide good customer service are respected members of any community, as they should be. Service to others is a moral thread that is an inspiration to us all. And this is the type of inspiration that tends to stay with us and motivate us for a long time. But inspiration doesn’t have to come from motivational media alone. It can come from communities too. Get out of the house or office once in a while. Join the local chapter of a trade organization (relevant to your eBay business) and attend monthly meetings. Join a committee or otherwise serve the organizaton. Go to trade shows relevant to your eBay business. Go to business seminars that teach you new skills. eBay retailing is an exciting, new, and challenging business. But sometimes that’s hard to remember that as you tape your fortieth package of the day. And don’t forget online communities. If you can’t seem to get out of your house or office, join one of eBay’s discussion boards or other community activities. Go Community on the eBay navigation bar. Local eBay Groups eBay is encouraging members to form local eBay groups. After about three years, the program is not a huge success yet, at least not in my area. Still, I encourage you to join in and make this program an eventual success. It has a lot of potential. There is one national eBay group, the Professional eBay Sellers Alliance (PESA), that appears to be on its way to success and has already held several successful national meetings in various cities. It is primarily
CHAPTER 3 BUSINESS DETAILS
59
an organization for high volume PowerSellers.
Finally, you might try Startup Nation (http://startupnation.com), which is inspirational media for startup entrepreneurs. This company was an exhibitor at eBay Live.
Resources SCORE (www.score.org) is a non-profit association, affiliated with the US Small Business Administration, which provides extensive free business counseling to small businesses. This is a great resource that will cost you only your time. Use it! American Small Businesses Association (http://www.asbaonline.com) is a professional organization for small businesses. It offers its members benefits that range from health insurance to discounted movie tickets. Small Business Notes (http://www.smallbusinessnotes.com) is an informational website that provides a wealth of business information and resources in easy-to-digest form.
This page intentionally left blank
4 Equipment, Supplies, and Space Don’t get carried away with buying a lot of equipment and supplies to start your eBay business. You may not need very much. But you will need some basics. This chapter covers the basics but isn’t intended to be a definitive guide to building your office infrastructure. It will help you set priorities, and priorities are useful when you have limited startup capital.
Hardware You need a normal PC (or Mac) computer, nothing fancy. Business software (word processor, spreadsheet, database, accounting) works just as well on a slow computer as a fast one. Webpage editing software, if you use it, doesn’t require a speedy computer either. A faster computer is nice to have for editing digital photographs, but you generally don’t need a lot of speed for managing eBay auction photographs.
Computer What you do need is a computer that will run an up-to-date operating system not older than Windows 98 (preferably Windows XP) so that
61
62
EBAY BUSINESS THE SMART WAY
you can use up-to-date software. A 300 MHz PC will provide enough speed for Windows 98, but you may need more speed for some of the more recent operating systems such as Windows XP. You also need basic peripherals such as a printer and possibly a scanner. One important item is USB capability (not available in Windows 95). A USB (Universal Serial Bus) connector is the latest and greatest way to hook up devices to computers. When you start using a digital camera, you will almost certainly need a USB connector (port) in your computer in order to get the digital photographs from the camera onto your hard disk. If you are starting from scratch, you can purchase adequate computer equipment for under $150 used. New equipment will cost you closer to $500. Of course, you can spend much more. Free Computer for Low-Budget Startup Read a book on how to put a PC together. A PC is not complicated. It has about a dozen parts. Then scrounge parts or even old computers from friends. Voila! You have a PC. I always seem to have about a halfdozen perfectly good PC components lying around unused (not to mention old PCs) that I would give to a friend. However, adequate computers cost so little today that I don’t recommend that you go to the trouble of putting one together unless you’re on an extremely tight budget.
Backup Backup is nice when you’re having fun with your computer. But unless you’re creating and storing a lot of valuable personal records, backup is not absolutely essential. However, when you operate a business on eBay, backup is absolutely mandatory. Record keeping is not only a necessary task but is the core of competent customer service. Without the protection of a reliable backup, any malfunction in your computer system becomes a nightmare that threatens to destroy your business. See Chapter 17 for more details on backing up your business data.
CHAPTER 4 EQUIPMENT, SUPPLIES, AND SPACE
63
Software Hardware is inexpensive today. Software tends to be expensive. Be prudent in what you buy. Don’t assume you will need something until you actually have a specific need for it. For instance, do you really need Microsoft Office (about $250 – a current business standard)? When you look at the overall picture for your eBay business, perhaps you don’t need it. For instance, your use of an auction management service (covered in Chapters 18 and 19) may mean you will never need to use Microsoft Office.
Buying Software It is easy to say that you will need a word processor, a spreadsheet, a database manager, and an accounting program, at a minimum, to run an eBay business. But that may not be true. You may need a word processor, but an auction management service (which you certainly do need) may provide the functions for which you would otherwise need spreadsheet, database, and accounting programs. You should always keep in mind, too, that software is not an expense. It is an expense saver. It enables you to do something much more efficiently and inexpensively than doing it without the software. If it doesn’t, there’s no point to using the software. Therefore, the three questions to ask yourself before buying software are: 1. Does the work that the software does need to be done? 2. Does the software do the work more efficiently and less expensively? 3. Is it true that I presently own no other software that can do this work? If you can answer all three with a yes, then buy the software. You won’t save money by not buying it. One thing is certain, however. You shouldn’t buy any software until after you have decided which auction management service you will use (see Chapter 19).
Free Software You will need a Web browser and an email program. It’s handy to have a webpage authoring program too. Web browsers are free from
64
EBAY BUSINESS THE SMART WAY
Microsoft, Mozilla, Netscape, and Opera. Microsoft used to give away Outlook Express (email) and FrontPage Express (webpage authoring) free until it gained a monopoly in the browser market. Now it no longer does. But you can still get comparable programs free with the free Netscape browser. Download the Netscape 8.0 (or greater) browser from Netscape’s website (http://www.netscape.com). It comes with a good email program and a great webpage authoring program named Composer, both free. Yo u c a n d o w n l o a d M o z i l l a ’ s Fi r e f o x b r o w s e r a t h t t p : / / www.mozilla.com, and Opera’s browser at http://www.opera.com. As a substitute for Microsoft Office try ThinkFree (http://www.thinkfr ee.com), which provides free Web software compatible with Word, Excel, and PowerPoint.
Bundled Software Bundled software is free software that comes packaged with hardware. For instance, most scanners and digital cameras come bundled with image editing software. If you’re taking pictures with a film camera and don’t have a scanner, you may need to find free image editing software somewhere else. For a great free image editor, try downloading IrfanView: http://www.irfanview.com You need the image editing software to edit and improve your auction photographs.
Internet Access You can get dial-up Internet access as low as $7 per month, although a more standard price is $20 per month. (And you can still get free Internet service too.) Every time you need to get online for email or to surf the Web, you must dial up and connect first. The top speed is 56 Kb per second. This is OK if you can’t afford more. (A more expensive ISDN dial-up line runs at 128 Kb per second and is recommended only as a last resort.) A better deal is a DSL telephone line with a speed of 1,500 Kb per second (1.5 Mb per second). Some DSL vendors provide the line only at a lower speed. The typical price for a DSL line is $30-$50 per month.
CHAPTER 4 EQUIPMENT, SUPPLIES, AND SPACE
65
The nice thing about DSL is that it’s connected 24 hours per day. You do not have to dial up. Consequently, DSL is recommended. It will save you a lot of time and make your online work seem easier. Other Internet Access Your television cable company may be able to provide Internet access to you. The speed and cost of the service is comparable to DSL or faster, but it comes over your televison cable rather than a telephone line. You can also get satellite Internet service that’s fast and full-time. Unfortunately, it tends to be more a little more expensive than the other alternatives. But check. The prices are coming down.
You connect a network cable (Cat 5e or Cat 6) from a DSL/cable modem to the network interface card (NIC) in your computer (see home router below). The special modem is often provided free by your Internet Service Provider (ISP), the company that provides your access line. A NIC costs about $10-$35. Don’t despair if you can’t get a broadband DSL, cable, or satellite Internet connection. A dial-up connection works just fine, but it will slow you down.
Home Router Don’t use a DSL or cable line without a four-port home router ($50$90). You will have no protection against hackers, an intolerable situation, particularly for a business (see Chapter 17). You connect a network cable from your DSL/cable modem to your home router. You connect another network cable from one of the ports in your home router to your computer NIC. You can connect up to four computers to the Internet this way. They can all have high speed access to the Internet at the same time. Wireless home routers are popular too and eliminate the network cables to each computer. For a wireless system, you will need wireless NICs in each computer. Wireless systems are great when your computers are spread around the house or the office, but you need to set up the system properly for adequate security. A cable system is better if all
66
EBAY BUSINESS THE SMART WAY
your computers are in the same room. If you buy a home router with a built-in print server, you can connect a printer to the router. Four computers can then use the printer.
Long Distance Service Want to pay for your DSL or cable line with long distance telephone savings? There may be a way. Use a voice-over-IP (VoIP) telephone service.
Vonage Try Vonage at: http://vonage.com First, you have to have DSL or cable Internet service. Second, you need a home router. Third, you need a black box (e.g., Cisco ATA186), which Vonage provides free. You connect a network cable from a port in your home router to the black box. You connect a normal telephone wire from the black box to any normal telephone. Voila! You have VoIP telephone service. Compare Vonage’s rates to any long distance service. If you have much long distance usage at all, you may be able to save enough on your long distance bill to pay for a significant portion of your DSL or cable Internet service. How does Vonage work? As the book goes to press, I’ve been using it for over four years and am quite pleased. It’s comparable to normal telephone service. You can use it for local, regional, or long distance calling. Vonage charges extra for overseas telephone calls, but the rates are inexpensive. Incidentally, Vonage provides full telephone services (e.g., voice messages, call waiting) for no additional charges. Vonage has competitors such as Net2Phone (http://net2phone.com). Use a Google search to find them and check them out. The number is growing, and they all offer a different set of telephone services. Vonage for Your eBay Business? If your eBay business requires that you talk with your customers via the
CHAPTER 4 EQUIPMENT, SUPPLIES, AND SPACE
67
phone a lot, Vonage is a good deal for you. It offers unlimited long distance service for $25 per month (residential line). You can even get an 800 number.
Skype Recently, eBay bought Skype, a VoIP provider. Skype offers several services, and it’s worth your time to review them at the Skype website (http://skype.com) occasionally in order to keep up to date. One service SkypeIn enables you to take incoming calls on your computer from a telephone anywhere. Another service, SkypeOut, enables you to call a telephone anywhere from your computer. Each of these services has a fee. To use either service, of course, you must be connected to the Internet. (Skype’s basic computer-to-computer VoIP service is free.) Skype also provides other services such as chat, messaging, and conferencing. Because it was purchased by eBay and because it has considerable potential for becoming a multifaceted communication medium, many software developers will be creating programs that integrate Skype functions. Skype was not quite ready for prime time business use as this book went to press. However, 2007 will see a flood of Skype hardware on the market, enabling eBay retailers to use Skype for business as effectively as Vonage (e.g., visit Multi-Link at http://multi-link.net). Auction management software developers and other software developers will integrate Skype in clever ways and perhaps introduce some exciting new ways to digitally conduct customer service. Indeed, the Skype revolution has already begun but won’t be fully visible until 2007. And get this! You can also use Skype for video calls, one-to-one! You can use Skype most conveniently with a USB VoIP telephone, but you can also use it with a microphone and speakers or a headset. For video calls, you will need a webcam. Customers A customer will not be able to talk with you via his or her computer unless they have a microphone and speakers, a headset, or a USB VoIP telephone.
68
EBAY BUSINESS THE SMART WAY
Again, as said for Vonage, if you have much long distance usage at all, you may be able to save enough on your long distance bill with Skype to pay for a significant portion of your broadband Internet service.
Business Machines Don’t go wild buying business machines you don’t need. Times are changing. For instance, you may not need a fax machine these days. You can send and receive faxes through your computer. For some people that’s more convenient, for others less convenient, than a fax machine. If you don’t use fax very much, however, you can stand the inconvenience. (I have managed to cut my fax usage to about one sent and two received a month.) Likewise, if you don’t need copies often, don’t buy a copier. Use a cheap scanner instead, if you have one. It’s slow but bearable if you don’t use it often. Your computer is your most inexpensive means of doing anything in business. A computer and printer are basic to business life. Attempt to do everything digitally with your computer system. That means a paperless office—easily achievable today. It will save you a ton of money in the long run. On the other hand, if you have frequent use for a fax machine or a copier, buy one. Make your home office easy to work in. There is no standard set of devices you need. Tailor your office machines to support your work style.
Basic List A basic list of business machines for an eBay business looks something like this: 1. Computer (with monitor, keyboard, mouse, and speakers). 2. Computer printer. 3. Telephone modem if using dial-up service, or a NIC if using DSL/cable. 4. Home router (if using DSL/cable) with print server (see Chapter 17). 5. Fax machine (optional) if you need one for something. 6. Copier (optional) if you will use one regularly.
CHAPTER 4 EQUIPMENT, SUPPLIES, AND SPACE
69
7. Scanner (optional) if you need one (e.g., for scanning color film prints). Inexpensive Combo HP, Canon, and other manufacturers now offer combination printercopier-scanner-fax machines for under $150. One of these can serve all of your needs in one purchase.
Fulfillment Equipment Don’t hesitate to buy strange machines for your packaging and shipping room so long as they save time and energy and don’t cost too much. This is a separate consideration from setting up an office because every fulfillment operation is different. See Chapter 13 for more information.
Office Furniture You may be spending more time in front of your computer now that you’re an eBay business. Make sure your furniture is comfortable and ergonomic. Otherwise you may develop health problems such as carpal tunnel syndrome. Try these resources for more information on ergonomics: http://www.ergo-2000.com http://ergo.human.cornell.edu/ergoguide.html http://www.safecomputing.com http://www.ergostoreonline.com http://www.spine-health.com/topics/cd/ergo/ergo05.html Ergonomic furniture doesn’t have to be expensive. A table and chair are recommended below. An ergonomic chair should be a top priority. On the Move One potential benefit of an eBay business is that you can do business from anywhere you can get a connection to the Internet. But it’s tough to find ergonomic furniture even in the best hotels, motels, and resorts. I take along a small folding table with a 25-inch height and a folding
70
EBAY BUSINESS THE SMART WAY
chair (with a cushion) matched to the table. I can use my computer for long periods comfortably—and safely (see On the Road below).
Office Supplies You’re in business now. Buy your office supplies in bulk because you will be using more of them. When you run out of printer paper, you will have to drive to the office supply store to get more, an unforgivable waste of time (and gas). Buy printer paper by the carton (10 reams), not by the ream (500 sheets). Ah, maybe that’s a poor example because we’re striving for the paperless office. But you get the idea. Buying in bulk is usually significantly less expensive than buying one at a time. Most office supplies are made to fuel the flow of paper. With minimal use of paper, you will need fewer office supplies.
Office Premises You can have a home office almost anywhere you can be comfortable. Typically home offices are in a spare bedroom, a study, or a basement room. The room must have adequate lighting so you don’t go blind and adequate electricity so you can feed your computer and other electronic devices. Watch out for windows and lights. If they’re in your line of vision (in front of you), they can cause eyestrain. If they’re behind you, they can cause an unwelcome glare on the screen of your monitor, which will also cause eyestrain. You need to be careful to position your monitor ergonomically in regard to the lights and windows in the room. This is the primary consideration in the placement of your desk or table. The availability of telephone and cable outlets should not be the primary factor in picking a room. You can run a telephone line or cable around the outside of your house at a modest expense to get to the room you want to use. An office should be comfortable and ergonomic. Let those two factors be your guide.
Storage, Packing, and Shipping You will need a place to store your inventory and do your packing and shipping. First, it’s the spare bedroom. Then it’s the garage. Finally,
CHAPTER 4 EQUIPMENT, SUPPLIES, AND SPACE
71
it’s out the door to somewhere else. There are a number of possibilities: 1. A relative’s, friend’s, or neighbor’s garage might work well. 2. In an outside office, usually the space will be too expensive for storage. Though, if the office space is cheap, it might make sense for storage. 3. Mini-storage is often inexpensive, but access is inconvenient. It’s generally not an appropriate place for a packaging and shipping operation. 4. A commercial warehouse might work well if the rent is reasonable. 5. An office-warehouse building is a good bet if you can afford the rent. 6. An old building with low rent is perhaps your best bet. If you are storing a lot of inventory—even though you shouldn’t be for an eBay business—you can save rent by separating the storage from the packaging and shipping. Storage space is inexpensive. Work space for packaging and shipping requires lighting, electricity, and open floor space that tends to be more expensive. Thus, you might do your packaging and shipping and a small amount of storage in your garage but store the remainder of your inventory in a nearby mini-storage unit.
Home Office Tax Deduction Many business gurus advise you to declare your home office a business expense and take an income tax deduction (depreciation) for it. This is one of the overrated benefits of being in business for yourself. For the little bit of tax relief, you will have to do a significant amount of extra record keeping. Also, rumor has it that a home office deduction triggers an IRS audit. This may not be true, but if you do get audited, a home office deduction will make the audit more complicated. (See sidebar below.) On the other hand, if you have a creative accountant and are willing to keep meticulous records, you can milk a considerable number of deductions out of your home office. But don’t take the deductions
72
EBAY BUSINESS THE SMART WAY
unless you’re willing to record the details necessary to support the deductions. If you use your car for business, you can deduct the mileage used for business at about 40 cents per mile (2006). Again, you must keep careful records to do so. (Also, make sure you have added your business use on your auto insurance policy.) If you use your car a lot, you may have to take a home office deduction in order to qualify for a mileage deduction. Consult your tax advisor. The point about tax deductions is that there is much misinformation and rumor all around us. Learn something about basic income taxation or consult an accountant. Same Home in San Francisco and Oklahoma City East Bay (San Francisco Bay Area) Improvements $160,000; land $400,000; and home value $560,000. Oklahoma City Improvements $110,000; land $50,000; and home value $160,000. Suppose the office you use is 10 percent of the area of the home, and you will depreciate the value of the improvements over 30 years. East Bay: $16,000 ÷ 30 = a $533 expense each year OKC: $11,000 ÷ 30 = a $367 expense each year At a tax rate of 28 percent, how much tax do you save? East Bay: $533 × .28 = $149 tax saving each year OKC: $367 × .28 = $103 tax saving each year
For more on tax deductions and small business go to http://taxloopholes.com where Diane Kennedy, CPA offers a variety of educational products on taxation for small businesses. Or read Minding Her Own Business 4th Edition, Jan Zobel, Sphinx Publishing, Naperville, IL, 2005.
Inexpensive Home Office Here are eight ways to set up a home office inexpensively: Desk Buy a folding table (particle board) at an office supply store.
CHAPTER 4 EQUIPMENT, SUPPLIES, AND SPACE
73
They come in different sizes, give you considerable flexibility, and cost between $30 and $50. The tables are durable enough for personal use. The tabletops are not durable enough for careless or heavy-duty use, but you can buy folding tables with durable Formica tops for about 50 percent more if needed. For serious typing you need the tabletop to be about 25 inches high. Most tables and desks are about 29 inches high. Cut 4 inches off the steel legs to get the table down to secretarial height. Put your monitor, keyboard, and mouse on the table. Office Chair This is not a place to save money. Your health depends on a chair that will support your back well. Fortunately, today you can buy such a chair for as little as $80 at an office supply store. Make sure it has an adjustable height. Out of Town I fly to visit the in-laws in Oklahoma City for about 10 days at Christmas. I was in the habit of using a laptop computer (terrible keyboard) at desktop height (29 inches) to work there. It wasn't much fun, and I didn't get much done. Finally, on one trip, I purchased a small folding table at a local office supply store, cut 4 inches off the legs, and cut away part of the steel support underneath to make room for my legs. I took along a laptop plus a good keyboard and used my father-in-law's adjustable desk chair. The work I was able to get done far surpassed my expectations—and I had fun working as I do at home where my office is set up ergonomically. I left the table at the in-laws’ and have used it on subsequent visits.
Office Supplies Buy office supplies in bulk to save money. You need more office supplies for a business than you do for personal use. Files You can purchase plastic cartons that will hold hanging files. They are more flexible and less expensive than filing cabinets. Remember, however, you want to operate as digitally as possible and keep the paperwork down to a minimum. Business Cards Buy inexpensive business cards wherever you can
74
EBAY BUSINESS THE SMART WAY
find them. As a virtual business, you won’t use them much except at trade shows, so don’t invest a fortune in them. Or, you can make your own elegant business cards with heavy paper stock (acid free), a word processor (or desktop publishing program), a laser printer, and a paper cutter. Computer You probably don’t need the latest greatest computer (see the Hardware section above). Your priorities should be elsewhere. Printer You can buy a new inkjet printer for under $60, albeit a slow one. You’ll do better to opt for a new laser printer for under $130. Communications Broadband via a DSL telephone line or a television cable is about $30-$50 per month. This will make your use of the Web and an auction management service much more efficient. Broadband will also support voice-over-IP telephone service (see Vonage in the Long Distance Service section above) that will save you considerable money on long distance and even in-state telephone calls. You can also use it for local calling.
On the Road Can you work well on the road? Although there are those who will disagree, in my opinion you can’t work very well with a laptop computer on just any tabletop with just any chair. The information below outlines my formula for inexpensive, efficient mobility with a motor home, van, SUV, or even a car. 1. Use an old computer, not necessarily a laptop. You can even use your normal desktop office computer provided you leave an upto-date backup of your hard disk at home. 2. Use a flat-panel LCD screen (if you don’t use a laptop). You can buy a 15-inch model now for under $200. Don’t use a normal monitor (CRT); it’s too heavy and far too cumbersome to cart around. 3. Buy a small sturdy folding table with a 25-inch height. You can probably get one locally for about $30. Costco seems to sell a lot
CHAPTER 4 EQUIPMENT, SUPPLIES, AND SPACE
75
of small tables made by Lifetime (http://www.lifetime.com). If you cannot find one locally, try Midg-ett (http://www.midgett.com) for good quality at about $50. I use a Midg-ett folding table that’s 18 (wide) x 32 (long) x 25(high) inches. 4. Get a folding chair. Steel card table chairs are fine. Buy a specific cushion to make your chair just the right height in regard to your portable table. An office chair is too cumbersome to cart around, although a Swedish kneeling chair works well. 5. You need a dial-up account from an ISP that offers local access telephone numbers everywhere nationally. Make sure your computer has a modem. The alternative for the more serious traveler is satellite broadband Internet service (the type that doesn’t need a separate upstream land line) with a small dish. Such service is now available at a reasonable price. You can even buy special dish mounts made just for RVs or other vehicles. Look at a Budget Satellite System RV mounting system (http://www.ideamaster .com/budget/rvmount.htm). And now flat satellite antennas are available. See the KVH low-profile TracVision A5 (http:// kvh.com), currently available only for satellite TV. They’re much less trouble and smaller than dishes. KVH also offers in-motion Internet access. Finally, many RV parks are installing wireless systems that you can take advantage of with the proper wireless equipment. 6. Naturally, you need to farm out your fulfillment to an independent contractor. For most eBay businesses, a mobile fulfillment operation would be much too unwieldy to operate and too susceptible to a sizeable loss through theft. This traveling idea may seem a little frivolous when you’re just trying to start your eBay business. Keep in mind, however, that one of the great advantages of being in a virtual business is that you can travel and still work. The other consideration is that when you do travel, you need to keep up on your auction management. You can’t be out of touch for long periods and still expect to deliver good customer service—and get positive feedback.
76
EBAY BUSINESS THE SMART WAY
A Lot of Resort Motel Rooms I have a friend who operates a lucrative one-man digital business online. He invested in a motor home at a cost of about $85,000 with special tables and fittings for all his computer equipment just so he doesn't have to stay at home. My special setup (folding table and chair plus LCD screen and old computer) is worth less than $500 and doesn't take up much room in my Trooper (SUV). I can work as easily and efficiently as my friend can on the road. Then when I leave my Trooper at a trailhead for six days and go backpacking, I don’t have to worry about expensive computer equipment being stolen. My loss would be under $500. With a laptop CD recorder, I burn a CD with all my work (away from home) and take it along backpacking so my data won’t be lost in the event of a theft. This is quick and easy to do. But you don’t have to go backpacking to use this precaution. I do it every time I’m away from my computer for an extended time on any trip. I put the CD in a pocket, camera bag, purse, or glove compartment. It's nice to have an RV, particularly for long-term trips, but you don't need one to put your show on the road. And $85,000 buys a lot of resort motel rooms.
5 Borrowing Money You need money (capital) for three things when starting a business: Equipment The equipment (and fixtures) you need to do business. Inventory The merchandise you sell. Other Operating Capital The funds you need for overhead such as space (real estate); utilities (electricity, telephone, Internet service, auction management service, etc.); employee wages (or independent contractors); transportation (using your vehicle for business); services (bookkeeping); and the like. You are undoubtedly paying for some of these things now for your home office, such as a computer, office space, utilities, and transportation. Nonetheless, you will need money for the remainder.
Business Plan To raise money in the form of a loan or an investment, you need to communicate to the lender or investor what your business is and how your business will perform in the future. This is called a business plan.
77
78
EBAY BUSINESS THE SMART WAY
Formal A formal business plan can be long and complex. It might contain the following sections: 1. Executive Summary 2. About the Industry 3. About the Company 4. Ownership 5. Products and Services 6. Market Analysis 7. Analysis of Competition 8. Marketing Strategy 9. Operations 10. Management 11. Personnel 12. Milestones 13. Risks, Problems, and Potential Problems 14. Profit and Loss Statement 15. Balance Sheet 16. Cash Flow Projection You will need such a business plan to borrow a large sum of money. You can buy a book on business plans and labor away to create this yourself, or you can hire someone to do it for you. There are books and consultants readily available. To get a better idea of what this entails, go to: Bplans (http://bplans.com), which has a robust website featuring information on business plans together with sample business plans. Nolo (http://nolo.com), which offers a book on writing a business plan at http://www.nolo.com/product.cfm/ObjectID/D4C16D20-02 20-4890-9F2E661D00DCD5F7.
CHAPTER 5 BORROWING MONEY
79
Note: Long URLs like the one above sometimes evaporate by the time you read them. The best procedure in such a case is to go to the core URL (nolo.com) and attempt to find the new address for the webpage by looking in a directory or by using keywords in a website search device.
PaloAlto Software (http://www.paloalto.com) provides software for writing business plans, Business Plan Pro. Also go to Bizplans (http://bizplans.com) where you can get information on using the software to create business plans. The US Small Business Administration’s (SBA) website (http:// www.sba.gov) where a detailed guide for business plans is located at http://www.sba.gov/managing/strategicplan/guide.html.
Informal An informal business plan is something less than outlined above. If you are a start-up eBay business, you need a well-thought-out business plan, but it doesn’t have to be fancy. It needs to explain the nature of your business, why you need to borrow money, and how you’re going to pay the money back. Numbers (estimates of income and expenses) are an important part of such a business plan too. Unless you need to borrow a large sum of money, an informal business plan will probably be adequate. But overkill probably won’t hurt you in regard to business plans, so do a thorough job even for an informal business plan.
Personal If you don’t need start-up money and you will finance your own eBay business, you should write a business plan for yourself. It can be more informal than even the informal one suggested above, but just getting something down on paper is often an enlightening experience. Then when you find yourself off track from time to time—as you will—you can refer back to your business plan to regain your bearings. It’s not that adhering to your original business plan is always the best course of action. It’s not! But rather, you can use your original business plan as the basis for updating the analysis of your business prospects.
80
EBAY BUSINESS THE SMART WAY
Savings Most people can get a good start with their business on eBay with a modest amount of savings. After all, an eBay business is not as moneydemanding (capital intensive) as starting a business in a physical location where you need inventory that takes time to turn over, store fixtures, employees, and other expensive overhead. Make a plan to get your business started on your savings and save yourself the trouble of trying to raise money.
Credit Cards Credit card credit has become a means of borrowing large amounts of money today, even for people of modest means. It may not be wise for you to use this method. First, because this type of credit can be extraordinarily expensive, it should be a last resort, particularly if you need a large amount of money over a long term. Second, it is too easy to get in over your head charging on credit cards. No one will ask any questions until you default. (Often a relative or a banker asking probing questions before loaning you money can be a good thing.) Then too, the huge amount of interest and the unconscionable late and over-limit charges can bankrupt even a millionaire. If you do use credit card credit, plan such use so that you avoid any future financial crises, don’t use it for long term borrowing, and end your dependence on credit cards as soon as possible. However, if you charge inventory on your credit card and can turn the inventory over (sell it) before you are obligated to pay interest or pay back the money (usually the next month), credit card financing can be a real benefit. Time Your Purchases Time your inventory purchases so that you get more than a full month of an interest-free loan. For example, suppose your credit card closing date is the 25th of the month. You typically get a statement a week later on the 2nd of the next month, and you have until the 20th of that month to pay off the amount owed before it starts accumulating inter-
CHAPTER 5 BORROWING MONEY
81
est. Buy all your inventory on the 26th and charge it on your credit card. You won't have to pay it until the 20th of the month after next. In other words, suppose you buy your inventory on the 26th of March (the day after the account closes for the month). You don't get billed until the statement that comes May 2nd, and you have until May 20th to pay without accumulating interest. That's 54 days of credit. With an eBay business, you ought to be able to have the inventory shipped to you, turn over the inventory, get paid by your customers (eBay buyers), and pay your credit card balance in less than 54 days, thus obtaining interest-free financing for your inventory. Check the terms of your credit card agreement to determine how you can work the system to obtain the longest period of interest-free financing. Terms are different for each credit card issuer, and the scheme outlined above may not work for you. Today many credit card issuers charge interest from Day 1. Consequently, the above scheme won’t work. If you can’t do what is suggested above, avoid using credit card credit. It’s nice if you can get 54 days of free credit, but if you can’t make it work, seek a source of financing less expensive than credit cards. For long-term financing, credit-card interest will bury you.
Having warned you against credit cards, let me mention that some credit card companies have special credit card programs for small businesses that may be considerably less expensive (lower interest) than normal credit cards. Inquire, and then thoroughly check out any such programs before using them. Then too, some normal credit cards charge low interest. For sure, they may be uncommon, but they exist. When evaluating credit card borrowing, always remember the devil is in the details. Green with Envy One reason credit card debt is not a good idea is that the fees, late charges, and high interest rates charged by financial institutions amount to a level of usury that makes organized crime green with envy. And thanks to well-lobbied legislatures, it’s all perfectly legal.
82
EBAY BUSINESS THE SMART WAY
Relatives A time-honored means of getting money to start your business is to borrow from relatives or friends. You don’t need much to start an eBay business, so restrict your method of getting money to borrowing only. Don’t give away a share of the business to anyone in order to raise money. Risks There are non-financial risks to every lending source. Borrowing from relatives or friends is a good way to cause rifts in the family or lose friends if you don’t pay back the money promptly. Defaulting on a loan from a bank is a good way to ruin your reputation and your credit. Therefore, it’s a good idea to consider the consequences of failure in regard to your source of lending before you seek a loan.
Angels Angels are people who seek to make loans to (at high interest rates) or buy ownership interests in start-ups or immature businesses. This is a type of venture capital and is an early step toward raising money through a venture capital firm. Such an investment is normally for a significant amount of money and is well beyond the amount the average eBay start-up business needs. Nonetheless, you may need angel financing someday to expand your eBay business after it becomes well established and continues to expand.
Banks Banks are good sources of funds because they charge reasonable interest rates and in some cases may be able to give you some assistance with your business. They can also tailor commercial loans and payback plans to fit your needs. Ultimately, as your eBay business expands and needs more operating capital than you can provide, a bank may be your best source of money.
Operating Statement It’s normally easier to borrow money after you have been operating for a while, if your business is successful. You still need something that resembles a business plan, but an operating statement (an accounting
CHAPTER 5 BORROWING MONEY
83
of your operations) is important too. Consequently, it’s important to keep good bookkeeping records, which you will need to create an operating statement.
Net Worth Statement (Collateral) A banker is not likely to loan you money without collateral. Consequently, your banker will be looking for assets to be used as collateral. Your net worth statement lists your assets and liabilities and gives your banker an idea of what might be used for collateral. The bank has a standard form for this statement, and you should use that form. Occasionally a banker may loan you money without collateral (referred to as “on your signature”). That sometimes happens when you have a large bank account balance, borrow a relatively small amount of money, and have a long history of good credit with the bank.
Borrowing Dilemma The borrowing dilemma is simply that if you are successful and growing, you will be likely to need increasing amounts of money from your bank to increase your operating capital. If you always need more and more money, when do you pay it back? Theoretically, you would never pay it back (until you quit growing) because as soon as you paid it back you would need to borrow more. Unfortunately, bankers don’t see it this way. They want to see a payback. An easy way to show a payback is to borrow for a long term. Your loan payments will normally be monthly. Thus, if you borrow $30,000 amortized over 7 years at 8 percent interest, your monthly payments will be $467.59 per month. If at the end of a year you go back to your banker to borrow an additional $25,000 to finance your eBay business expansion, you will already have paid back $3,331 of the original loan (i.e., $2,279 interest and $3,331 principal). Your banker will be happy. It’s the short-term borrowing that’s a little more ambiguous. Typically you will borrow quarterly (every three months). At the end of the quarter your banker will expect you to pay interest for three months plus reduce the principal by a reasonable percentage. Thus, if you borrow $20,000 at 9 percent interest, at the end of three months you might be expected to pay interest of $450 plus make a payment of $3,000 for
84
EBAY BUSINESS THE SMART WAY
the reduction of principal. The loan would then be rolled over. That is, you would receive another three-month loan of $17,000 ($20,000 – $3,000 = $17,000) at the then-current interest rate. The trouble here is that you need another loan of $24,000, not $17,000, because your business is expanding. Assuming your banker approves this additional amount, you will be paying $3,450 interest and principal and will immediately receive $7,000 ($4,000 additional + $3,000 that you just paid back) as the loan is rolled over at the increased amount. Does it make sense for you to pay $3,450 and immediately receive $7,000 from the bank? Why not have the bank just advance you $3,550, the difference between the new loan ($24,000) and the old loan ($20,000) less interest ($450)? The answer is that bankers like to be paid back. It’s evidence that you have the capability to pay back the loan even if you have a legitimate need to borrow more and more money as your business expands. This is the dance. Pay attention to it. Always pay back your loan as per agreement or as per request. It will make your banker happy, even though she may immediately loan you an increased amount of money. Keep in mind that you are at risk when you borrow in the short term. At the end of any quarter, the bank can decide not to loan you any money at all and may call the loan; that is, you will have to repay the full amount of the loan. Different Loans Normally when you borrow for buying equipment and fixtures, you borrow long-term. This makes sense on the theory that your equipment will last a long time and can be used as collateral until it substantially depreciates. When you borrow to buy inventory and cover other operating expenditures, you borrow short-term. This makes sense on the theory that your financial needs for operations depends on day-to-day variables such as seasonal sales. Typically, your inventory will be part of your collateral.
Compensating Balances For every dollar deposited in a bank account, the bank can lend a cer-
CHAPTER 5 BORROWING MONEY
85
tain number of dollars and charge interest to borrowers to earn money. The Federal Reserve controls the ratio, in effect, by mechanisms that you can read about in books on economics or banking. For instance, let’s say the current ratio is 0.9:1, and the current commercial interest rate is 7 percent. (The ratio may be higher or lower depending on a number of factors beyond the scope of this book.) That means that for every $1,000 deposited in a bank account, the bank can loan $900 to borrowers and charge 7 percent interest on the $900. Suffice it to say that bank deposits are important to bankers. One of the first things your banker is going to want to know is how much money you will keep in your business bank account. If you are required to keep a certain amount of money in your bank account as a condition of getting a loan, it is called a compensating balance arrangement. For instance, if you borrow $30,000 but are required to keep no less than $5,000 on deposit at all times, that’s a compensating balance of $5,000. Regardless of whether your banker makes a compensating balance mandatory in your loan agreement, she will still monitor your business bank account balance and will undoubtedly encourage you to keep your balance as high as possible. This presents three realities to you. First, your large account balances at another bank will entice a banker to loan you money because she will require you to move such balances to her bank. Second, you will probably not get the loan unless you move the balances to her bank. Third, the higher the balances, the easier it will be to get a loan.
Timing When do you borrow money? First, when you don’t need it. Bankers love to loan money to people who don’t need it. It’s the joke of the business world, but it’s true. The time for you to borrow is when you don’t need the money and can pay it back without any financial strain. Second, borrow early in the initial phase of your business. Don’t wait until you need a lot of money to borrow some. Start borrowing early to build your track record of repayment on time. When you need to borrow a lot, it will be easier. What amount should you borrow? Start with a small amount. Bankers
86
EBAY BUSINESS THE SMART WAY
are eager to get new customers. Even if they have a minimum loan limit, they may waive it and loan you less just to cultivate your business. Something to note is that a small bank is more likely to loan you a small amount of money than a large bank or a branch of a large bank. Indeed, a large bank may not be interested in your business at all until you grow into a substantial small business.
SBA Loans The Small Business Administration (SBA) guarantees bank loans to small businesses. What does this mean to you? It means that you may be able to get a loan because the SBA guarantees it whereas otherwise the bank would not make the loan to you. This, however, can be a little misleading. The bank will not lower its lending (underwriting) requirements just because the SBA will guarantee payment on the loan. First, the SBA has to approve the loan and will not do so unless the bank uses sound lending practices. Second, in regard to the bank, it often takes effort to collect on an SBA guarantee just as it does to foreclose on collateral. Consequently, don’t assume that it will be easy to get an SBA-guaranteed loan, although it should be easier than getting an unguaranteed loan.
Trust Always be straight with your banker. It’s the only way to build a lasting relationship. Make sure you’re the one to give your banker any bad news about your business. She should never hear it first from someone else. An early communication of bad news is better than a late one. Indeed, your banker can often help you work through a financial crisis. Keep in mind too that any false statement to a bank may be a violation of state or federal law. On the other hand, never trust your bank. Your banker doesn’t loan you the money, the bank does. Assuming you can trust your banker, it still doesn’t mean you can trust the bank. The bank can decide to call your short-term loan (require repayment in full at the end of the current term, normally one quarter) at any time for reasons in many cases that have nothing with you or your credit record. The exception is a
CHAPTER 5 BORROWING MONEY
87
long-term loan agreement; but a bank might attempt to call a longterm loan, too, based on some technical breach of the loan agreement. If the survival of your eBay business requires short-term bank financing, you are at the mercy of the bank. This is not a good situation to be in. You may be required to pay back the loan for your business before you can replace it from another source. Failure to pay off the loan immediately could put you out of business. What defenses do you have against a bank? First, cultivate contacts with bankers at other banks. If your eBay business is a financially sound one with a good track record, you may be able to borrow from another bank reasonably quickly should your current bank cut you off. Second, run your business so that you can survive should you lose your source of loaned funds. You may have to cut back the scope of your eBay business activities temporarily until you can find another source of money, but at least you won’t be bankrupt. Feedback There are many bankers familiar with eBay today. If your banker understands eBay, the first thing she will do when you attempt to borrow money is to check your feedback record. This is yet another reason to ensure that you maintain an excellent eBay reputation.
Other Lending Sources Some of the other sources of money for your business are obvious but not always recognized as sources of capital. Check Out Rates Go to Bankrate.com to check out loan rates and get other information for small businesses (http://www.bankrate.com).
Vendor Leasing When it comes to investments for equipment, your wholesalers or suppliers may be able to help you by leasing you equipment related to what they sell you. This is often an easy source of business capital. Except for legal differences, a lease is virtually identical to a loan. That
88
EBAY BUSINESS THE SMART WAY
is, lease payments are just like loan payments. You don’t have to pay for the equipment up front. You make monthly payments over a certain number of years. For instance, a supplier of packing materials might lease you a shrinkwrapping machine for your fulfillment operation. The machine is worth probably only between $1,000 and $2,000, but the lease reduces the amount you will have to borrow elsewhere. Sometimes there’s not even a credit check, particularly if you’ve done business with the supplier before and have paid your bills on time. Always ask what the interest rate is on a lease. The interest can be calculated, and your best protection against paying high interest is to know what the interest is in the first place. Sometimes a supplier might even loan you equipment at no cost just to encourage you to order more supplies. It’s smart business to ask your wholesalers and suppliers if they will lease you or loan you the equipment you need.
Vendor Credit You don’t have to borrow money from the bank if you can get it from your wholesalers and suppliers. If they provide you with goods and services on credit, it’s just like loaning you the money to buy your goods and services up front. The big question is, What is the length of the period you can keep this money? The answer is, whatever is offered or whatever you can negotiate. Here are some possibilities: Cash Discount Terms The presumption is that the payment is due 30 days after the reference date. The expression indicates the discount for prepayment within a specified period. ½ % 10 A half-percent discount if paid on the 10th day after the reference date. 1% EOM A 1% discount if paid by the end of the month. 2% EOM 10 A 2% discount if paid on 10th of the following month. 2% 10th & 25th A 2% discount if paid on the 25th of the month
CHAPTER 5 BORROWING MONEY
89
for invoices issued in the first half of month and 2% discount if paid on the 10th of the next month for invoices issued in the second half of the month. Net Terms There is no discount. The terms are for payment. Net Payment due upon receipt of invoice. Net 10 Payment due on the 10th day after the reference date. Net EOM Payment due at end of month. Net EOM 10 Payment due on 10th of the month after the reference date. Net 30 Payment due on the 30th day after the reference date. Net 10th & 25th Payment due on the 25th of the month for invoices issued in the first half of month and due on the 10th of the next month for invoices issued in the second half of the month. Compound Terms These expressions are a combination of discounts and terms for payment. 1% 10 Net 30 A 1% disocunt if paid on the 10th day after the reference date; payment due on the 30th day after the reference date. 2% 10 Net 60 A 2% discount if paid on the 10th day after the reference date; payment due on the 60th day after the reference date. Clearly, if you have a physical location where you sell off the shelves, most wholesale purchasing terms do not permit you enough time to turn over all of the merchandise before you have to pay for it. On eBay, however, the sales periods are relatively short (the longest auction is ten days). If you plan properly and obtain favorable terms of payment, you can turn over all of your inventory before having to pay for it. This is just like a free loan for operating capital.
Lending Associations Certain ethnic groups and nationalities have been known to form
90
EBAY BUSINESS THE SMART WAY
associations of lenders and borrowers. If you can become a member of one of these, it might be your best means of borrowing money. An effort to take this idea online is Prosper (http://prosper.com), which is open to anyone. It bills itself as the “online marketplace for people-topeople lending.”
Lenders for eBay Businesses The following lenders have been exhibitors at the eBay Live conference and presumably are interested in lending you money to operate your eBay business: Direct Capital Will provide equipment leasing (financing) for financing your business equipment. Go http://financing-center.ebay .com/ebaybusiness to find the current details on this program. GE Business Credit Services Now offers an unsecured (signature) loan up to $50,000 to eBay businesses. Go to http:// pages.ebay.com/businesscredit on eBay or to GE’s website at http:// www.gebcs.com. Naturally, you must meet the credit requirements of GE to qualify for the loan. GE will also make secured business loans. An interesting online source of investment capital is: vFinance Investments, Inc. Helps you find capital for your business. Go to http://www.vfinance.com. There are thousands of sources of small business financing. eBay businesses are no longer considered to be strange animals. Today you will get a welcome reception at many small business lenders, some of them in your immediate community.
Resources Many books have been written on small business financing. They’re available in all the major bookstores. I can’t cover everything in this chapter, so I’ve hit the highlights that seem the most appropriate to eBay start-up businesses. But there’s much more information available on this topic.
6 Amnesty for Criminals Like You The only way to understand the impending folly of your government is to understand first what is supposed to happen. (How’s that for an objective opening sentence?) It all starts with a Supreme Court case, Quill v. Heitkamp (North Dakota), 1992.
The Case In the case, Quill (a mail-order office supply company with offices and warehouses in Illinois, California, and Georgia) sued the State of North Dakota for requiring Quill to collect a use tax on goods sold in North Dakota. Quill had no physical presence, tangible property, nor employees in North Dakota. It delivered the merchandise by mail or common carrier. The case made its way from the North Dakota courts to the U.S. Supreme Court. The Supreme Court ruled that: 1. Under the Due Process clause of the Constitution, a physical presence is not necessarily required in order to come under the North Dakota taxing jurisdiction. The fact that Quill routinely solicited business in North Dakota via junk mail to North Dakota residents was enough (in this specific case) for North 91
92
EBAY BUSINESS THE SMART WAY
Dakota to enforce the collection of its use tax. 2. Under prior interpretations, a physical presence in a State was required in order to come under a state’s taxing jurisdiction. In fact, that is still the law for small mail-order businesses. Quill, however, had national sales of over $200 million and did $1 million of business with 3,000 customers in North Dakota. The Court felt that such a volume of business was enough to justify North Dakota’s jurisdiction over Quill’s sales. 3. Under the Interstate Commerce clause of the Constitution, the obligation to collect North Dakota use tax was an unreasonable burden on interstate commerce in regard to Quills commercial activities. The ruling on the third issue won the case in favor of Quill, and this case upholds the current status of the law. However, the Supreme Court went on to indicate that whether collecting a use tax is an unreasonable burden on interstate commerce is not only an issue “that Congress may be better qualified to resolve, but also one that Congress has the ultimate power to resolve. No matter how we evaluate the burdens that use taxes impose on interstate commerce, Congress remains free to disagree with our conclusions.” Further: “Accordingly, Congress is now free to decide whether, when, and to what extent the States may burden interstate mail-order concerns with a duty to collect use taxes.” Thusly did the Supreme Court toss this hot potato to the US Congress. So hold on folks. This is not the end of the story. Politics, Not Me! I refrain from making political comments in my books, although I am occasionally tempted to do so. (Hey, as a political science major in college, it’s hard to refrain.) As a reader of “How To” books myself, I find political commentary in such books (although not unusual) to be mostly irrelevant and always self-serving; that is, serving the political ego of the author. My thought is that if readers wanted to get political observations, they would read The Power Broker (1,344 pages and
CHAPTER 6 AMNESTY FOR CRIMINALS LIKE YOU
93
highly recommended) by Robert Caro or some other stirring political commentary, not get it from an eBay author. In this case, however, the politics are too close to the subject of the book. Subjecting small retail businesses to the caprices of 7,600 rancorous political taxing entities—even indirectly—is more than I can bear, especially considering that sales tax collection can be enforced by using criminal as well as civil penalties.
The Situation Congress may be insanely dilatory, but it is not a shrinking violet when under pressure. And with the advent of the Internet and growing online commerce, the states have been aggressive in putting on the pressure to have Congress approve state enforcement of the collection of sales taxes by out-of-state (remote) retailers. Consequently, we now have a situation in which there is every indication that Congress intends to act. The Streamlined Sales Tax Project (SSTP) is a multi-state effort to get Congress to pass a national law that requires all retailers to collect sales tax for each taxing jurisdiction. It has made headway, and Congress may have already passed a law by the time you read this book. On the other hand, with your opposition, such a law could be defeated in Congress. Study this issue at NetChoice (http://www.netchoice.org – see Figure 6.1). The future may bring a national law that requires you to collect sales tax for each member state. That’s 46 states including the District of Columbia (51 – 5 = 46), right? Not exactly. In each state, each county collects a different sales tax. In some states, each city collects a different sales tax. Thus, there are over 7,600 taxing jurisdictions. Soon, you may be required to collect sales tax for each of them. The states are claiming that the $40-$70 billion per year shortfall in taxation during the early-decade recession was due to the loss of sales tax for ecommerce. That’s mostly politicians’ propaganda. A University of Tennessee (UT) 2001 study cited a $26 billion per year loss by 2003 and $50 billion by 2008. The UT study assumed a 40 percent yearly growth rate for ecommerce, which has not materialized. Such growth has been only 12 percent a year. A Direct Marketing Associa-
94
EBAY BUSINESS THE SMART WAY
tion study cited a $2.5 billion per year loss, which is probably more accurate. The US General Accounting Office (GAO) made various estimates somewhere in between depending on a variety of assumptions.
Figure 6.1 NetChoice website.
Well, it turns out that the loss is now estimated at $3.7 billion for the year 2008 according to the US Department of Commerce. Whatever the loss, collecting this lost sales tax is clearly not the panacea for the states’ financial ills. In the Final Analysis Of the $3.7 billion in “lost” sales taxes, how much is really lost? Most remote commerce is business to business (B2B) commerce, not consumer commerce. If a business in Kansas doesn’t pay sales tax in Vir-
CHAPTER 6 AMNESTY FOR CRIMINALS LIKE YOU
95
ginia on something purchased in Virginia by mail order or via the Web, it has to pay use tax in Kansas. Most businesses pay their use tax because non-payment shows up in state audits. Although the tax in this example goes to Kansas instead of Virginia, the overall effect is uniform. Each state gets their share of the sales-use tax. That leaves only a small percentage of the “lost” sales tax uncollected. And that small percentage is the target of the states’ cumbersome effort to collect. Consumers generally don’t understand that they should pay the use tax on goods bought outside their state. Perhaps an educational campaign for consumers to induce them to voluntarily pay use taxes would yield greater tax revenues in each state than the Byzantine digital-political sales tax collection solution proposed.
Steve Forbes, in his column in Forbes magazine, March 27, 2006, points out that Internet sales are barely two percent of all retail sales, and the alleged crisis in state government revenues is not supported by facts. And he’s right. State tax revenues are now (in 2006) up considerably with the upswing in the economy, and some states are now talking about giving a tax refund. In fact, state tax revenues never did decline even during the early-decade recession. And what about the burden of payment? Do you have to write 7,600 checks each quarter? Each month? Each week? Who knows? This could be your first relationship with the County of Socorro, New Mexico or the County of Noxubee, Mississippi. Indeed, this could be the biggest debacle since Prohibition. But probably you will only have to make one payment to each state quarterly or to a service that makes the 46 payments for you (for a fee). Mr. Forbes goes on to say, “The bigger guys will have no problem, of course. But struggling, startup entrepreneurs will be hit hard. More than 700,000 people, for example, have thriving businesses selling stuff on eBay.” But there may be hope. The five states without sales tax (Alaska, Delaware, Montana, New Hampshire, and Oregon) and other states that decide not to enforce a national law may become tax havens for ecommerce. Online businesses in those states might have an advantage.
96
EBAY BUSINESS THE SMART WAY
Fortunately, the five states without sales tax are among the nicest states in which to live—at least for certain times of the year. Have you thought of moving your business? Unfortunately, even the five states without sales tax will most likely have to comply with any national law that Congress passes. And Consumers? If a national law passes, will it enable states to potentially track a citizen’s consumer spending? After all, every state has plenty of legislation protecting special business interests that require that certain products be bought in-state. Mail order and ecommerce are good ways to get around these anti-competitive laws passed by state legislatures after intense lobbying by special intrest groups (e.g., the price of milk is regulated by the State of California to support prices). Will states be able to identify consumer offenders through a sales tax reporting system (and audits)? As a consumer, is there a big fine in your future? Or jail time? If you think I’m kidding, look at the fiasco today regarding the interstate shipping of wine to consumers.
The Agreement With the hope that Congress will act, the States have taken steps to reduce the burden on interstate commerce of enforcing the collection of sales taxes by every mail-order and Internet retailer. That effort of the states is the Streamlined Sales and Use Tax Agreement (SSUTA).
The 7,600 in Charge The huge problem, as mentioned above, is that the taxing jurisdictions are not limited to the 46 states (and the District of Columbia) that have a sales tax. Within those states, individual municipalities and counties can increase sales taxes and in some cases even collect the taxes and enforce the collection of the taxes. There are alleged to be about 7,600 different taxing authorities (jurisdictions) nationally: States Counties Cities
Towns
CHAPTER 6 AMNESTY FOR CRIMINALS LIKE YOU
97
In addition, what can be taxed is different from jurisdiction to jurisdiction and under what definition a particular item is placed varies from jurisdiction to jurisdiction: • Candy may be a food in one state (and exempt from sales tax) but not in another. • Naturally carbonated water is exempt from sales tax in New Jersey but artifically carbonated water isn’t. • Clothing up to a $175 sales price is exempt from sales tax in Massachusetts, but if it cost $175.01 or more, it’s subject to a 5 percent sale tax. • Fruit juices that are 100 percent juice are exempt from sales tax in Rhode Island, but anything less than 100 percent is taxable— except cranberry juice cocktail. • Flags (state and US) are exempt from sales tax in Pennsylvania unless sold with an accessory such as a flagpole; then they are taxed fully. (Source: Avalara, http://www.avalara.com) Boy, it’s going to be great fun figuring out all this for 46 states (something a digital system can’t do). But it doesn’t end there. There’s money at stake for each jurisdiction. Thus, in each state the jurisdictions are constantly bickering in favor of their own interests over other jurisdictions in the state (e.g., county v. state, city v. county, etc.). Politics as usual. The result is that the amount of sales tax, the assignment of tax to certain goods, the definitions of goods, and the collection of sales taxes (and the paperwork) are forever in a dynamic posture. Nothing stays the same. Indeed, the SSUTA even permits two taxes for each jurisdiction (i.e., 15,200 different tax rates). And the 7,600 taxing authorities want you to collect their sales tax and file tax returns. Something to look forward to.
The States Go to Work Knowing that Congress will not agree to 7,600 tax collectors, the states have taken the initiative to attempt to simplify their sales tax laws to conform with an agreed national standard. As mentioned above, the agreement is the SSUTA, and you can find information on it at http://
98
EBAY BUSINESS THE SMART WAY
www.streamlinedsalestax.org. It’s a 104-page document available in PDF form for your convenient reading. You won’t be able to get any inexpensive advice from your attorney on this. It will cost you $2,000 just to have him read it, and then he won’t understand it until he attends a legal seminar that explains it. Once enough states have signed the agreement, the states intend to go to Congress to get a national law passed that authorizes the states to enforce the collection of sales taxes on out-of-state retailers. Because of all the bickering and politics inside each of the states, only 11 states (as of October 2005) are signatories to the new Agreement thus far out of 44 states that have crafted and supported the Agreement. And the entire program is behind schedule. Nonetheless, more states are anticipated to follow as soon each resolves its internal political conflicts, and enough states have signed already to encourage Congress to move forward.
Their Position The states take the position that they have the right today—and have always had the right—to enforce collection of sales taxes on out-ofstate retailers.
Amnesty The states in their generosity, however, are willing to give you amnesty for neglecting to collect sales taxes prior to the date you apply for amnesty. As your state joins the Agreement, you will have one year to apply for amnesty in each of the other states. Once you apply, you have to start collecting sales taxes for that state. See http://www.sstregister.org /sellers. You Can Choose You don’t have to apply in every state. You can choose the states in which you want to get amnesty. And the amnesty program is not part of the SSTUTA.
Keep in mind that Congress had not passed any law yet (at the time this book went to print) that authorized the states to enforce collection of sales taxes on out-of-state retailers. No matter. If you don’t apply for
CHAPTER 6 AMNESTY FOR CRIMINALS LIKE YOU
99
amnesty, eventually you may be subject to audit, payment of back sales tax, civil penalties, and criminal penalties. In other words, an auditor from Idaho may show up at the front door of your house in Boston, where you operate your eBay retail business, and demand to audit all your eBay sales in Idaho. With 46 of these guys on the prowl, I am recommending that eBay retailers get houses with large foyers. Not Many eBay Retailers Included I have been informed that the amnesty program is directed at large retailers that have physical locations in certain states for which they have not been collecting sales tax. If that intrepretation is correct, and it appears that it is, then few eBay retailers are likely to be affected.
The Congress Where’s Congress in all this flurry of activity? Who knows? If I was a soothsayer, I would gladly give you a prediction. But as we all know, Congress is likely to do anything at any time, although usually later rather than sooner. There is a bill before the Senate now (S.2152) referred to the Committee on Finance. It supports the SSUTA and the goals of the states.
The Reality What’s the reality of this insane sales tax collection edifice? Therein lies the threat to American business as we know it.
The Proposals There are three proposals by the states. They may sound OK, but there’s more reality to come later. Here they are: Model 1 A Certified Service Provider (CSP) will perform all of a retailer’s sales tax functions at the states’ expense. But regardless of the CSP, you are still responsible to each of 46 jurisdictions. Model 2 A retailer can use a Certified Automated System (CAS), off-the-shelf software used in-house. This is for retailers that desire to use software that integrates with their own system.
100
EBAY BUSINESS THE SMART WAY
Model 3 A large retailer can develop its own custom software and have it certified by the states. This all makes sense and seems realistic. However, no system has substantial experience yet providing the services needed. The states are now starting to say that they cannot provide the system free for retailers as they had intended. The fact is that they don’t even know if the vendors can provide systems that will be able to do the job well. When will they have a CSP that can handle 1.3 million eBay retailers?
The Real Reality The real reality is that you’re likely to get stuck holding the bag on this new tax collection system. Translated, that means you’re going to pay for it. What’s it going to cost? Here’s what I said in the Second Edition of this book: It is proposed that the states will offer “free” software. If so, I predict that your software cost to use the free software in your business will be at least $1,000 per year. Maybe $3,000 per year. (But this statement is simply based on my familarity with the California K-12 school accounting system as a charter school founder and board member.) Hey, maybe $5,000 a year.
I believe I was wrong. I now believe that you will eventually pay on a percentage basis like a Visa or MasterCard merchant. I don’t know what the percentage will be, but I will be surprised if it is less than two percent. That means your position vis-a-vis offline retailers will change. Assume an eight-percent sales tax: Retailer Today Future Offline
8% sales tax
8% sales tax
Online
no sales tax
8% sales tax + 2% CSP fee
(+ shipping) (+ shipping) Accordingly, your effective price to customers will go up 10 percent, and you will be at a 2 percent (+ shipping) disadvantage in regard to offline retailers instead of an 8 percent advantage (an advantage traditionally nullified by the shipping costs for most goods).
CHAPTER 6 AMNESTY FOR CRIMINALS LIKE YOU
101
The Fee that Broke the Camel’s Back? As I pointed out in Chapter 8, fees can add up quickly. Another two percent may ruin a lot of eBay businesses, particularly ones that sell low-priced merchandise.
Be advised, however, that the states are committed to paying for the CSPs initially. One hopes that Congress won’t pass a law if the states can’t pay for the CSP services. But with the states already backpedaling on their committment, it’s only a matter of time before the entire financial burden of collection will be transferred to retailers. Therefore, my speculations above, if correct, will not be in effect initially, but will come eventually. Am I right? Who knows? I am guessing. What’s your guess? It’s undoubtedly as good as mine. Is there a silver lining in this dark cloud? There might be. The proposed bill exempts small businesses. Businesses with less than $5 million per year in remote (e.g., online) sales may be exempt. This will exempt many eBay retailers. However, there are two problems. First, the Senators apparently cannot agree on the definition of “small business.” Thus, which retailers will have exempted status is not certain. Mr. Forbes says in his column, “The compliance cost will be a crusher for small businesses…Enzi and Dorgan [Senators] accept the principle that certain retailers should be exempt from the program. However, the two can’t agree on what constitutes a small business.” Second, $5 million seems like a lot today, but will it still seem like a lot in 20 years? 30 years? The exemption dollar amount is probably unlikely to be changed. For Example, the Alternative Minimum Tax This tax was established in 1969 to tax rich people who otherwise might not pay much tax. Today it mostly affects middle-class people. Salaries are much higher now, but the dollar threshold for the tax has never been changed. It is expected to affect one-third of all taxpayers by 2010. Will a small business exemption of $5 million for SSUTA follow this historical example? Quite likely.
102
EBAY BUSINESS THE SMART WAY
More Real Reality Here are my objections to this sales tax monstrosity about to be inflicted upon us. 1. The CSP services are likely to eventually cost ecommerce retailers a lot of money and put them at a disadvantage. Even if the states pay for the operation of the CSP services initially, it’s likely that the states will find a way over time to shift the cost to retailers. 2. Presumably you have to comply with the registration requirements in all states. If 46 states require a $200 deposit to get a sales tax license, that’s $9,200 up front to start an ecommerce business. (Some states don’t require a deposit.) 3. Presumably you will be subject to 46 annual audits. 4. Each retailer is responsible to 46 taxing authorities. If your CSP makes a mistake, the authorities will come after you. What’s the chance of a CSP making a mistake? You answer that one! How much time will you have to spend getting things straightened out? Multiply that by 46. Food for thought. 5. The CSP officers can embezzle the funds, but that doesn’t let you off the hook. How likely? Remember Enron, Tyco, WorldCom, self-serving Wall Street brokerage firms, corrupt mutual funds, irresponsible national accounting firms, etc., etc., etc. (all in the first few years of this century). 6. Can 46 taxing authorities can come after you wherever you are to make good the embezzeled funds? No. Probably just your own state will be authorized to enforce collection for all other states. But your state can hit you with civil and criminal penalties. Criminal penalties mean you go to jail—or prison. The CSP won’t go to jail or prison. In fact, if the CSP embezzles, the embezzling officers will escape and retire with the funds in the Caribbean while you spend your retirement funds to pay the deficit to the Gang of 7,600. 7. You will have to use sophisticated software to run your retail business. (I recommend this in any event.) It has to be able to interface with the CSP. However, nearly all beginning ecom-
CHAPTER 6 AMNESTY FOR CRIMINALS LIKE YOU
103
merce retailers and some experienced ecommerce retailers use paper accounting systems. This will no longer be possible. 8. Just the prerequisites of dealing with a CSP will raise the overall entry requirements for ecommerce businesses to a higher level than ever before. One of the great cornerstones of the American economy (and the eBay economy) is easy entry into business. 9. Some states have already used the “streamlining” of sales taxes under SSUTA to impose new taxes. 10. The politicos in 7,600 jurisdictions will be making up sales tax laws that you will have to follow. Do you have a vote? Will the politicos run wild regulating those people out of state without a vote? Count on it. Today in Seattle there is a 28% tax on rental cars at SeaTac International Airport. 11. Just the idea that the categorization of goods is workable under SSUTA defies belief for a system that fails to establish uniformity and requires only that definitions be “in substantially the same language.” What does that mean? Who knows? (Maybe it means that any time a state makes an exception, it has to use the word “except.” Remember the cranberry juice cocktail?) 12. This tax collection scheme will be self-policing. That means it’s up to each state to make it work fairly. Good luck with that notion! 13. There is plenty of evidence that the states’ attempt to come up with a workable system has already failed. But don’t count on that fact to stop Congress from passing a law in favor of the states. But again let me emphasize, a small business exemption in any law passed by Congress may exempt you from all this, making this entire chapter irrelevant to your eBay retail business. Realistically, is an exemption something you can count on? Who knows? In Whose Interest? In whose interest is this states’ sales tax collection initiative? It is said that it’s only fair to Main Street retailers that mail order and Web retailers be required to collect sales tax too. However, for decades Main
104
EBAY BUSINESS THE SMART WAY
Street retailers have seen their businesses eroded by shopping malls and discount stores. eCommerce is Main Street’s opportunity to level the playing field. Some commentators claim that many Main Street retailers have managed to stay in business and prosper because they learned how to sell on the Web as a profitable sideline. Others have gone out of business because they did not expand their sales effort to the Web. (My own observations bear this out.) Consequently, one can conclude that this states’ initiative is not in the interest of Main Street retailers. Indeed, the shipping costs for most consumer items (a requisite of mail order and Web sales) has always leveled the playing field for the competition between Main Street retailers and remote retailers. On the other hand, many mall retailers and discount stores are national chains that are already paying sales tax in every state. They, of course, welcome the states’ initiative because it puts their competitors at yet another disadvantage.
And now a final word for those who sell digital merchandise. SSUTA has special provisions that are unworkable and expose sellers of digital products to unfair financial liability. Since this is a specialized segment of the total retail market, it’s beyond the scope of this book, and I won’t dwell on this issue; but if you sell digital products, you will want review these special provisions very thoroughly.
Pandora’s Box Without thinking about it a lot, there are two questions that pop into my mind in regard to a new law passed by Congress to support the states: one regarding liability and another regarding crime. Perhaps these are frivolous concerns. Perhaps not. The point is, no one can predict where a new law will take us. And I have the feeling this new law can take us in directions that no one wants to go.
Liability Unless a new national law regarding the multi-state collection of sales tax expressly denies states’ jurisdiction for any other purpose than collecting sales tax, will the new law inadvertently confer jurisdiction for multiple purposes? This is an interesting question. And there may be 46 different answers in 46 different states.
CHAPTER 6 AMNESTY FOR CRIMINALS LIKE YOU
105
Income Tax Liability If all the states can force you to collect sales tax, they may be able to collect income tax from you too. Hey, it’s only fair, right? How would you like to pay income tax in 46 different states? Even some cities collect income tax. General Liability If the states have jurisdiction to collect sales tax from you, do their citizens also have jurisdiction to sue you in their own state courts? For instance, today if you’re a seller living in Mississippi, an irate buyer in Idaho can’t sue you in Idaho. The buyer must go into a Mississippi court to sue you. Under the new law, can the Idaho buyer now sue you in Idaho because you pay sales tax in Idaho?
Criminal Liability What happens if you sell used barber’s implements from your eBay business in Vermont. You clean the used implements thoroughly with detergent before selling them. You sell to citizens of Ohio and collect sales tax for the State of Ohio. Unbeknown to you, Ohio requires that such used implements be autoclaved prior to selling. You also sell to citizens of Iowa and collect sales tax for the the State of Iowa. Unbeknown to you, Iowa requires that such used implements be soaked in an o-phenyl phenol and isopropyl alcohol solution for at least one hour prior to packaging for a sale. Are you subject to criminal prosecution in Ohio and Iowa, via inadvertent jurisdiction conferred by the the new law, for your wrongful cleaning of the implements? Who knows? (Note: This is strictly a hypothetical example. I don’t know what the states of Vermont, Ohio, and Iowa require, if anything, in regard to the sale of used barber’s implements.)
Summary How can an author summarize this mad apocalypse of tax collection? In three sentences: Write your Congressperson. A dozen times! Visit him or her.
106
EBAY BUSINESS THE SMART WAY
Moreover, lobby to prevent your state from joining the Agreement. This is much closer to home and a way out for you. My advice in three sentences: Write your state legislator. A dozen times! Visit him or her. Mr. Forbes concludes his column, “The whole SSUTA action is pure political piggishness, a mechanism to make it easier for politicos to boost rates in the future. Congress should not sanction this ploy, and if it does, President Bush should dust off that so far unused tool, the veto, and actually exercise it.”
III Conducting Business
This page intentionally left blank
7 Selling on eBay The way you sell on eBay is via auctions (except for eBay Stores). Even eBay’s fixed-price selling takes place through the eBay auctions. Therefore, the auctions and the auction regulations will be among your ongoing concerns.
Types of Auctions You use the different types of eBay auctions for different purposes. This gives you some flexibility. You don’t have to conform to only one means of selling all the time.
Normal The normal eBay auction is a silent auction with a certain time of termination (exactly 3, 5, 7, or 10 days later to the second from the time it’s entered) and a minimum bid. It is for one item only. Where do you set your minimum bid? Depends on with whom you talk. If you set your minimum bid low, it will attract inexperienced bidders, but it won’t necessarily impress experienced bidders. If you set it a little below market value, you may eliminate all but serious bidders. If you set it over market value, you won’t get any bidders.
109
110
EBAY BUSINESS THE SMART WAY
Reserve eBay allows you to set a reserve. It’s really a secret minimum bid. Unless the bidding meets or exceeds the reserve, you don’t have to sell the item. The auction is marked as a reserve auction. As soon as the bidding meets or exceeds the reserve, the auction shows the reserve as having been met. Some bidders will not bid on a reserved auction. They don’t know whether the seller is reasonable about pricing, and they don’t want to waste their time to find out. It’s a little crazy to have a minimum bid and a reserve, really two minimum bids. Be careful how you handle these. If you set your minimum bid low, it doesn’t tell serious bidders anything except that you want to suck in the amateurs. If you set your minimum bid high but still somewhat below market value, it’s a signal that you are a reasonable seller and that your reserve is probably only a little higher. I have seen some sellers reveal their reserve. That makes no sense. You might as well use the normal auction format and use one minimum bid. (Of course, it does save money on eBay insertion fees to set the minimum bid low.)
Dutch This is an auction of multiple identical items. Bidders specify how many of the identical items they are bidding on and bid in the normal way. The highest bidders for the items win the auction. However, everyone pays only the bid of the lowest winning bidder. The seller sets a minimum bid but no reserve is allowed. Is this a strange auction, or what? Nah, it’s not that strange. Let’s look at two ways you can use a Dutch auction. Suppose your Dutch auction will normally sell 15 items at the minimum bid you set or a little higher. If you want to get a significantly higher price, try offering only 10 items at a time instead of 15. You have reduced the supply. If you want to sell at a fixed price (the minimum bid price), offer 30 items at a time. You have increased the supply to the point where the price will not get bid up. This latter technique is a good one for selling multiple identical items
CHAPTER 7 SELLING ON EBAY
111
at a fixed price without using eBay Buy It Now. In fact, sellers used it for fixed-price selling long before Buy It Now was instituted. Try Dutch auctions as well as individual auctions. Every retailer should have experience with Dutch auctions and the confidence to use them when appropriate.
Private Since anyone can bid at a private auction, what makes it private? Simply, the identity of the bidders is not shown. Even the seller knows only the winning bidder’s identity.
Restricted Access This is an auction that restricts participants. For instance, auctions for Adult Erotica are restricted to those who have proven that they are 18 years old or older. This is not a separate type of auction.
Fixed Price Fixed prices are relatively new to eBay. The Buy It Now price is posted in the auction listing until someone makes a bid higher. Then the Buy It Now fixed price disappears and is obviously no longer available. Fixed pricing has become popular. About 30 percent of eBay items have a Buy It Now price. It gives eBay the flavor of a Web mall, a huge Web mall. It especially appeals to buyers who look for a good price but need an item immediately. A buyer may need an item immediately for a specific purpose, or she may need to buy it immediately because she doesn’t have the time to keep looking or to come back tomorrow. In any event, the Buy It Now device gives you one more way to induce people to buy. If you don’t think you want to use Buy It Now, you might consider at least experimenting with it. Fixed-Price History Flint and Palmers, a London haberdashery, made history in the latter half of the 18th century by opening its door one morning with every item in the shop marked with a price. Prior to that, retail customers in London bargained for every purchase. “Business at Flint and Palmers was brisk due to the low prices and the elimination of time wasted on bargaining, and Mr. Flint became wealthy. When other shopkeepers
112
EBAY BUSINESS THE SMART WAY
observed his success and growing fortune, they too began pricing their goods.” (Old London Bridge, Patricia Pierce, Headline, London, 2001)
The fixed price is not a type of auction. It is an add-on to an auction. Be aware that when you use it with a reserve auction, it may confuse bidders. Why? Because it’s like a minimum bid. An auction with three minimum bids (i.e., minimum, reserve, and fixed), in effect, is bound to be a little confusing. You will want to keep your reserve below the fixed price. It may unnecessarily irritate bidders if it’s higher.
Best Offer When you elect to include a Buy It Now fixed price for your auction, you can also elect the Submit a Best Offer option. That enables a buyer to submit an offer lower than the Buy It Now price. You have two days to accept or reject the offer. If you accept the offer within two days, it is binding and constitutes a contract just as the conclusion of an auction does.
Listing an Auction Listing an auction (offering an item for sale) is easy. You simply fill in the listing information in the eBay listing form. Voila! The auction is published immediately.
Posting To list an auction, go to Seller on the eBay navigation bar. Log in, and you’re ready to enter information (see Figure 7.1). Make sure you enter complete information. The Web is an informational medium. You get only one chance. You can make corrections or add more information later, but such data is simply added to the auction ad and does not replace what’s already there. It’s easy to post one auction ad or even a few action ads. But for posting lots of ads (bulk ads) at the same time, you will want to use Turbo Lister. Category The placement in a category is very important. You need to find out where other similar items are being sold on eBay. It may not be selfevident. It may take some research on your behalf. If you miss the right category, your chances shrink of getting top price for your item.
Suppose you go to water toys and find that five water guns similar to the one you want to sell are listed. If you list your water gun there, however, you may not sell it easily. Under squirt guns, dozens of water guns are listed, and that’s apparently where most bidders go to look for water guns. Pricing If the price isn’t right, you’re wasting your time on eBay. Read Chapter 10. Information on minimum bids and reserves are presented earlier in this chapter. Auction Title The auction title needs to contain keywords that will help potential bidders find the item. It should be straightforward and contain no eBay abbreviations or any other abbreviations (see Figure 7.2). The object here is to have your item get found, not to market it.
Figure 7.2 Auction title.
It’s also essential that the title be easily readable. It should adhere to typesetting rules (see Chapter 8). All caps, bold type, abbreviations, and the like all impair reading. When a potential bidder is skimming the auction list, she may miss any titles that aren’t easily readable.
114
EBAY BUSINESS THE SMART WAY
This idea runs in the face of the common wisdom that a seller should make the title stand out. Don’t fall for it. (Be conscious of your auction skimming the next time you look for something on eBay. Observe what you notice easily, what’s hard to decipher, and what’s irritating. You’ll see what I mean about good typesetting.) Often the flawed attempt to stand out with poor typesetting is an amateur attempt at marketing. Why would you put a Ford pickup truck in all caps? The gal looking for a Ford pickup is going to be interested in your auction ad no matter how the title is typeset. In fact, she is more likely to read the title if it is typeset in a readable manner, not all caps. Do you really think that someone looking for a Dodge van is going to look at a Ford pickup because the title is in all caps and then buy it? Never happens. The title is your opportunity to have your item get found. It is not a marketing opportunity. Your auction ad is your marketing and selling opportunity. However, for impulse items that buyers are not looking for, a title made up of hype might sell well. Be aware, however, that most items don’t fall into the impulse category. Abbreviations Below are some eBay abbreviations you can use with confidence in your auction titles. WMBIDOOMB Was mint before it dropped out of my boat BIMBIIGDRWGN Box is mint but item is greasy, discolored, and runs with a grinding noise IIMEFMM Item is mint except for moldy mouthpiece OSWTANT Old stock with tags and no termites It always astounds me that full-grown adult writers, who otherwise have fully functioning brains, advise readers to use abbreviations in auction titles and auction ads. I have been on eBay since 1998, have bought hundreds and hundreds of items in dozens and dozens of categories, and have written seven books about eBay. And I don’t understand the abbreviations. What chance does the casual eBay member have?
CHAPTER 7 SELLING ON EBAY
115
Few buyers or sellers today will understand eBay abbreviations. eBay is so huge now that only a tiny percentage of participants are active members of the eBay community. Don’t use eBay abbreviations unless you want to give up part of your market and sell at a lesser price. In the beginning, collectibles constituted almost 100 percent of what was sold on eBay. In 2003, collectibles made up less than 6 percent of what was sold on eBay. Most of the abbreviations you see quoted by eBay writers come from the original eBay collectibles community. But today the abbreviations are history. Don’t use them. I will concede, however, that where most of the auction activity for certain items takes place inside a small community of people and outsiders are unlikely to bid, abbreviations might be appropriate and even useful. But such is a rare situation. Most eBay members see eBay as just another marketplace to purchase products, not as a game nor as a community. They don’t have the time, interest, or inclination to learn eBay abbreviations. Therefore, spell out what you want to say. I suppose ultimately it’s not that abbreviations are so bad, it’s just that words are much better. Auction Ad The aucton listing is an eBay webpage. The listing information goes at the top of the webpage in standard eBay format and includes the title. Below is the auction ad, which is your opportunity to make a sale. Below that is the standard eBay bidding format. In other words, when you enter the auction ad (the middle third of the listing webpage), it’s your chance to be creative. The remainder of the listing webpage is in standard eBay format and out of your control. Common Mistakes Mistakes in your listing will cost you money either in lower bids or no bids. 1. Spelling mistakes in the title can place your item out of the loop; that is, bidders can’t find it because you spelled its name or some crucial bit of information incorrectly. Use a spell checker and otherwise be careful. 2. A poorly worded title can have the same effect as a misspelling.
116
EBAY BUSINESS THE SMART WAY
Include all the key words that bidders will look for. 3. Placement in the wrong category can make your item invisible to many potential buyers. Take the time to make sure the listing category is right. 4. Too little information. Potential bidders want to know a lot about the item, or they won’t buy it. 5. Unformatted information. Wide paragraphs that have no margins are almost unreadable. You need to provide HTML formatting to your auction ad information or use an auction ad template. 6. No photograph. This is usually a fatal mistake. If nothing else, at least take a picture of the box in which the item was packaged by the manufacturer. 7. Mistiming can be a bummer too. Your auction should end when potential bidders are at home. You determine that by research. This seems self-evident. Yet I see auctions ending at 2:00 in the morning. And it’s a rare auction that should end at 2 AM. I have purchased merchandise at great prices because of every mistake mentioned above. This is not a theory. Sellers make these mistakes every day and make less money than they would have had they been more careful. Optional Listing Features For an additional fee, you can get some extras for your listing: Home Page Featured Your listing rotates through the home page (not guaranteed) and appears in the special Featured Items section. Featured Plus! Your listing appears in the Featured Items section at the head of the first page in its category. Your listing also appears in the main list for the category. In other words, it appears twice. Highlight Your listing appears highlighted to draw attention to itself. Bold Your listing appears bold to draw attention to itself.
CHAPTER 7 SELLING ON EBAY
117
Border Your listing appears with a purple border to draw attention to itself. Subtitle You can have a subtitle below the auction title for your auction. However, it is not searched by the eBay search engine, and therefore is strictly informative. Item Specifics Enables you to provide additional details relevant to your item. Helps potential bidders find your item easier using the Product Finder. Picture Gallery Your photograph appears next to your listing. Your item also appears in the Picture Gallery where bidders can shop by pictures (photographs) instead of by words. Gallery Featured Premium placement in the eBay Gallery. Featured Section Your listing (photograph) appears in the Featured Items section at the head of the first page in its category. Gift Service Tags the item as being recommended for a gift. List in Two Categories You list in two categories (or more) just to make sure you have the primary categorizations for the item covered. 10-Day Duration Extend your auction to 10 days. Buy It Now For fixed price listings. You can also add the Submit an Offer, which enables a bid under the Buy It Now price that you can accept or reject. Get It Fast By meeting certain eBay criteria (e.g., USP Next Day Air shipping), you can have your auction designated with this label. Buyers find your item through a special search. There are also sets of features called packs. You can order certain sets of features less expensively than buying them individually. Are they worth it? Generally, no! You have to have a hot item to make paying extra for special treatment cost-effective. eBay is going into contortions trying to squeeze extra revenue out of you. Indeed, who visits the featured page? I never have. Who visits the Featured Sec-
118
EBAY BUSINESS THE SMART WAY
tion? Many bidders skip it because they know the item will be in the general list, and they don’t want to see the item twice. Bidders can read a plain title much easier than a bold, highlighted, or bordered title. Bidders like to skim, and bold and highlight get in the way. Why pay extra for it? The Picture Gallery is great for some items, unnecessary for most. The Featured Section and the Featured Plus are not worth the extra fee for most items. The Gift Service is a little dubious as a cost-effective technique for selling. But perhaps it works during the Christmas season. The Subtitle can help sell some items but for most isn’t worth the extra expense. Listing in two categories makes good sense for some items but is not necessary for many items. This is worth the money where it is necessary. Extending your auctions to ten days does make sense for most items. (See Daniel Reeves’ paper, cited in the beginning of Chapter 27, which indicates that longer auctions get significantly higher prices.) Do it particularly for items that are difficult to sell. Paying for Buy It Now, a fixed-price presentation, is another way to sell, and it makes a lot of sense. Experiment with it. Rather than accept my opinionated comments, however, you need to experiment with your items to see what works and what doesn’t. Each item is different. When you sell in quantity, the considerations are different too. What eBay Claims eBay claims that using some of the extras such as bold, highlight, and featured gallery increases the sales prices of items. Take such self-serving hype with a grain of salt. That may work for unfocused shopping, but most buyers look for something specific. Bold, highlight, and featured gallery make no difference in most cases. On the other hand, listing in two categories can obviously make a difference, assuming the item belongs in each category. Observe how you shop yourself and use common sense to determine whether one of the eBay extras is likely to be cost-effective. Then experiment. You will become an expert on what works for your items.
CHAPTER 7 SELLING ON EBAY
119
Relisting If your item doesn’t sell, you can relist it free. Take advantage of this eBay policy.
Listing Fees You pay a non-refundable insertion fee to list an item. If the item sells, you pay a final value fee. If the item doesn’t sell, you can relist once free. Check the listing fees on eBay. They change from time to time. Note that the fees for real estate and eBay Motors are different than normal items. (Extra fees are charged for most of the optional listing features covered above.) The listing (insertion) fee poses a particular dilemma for eBay sellers. I generally favor setting the minimum bid high but below market value with no reserve. Unfortunately, the insertion fee is based on the minimum bid. Consequently, I would have to pay more to list an item than someone who puts the minimum bid at 99 cents (the lowest insertion fee possible). However, if you put the minimum bid that low, you might not feel comfortable without a reserve, and a reserve will scare off some buyers. It is a gruesome fact that the nickels and dimes add up. You’ve got eBay fees, credit card fees, PayPal fees, auction management service fees, postage meter fees, and so on and so forth. You have take an aggressive attitude about cutting back these small fees wherever possible, or your profit will evaporate little by little. So, the dilemma above is a real one, and everybody will come to their own conclusion as to what to do about it based on the item, the value, and the eBay market. FeeFinder HammerTap (http://www.hammertap.com) has a fee-finder program that you might use to evaluate the fees you pay.
Turbo Lister With eBay’s Turbo Lister (auction listing software), you can work on your auction listings in a table format like a database table or a spread-
120
EBAY BUSINESS THE SMART WAY
sheet. This is far more efficient than using the eBay online entry form or any other one-record entry form. See Chapter 19 for more details on Turbo Lister. Turbo Lister enables you to integrate other applications you want to use into your eBay operations easily. This is a particularly important feature for retailers operating a physical location with typical retailing software. Such retailers may not want to switch software just to accommodate eBay auctions. They can use their normal software to export delimited data on products directly into Turbo Lister for automated auction postings. This can be a simple process, but I recommend that you get a database expert to help you with this if you fall into the category of someone with a physical location who wants to stick with your normal retailing software (e.g., point-of-sale software).
Taboo Items You can’t sell everything on eBay. Certain items are prohibited either by law or by eBay policy. In addition, certain items are not advisable except in certain circumstances.
Prohibited eBay doesn’t prohibit selling every item prohibited by every state, but it does prohibit many items which the federal government or the states prohibit. For instance, not surprisingly, eBay prohibits the sale of body parts. (eBay also restricts sales of certain types of items as a matter of policy. See next section.) Note that the list grows as people push the eBay rules. Check an upto-date list on eBay before you commit yourself to a major selling effort. Note also that some of the items on the list above are perfectly legal, such as alcoholic beverages. However, such items are heavily regulated and taxed. Since eBay feels that it cannot ensure that buyers and sellers follow such regulations, it simply prohibits the items. eBay itself restricts many items as a matter of policy. This makes many people angry. Nonetheless, eBay can do it. For instance, eBay doesn’t allow spam lists or spam software to be auctioned. Although legal, eBay likely feels that such lists and software are not healthy for the
CHAPTER 7 SELLING ON EBAY
121
Internet community. In many cases, eBay doesn’t allow something to be sold, probably just because it is worried about potential liability. It’s simply a business decision.
Restricted Some items on the list at the end of this section are not absolutely prohibited but are what eBay terms “questionable.” A sample restricted list follows: Food Autographed things Artifacts Hazardous materials Used clothing These are items that may cause problems. Food may spoil in transit. Autographs may be forgeries. Artifacts may be stolen from protected archeology sites. Hazardous materials require special packing and shipping. Used clothing should be clean. If you can solve the potential problems, you can sell the items on eBay. Food needs to be shipped by a means that preserves it properly. Autographs and artifacts need to be authenticated. Hazardous materials need to be packed and shipped safely. And used clothing needs to be thoroughly washed.
List Again, check the up-to-date lists on eBay before you commit to selling items that may be on the lists. A sample list of prohibited and restricted items (likely to be out of date by the time you read this) follows: Academic software Alcohol Animals and wildlife products Anti-circumvention policy Artifacts
122
EBAY BUSINESS THE SMART WAY
Authenticity disclaimers Autographed items Batteries Beta software Bootleg recordings Brand name misuse Catalog and URL sales Catalytic converters and test pipes Comparison policy Copyrights Compilation and informational media Contracts and tickets Counterfeit currency and stamps Counterfeit items Credit cards Downloadable media Drugs and drug paraphernalia Electronics equipment Embargoed goods and goods from prohibited countries Event tickets Faces, names and signatures Firearms, ammunition, replicas, and militaria Fireworks Food Freon and other refrigerants Games software: Sony, Sega, and Nintendo
CHAPTER 7 SELLING ON EBAY
Government IDs and licenses Hazardous, restricted, and perishable items Human parts and remains Image or description theft Importation of goods into the United States International trading – buyers International trading – sellers Lockpicking devices Lottery tickets Mailing lists and personal information For mature audiences Medical devices Misleading titles Mod chips Movie prints OEM software Offensive material Pesticides Plants and seeds Police-related items Postage meters Pre-sale listings Prescription drugs and devices Promotional items Real estate Recalled items
123
124
EBAY BUSINESS THE SMART WAY
Recordable media Replica and counterfeit items Satellite and cable TV descramblers Slot machines Stocks and other securities Stolen property Surveillance equipment Tobacco Trademarks Travel Unauthorized copies Used clothing Warranties Weapons and knives Wine
The Effect of the Taboo Most reasonable people reading the lists will immediately understand why most items are prohibited. eBay is more reasonable than arbitrary. Out of thousands of categories of items being auctioned every week (65,000 in 2005), the prohibition of a few dozen items does not seem to be particularly smothering. The taboo is generally inconsequential except to those who would like to deal in the forbidden merchandise. You need to carefully check the lists (on eBay) before you commit yourself to selling a particular set of items. You will want to make sure that your items are not included.
Illicit Practices In addition to product taboos, you will want to avoid illicit practices that violate eBay rules. You can get suspended from eBay for violating such rules. Keep in mind that eBay can keep track of its members bet-
CHAPTER 7 SELLING ON EBAY
125
ter today than it did in the past and will continue to improve in this regard. Read eBay the Smart Way for a more thorough treatment of this topic.
Your Marketplace Many of the rules against these eBay offenses have been prompted by naughty neo-post-adolescents who are not mature enough to realize that ecommerce is not a game. Nonetheless, there are enough mature bad actors participating in eBay, too, who are in it for ill-gotten gains. Consequently, you need to be cautious. eBay is your market, your community, and your business. It’s your responsibility to help keep it an honest and healthy marketplace. It’s your duty as a responsible member to report any illicit practices to eBay or to an appropriate law enforcement authority. What’s eBay doing about illicit practices? It has tightened up the signup process for new members and the tracking of bad-acting members. It has hired multiple ex-federal district attorneys to head up its investigation and enforcement department. It continually institutes new policies and uses digital technology to attempt to minimize illicit behavior on eBay. And it has over 1,300 employees worldwide devoted to security. eBay claims that only 0.003 percent of all eBay auctions experience illicit activities. That’s a pretty good record, although it is difficult to estimate how many claims go unreported. Review the Rules eBay changes its website and updates its rules from time to time. Therefore, don’t rely on this chapter for a current summary of the rules. Please review the rules as published on eBay occasionally to bring yourself up to date.
Passive Endeavor Auctioning is a passive endeavor. You put up your auction. You don’t do anything. Then when it’s over, you start dealing with the winning bidder. Occasionally, you may communicate with bidders during an auction, should they need additional information about something.
126
EBAY BUSINESS THE SMART WAY
You don’t need an auctioning strategy. You just need to wait until it’s over. The bidders do all the work. This view points out that you need to do all your work before the auction starts, because after it starts, you cannot do anything. What do you need to do for a successful auction? 1. Make sure your item is listed in the proper category with a title that contains the proper keywords. 2. Schedule the auction with common sense. 3. Set your target price intelligently. 4. Devise a strategy for setting the minimum bid, the reserve, or the Buy It Now price. 5. Create an attractive auction ad overflowing with information about the item and include a photograph. 6. Stand ready to communicate with bidders promptly, if necessary. 7. Stand ready to promptly follow up immediately after the close of the auction. If you do numbers 3 and 5 with skill, doing number 4 imperfectly probably won’t matter much. Is that all? No. You have to figure out how to do all of that efficiently for multiple items. Doing so will require the intelligent use of auction management software.
Text-Box and Banner Advertising on eBay eBay now has text-box advertising. It works on a keyword system like Google Adwords. You pick the keyword(s) you want to associate with the products you advertise. For instance, let’s say you sell panorama cameras. You pick the word “panorama” for the keyword. When someone searches on eBay using panorama as a keyword, your text-box ad (with a link) appears on their eBay screen. When someone clicks on the link in the text-box ad, they go to your auctions or to your eBay Store, and you pay for the click-through. Is this expensive? That’s difficult to say. It depends on too many factors. It can be inexpensive. And you can limit your payment to a maxi-
CHAPTER 7 SELLING ON EBAY
127
mum, so your financial risk is contained. It’s sure worth some experimentation no matter what volume of sales you may have. eBay banner advertising is also available. You need to create the banner ad that you will use for advertising as well as for an eBay Store banner. Here are some websites where you can get some help: AdDesigner, http://www.addesigner.com PowerHomeBiz, http://www.powerhomebiz.com/vol35/bannerads .htm
Power Sellers This book doesn’t say much about PowerSellers. Why? Because I just assume you will become one. You need to sell at least $1,000 in merchandise each month. Figure that a 20 percent profit on that minimum will give you an income of $200 per month. Anyone coming close to supporting themselves or even just conducting a healthy parttime retail business on eBay will be a PowerSeller many times over. So there’s no reason to dwell on the requirements here. Just make sure when you go over the minimum that you satisfy the other requirements too. Then you can take advantage of the PowerSeller benefits. The benefits are free. Are the benefits worth the trouble of becoming a PowerSeller? That’s a reasonable question. It’s a question you need to answer for yourself by evaluating the PowerSeller program. Does it make much difference to buyers whether you are a PowerSeller? It gives you more creditability. It sure can’t hurt. But it won’t substitute for top-notch customer service. So, don’t let it go to your head.
The Heart of the Matter It’s appropriate to end this chapter with encouragement to pay attention to your auction ads (the middle part of the eBay listing). Again, the Web is an informational medium. Include plenty of information on the item you try to sell. There’s no practical limit. Online information sells. The auction ad is the heart of eBay selling. Read Chapter 8, which provides details on how to create effective auction ads.
This page intentionally left blank
8 Auction Details Selling effectively on eBay is a matter of managing the details. To some degree you can automate your eBay procedures with an auction management service. Even so, you need to manage the details in setting up such automation.
Advertising Your auction ad is your key not only to selling in the first place but to getting the maximum bid you can get for an item. The fact that your item sells profitably is almost meaningless if it would have sold more profitably had you advertised more effectively. Certainly advertising is an art well beyond the scope of this book. However, eBay advertising gives you an advantage over other forms of advertising such as display ads in newspapers and magazines. Volume of information matters; hype doesn’t. Volume is easy; hype isn’t.
Complete Information The Internet is an informational medium, not a hype medium. Website visitors’ expectations are different from newspaper and magazine readers’ expectations. Space in newspapers and magazines is expen-
129
130
EBAY BUSINESS THE SMART WAY
sive. You have to keep things short to stay within a reasonable advertising budget. You’re forced to use hype to catch the reader’s attention. You don’t have enough space to inform a reader. Readers expect hype. On the Web in an eBay auction ad you have all the room you need to tell the story of the item being sold. Space is not at a premium. Website visitors expect to be informed about the item. Think about it. A potential bidder cannot see, hear, feel, taste, or smell the item offered in an auction as he can in a store. He cannot casually talk with a sales clerk as he can in a store. Therefore, he seeks a substitute. A good substitute is plenty of information (text) and something to look at (photograph) in an auction ad. The information has to describe the item completely, going even so far as to list the product specifications and features in detail. A photograph is effective even if it’s just a photograph of the box in which the item is packaged.
Easy to Read The information must be easy to read. Text is easiest to read in a column with normal size serif type and normal writing style. On the other hand, text in one huge paragraph as wide as the webpage is almost unreadable, and you will lose a percentage of your prospective bidders with such an ad. But, if you divide up the text into multiple paragraphs, set it in a column (using the HTML TABLE markup), and make the type large enough, every reader will be able to read your ad easily. Type The normal size for type is from 10 to 13 points. The browser default is 12 points. Set text in a column that’s 9 to 11 words wide (a table about 450 pixels wide). This is optimal for reading at the default type size. Make sure the color of the type contrasts with the color of the background. Low contrast makes reading difficult. Black type on a pastel color (white is a little harsh on the eyes) makes a good combination. Typesetting Guidelines By following a few simple guidelines, you can make your text look professional.
CHAPTER 8 AUCTION DETAILS
131
Italic
Use italics for emphasis and for customary uses, such as for book titles. Smoke a lot? Then the new Flaremore lighter is for you. It’s compact, easy to use, and kicks out a flame that will start even the most stubborn cigar. And it’s good for 1,000 lights after which you can throw it away safely. The introductory price, seen only on eBay, is only 50 cents each purchased in a case of 20. Total price is $10 for the case. Bold
Use bold for headings, headlines, and even for warnings. But do not use bold for emphasis. It makes reading more difficult. Incorrect Smoke a lot? Then the new Flaremore lighter is for you. It’s compact, easy to use, and kicks out a flame that will start even the most stubborn cigar. And it’s good for 1,000 lights after which you can throw it away safely. The introductory price, seen only on eBay, is only 50 cents each purchased in a case of 20. Total price is $10 for the case.
Correct Warning: Never use your Flaremore lighter while filling your car with gas. It’s better to smoke at a different time and place. Bold Italic
Use only as a substitute for bold. All Caps
Don’t use “all caps” (text made up entirely of capital letters). It’s difficult to read. All caps is an old typewriting technique, no longer necessary. And don’t use all caps for headings or headlines either. SMOKE A LOT? THEN THE NEW FLAREMORE LIGHTER IS FOR YOU. IT’S COMPACT, EASY TO USE, AND KICKS OUT A FLAME THAT WILL START EVEN THE MOST STUBBORN CIGAR. A ND IT’S GOOD FOR 1,000 LIGHTS AFTER WHICH YOU CAN THROW IT AWAY SAFELY. THE INTRODUCTORY PRICE, SEEN ONLY ON EBAY, IS ONLY 50 CENTS EACH PURCHASED IN A CASE OF 20. TOTAL PRICE IS $10 FOR THE CASE.
132
EBAY BUSINESS THE SMART WAY
Superscripts and Subscripts
HTML supports superscripts and subscripts. Use them when appropriate. Bullets
HTML supports bulleted lists. Use these to dress up your text and make it look professional. • Easy to use • 1,000 lights • 50 cents each Numbers
HTML supports numbered lists. Readers find numbered lists useful and readable. 1. Compact 2. Easy to use 3. Kicks out a flame to remember Borders
To create boxed text, use borders. Use boxes for special instructions or sidebars. You create boxed text by putting the text inside a one-cell table with the border showing. Smoke a lot? Then the new Flaremore lighter is for you. It’s compact, easy to use, and kicks out a flame that will start even the most stubborn cigar. And it’s good for 1,000 lights after which you can throw it away safely. The introductory price, seen only on eBay, is only 50 cents each purchased in a case of 20. Total price is $10 for the case. Type Size
One sees a lot of small text used on the Web. It looks neat, but it’s hard to read. Use the browser default size (12 points) instead. If you use type much larger than 12 points, people will also have trouble reading it easily.
CHAPTER 8 AUCTION DETAILS
133
Rules
Use rules (straight horizontal lines) to divide your auction ad into sections if appropriate. Using headings is better, but sometimes rules are OK too. Underlines
Don’t use underlines in Web pages. An underline signals a link. Using underlines will confuse your buyers. Flush Left
Keep the text flush left (lined up on the left side). If you use flush right, the text will be difficult to read. If you center all the text, it will be uncomfortable to read. Flush Right Smoke a lot? Then the new Flaremore lighter is for you. It’s compact, easy to use, and kicks out a flame that will start even the most stubborn cigar. And it’s good for 1,000 lights after which you can throw it away safely. The introductory price, seen only on eBay, is only 50 cents each purchased in a case of 20. Total price is $10 for the case.
Centered Smoke a lot? Then the new Flaremore lighter is for you. It’s compact, easy to use, and kicks out a flame that will start even the most stubborn cigar. And it’s good for 1,000 lights after which you can throw it away safely. The introductory price, seen only on eBay, is only 50 cents each purchased in a case of 20. Total price is $10 for the case.
Creating Efficiencies The fact that information in volume helps sell items has two realities. First, it’s easier and less expensive to provide effective written information than effective hype. (Hype is difficult to write and requires an advertising copywriter.) Just supply the facts, all the facts. Second, a volume of readable information takes time and effort to produce. What can you do to reduce the workload? After all, you have a lot of items to sell, and you can only do so much for each.
134
EBAY BUSINESS THE SMART WAY
Templates Use a template for your auction ads. It doesn’t have to be fancy. It should place the text in a readable column. You don’t have to reinvent each new auction ad. You merely fill in the template with information, and the ad is ready to upload to eBay (see Figure 8.10). Auction management services provide a variety of nicely designed templates for you to use. Even eBay provides templates now.
Figure 8.1 Simple auction ad template created by author with HTML.
Links Use links to manufacturers’ websites for additional information. This is permitted by eBay and is a good way to provide potential bidders with features, specifications, and even narratives on products. Be sure to check the link to make sure that it works. Manufacturer’s Information If you can’t link to a manufacturer’s website, you can try to find the manufacturer’s product information (including photographs) in digital form. Then you can copy and paste it into your ad. Likewise, you can save and paste a manufacturer’s logo into your ad.
CHAPTER 8 AUCTION DETAILS
135
You Are Liable I mention these two processes with some reservations. First, using a manufacturer’s information without permission is a copyright infringement. Second, using a manufacturer’s logo without permission is a trademark violation. You are liable if you do either. However, out of the millions of auctions on eBay each week, a significant percentage of the auction ads do include either a manufacturer’s information or a trademark or both. Few, if any, of the sellers obtain permission to use either. As a practical matter, it seems a safe and even a reasonable practice until a manufacturer complains. And, indeed, some manufacturers do complain. eBay’s VeRO program may shut you down when your auction ad contains copyrighted text or a trademarked logo. Thus, you need to tread carefully. If you do get shut down, you will know that whatever you used, should not be used again.
If you can’t find a manufacturer’s information in a digital format, you can scan an advertising brochure or a product package and put it in your ad as a photograph. The ad will take somewhat longer to download, but it’s better than nothing. If you attempt to use a manufacturer’s text and logo to lead people to believe you are the manufacturer or that you are a legal representative of the manufacturer, you have crossed the line. You are guilty of fraud and may be subject to criminal sanctions. However, if you are a dealer for the manufacturer, you have implied permission to use their product literature and logo. Fellow eBay Members Don’t use the product information or photographs created by fellow eBay members with whom you are competing. That’s not fair and violates the spirit of the eBay community.
Boilerplate Boilerplate refers to text in a contract or document that is used over and over again in similar contracts or documents. In other words, it’s the part you don’t have to rewrite. You need to use boilerplate in your auction ad. What should it include?
136
EBAY BUSINESS THE SMART WAY
Marketing Information
Always use your eBay auction ads to market your eBay business. It’s a great opportunity you can’t afford to miss. Promote your website first, if you have one. You can’t include a link to it (eBay outlawed that a while back), but you can publish your email address (which includes your URL) and even talk about your website (in the text). Close to the Line If you promote your website in your auction ad, you are walking close to the line. Check with eBay rules to see the latest on what is permissible and what is not.
Promote your business. Tell about your history, your success, and what you sell. Surprisingly, bidders want to know more about you. Information increases their comfort level with you. They will read about you. Don’t overdo it, but do something. Some of the auction management services automatically provide a small but wide display menu with a few of your other auctions on it for inclusion in your auction ad (at the end) in order to boost overall sales via cross-selling. eBay provides this service now too. eBay also includes links in the head of the auction listing, which do the same thing. This works as long as the other auction items are similar or relevant. Otherwise the items may not interest buyers. But it shows that with a little imagination you can use your auction ad for something beyond just selling one item. Arrangements
There are a few things you have to tell bidders in every auction ad. How they can pay for the item. That’s a constant. How the item will be shipped. That’s probably a constant, too, except in the case where the winning bidder wants faster shipping. And how much the shipping will cost. That’s a variable, but the wording can be a constant except for the exact amount, which will change with each item. This is a good place to tell bidders anything else you want them to know in regard to how they can do business with you. Some sellers include elaborate rules in their boilerplate, and they expect bidders to follow such rules. Each time they get burned by another bad-acting
CHAPTER 8 AUCTION DETAILS
137
winning bidder in a new way, they add yet another rule. It makes sense to me to have several simple guidelines for the people you are about to do business with. After all, it’s your auction, and you’re expected to take the lead in making the business arrangements. An extensive set of rules, however, is a little too enthusiastic. What will happen is that winning bidders will ignore them, and that may lead to a genuine misunderstanding that you may interpret to be a total violation of your rules. The rules may even turn bidders away offended by your arrogance, although that prediction depends on someone actually reading your rules, which is very unlikely. So, if you’re one of those people who thinks you can pull off a perfect transaction through rule making, lighten up and do a heavy edit on your list of rules. Like Products If each item you sell is unique, then you will have a lot of work to do to make each auction ad on a custom basis. On the other hand, if you sell the same products over and over again, you can reuse your auction ads with little, if any, adjustment.
Auction Title Your auction title needs to be straightforward, be readable, contain key words, and follow typesetting guidelines. This requires a little research. Find out what other sellers are using as titles in auction ads for the same or similar items. This will give you some ideas for keywords. Don’t use all caps, bold, or other gimmicks in the auction title. Don’t pay extra for bold or highlighting. Make it readable according to typesetting guidelines. For standard consumer items, just stating the facts is enough: Sony DCR-TRV22 Mini DV digital camcorder, new This is a good title. For unfamiliar merchandise, you need to provide maximum descriptive information on one line. For a few rare items, particularly impulse purchase items, you can use a little hype. But as soon as you do, you risk losing your credibility. All
138
EBAY BUSINESS THE SMART WAY
things considered, experiment to see what works well. Subtitle eBay now permits a subtitle, but the eBay search engine does not search on key words in the subtitle. Use the subtitle—if you think it’s worth the extra money to include it—to increase the information about the item and as a lead-in to your auction ad.
Multimedia eBay auction ads are multimedia: text and images (digital photographs). Still, the more media, the better, right? Not necessarily. You have two easy choices for adding media, audio and video, but will they help sales? Audio is great—the first time around. After that it’s irritating. Video is great, except when it’s boring. These media are strictly for special use. Audio usually starts when the webpage loads. Anytime a potential buyer returns to the auction ad, the audio plays again. This is not a good arrangement. It’s rude! The best way to provide audio is to make it an election. That is, instruct potential buyers to click on a button to start the audio. That way they never have to listen to it a second time. But that raises another issue. If the audio is uninformative, you waste buyers’ time. That’s not a good way to encourage sales. Video has the same problems as audio exactly. If the video starts automatically, it’s potentially irritating. If it starts with a click on a button, it had better be informative, or you may lose a sale. Here are services that can enable multimedia in your auction ad: Add Live Voice, http://www.addlivevoice.com Auction Video, http://www.auctionvideo.com There are plenty of other ways to incorporate diverse media, but these make it easy. How should you use these media? Certainly not for hype. Potential buyers will resent that you have wasted their time if all they hear or see is hype (e.g., like a radio or television commercial). Use a medium only when you have a specific reason to use it. A presentation in a
CHAPTER 8 AUCTION DETAILS
139
medium should have the following characteristics: 1. Informational – adds useful information to the auction ad 2. Better than text – adds information in a way that’s more compelling than text and images 3. High quality production – doesn’t seem amateurish 4. Short – gets right to the point and doesn’t ramble 5. Strictly electable – starts when a buyer clicks on a button (i.e., doesn’t play automatically) Even if a presentation meets the criteria above, you have to decide, Is it worth it? Making high-quality audio or video is usually much more time consuming (and expensive) than writing text. It needs to sell items better than text and images, or you will have wasted your time and money. And one last warning. Don’t use these media to show off. Nobody cares. The days when these media were new and exciting on the Web were in 1996. We’ve come a long way since then. Generally speaking, the use of these media is not cost-effective. I will concede, however, that with 50 million items for sale today, there are bound to be situations where audio or video, if properly produced, can help makes sales. The most likely use for these media is to help sell big ticket products that justify a little more attention from both you and your customers.
Placement You must put your ad in the right place—in the right eBay category— to be found by potential bidders. Chapter 7 covers this concept.
Timing Don’t lose a lot of sleep over what is the best timing. Common sense dictates that people are most likely to visit eBay when they are at home and awake. If you want to be precise, however, there is a way.
Casual Approach You will want to make sure that the end of your auction (exactly 3, 5, 7, or 10 days from the commencement of your auction) falls during the
140
EBAY BUSINESS THE SMART WAY
evening (but not too late) or on a weekend. Some items may have a special time that’s best to sell, but most items sell best when people are at home. See timetable in Table 8.1. Table 8.1 Japan 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 1:00 2:00 3:00 4:00
eBay Time and US, Japan, and Britain Time Zones Hawaii 10:00 11:00 12:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00 10:00 11:00 12:00 1:00 2:00 3:00 4:00 5:00 6:00 7:00 8:00 9:00
Theoretically, if a buyer uses proxy bidding, the timing of the end of the auction is irrelevant. Many potential bidders who use proxy bidding, however, feel more comfortable bidding if they can conveniently attend the end of the auction—even if it turns out that they don’t. Many don’t rely on proxy bidding, and many look forward to bidding
CHAPTER 8 AUCTION DETAILS
141
in the final minutes of the auction. That makes timing important. Remember, the auction must be a convenience for buyers, not sellers. If you’re a workaholic seller and post auction ads in the middle of the night, you’re going to lose potential bidders (unless your product appeals to college students). Remember also that most of the people in the US live in the East. Most of the rest of them live on the West Coast. There’s three hours difference. That makes your timing tricky even when you have a good idea of what time of day is best. For a more refined estimate of timing, try Dave’s Interactive Calendar at http://auctionbytes.com/Email_Newsletter/calendar/calendar.html. It’s not scientific, but you may find it useful.
Precise Approach Sellathon (http://sellathon.com) provides an analytic service named ViewTracker that will provide you plenty of information to chew on about your auction ad visitors. It’s quite robust. And it includes the time that each visitor visited your auction ad. Consequently, with some experimentation, you can acquire experience regarding the most popular times for potential buyers to visit the specific items that you sell. This is about as definitive as you can make a timing analysis. For additional programs that can provide precise timing for specific items (including time of year), try the analytic research services and software mentioned in Chapter 11. Some provide timing data.
Cell Phones And we thought everyone was going to access the Web via their desktop computers or laptops when at home in the evenings or on weekends. How dumb of us! Today, everyone (except me) accesses the Web via their cell phone. How can a little screen on a cell phone see that huge webpage? For an answer, look to Bonfire Media’s Pocket Auctions for eBay (http://www.bonfiremedia.com) or UnwiredBuyer (https://www.unwiredbuyer.com). Even if you don’t use these services yourself, encourage your bidders to use one of them. You don’t want anyone to miss making a final bid on your item just because they are driving between New York and Stamford during rush hour.
142
EBAY BUSINESS THE SMART WAY
Valuation Valuation is another important key to success on eBay. This is a simple concept. You appraise an item before you auction it. That is, you estimate the sales price based on research. The adverse consequences are drastic if you don’t. One consequence might be that you end up selling the item for much less than its current market value. In other words, you cheat yourself because you didn’t know enough to set a reserve price high enough. Another consequence might be that you ask too much for the item (minimum price or reserve price), and no one will bid on it. You waste time, energy, and money. See Chapter 11 on Pricing for a more complete discussion of this crucial topic.
Linking As mentioned, you can’t link to your independent website from an auction ad. You do have a link to your eBay Store (if you have one): a red icon in your seller’s section at the top of the auction listing. That’s great, particularly if you don’t have an independent website. But keep in mind, a link to an eBay Store with dissimilar or irrelevant items to the one being auctioned may not be very fruitful in generating extra profits.
About Me In your auction ad, eBay automatically gives you a link to your About Me page on eBay right by your eBay ID in the auction listing. Don’t overlook About Me. It’s a great opportunity to tell your story, which will help sell your merchandise. It’s only one page, but you can make that page as long as you want to. Think of it as your brochure website on eBay. Give some background information on yourself and your eBay business. Say something about your business philosophy. Brag about the unique character of your business, if it has one. If not, brag about something else. But don’t use a lot of hype. You have plenty of room. Just state the facts, especially when you’re bragging; that is, provide a lot of information.
CHAPTER 8 AUCTION DETAILS
143
Tell people who you are and where you are. Include photographs of yourself and even of your home office or warehouse. As you materialize through your webpage, people will trust you more and look favorably on doing business with you. This is a big plus in a virtual world. You need to know a little HTML to do a generous About Me webpage, but it’s worth the effort. (See the HTML tutorial in Appendix V.) You can have a link to your website in your About Me presentation. This is your chance to promote your ecommerce (i.e., off eBay) on eBay.
Final Details Finally, before I conclude this chapter I have to mention that you can save yourself some self-delusion by using a correct typeface, and you can gain more control over your auction ads by learning Hypertext Markup Language (HTML).
Typeface You can typeset your text in any typeface you desire. Unless a visitor to your auction ad has the same typeface installed on their computer, however, they will not see your typesetting. Rather, they will see the typesetting in the default typeface: Times New Roman (Times for Mac). Consequently, you must use typefaces that everyone has. It’s the only way to be sure that everyone is seeing your typesetting the same way and also that your typesetting makes sense. The three typefaces that everyone has are: 1. Times New Roman (Times for Mac), a serif font – Default 2. Arial (Helvetica for Mac), a sanserif font 3. Courier New (Courier for Mac), a typewriter font The default is #1 above. So, if you don’t do anything, you can’t go wrong. If you use HTML to change the typeface, however, it had better be one of the three above, or you have lost control of the typesetting for a certain percentage of your audience.
HTML A little HTML here and there can go a long way toward making your
144
EBAY BUSINESS THE SMART WAY
auction ads just the way you want them. Read Appendix V for a brief HTML tutorial that covers all you need to know. And don’t despair. HTML is easy and even fun. With HTML you can create your own templates. Moreover, you can tune up someone else’s templates (in the public domain) and use them for your own purposes. For doing comprehensive Web work (e.g., multiple webpages) you might try a webpage authoring program such as FrontPage. It’s not much more difficult to use than a word processor. For a free webpage authoring program, go to http://netscape.com and download the latest Netscape browser package. In addition to the browser, it comes with Netscape Composer, a great webpage authoring program. And it’s free! Try it. You’ll have fun with it. But remember. Don’t change the typeface to anything but one of the three standard typefaces above.
Where the Work Is As mentioned in Chapter 7, your job is to prepare well for the auction. There’s not much you can do after it starts. The seller’s best strategy is to do things rationally before the auction commences. And now to close this chapter with an eloquently written auction ad, I give you the productive ad Bob Kitchner (Dangerous Threads) has written and used profitably for a long time. A Beautiful Piece of Leather! Cut in our own shop from Thick #1 Belt Grade 7/8 ounce Domestic Hides tanned in Tullahoma, Tennessee, this belt will outlast you! The leather, called “Tomahawk”, was specially developed for us: it is chrome tanned for heat and shrinkage resistance, then veg retanned with quebracho and wattle tree extracts to fill in the grain and give it plumpness and a smooth texture. Then it is dyed and wet-stuffed with fat liquors to give the leather a fine, supple “hand”. Ain’t no cheapie import... Sturdy Antiqued Buckle cast in Rhode Island. (Fastened with snaps; you can change buckles if you want to). Color: “Tobacco”, a rich shade of medium brown. Width: 1 1/4.
9 Photography Elsewhere this book cheerleads the use of photographs in auction ads. Photographs really do help sell. Omission is often fatal to auctioning success, leading to either a lower winning bid, a final bid below the reserve, or even a lack of bids. If you want to conduct a business on eBay, plan on using a photograph, or several photographs, in every auction ad.
Taking Photographs This isn’t a book about photography, but I’ve provided some basics for photographing your auction items. Paying attention to the basics should result in attractive photographs to help you sell your items. The Pros There are not only photographers who specialize in photographing merchandise, but many of them even specialize in certain types of merchandise (e.g., cars, office machines, clothes). Don't be disappointed if you can't duplicate their quality. That's what they do all day,
145
146
EBAY BUSINESS THE SMART WAY
every day, using thousands of dollars of equipment. But you can routinely take acceptable photographs by following a few basic guidelines. Follow the guidelines, experiment, and devote some resources to equipment that enables you to take attractive pictures.
Equipment Quality Your goal is to present a sharp picture of the auction item you want to sell. Although an image editor can do a lot to enhance a photograph (see Chapter 10), it can’t work miracles. You have to use a camera that has at least minimal quality. Fortunately, the digital camera market is very competitive today, and high quality cameras are inexpensive. Stick with brand name cameras. It’s not difficult to find good quality cameras with high quality lenses at a reasonable price. In my book eBay Photography the Smart Way written in 2005, I used a Olympus C-2020, a 2-megapixel (MP) digital camera (circa 2000), to take the photographs for the book. The photographs turned out just fine, proving that you don’t need a super camera to take good photographs for eBay auction ads. Today the standard digital camera is a 5-MP camera, and you can buy a brand-name camera with 3 or 4 MPs for under $100. Besides the lens, the quality is in the light metering and the focus mechanism. If you have to worry about light metering, you’re going to spend more time taking photographs than you should. Get a camera that has good light metering (most do). If the camera has automatic focusing (desirable), make sure it’s good quality (most are). Some fixed-focus cameras are adequate also. And in addition, your camera should have reasonable close-up (macro) capability. You should be able to take a picture that’s as close as two feet away (see Figure 9.1) or even closer. If you need to photograph small things such as diamond rings, you need special close-up capability. This may require a special lens (for a DSLR) or the addition of a special lens mounted over the existing lens (for a point-and-shoot). Consult with an expert before you buy a camera if you need this capability. Otherwise, you may pay more than you need to.
CHAPTER 9 PHOTOGRAPHY
147
Figure 9.1 Close-up photograph.
Many other camera features are not essential but can provide convenience, particularly for mass production work. For instance, many cameras have zoom lenses. Although not necessary for high-quality eBay photographs, zooming can save time. It’s also nice to be able to operate a digital camera or a flash unit with an AC adapter instead of batteries. It saves money and provides convenience. Your eBay photography studio will certainly have an electrical outlet nearby.
Flash If you take photographs of merchandise close up with a flash, keep the built-in flash from overpowering the photographs with glare. It’s best to use a diffuser over the built-in flash, something translucent such as a piece of white sheet plastic or a white plastic bag. If you use an independent flash unit, don’t aim it directly at the item. Bounce it off the ceiling or wall so as to diffuse the light. You can also buy special white plastic diffusers for independent flash units. Flash is not recommended for eBay product photography, however, and you will be able to take better photographs more efficiently with special lights.
Background Use a one-color plain cloth for the background. A busy background will be distracting in a photograph. A plain bed sheet spread over the
148
EBAY BUSINESS THE SMART WAY
back and seat of a chair or taped on the wall and floor makes a workable studio. For a better and more permanent studio, consider buying a roll of photographic background paper available from major photography catalogs or at professional photography stores. The paper itself is reasonably inexpensive. The rack to hold it costs more. Don’t buy the rack. You can devise your own rack for a few bucks (e.g., a broom stick hung from the ceiling with parachute cord at each end).
Lights The way to take better photographs indoors is to use photo floodlights. Such floodlights are good for photographing almost anything indoors, even small items close up. They help reduce glare compared to a flash. A pair of economy photo floodlights with stands costs about $100 but will save you many wasted photographs (wasted time). Why do they come in pairs (or threes)? You need to set them at angles on each side of the auction item. In other words, using photo floodlights straight on the subject is not very effective. You can use a third light effectively to backlight large bulky items (see Figure 9.2).
Figure 9.2 Lights set to photograph subject. Diffused Lighting The lights must be diffused. Diffusers for floodlights are modestly priced. You can also use umbrellas. The flood light beams into the
CHAPTER 9 PHOTOGRAPHY
149
umbrella, which then reflects diffused light onto the item being photographed. You can find lighting equipment in a photography catalog or at a professional photography store. You will need only simple and inexpensive lighting.
For very small items you can use a flip light (diamond grading light) such as the ones sold by Cloud Dome (http://clouddome.com). And a Cloud Dome is a great device too. It’s a translucent plastic bowl with a hole to poke the camera through. It diffuses natural light from outside the dome to create a soft light for photographing a small item inside the dome. There are lighted boxes you can use for photographing medium to small items, which are considerably more expensive than the Cloud Dome. Yet they are perhaps more convenient: Coloreal eBox, http://www.ortery.com MK Digital Direct, http://www.mkdigitaldirect.com Litestage, http://www.litestage.com The EZCube (http://ezcube.com) is a light tent, less expensive than a box, which provides you with another choice. A clever device, which seems to work well, is the briefcase with a special reflector inside made by Sharpics (http://www.sharpics.com). It’s portable, and you can use it effectively using a flash with a little experimentation.
Outside Outside, take your photographs on a bright overcast day. If you take your photographs on a dull overcast day, they may be dull photographs. If you take them on a sunny day, the sunlight will not be diffused, resulting in dark shadows and and too much glare. Make sure the sun is coming from behind you over your shoulder as you photograph your auction items. And work so that your shadow falls outside the photograph. For instance, that means that you will have to move a car three times to photograph it. You start on the left side with the sun coming from behind over your shoulder. Then you reposition the car to photograph the rear with the sun coming from
150
EBAY BUSINESS THE SMART WAY
behind over your shoulder, and so forth. Expert photographers teach us that bright sunlight can cause shadows that are too harsh, while a bright overcast day provides softer light for better photographs. That may be true, but you can have the sun and soft shadows too. Use photo floodlights or a flash outdoors to fill in the shadows caused by strong sunlight. That’s what the pros do. Or on a bright sunny day you can also take photographs in the shade (e.g., by the side of a house) to get softer light. Take care also to present a background that does not distract from the auction item. A sense of marketing helps too. For instance, a photograph of a car in a pleasant residential setting is preferable to a photograph of the same car on a used car lot.
Tripod The use of a tripod is the mark of a professional and is essential to photographing eBay items indoors and outdoors. Make sure you always use one. It’s awkward to use a tripod ad hoc. But if you set up space for a small studio in the corner of a room and put a tripod there permanently, it will seem natural to use it.
Shooting When shooting: 1. Set up your lighting to avoid glare. 2. Use a tripod. 3. Focus carefully (automatic focus usually works well). 4. Fill the viewing frame (the photograph) with the item. 5. Take the shot. 6. Review your photograph on the LED screen (digital camera). Develop a routine way of taking photographs and photoprocessing. This is called a workflow. You want your workflow to be easy, complete, and short; that is, efficient.
Display Props Not all auction items are displayed properly lying on a bed sheet set in
CHAPTER 9 PHOTOGRAPHY
151
a chair. For more expensive items or for items you sell repeatedly, spend a little imagination and money on props to help display such items better. You can get ideas from traditional retailers and in mailorder catalogs. Mannequins Find a mannequin somewhere and buy it (i.e., on eBay). Use it to display clothes or other items worn on the human body (e.g., jewelry). You can also use mannequin parts to display certain items (e.g., arm and hand to display a glove). If nothing else, you can get a half-mannequin (front but no back) on eBay inexpensively (about $15). Display Stands There are hundreds of different kinds of display stands and racks. Some are worth buying if you have a specialty niche. Many can be duplicated with materials such as coat hangers, 2×4s, duct tape, clamps, and the like. Be creative. Clothes Hang and steam clothes before photographing to make them look their best. Clothes are perhaps the most trouble to photograph well, and you will have to practice. Fabrics You can achieve the plain studio background look with bed sheets as suggested earlier. This is appropriate for many auction items, but some items need a little extra pizazz. For instance, velvet and satin can give a look of elegance to appropriate items such as jewelry. Always use solid colors. Printed or multicolored fabrics are too busy and will detract from the item being photographed.
Film You can use a normal film camera to take photographs of merchandise for your auction ads. You get the film developed. Then the next step is to digitize the photographs. You can use a flatbed scanner ($50-$150), a film scanner ($200+), or Kodak Picture CD (available at your photofinisher). This is a lot of trouble, but it works well.
152
EBAY BUSINESS THE SMART WAY
Not Recommended Using a film camera for eBay photographs is not recommended. Digital cameras no longer cost a lot and now have significant usability advantages and cost advantages over film cameras.
Digital Cameras The most convenient and least expensive (over the long run) method for taking auction ad photographs is to use a digital camera. Today, 4MP cameras are cheap, and a 3-MP camera for most eBay items is considered professional quality. The standard digital camera today has 5 MP. Digital cameras usually take sharp close-up shots and do not require a close-up lens except for very small items. However, you do have to turn on the camera’s macro setting for closeups. In general, it seems easier to take good photographs with a digital camera than with a film camera. You can even see your photographs on the LCD screen on the back of the camera after shooting. If a shot doesn’t turn out well, you know immediately to shoot again. Thus, buying and using a digital camera is money well spent and is essential to anyone serious about their eBay business. Highest Quality Most digital cameras give you a choice of quality settings for your photographs. The higher the quality, the more memory used. Using lower quality enables you to take more photographs in one shooting. However, always use the highest quality photograph setting on your digital camera for auction ad photographs. If you need to shoot more pictures at one time, buy more memory for your camera. You may not always need the highest quality, but you can always go down in quality. You can’t go up. Removable memory is desirable because it enables you to upgrade the size of your memory to take more photographs in one shooting. Most digital cameras now use SmartMedia cards (small and thin) or Compact Flash cards (small but thicker), although there are several other formats also. Cameras typically come with 8-MB cards (about 10 photographs) or 16-MB cards (about 20 photographs), but you can use 128+ MB
CHAPTER 9 PHOTOGRAPHY
153
cards (about 160 photographs) in most point-and-shoot cameras.
One of the features to look for in a digital camera (see Figure 9.3) is the means of getting the image out of the camera and onto your hard drive. The most popular means is a USB cable and the use of software that comes bundled with the camera. (The necessary software may already be present in your computer.) You plug the small fitting at one end of the USB cable into your camera and the large fitting at the other end into a USB port in your computer. The photographs (image files) show up as a separate disk drive on your folder tree populated with numbered image files. Older digital cameras use other connections such serial cables.
Figure 9.3 An inexpensive, good quality digital camera.
You can also remove memory cards from your digital camera and put them in a card reader connected to your computer via a USB cable. Again, your computer will see the card reader as a separate disk drive populated with image files. This is the best way to make the transfer, as it doesn’t run down your camera’s battery. Photo Programs All digital cameras come with free software for transferring images from the camera to your computer and for manipulating the images. Sometimes these programs are more trouble than they’re worth. You will need to experiment in order to work out a routine that you can easily repeat (i.e., create a workflow). Your workflow will help you to work efficiently. By using a card reader, you can bypass a manufacturer’s transfer program and make your transfers the same way for all cameras you use now and in the future. In other words, you don’t have to learn a new
154
EBAY BUSINESS THE SMART WAY
manufacturer’s transfer software every time you use a new camera.
Image Services Your photographs can be uploaded to anywhere (any address) on the Web, and then you can use them in your auction ads. What’s the best place for them? It’s probably on the Web storage space provided to you by your Internet Service Provider (ISP). When you get dial-up or DSL/cable service, your ISP usually provides you with Web space to put up a website. If you don’t use all of that space for your website, you can use it to store your photographs for your auction ads. It’s easy to upload the photograph files to your website space via File Transfer Protocol (FTP). Use an FTP program like WS_FTP Pro (see Figure 9.4). The program will show your computer’s folder tree on the left and your website’s folder tree (the ISP’s computer) on the right. It’s quite simple to transfer an image file from a folder on your computer to a folder on your website space. In fact, you can upload multiple image files in one upload, making it fast and efficient to put your photographs online.
Figure 9.4 WS_FTP Pro screen.
CHAPTER 9 PHOTOGRAPHY
155
There are also other FTP programs you can use. A short list follows: CuteFTP, http://www.cuteFTP.com Fetch (for Mac), http://fetchsoftworks.com FTP Voyager, http://www.ftpvoyager.com WS_FTP, http://ipswitch.com (look for an eBay tutorial at http:// www.ipswitch.com/_ebay/index.html and for WS_FTP Home at http://ipswitch.com/products/WS_FTP/home/index.html)
Alternatives Where else can you store your images? Well, there’s no shortage of places. eBay You can store one image per auction free on eBay. This may be the best deal for most of your auctions. But eBay charges extra for multiple images per auction. So, if you need a lot of photographs for certain items, you might want to consider an alternative. At Least One Even if you use another photographic service, you will want to use one photograph for the eBay service. That will be the photograph that goes at the head of the auction listing, next to the auction in the auctions listings, and in the Picture Gallery.
Storage Services There are free places to store your images online. You can use one to save money. There are also inexpensive places to store your images. What you pick will probably depend on what services are offered and what price is charged. But storing images files is neither complex nor expensive. Here are a few: FreeImageHosting, http://www.freeimagehosting.net ImageHost, http://www.imagehost.com ImageHosting, http://www.imagehosting.com Picturetrail, http://www.picturetrail.com
156
EBAY BUSINESS THE SMART WAY
PixHost, http://www.pixhost.com ProPicHosting, http://www.freepichosting.com Webshots, http://webshots.com There are so many of these services now, you can’t go anywhere on the Web without running into one of them. Presentation Service Some storage services are more than storage. You get a presentation of multiple small photographs on a presentation panel. As bidders visit your auction ad, they can click on a photograph, and it gets bigger. This makes an attractive feature and is widely used for eBay auction ads (see Figure 9.5). My experience has been that some of these presentation systems don’t work for bidders about one time out of ten. That is, when a bidder clicks on a photograph, it doesn’t get bigger. It stays the same size. You might be better off having a few photographs large enough for bidders to see something.
Figure 9.5 iPIX, a popular photo service for eBay sellers.
You can even give a slide presentation in your auction ad. Slide Tour (http://www.slidetour.com) gives a slide presentation of all the images you want to include. It’s worth a look. Auction Management Service Auction management services typically provide a system for displaying
CHAPTER 9 PHOTOGRAPHY
157
your photographs. If you subscribe to such a service, use its image system. It is integrated into the overall system and should prove easy and efficient to use. Host ISP If you have a website separate from your dial-up or DSL/cable ISP, you have a host ISP. You should have enough space to upload image files. If not, your host ISP should be able to provide you with some additional space for a modest monthly fee.
How to Use A photograph after being uploaded to the Web has a unique address on the Web. To pull the photograph into a webpage (e.g., an eBay listing page), you simply need to know the URL (Web address) of the photograph. Suppose you want to store photographs at a website known as PhotosStorage with the domain name photos-storage.com. You open an account, and they tell you that your root directory (folder) is photosstorage.com/smith-account (your name is Smith). You can upload your digital photographs to that folder. Suppose you upload the photograph of a silver bracelet with the file name bracelet-pic-5.jpg. How do you show it in webpages? The following HTML image markup will pull the photograph right into the webpage from the photograph’s address at the Web domain photos-storage.com:
Choosing a Service Many people like to play with their photographs. Photography is one of the most popular hobbies in the US. You can spend as much time as you want to taking photographs and doctoring the images. If that’s your thing, there is plenty of software to keep you quite busy and plenty of image systems to make spiffy auction ad presentations. But if photography is not your thing, keep it simple. This chapter outlines the basics you need to know to make attractive photographs that will help sell your merchandise.
158
EBAY BUSINESS THE SMART WAY
For a complete explanation of product photography by a product photographer with 40 years experience, Stan Livingston, read eBay Photography the Smart Way.
10 Using Image Software Why have an image software section in an eBay book? Hey, it’s fun to brighten up your digital photographs for your eBay auction ads. Moreover, it sells items too. Good photographs promote sales. Image editing programs range from Adobe Photoshop at over $600 to freeware or shareware programs you can download from the Web. Some are quite easy to use. Some are incomprehensible. Here I will show only the basics and leave the more sophisticated incomprehensible programs to those who have the need or desire to learn a lot more. Many image editors make easy-to-use darkrooms. Before you use an image editor, however, you first have to digitize your photographs. If you have questions about digitizing photographs, review Chapter 9. This chapter assumes that you have the photographs on your hard disk or on a Kodak Picture CD. However, want to know something about those darn photographs? They’re never quite like they should be. The more photographs you take, the more you start to emulate a professional photographer. Where you might shoot one roll of film, a professional will shoot six or eight rolls. No wonder professionals get better pictures. But taking all those photographs takes time and even
159
160
EBAY BUSINESS THE SMART WAY
money (if you use film). All you really need are a few simple photographs to use for your eBay auction ads, and you only have the time and money to take a few shots. It’s not easy always to do your best photographic work with such time and money restrictions. That’s where an image editor comes in; it’s a digital darkroom.
The Digital Darkroom You can do amazing things with image editors. Using color graphics is highly complex technology that’s impossible to understand without a lot of study. The top programs have extensive and robust capabilities. Using Adobe Photoshop proficiently, for instance, entails applying it to specific projects. You can spend months, or even years, learning how to use it for photographs. In contrast, this chapter will cover five simple things you can do quickly and easily to improve your digitized photographs. The program we use is the freeware IrfanView, (http://irfanview.com). IrfanView This program was picked because it is a popular freeware program that you can download from the website mentioned. It’s a capable program, but there are commercial programs that offer additional functionality and convenience. If you do a lot of image preparation work, you might consider buying a robust program like Photoshop Elements (http://www.adobe.com) for under $100. (This is a slightly less capable version of Photoshop, which sells for about $600.) A lesser program but one which you may find adequate is Corel Paint Shop Photo Album (http://jasc.com) with a list price of $49. It includeds some efficient controls that you may find useful for quick work. Some versions of Microsoft Office come with image editing programs. Microsoft has had so many different image editors over the years, however, that I won’t even attempt to give you a current name. Today computers or video cards often come bundled with an image editor, as does a digital camera or a scanner. If you know you have an image editor, try it on some digital photographs. If you don’t know whether you have one, look around your hard disk for an unfamiliar program. You may just find an image editor. Image editors usually have
CHAPTER 10 USING IMAGE SOFTWARE
161
the word photo, picture, or paint somewhere in their name.
Image Editing You need only a few features from an image editor, so don’t buy image-editing software unless you want to spend a lot of time doctoring images. Use a free image editor or the image editor that comes with your digital camera or your scanner. The only features you will need are: Cropping The capability to cut a smaller photograph out of a larger photograph. Brightness Adjustment The capability to change the brightness of a photograph. Contrast Adjustment The capability to increase the the difference between levels of light and darkness in a photograph. Resizing The capability to reduce the size of the photograph. Sharpness Adjustment The capability to make the resolution of the photograph appear sharper. You should take care to get the best photographs possible by learning how to use your camera. The five processes above will then enable you to use your image editor to make very nice auction ad photographs. Remedial Image Editing You can use advanced image editing software to make good photographs out of bad. But you have to ask yourself, Is this the best use of my time? In most cases, it probably isn't. Image editors are not the easiest programs to learn, and remedial image editing takes a lot of time. You’re better off learning how to take good photographs in the first place.
Cropping Cropping is the first step in your image editing. Use the cropping rectangle tool in IrfanView to outline that portion of a photograph you want to use. Then crop it out of the photograph. Everything outside
162
EBAY BUSINESS THE SMART WAY
the outlined rectangle will disappear. If the cropped image looks right, use Save As to save it as a new image. Image File Management When using image files, start with an original, but after cropping save as a new file. Then continue your editing. This procedure preserves the original. Should you get carried away with your editing and end up with something awful, you can always go back to the original file and start over.
Until digital editing made it easy to crop photographs, you had to be very careful to frame a good picture before you took it. Today you can be more careless with your framing. Your eBay auction ad photograph should include everything in the image needed to sell the auction item, but nothing more. Crop away the excess portion that contributes nothing to selling the item (see Figures 10.1 and 10.2). Even cheap digital cameras take a 640 × 480 pixel image (considered small for a digital camera), which is too large for an eBay ad. Anything larger that 400 × 300 will take too long to download and is more than you need. That means that you can take a photograph, crop it, and still have something large enough for a good size eBay ad. To try IrfanView’s cropping, put the cursor on the photograph and press the left mouse button to create a cropping rectangle. Then go Edit, Crop selection.
Figure 10.1 Original photograph.
CHAPTER 10 USING IMAGE SOFTWARE
163
Figure 10.2 Cropped photograph.
Brightness Brightness and contrast adjustments require some experimenting. You can find a certain adjustment that will work for most of your photographs. Use such an adjustment keeping in mind that some photographs will require special editing. I’ve found that making most photographs a little darker works well (but only with a corresponding boost in contrast). I use an adjustment between -5 and -10 as my standard for brightness. Unfortunately, as you decrease the brightness, a photograph takes on an ominous darkness. In combination with increased contrast, however, a photograph with decreased brightness can take on a rich look that’s full of life. Consequently, you may find, as I have, that you must use both of these controls to improve the look of photographs. More times than not, I reduce the brightness a little and boost the contrast to get a substantially improved photograph. Indeed, it’s amazing how much you can improve the look of a dull photograph by changing only contrast and brightness. For IrfanView, go Image, Enhance colors. Use the contrast and brightness sliders.
Contrast Increasing the contrast seems to make most photographs look better
164
EBAY BUSINESS THE SMART WAY
and sharper. It also seems to lighten most photogrphs. Consequently, by using this adjustment in coordination with brightness you can improve the quality of a photograph. I usually boost the contrast of photographs with an adjustment factor of +10 to +30. This, combined with the brightness adjustment mentioned earlier, substantially improves the look of about 80 percent of my photographs. The remaining 20 percent require custom adjustments. Increasing the contrast too much gives a photograph a undesirable surreal look. How do you know what the right amount is? You can see it. As you apply the contrast, you will see the photograph change before your eyes. Not all image editors will do this, but you want to use one that does. You will probably find yourself adding contrast to all your eBay product photographs. For IrfanView, go Image, Enhance colors. The contrast and brightness controls are together.
Gamma Gamma is the light intensity of the monitor. It is another way to adjust the brightness and works a little differently than the brightness control. It wouldn’t be mentioned here except that in some graphics editors the contrast and brightness controls, which are often displayed together, are displayed along with the gamma control too. If the control for gamma is not displayed with contrast and brightness controls, you can find it elsewhere in a graphics program. I recommend leaving this control alone, unless you are an expert photographer.
Resizing Your next-to-last editing step is to resize the photograph to the size that you need. You can’t go larger and maintain quality without using special techniques. If you do, the image will grow fuzzy and finally start showing the pixels. However, you can always go smaller. Since most digitized photographs are quite large, you will almost always need to resize them to the smaller size appropriate for display in your auction ads. Larger photographs require larger digital files, which take longer to download. Potential bidders don’t like long downloads. So, keep your photographs no larger than the size you need to display. Usually 300 to
CHAPTER 10 USING IMAGE SOFTWARE
165
400 pixels wide is the maximum needed for eBay ads. If you want to show special details or show art work, you can use a width up to 700 pixels. But normally keep your digital photographs for eBay ads to between 300 and 400 pixels wide. IrfanView has a resizer wherein you enter the numbers (the dimensions) you want. For IrfanView, go Image, Resize/Resample.
Sharpness Almost every photograph looks better with a little digital sharpening. Sharpening increases the contrast at the border of different levels of light and darkness in a photograph. Sharpening won’t cure a photograph that’s out of focus but it will make an average photograph look great. Sharpening is the last step in the editing process. If you sharpen before you resize, you will lose sharpness when you resize. Always sharpen the exact size (i.e., after resizing) of the digital photograph you will use in your eBay ad. For IrfanView, go Image, Sharpen. This has become an increasingly popular feature of image editors because it works so well. See Figure 10.2 for the original photograph (cropped) and Figure 10.3 for the IrfanView sharpened photograph. All in One Some digital editing software now has just one adjustment control to adjust your photographs. It includes both brightness, contrast, and sharpness, and possibly gamma. Some controls are proprietary and also make other adjustments at the same time. You will have to be the judge of whether such an adjustment control is right for you. I have found all-in-one adjustment controls to be very useful for efficient workflow.
Batches When you have a lot of photographs to take, you need efficiency. If your photographic workload is burdensome, look for image editors with batch-processing capabilities. You can edit more than one digital photograph at a time. This doesn’t work for cropping, but it works for brightness, contrast, resizing, and sharpening. It works particularly
166
EBAY BUSINESS THE SMART WAY
well when all the photographs are taken in an identical or similar environment (e.g., in your eBay photographic studio).
Figure 10.3 Finished photograph.
It's Your Call Everyone takes photographs differently, uses different equipment, and edits differently. The guidelines in this chapter are just that: guidelines. They are not hard and fast rules. You need to experiment and put together a photographic process (workflow) that suits your capabilities, satisfies your aesthetic judgment, works efficiently, fits your budget, and produces photographs of reasonable quality. And that’s all. The key word here is workflow. This chapter has outlined a workflow that you need to adopt and refine for your own eBay business operations.
File Formats There are many graphics file formats. No matter what you start with, you must eventually convert your photograph to a GIF (.gif) or JPEG
CHAPTER 10 USING IMAGE SOFTWARE
167
(.jpg) format. You can also use PNG (.png) format. Most graphics editors will convert photographs from one file format to another. Simply use Save As to save a photograph in the file format you want.
GIF GIF files are compressed as much as 2:1 without loss of quality. However, they are only 8-bit files, that is, 256 colors. You need at least 256 colors to make a photograph look real, so GIFs work OK. But JPEGs with more colors work better for photographs.
JPEG JPEG files can be compressed a little or a lot. JPEG compression is “lossy,” which means that quality diminishes during the compression process. The greater the compression, the smaller the file and the greater the loss of quality. But JPEGs are 24-bit files; that is, 16 million colors. Consequently, JPEG files can look good, particularly when they’re not compressed much. JPEGs work better than GIFs for photographs because they have more colors.
Summary The workflow this book recommends for processing your photographs is simple: 1. Take a photograph. 2. Digitize it. (If already in digital form, transfer it to your hard drive.) 3. Crop it. 4. Adjust it (i.e., brightness and contrast). This step is optional but recommended. 5. Resize it to the size you need for your auction ad. 6. Sharpen it. This step is optional but recommended. 7. Upload it to your storage place on the Web for your eBay photographs. 8. Put it in your auction ad. This is a simple strategy and an easy one that will accomplish the goal
168
EBAY BUSINESS THE SMART WAY
of posting attractive photographs that get more, and therefore, higher bids for your eBay auction items. And for you Google fans, try Picasa, a free photo album and image editor you can find on Google to download. Due to Google’s marketing power, this program will probably supersede Irfanview as the most popular free image editor.
11 Pricing By far, the most important auctioning technique for both buyers and sellers is knowing the value. If you don’t know the value of an item as a buyer, you are likely to underbid or overbid. If you underbid, you may lose out on a great bargain. If you overbid you will pay more than you need to for an item. If you don’t know the value of an item as a seller, you are likely to list the item with a minimum bid or reserve that does not maximize your sales price. If the minimum bid or reserve is too low and the bidders are few, you might end up selling a item below its maximum potential price. If you list the item with a minimum bid or reserve that’s too high, you may not get any bidders. There are even a few listing techniques you can use to encourage maximum bidding. But they all depend on knowing the value of the item. So, finding the market value of the item is your most important first step to selling success on eBay. The question is, What market? More and more, the answer is eBay. That is, eBay is the market for an amazing number of goods. If you can find what an item has sold for in the past on eBay, you will have a
169
170
EBAY BUSINESS THE SMART WAY
good idea of what it will sell for today. If not, you can research values other places online and even offline to create data for making a value estimate (appraisal).
Prices Prices are all over the place on eBay. For popular items, such as hotselling name-brand merchandise, eBay prices for new merchandise might be a premium over the list price. For excess supplies being dumped on the market, eBay prices might be only 20 percent of list price. For a niche market in which there’s one primary seller on eBay, the new merchandise might go for 75 percent of list price. After a halfdozen more major sellers move into the niche, the new merchandise might go for 60 percent of list price. There are two things to remember about eBay. First, every item has its own market. It’s difficult to make accurate generalizations about the markets for items, even similar items. Second, if you can make one generalization about eBay, it’s that merchandise sells for less than in other markets. Why? Buyers seek lower prices as a reward for taking the risk to purchase an item from someone whom they don’t know. But even this generalization doesn’t apply to some eBay categories. So, you can see that value research is the first step for auctioning success.
eBay Research You can access the eBay auction archives by checking Completed listings under Search Options on the left side of the listings webpage. You will see a list of auctions that looks exactly the same as normal auctions except that the item prices are final. eBay archives several weeks of auctions. Several weeks is enough for many items with regular sales and not enough for items with occasional sales. This makes a pretty good research tool so long as the item you research has had regular sales. Unfortunately, even items with regular sales have up periods and down periods on eBay. One week you may find a half-dozen identical items up for auction, then the week after only one, and then none the week after that. Sales ebb and flow, ebb and flow. Nevertheless, eBay archives can work well for you, particularly if you can take a couple of weeks to do your value research. But when the eBay archives fail for you, you have to turn to other sources.
CHAPTER 11 PRICING
171
Online Research Thousands of manufacturers now publish their list prices on their websites. Although most such publications cover only current list prices for current merchandise, some websites also keep in website archives the list prices for obsolete merchandise going back a few years.
List Prices Magazines that review products often include the list prices (Manufacturer’s Suggested Retail Price – MSRP) in the reviews. Many magazines are now published online as well as in print. You can access past reviews online often going back as many as four or five years. This is a good source of list prices. Another source of list prices is the typical product portal. Some enterprising individual (or company) compiles all there is to know about a product or a group of similar products. Such mini-portals often publish reviews or lists that include list prices. If you know the list price, you can estimate the price for used merchandise. Indeed, many buyers use list prices as guidelines for purchasing. I know I do. Here are my general guidelines for purchasing on eBay: New Items Must be priced at 40 to 55 percent of list price (i.e., a 45 to 60 percent discount). Used Items (excellent condition) Must be priced at 35 percent of list price (i.e., 65 percent discount). My guidelines work well for me, and I purchase quite a bit of new merchandise on eBay. But even though my guidelines work well for me, there are still plenty of exceptions where they don’t work. Consequently, I occasionally make mistakes and miss bargains or pay more than I need to.
Advertised Prices You can find advertised prices for merchandise at many stores and malls on the Web. This by itself doesn’t tell you much. Some sellers (merchants) sell goods at a premium over list price. But one good
172
EBAY BUSINESS THE SMART WAY
place to get better information is a price comparison website. This is a website that automatically provides the latest prices for particular goods at a number of different stores or malls. For instance, at BizRate (http://www.bizrate.com) you can get the latest prices for a specific model of a Canon ink jet printer at a dozen or more different online stores. You will usually find quite a range of prices on popular new merchandise (from 50 percent under list price to 10 percent over list price) at price comparison websites. Most buyers using eBay aren’t stupid. They do the research too. If you want to sell items that certain online stores sell for as low as 50 percent of list price, you may have to meet the low prices or sell at even lower prices. That is, you will have to be competitive to be successful on eBay. You can find merchandise being sold online by using the search engines such as Google. In fact, sometimes looking for merchandise via Google is almost like looking for it via eBay. Google works pretty well. Now Google offers Froogle (see Figure 11.1). Froogle started in the spring of 2004 after being in a beta test for 15 months. It’s strictly a search engine for retail merchandise. It works quite well.
Prices for Used Goods For used goods, there is not as much pricing information. You can fre-
CHAPTER 11 PRICING
173
quent websites where used goods are sold, or the sales of used goods are reported. Some, like Amazon.com, may provide pricing information in sufficient volume to be useful and dependable. Unfortunately, most such websites, even the largest, are limited to a fairly narrow range of categories of merchandise (e.g., Amazon.com) and don’t cover much ground. Pricing research online for most used goods requires ingenuity and persistence.
Analytic Research Now there is the possbility of research that renders more than just market values. In the last four years online research analytic programs have been devised that do sophisticated analysis with eBay sales data. Andale This auction management service (http://andale.com) has developed a suite of research tools that you can use to determine what’s selling well in each category, what the eBay market values are for specific items and how many competing sellers exist, how your sales compare to others in your category and how you can improve you own sales, and how to develop selling strategies including the best categories in which to sell. AuctionIntelligence Use this to determine pricing trends, timing, and hot products (http://www.certes.net/auctionintelligence/server/ home.aspx). There’s a wealth of data to be digested and put to good use in increasing your sales. HammerTap 2 This is the enhanced version of a seasoned analysis program (http://www.hammertap.com). It analyzes eBay sales data to provide you with robust information that will help you determine selling prices and improve your sales. It’s now a subscription Web service. Mpire This is another auction management service (http:// mpire.com) that also provides analysis capabilities. Terrapeak This is a marketplace research service which uses eBay data (http://www.terapeak.com). It’s amazingly robust and can provide you with a wealth of useful information. These are the types of software and software services that can give you
174
EBAY BUSINESS THE SMART WAY
the edge over your competitors. That is, unless your competitors are using them already. These are also programs for which you should be willing to pay a lot of money, if you are a savvy retailer. Happily, they are modestly priced. It Takes Time Too The biggest problem with this type of software is not whether you need to buy it and use it or not. You do. The problem is taking the time to run the reports, read them, analyze them in regard to your retail sales, and thereby develop strategies and tactics to implement a productive sales plan. This is a process that requires priority in your busy eBay retail life.
Offline Research Unless you’re very young, offline pricing research was your life’s work until the Internet came along. You’re an expert. You use newspapers to find list prices, sales prices, and prices for used goods (e.g., brand advertising, merchant advertising, and classified advertising). Where else can you look? Catalogs Catalogs are a good source of merchandise pricing for new goods. Magazines Special magazines devoted to a certain class of merchandise or collectibles may publish current market price lists. Books Some specialized books devoted to certain merchandise contain price lists. Shopping You can go into a store to look at price tags and talk with a sales clerk to get pricing information. Dealers Dealers in a special line of merchandise will know current prices. Trade Organizations Even some trade organizations publish pricing information for both members and the general public.
Appraisers Appraisers are experts who estimate the market value of goods. Com-
CHAPTER 11 PRICING
175
petent appraisals normally involve some work. Many involve a lot of work depending on the item to be appraised. Few appraisals require only nominal work. Consequently, most experts who do appraisals like to get paid for them.
Offline Appraisals An offline appraisal costs more because you often deal with an expert on a face-to-face basis. That takes the expert’s time and energy. In addition, an expert has to do a certain amount of time-consuming marketing just to get clients in the first place. The ongoing communication between appraiser and customer tends to be via telephone. If you can justify paying for it, an appraiser’s service may be your best bet in determining the value of an individual item or type of item.
Online Appraisals Many experts use a website to market their offline appraisal business. In such cases, the appraisal service usually doesn’t have an online component. It’s just the normal appraisal service delivered offline but advertised online. Some experts, however, provide online appraisals. These are appraisals researched online, prepared digitally, and delivered via email or in a document file attached to an email message. A website is often the sole marketing device used to get appraisal customers. Often the appraisals are assembly-line appraisals with one fee that fits all, even though some appraisals take more work than others. The ongoing communication between appraiser and customer tends to take place via email. Such appraisals tend to be less expensive due to their efficient digital procedures and digital assembly-line production processes.
Appraisal Services You can find appraisal services on the Web. They are often offered in conjunction with a website that covers the type of items you need to have appraised. For example, a website for a certain type of collectibles might have a link to an appraiser who does appraisals for such collectibles. Use a search engine to find online appraisers. A general online appraisal service that covers a wide variety of prod-
176
EBAY BUSINESS THE SMART WAY
ucts is WhatsItWorthToYou (http://whatsitworthtoyou.com). You can get an appraisal there for the low cost of $9.95 (see Figure 11.2). This service has been an exhibitor at the eBay Live conferences.
Trial and Error The least attractive valuing technique is trial and error. You have to experiment auctioning the same type of items with different minimum bids and reserves in a succession of auctions to find the sales price point. This is a lot of work and is the last resort to be reserved for those cases where research does not yield a clear value. On the other hand, when you can’t find the value through research, eBay trial and error becomes the only technique to accurately set a value. And thank goodness that eBay provides a medium with which you can experiment and find a value—usually within a reasonably short time. Indeed, eBay offers an unprecedented and unique opportunity to accurately estimate a sales price. Moreover, trial and error is so useful that many company marketing departments, as well as individual businesspeople, now use eBay as a testing ground to determine the prices of new merchandise. So, ironi-
CHAPTER 11 PRICING
177
cally, the least attractive technique for quick and easy pricing becomes a cost-effective and reasonably efficient technique for sampling the market and setting list prices for mass merchandising. The trial and error technique is also useful for scarce or rare goods, although it’s tricky—but not impossible—to determine the value without actually selling the item.
Selling Strategy Setting a price, minimum bid, and reserve price intelligently is more a result of experience than instruction. Every market and every item is different. This section offers some ideas, but there are no immutable rules (contrary to what some other books will tell you).
Setting a Price The best strategy for selling is to know what the value of an item is and devise a strategy to sell it. For commodity items this is usually easy and quick to do. For instance, research the value in the eBay archives for the item. It takes only seconds, or minutes at the most because there are plenty of sales (completed auctions). Then set a minimum bid and reserve price according to a predetermined strategy. Develop some predetermined strategies for various situations. As soon as you determine the value, use that value and an appropriate predetermined strategy to create your auction ad. It’s quick, efficient, and effective. For example, a typical strategy would be to set the minimum bid to a low amount and set a reserve price a little below the market value of the item. For unique items, estimating a price is more difficult. There may be no comparable sales in the eBay archives. You may have to do research both online and offline or even get an appraisal. Naturally, for lowpriced items, it’s often not worth the effort or cost. You can use eBay to determine market value. If you don’t want to give up one of the the items, auction the item with a high reserve and see how high the bids get. If you don’t care about keeping the item, auction the item with a low minimum bid and see how high the bids get. (This process is not guaranteed to be definitive, although often it may be the best appraisal you can do anywhere.)
178
EBAY BUSINESS THE SMART WAY
Setting Up an Auction What’s the best way to set up an auction? It depends on whom you talk to. Some say to set the minimum bid at $1 to attract bidders. But I don’t think that necessarily attracts experienced bidders. Others say to set the minimum bid at a price somewhat lower than market value. That shows that you’re a reasonable seller and that the auction may be worthwhile for experienced bidders. While it may be more attractive to experienced bidders, it may not inspire novice bidders. Setting the minimum bid at market value is probably not a good strategy. Everyone looks for a bargain, and a minimum bid at market value doesn’t look like a bargain even though it might be a great buy. Buyer’s Research How do potential bidders know what the market value is? They research it just like you do as a seller. The higher the value of an item, the more likely that potential bidders will research the value carefully and thoroughly.
In any event, it’s clear that an auction without a reserve price is more attractive to all potential bidders. Some bidders just won’t bid in an auction with a reserve price. Buyers in a hurry to get something will typically avoid auctions with reserves. A reserve price often just takes the pizazz out of an auction. When should you set a reserve? When you’re in doubt and can’t afford to sell an item for too little. If you know the market—know the values—you can run auctions without reserve prices but with the confidence that you will sell profitably. It’s when you don’t know the values and can’t sell confidently that you need to use a reserve price for protection against a significant loss.
12 Special Auctions If your products fall into certain categories, eBay may have a special auction for you. Some special auctions are separate auctions, and your items do not appear in the main eBay auction. Others are just sections carved out of the main eBay auction, and your items will appear in both the special auction and the main eBay auction. These specialty auctions provide you an opportunity to reach your market more efficiently. That is, the specialty auctions draw more selfselected potential bidders. Keep alert, however, as some of these auctions have special rules and special fees. An Experiment The special auctions comprise an ongoing eBay experiment. They come and go from time to time. They even change names. The day this book went to press in July 2006 was just a snapshot of the eBay special auction situation at that time. By the time you read this book, the special auctions may be significantly different.
179
180
EBAY BUSINESS THE SMART WAY
Special Section Auctions These special auction sections are part of the main eBay auctions but get special treatment.
Local Auctions Local auctions for almost 100 US cities were an eBay feature while I wrote the First Edition of this book. Imagine my surprise when I found them missing from the eBay website during the final edit of the First Edition. They just disappeared. They were not separate auctions. Each was just a subset of normal eBay auction lists selected out of the main database and displayed as a stand-alone local auction. Apparently, they’re now history. eBay still has the programming to provide local auctions but does not make it available at the eBay website. Whether eBay will bring them back in a reincarnation someday remains to be seen. eBay has had problems making local auctions work well. They haven’t quite figured out how to do it so far. Yet the potential for local auctions remains considerable. One must assume that someday when eBay is a much larger marketplace than today, there will be enough critical mass in many cities to make local auctions work well. But who knows? Perhaps their local auction scheme is flawed. Craig’s List If you want to see a successful local marketplace in action, try Craig’s List (http://craigslist.com). See more below and also in Chapter 21.
Real Estate Real estate enjoyed success on eBay but didn’t keep up with the growth of other categories. The real estate auctions today are more of an advertising medium than a selling mechanism. Classic Case This is the classic case of advertising rather than selling on eBay. Real estate gets special treatment that other categories don’t get. It’s almost a separate auction. Yet for the most part, it’s simply an advertising
CHAPTER 12 SPECIAL AUCTIONS
181
medium. It illustrates the advertising power of eBay.
Everything Else This is a catchall category. Unfortunately, there are a good number of significant categories that don’t yet have a huge volume of auctions and therefore get lost in the shuffle. This category includes all such auctions and gives them a little bit of a highlight on eBay. In other words, the miscellaneous category was somewhat overlooked before. Now it has a name and some stature. This is a smart move. If you happen to have items that fall into the miscellaneous category, this category may help your sales.
Separate Auctions The history of separate auctions on eBay makes a colorful story. However, describing the current special auctions is about as much as this book can do without turning into a history book.
Live Auctions Live, indeed. Yes, bidders bid in real time on auction items. The items are mostly: • Art • Art objects • Fine art • Collectors’ books and manuscripts • Decorative art • Antiques • Antique cars • High-end collectibles • Dolls and toys • Coins • Stamps • Entertainment
182
EBAY BUSINESS THE SMART WAY
• Jewelry • Wine • Real estate • Business and industrial Bidders must register and be verified. The sellers are auctioneers and auction houses. If you’re an auctioneer, this is your cup of tea. If not, should you want to use this special eBay auction, you will have to find a licensed auctioneer to do your auctions for you. Or, you can place your items with an auction house.
Global Auction Sites eBay is expanding across the globe. It now has auctions in over 31 foreign countries, and most are doing well. Japan isn’t one of them. eBay shut down its auction in Japan in 2002. It had an unbeatable competitor there. But it vows it will return someday. India (see Figure 12.1) is the latest country to join the eBay auction community. (Note that English is one of India’s official languages.) You can access the international auctions from eBay’s home page. See Chapter 22 for a more thorough treatment of international business via eBay. And read eBay Global the Smart Way, which shows you how to increase your eBay sales by selling abroad and how to import merchandise from abroad to sell on eBay US.
eBay Motors This is a very successful auction for used cars and trucks, antique cars, recreational vehicles, and almost anything with 2+ wheels. Many dealers have been successful in selling vehicles, and some even specialize in selling on eBay. One dealer in Dallas is reputed to have 176 vehicles in stock strictly for selling on eBay. You can learn more about this specialty auction by reading eBay Motors the Smart Way, which covers consumer buying and selling, and also dealer sales. Because vehicles are a big-ticket item, this is one place where trust and customer service really count. eBay Motors really works, so don’t take it lightly (see Figure 12.2). In 2005, eBay Motors sold approximately 1,600,000 vehicles! (These are my projected figures. See Chapter 1.) Licensing This section assumes you have a dealer’s license. If not, get one in your state. You can’t sell vehicles without one (except your own). If you’re not a dealer because you’re an employee selling vehicles from a company fleet or otherwise selling legally without a license, act as if you are a dealer and follow the recommendations below. Customer Service The first rule of dealer sales is that you need to be aware of the eBay way. Acting like the public’s image of the typical used car dealer on eBay is not going to win you the customers nor the good feedback you need to be successful.
The second rule of dealer sales is to accommodate the buyer. In most cases, the buyer will travel from a distant city to pick up the car you sold him. He needs an out. That is, you need to guarantee satisfaction at delivery. If the buyer doesn’t like the vehicle, don’t hold him to the purchase. That’s only fair. And buyers won’t abuse such a guarantee. After all, they have to travel (at their own expense) to take delivery. Accommodate a buyer in every way possible. Here are some means of doing so: 1. Provide information on your business. 2. Provide plenty of accurate photographs of the vehicle. 3. Describe the vehicle in your auction ad completely, including defects. 4. Agree to have the vehicle inspected as a condition of closing the transaction. 5. Agree to close the transaction free. 6. Agree to close the transaction in escrow, if requested. (You can point out that an escrow closing is not necessary as dealers are licensed to properly close vehicle sales.) 7. Agree to mediation in the case of a dispute (e.g., Square Trade). 8. Pick up the buyer at the airport. 9. Agree to help arrange for shipment should the buyer decide to take delivery at home. Keep in mind that the buyer is in a very vulnerable position buying a vehicle unseen in a distant city. Do everything you can to build confidence in the purchase transaction. Whatever you do, don’t mislead or deceive. That’s the kiss of death— your death—on eBay. Vehicle sales work well on eBay only because sellers play it straight and give good customer service. Pricing Vehicle market values are widely available on the Web from Edmunds, http://edmunds.com, Kelley Blue Book, http://www.kbb.com, and other sources. Sooner or later, many of your prospective buyers will check
CHAPTER 12 SPECIAL AUCTIONS
185
the value of the vehicle you have for sale. Most of the prospective buyers are bargain hunters. Why else would they even consider buying an unseen vehicle in a distant city? If you cannot offer bargain prices, you will probably not be successful selling vehicles on eBay. Consider putting a link in your auction ad to one of the pricing websites so that your prospective bidders can check the market value of the vehicle you offer. Use Your Imagination You can afford some sales pizazz for big-ticket items such as vehicles. Use your imagination. Remember, you’re dealing with a weary traveler when the winning bidder comes to pick up the vehicle. How about a coupon for a free dinner at the leading restaurant in your town for every buyer? How about one free night at a motel? How about a full tank of gas and a free coupon for fifteen more gallons? How about a cooler full of ice and soft drinks?
eBay Stores To have an eBay Store, you must fill it with fixed-price (Buy It Now) items. There’s a charge. It’s essentially a mall sponsored by eBay. It’s a terrific opportunity for greater sales. Chapter 24 covers it in more detail.
Half.com Half.com is a place to sell new and used books and even textbooks (or anything with an ISBN number) at a discount. It is a huge book catalog similar to Amazon.com. It also sells music and movies (UPC code items). A while back it expanded into video games and consumer electronics (game hardware). This is a fixed-price catalog website with its own rules and procedures. It even has a feedback system. It enables you to sell a limited range of items in a different selling format than eBay or eBay Stores. eBay was on the verge of totally integrating Half.com into eBay itself. The new name was to be the Half Zone. But eBay members screamed, and the integration never happened.
186
EBAY BUSINESS THE SMART WAY
Industry Marketplaces This is eBay’s business-to-business (B2B) auction. It has not caught on as fast as the retailing auctions and has competition from specialty B2B auctions across the Web. Nonetheless, it remains viable particularly for small businesses that are not plugged into specialty B2B auctions elsewhere. Indeed, it has grown to an impressive volume. It has gone through several names and URLs. At the time this book went to press it was accessed by the Business & Industrial home page link and had the name Industry Marketplaces. This category or special auction (whatever you want to call it) has undergone more face lifts than a 70-year-old actress. All it really consists of is a subset of the main eBay auctions. The main categories are: Agriculture & Forestry Construction Food Service & Retail Healthcare, Lab, & Life Science Industrial Electrical & Test Industrial Supply, MRO Maunfacturing & Metalworking Office, Printing & Shipping Other Industries This is not the first time eBay has tried something to make its B2B auctions stand out. Perhaps the B2B auctions for small businesses have not yet reached critical mass. But these categories increased nearly 100 percent in 2001, 2002, and 2003, putting them on the road to an eventual success comparable to eBay retail. If your business is one that sells primarily to other businesses, you will want to take a close look at this eBay category. For instance, the owner of a metal fabrication business I talked with in Alabama told me that he bought machine shop tools (e.g., lathes) on eBay at prices significantly lower than he could otherwise. He was also building a 3,000
CHAPTER 12 SPECIAL AUCTIONS
187
square feet building to expand his business and was buying construction supplies on eBay inexpensively. He told me he bought drywall for his new building on eBay several hundred miles away in Tennessee, and it was cheaper than buying drywall locally even after the cost of shipping from Tennessee.
eBay Business There is an eBay Business site at http://ebaybusiness.com. It encompasses Industrial Marketplaces and adds Office Technology, Office Supplies, and Professional Gear. It is yet another eBay incarnation of B2B ecommerce. It also offers services and resources for eBay retailers.
Professional Services Professional services had their own auction place on eBay called Elance. But Elance is not an eBay company and is no longer featured on eBay’s home page. Chapter 28 speculates (authors have their speculative vices) on how services might be sold on eBay. It also covers Elance as a separate online marketplace in more detail.
The Reality If you’re looking to feel safe and secure betting your eBay business on an eBay special category or auction, get over it. eBay is experimenting and will continue to experiment with new ideas in auctioning; or, to put it more precisely, new ideas in selling. Today’s special auction could be tomorrow’s run-of-the-mill auction. That may not have much effect on your eBay business even if you fit in the special category of the special auction. But if it does, you need to consider the possibility that your special auction may evaporate leaving you to conjure up a new selling strategy. Of course, several of these special auctions have become firmly entrenched in the eBay mainstream (e.g., eBay Motors).
Non-eBay Marketplaces It makes more sense to describe eBay as a marketplace rather than an auction. And now sizeable and significant non-eBay marketplaces have emerged which deserve your attention.
188
EBAY BUSINESS THE SMART WAY
Craig’s List As I said earlier in this chapter, eBay hasn’t figured out how to create local marketplaces yet. This book is about eBay, because eBay is the largest marketplace on the Web. But when another marketplace fills a major void not adequately covered by eBay, it’s appropriate to include such a non-eBay marketplace in the book. And that would be Craig’s List (http://craigslist.com). Craig’s List started in San Francisco early in the Internet explosion. It started covering a few other cities not too much later. More recently it expanded to cover approximatly 200 cities, about 40 percent of them abroad. Craig’s List is successful because it has figured out how to create a local marketplace. It’s different than eBay, and it really works. Craig’s List is free for sellers. You can only list an item in one city, not all. And it’s more like classified advertising than like a clever new online marketplace. It’s a great place to sell large or heavy items locally that can’t be shipped elsewhere except by truck. I bought a Life Fitness treadmill (list price $3,900) used but in new condition on Craig’s List for $800. The seller delivered it to my house and set it up for me. The treadmill weighs 230 lbs. Had I bought it on eBay from a seller in another city, shipping would have cost a fortune. The trucking company would have delivered it only to my front door (but not inside), and I would have had to get it into the house and set it up. Should you sell on Craig’s List? Sure! But you will want to limit your sales to appropriate items and to just your city. (Craig’s List has no advantage over eBay for selling in another city and in fact would likely not be as effective.) So, check it out and then try it out. It’s local. It’s another successful and potentially profitable marketplace in which you can participate. And it’s in this book because its importance is growing. 25 Percent Interest Several months after I included Craig’s List in the Second Edition of this book, eBay bought a 25 percent interest.
CHAPTER 12 SPECIAL AUCTIONS
189
Google Google isn’t known as a marketplace, but as the leading search engine it is. People use it to find online retailers when they want to buy something. It also has advertisers, and the advertisers sell successfully via Google AdWords. Indeed Google’s sales may exceed that of eBay. But there is no way to tell. Google doesn’t collect fees from retailers and generally doesn’t know about any transactions that result from a Google search. There are no useful statistics. Interestingly, eBay itself is one of Google’s biggest advertisers. The best way to sell on Google is to buy advertising or to get found by Google. To get found, you will have to structure your independent website specifically to be found by Google. That requires substantial resources (e.g., time and money). But there’s now an alternative.
Froogle Google started Froogle in a beta test which lasted from December 2002 until March 2004. Froogle is now a separate ongoing operation that’s a solid part of the Google system. Froogle is free for retailers, and is strictly commercial. Your website does not have to be found by Froogle. You enter your items for sale directly to Froogle via a data feed (see Chapter 21). This is the biggest and most important ecommerce phenomenon since eBay gained market dominance in 1998. This is a marketplace you don’t want to miss. eBay has integrated into Froogle, and you may find your auction items appearing on Froogle as well as eBay. For a more reliable presence on Froogle, you will need to send your own datafeed.
Shopping.com This is an example of a comparative shopping website. These have become very popular. For a particular item, such a website compares the prices of various vendors. Different comparative websites include a different mix of categories. eBay bought Shopping.com and has nicely integrated it with eBay auctions.
This page intentionally left blank
13 Fulfillment Fulfillment is just a fancy name for filling the order. In the case of eBay, you’ve sold an item to the highest bidder, the bidder has paid you, and now it’s time for you to deliver the goods. How you do that comprises your fulfillment operation.
Drop Shipping Drop shipping is almost too good to be true for an eBay business. The manufacturer or distributor has the item packaged for a consumer in a warehouse ready to ship. Your job is simply to sell the item and notify the manufacturer or distributor to ship it to the buyer. You don’t have to store any inventory or ship anything. This is great work if you can get it. You just push papers (more accurately push digits) and make a profit. You never touch the product. You don’t take any risk on holding inventory. What’s the catch? Well, not all manufacturers and distributors offer drop shipping. Those that do are likely to charge higher wholesale prices or a drop shipping charge. In other words, you pay for the drop shipping one way or another. The drop-shipping fulfillment may not be as quick as today’s online standards require. In fact, the fulfillment 191
192
EBAY BUSINESS THE SMART WAY
may be slow, and you may have no control over it. This will not make your eBay buyers happy. A good source to learn more about this is eBay Inventory the Smart Way, which covers sources of inventory as well as drop shipping and manufacturer-retailer and wholesalerretailer relationships.
Drop Shipping Wholesalers There is a certain ilk of wholesalers that will purport to make you successful (rich!) in ecommerce (yesterday it was mail order) by selling merchandise to you wholesale and drop shipping for you. Many of these product offerings are weak, and you will waste your time trying to sell their lackluster merchandise. Indeed, the main feature of their offer is the drop shipping itself. Basing your eBay business on drop shipping rather than on saleable products will likely prove to be a disaster. Consider these offers very carefully before you commit to such a sales program. But there are also plenty of distributors that provide great products and also drop ship. Read Chapter 15 for more on sources of distributors that drop ship.
Always Inquire Always ask whether drop shipping is available. Any manufacturer or distributor that will drop ship for you will take part of the fulfillment burden off your back. If the wholesale price is right or the drop shipping fee reasonable, take advantage of the drop shipping. Drop shipping is on the rise. It will become available from more manufacturers and distributors in the future.
Operations Should you use drop shipping, however, you will want to carefully monitor the reliability and timeliness of the fulfillment. You are, in effect, placing your eBay reputation in the hands of the manufacturer or distributor. A winning bidder waiting too long to receive the merchandise is not going to accept your excuse that it’s the fault of another business (i.e., the distributor). Always keep in mind, if the drop shipping wholesaler is out of stock for a product you’ve sold on eBay, you’re out of luck (i.e., you’re likely
CHAPTER 13 FULFILLMENT
193
to get negative feedback). You had better figure out ahead of time how to deal with this problem. Don’t get carried away by drop shipping. It eliminates a significant portion of your costs in handling a product, but it doesn’t eliminate all of your costs. If you take the mass-offering shotgun approach to selling products just because the products can be drop shipped, you may find yourself drowning in sales costs (e.g., eBay fees) for unsold products. Another drawback to drop shipping is that any other eBay retailers can do it too with the same product. Don’t expect many drop shipping wholesalers to be discriminating with whom they deal nor to give exclusives to anyone.
Normal Operations Fulfillment is the most tangible part of most eBay businesses. It requires an investment in inventory, equipment, and packing supplies, as well as space to operate. It also requires hard labor. Well, perhaps not hard labor (except for heavy products), but certainly tedious labor.
Inventory eBay buyers expect delivery immediately. They are willing to wait through the shipping transit period but not beyond. That’s why you need to have inventory in stock to be a successful seller on eBay. You need to ship immediately after the buyer pays. (This requires money to buy inventory unless you can get credit from your wholesalers.)
Warehouse To hold inventory, you have to store it. You might do that in your closet, spare bedroom, garage, utility shed, your friend’s garage, a mini-warehouse, or a commercial warehouse. You need to protect the inventory from heat, cold, moisture, and perhaps even rodents or insects. And don’t forget theft. (Wherever you might do this outside your home, it’s going to cost money.)
Shelving In your garage or in a warehouse, you store inventory on shelves. You can buy inexpensive sheet steel shelving at a discount store. This is good for light merchandise. For heavy merchandise you need to
194
EBAY BUSINESS THE SMART WAY
upgrade to industrial shelving made from a heavier gauge of sheet steel. Industrial heavy-duty steel wire shelving is also appropriate. You need to look for a place to buy industrial shelving in your town. If you buy it on eBay or from a catalog, the shipping cost is likely to be high. Assembly Steel shelving comes disassembled in a box. It is easy to assemble. It takes only a screwdriver and perhaps a pair of pliers.
Steel shelving is a good investment. If you buy it for your spare bedroom (current warehouse), you can move it to the garage later when you expand. Eventually, you can move it to your warehouse when you get really big. Look for retail stores or industrial businesses going out of business. Rush in and buy their warehouse shelving at a discount before someone else gets it.
Operational Space Where you pack and label your merchandise for shipping is your operational space. It’s not necessarily the same as your warehouse space, although convenience dictates that it usually is. This is where you use your fulfillment equipment, some of which may require electricity. Most mini-storage units do not make very good operational spaces. They aren’t set up to be used for operations, and in fact, they may have rules forbidding such activity. You are more likely to find operational space in an office-warehouse building or a warehouse.
Equipment The equipment you will use for packing and shipping depends on the products you sell. At a minimum you will need a manual taping device to tape packages, a scale, and perhaps a postage meter. You might also need a pallet mover, a shrink-wrapping machine, a packing-material dispenser, or any one of a number of other machines. Plan your machines and your operation before you commit to your operational space. If your operational space is separate from your administrative space,
CHAPTER 13 FULFILLMENT
195
you will need separate communications devices, such as a telephone, a fax machine, and a computer (email). Communication A packing slip and a mailing label can act as a fulfillment order. Neither should contain any sensitive information such as a credit card number. Each can be attached to an email message as a text document and sent to your fulfillment site. Or, each can be delivered to your fulfillment site on paper. Note this type of a system works well even when you do everything yourself in the same place (i.e., both administration and fulfillment). Pay Online If you use the US Postal Service for shipping, you will save time and effort by using a postage meter to print and affix the postage on packages in your fulfillment operation. You can rent a postage meter for as little as $15 per month. You can also pay for the postage electronically from your home office. (Anything to keep you from waiting in line at the post office is a godsend.) In addition, the Postal Service now offers a system where you can print postage (together with a mailing label) on your own computer printer via the Internet. You pay with a credit card or PayPal. Some vendors enable you to print postage with your computer printer for as little as $4 per month. With most systems, you can pay for your postage online with a credit card. PayPal integrates the Postal Service online postage system into a handy checkout mechanism that you can use free. See Chapter 20 on PayPal.
A postage scale with postage rates built in can save a lot of labor in your fulfillment operation. When the rates change, as they do periodically, you refresh the rate structure electronically to bring it up to date. Often you can get a scale in a package deal together with a postage meter at an attractive price. A combination of basic mailing equipment and services can cost little and do the following for you: • Give a professional image
196
EBAY BUSINESS THE SMART WAY
• • • • •
Carry a custom message (printed with postage) Avoid overpayment (as with stamps) Eliminate post office visits Satisfy postal requirements for expedited shipping Make dropoff easier
Efficiency The Postal Service doesn’t permit mailing a parcel unless it’s handled by a postal clerk. That means you have to wait in line at the post office to mail packages. The exception is a parcel with postage from a postage meter. That’s a good reason to have a postage meter if you use the Postal Service for shipping. Leave those packages on the counter in the post office without waiting in line. You can also arrange to have them picked up free (with one-day notice). Using mailing equipment and services can really make a difference in bringing efficiency to your fulfillment operation. But you don’t have to use the Postal Service for shipping. Competitors offer comparable services that may be more cost-effective.
The progress and innovation in regard to equipment and processes for fulfillment in the last few years have been remarkable. A book cannot keep up. You need to review what is available, take the time to understand the various offerings, relate them to your own business, and then make a choice. Pitney Bowes Pitney Bowes is the traditional provider for postage meters. It rents a complete line of postage meters and machines, scales, and other fulfillment equipment. It also provides free mailing tools (online software services). In addition, Pitney Bowes operates a special website to assist small businesses, PitneyWorks, one you need to visit (see Figure 13.1). There it offers additional free online software services. Pitney Bowes, http://www.pb.com PitneyWorks, http://www.pitneyworks.com
Postal Service The Postal Service has a new free service named Click-N-Ship. It provides shipping labels with or without postage, all enabled and paid for right from your computer. Stamps.com Stamps.com is a service that enables you to print postage with your computer printer. This was the first such service. Additional services such as validating addresses and checking ZIP codes are also included. Plain paper shipping labels are a feature of this service too (affixed to packages with packing tape). No messy and sticky labels to print. This is the type of service that can make your fulfillment much easier. http://stamps.com You might try their NetStamps. These are computer-printer printed postage stamps. You Don’t Have to be a Dead President The NetStamps have no aesthetic appeal. Nonetheless, you can put your photograph on the stamps. You don’t even have to be a dead
198
EBAY BUSINESS THE SMART WAY
president to do so. Or you can put your newborn baby’s photograph on the stamps to celebrate the new arrival. Use your imagination and have your stamps make a statement.
Endicia Endicia provides Postal Service labels, postage, insurance, and confirmation without going to the Post Office. Review their offering at their website. It doesn’t take much volume for a service like this to save you money. http://www.endicia.com Neopost Neopost is another company, similar to Pitney Bowes, which provides equipment and supplies to mailrooms. Check out their website for competitive equipment packages for your fulfillment operation. http://www.neopostinc.com Ascom Hasler This company provides a range of mailing room equipment and services competitive with the other equipment providers. http://www.haslerinc.com Francotyp-Postalia Yet another competitor in the postage meter business, this company offers a variety of equipment to use in a basic fulfillment operation. http://www.fpusa.net Pelouze This is primarily a scale manufacturer that makes postage scales with updateable postage rates (see Figure 13.2). You need one of these, and you may be able to get one in an office supply store less expensively than from the postage meter companies. If you use a shipper other than the Postal Service, a Pelouze scale is a good choice too. http://pelouze.com
Packing Materials Don’t forget you need to store your packing materials as well as your inventory. Most likely you will use cardboard boxes for shipping, which don’t take a lot of space (folded), or envelopes. However, packing filler can take up huge amounts of space. Typically, you store styrofoam peanuts in a huge plastic bag hung from the ceiling with a dispenser at the bottom so that you can feed them into packages with gravity. Bubble wrap comes in big rolls, which take plenty of space. Bubble envelopes take more space than plain envelopes. Newspapers take up the least space and cost the least. However, using newspapers as a packing filler requires more labor and may not be acceptable to some shippers. Buy your packing materials in bulk from a specialty supplier. In addition, as you might expect, there are some enterprising people like you who sell packing materials on eBay. So, check out eBay too. Below are some suppliers for you to consider: Associated Bag Company All sorts of shipping supplies (http:// www.associatedbag.com). eBay Seller Center A group of links to eBay auctions offering packaging and shipping supplies in addition to lots of information on packing and shipping. Go Sell, Best Practices, Packing & Ship-
200
EBAY BUSINESS THE SMART WAY
ping. Also try the eBay auctions using various appropriate key words. You will find plenty of packing stuff at good prices. eSupplyStore Boxes and bags (http://www.esupplystore.com). Fast-Pack Perhaps the most interesting packaging is colored bubble wrap, bubble-wrap envelopes, and packing tape. It sure is distinctive (colorful). Your customers will remember you (http:// www.fast-pack.com). FP International Makes a variety of packing materials including CELL-O air cushions (http://fpintl.com). It also provides the equipment to fill the cushions with air. This is a space-saver for your fulfillment operation. FP also makes a FASTTrack paper packaging system. The paper packing materials can be recycled. Global Industrial Equipment An online and printed catalog with a huge amount of industrial equipment, some of it for shipping rooms and warehouses (http://www.globalindustrial.com). OnePak For super protection of expensive items, such as laptop computers, try these boxes, which come in various sizes with heavy-duty air bags included. They’re efficient to use in your fulfillment operation (http://onepak.com). UPS Store (formerly Mail Boxes, Etc.) Local franchises providing packaging shipping supplies (http://www.theupsstore.com). Paper Mart Boxes and tubes (http://www.papermart.com). Speciality Bags Special bags including anti-static bags (http:// www.protectivepackaging.net). Storopack Offers AIRplus air cushions and the equipment to fill them (http://storopackinc.com). Storopack also makes PAPERplus, a protective paper mattress used in packing. Because it can be recycled, it is environmentally friendly. Uline Mostly shipping supplies (http://www.uline.com). This company publishes a thick and useful catalog, which you can request online and have sent to you in the mail.
CHAPTER 13 FULFILLMENT
201
Free Packaging The Postal Service provides free packages for Priority Mail (http://supplies.usps.gov). If you ship via the Postal Service, you will want to find out what’s currently available. (The Postal Service will even co-brand the packages with you.) In addition, other shippers also offer free packaging, which can save you money. Most of this packaging doesn’t offer much protection for your auction items, but a little bubble wrapping can solve that problem easily.
It’s smart to protect items by placing them in plastic bags before shipping. Buy these in various sizes where you can buy them in bulk at a discount. DHL has a comprehensive packing tutorial on its website ( http:// www.dhl.com/publish/g0/en/information/shipping/pack.high.html). In addition, FedEx has a brief packing tutorial (http://fedex.com/us/service s/ground/packaging).
Resources You undoubtedly have local stores where you can buy fulfillment equipment and supplies inexpensively. For instance, you can get a commercial-quality taping device for under $10 at a discount store. The tape is inexpensive, too, when purchased in a six-pack. So, visit your discount stores and discount office supply stores to price what you need to buy for your fulfillment operation. Compare such prices to other sources and to national catalogs. You will find that you can buy what you need in such stores inexpensively so long as you don’t need to buy in bulk. For bulk buying (e.g., 500 cardboard boxes), you will get better prices from a specialty supply vendor.
Shipping Most eBay businesses ship via UPS (United Parcel Service) or the US Postal Service. Federal Express Ground (Home Delivery) and DHL are competitive new entries into this market that you will want to consider. Note that the couriers (see sidebar) provides $100 insurance included in the normal shipping charge. The Postal Service charges extra, and it’s not cheap.
202
EBAY BUSINESS THE SMART WAY
Couriers FedEx, UPS, and DHL are known internationally as “couriers.” That’s the name eBay Global the Smart Way uses.
For overnight, use FedEx, UPS, Express Mail, or Airborne Express (now owned by and integrated into DHL). Many of your customers will want to track their packages. If you use a shipper that makes tracking available, send the requisite tracking number via email to your customers automatically. The capability for your customers to track packages will save you a lot of tedious email. To learn more about shipping, visit the requisite websites: Canada Post, http://www.canadapost.ca DHL, http://www.dhl-usa.com Federal Express, http://fedex.com Postal Service, http://usps.com Purolator, http://www.purolator (owned by Canada Post) RedRoller, http://redroller.com (comparative website) UPS, http://ups.com All of these shippers enable you to work via the Internet to manage your shipping. They also provide robust proprietary software with various levels of digital complexity to enable you to set up your own shipping system. Plan on spending some time at each website to determine what they offer, and then choose a shipping management package that suits your situation. This is a very competitive industry, and the various programs evolve constantly, even at the Postal Service. Unfortunately, it’s impossible to stay current with the changes in a book, and I’m going to leave it to you to investigate on your own what is the latest and greatest that the couriers and the postal services have to offer you. It gets more impressive, and more importantly more efficient, every year. The trend is in your favor. The services are getting better, and they’re available to small businesses that are digitally savvy.
CHAPTER 13 FULFILLMENT
203
Shipping Rates Shippers’ rates are somewhat straightforward when you ship one package. When you ship multiple packages every day, however, the rate structure gets less expensive but more complicated. You can take advantage of quantity shipping and get reduced rates and reduced pickup fees among other benefits. It pays to study the rate structures to determine which shipper will be the most cost-effective for you. I favor charging a flat rate for shipping and handling. Make sure you use the term shipping and handling, not just shipping when you use a flat rate. If you want to charge for shipping—whatever it costs—put a shipping calculator in your auction ad as part of the listing procedure. That way potential buyers can calculate the shipping cost. Shipping Services Automatic shipping arrangements and charges are offered via shippers’ websites. Anyone can use such free services. The auction management services tap into the shippers’ websites to arrange shipping automatically. Such software calculates the shipping charges and adds them to the buyer’s checkout. They also print the shipping labels. Of course, you can do all this manually, but it’s a lot of work. It’s easier to use an auction management service. Plain Paper Labels Shipping labels can be printed on plain paper and taped to packages. You don’t necessarily have to use pre-printed labels with sticky backing that require special handling in regard to your computer printer.
In addition, you can get a variety of services that may give your fulfillment operation a boost, even actual fulfillment services. FedEx Home Delivery This is part of FedEx Ground but specializes in delivery to residential homes. If you’re selling to consumers, you will want to investigate this service carefully to determine what advantages, if any, it offers. iShip This is a retail shipping management service that you may find handy when you grow large (http://iship.com).
204
EBAY BUSINESS THE SMART WAY
UPS Store (formerly Mail Boxes, Etc.) UPS Store is a local franchise with a physical presence that supports small businesses with a wide variety of goods and services. You can buy packaging and shipping supplies there. Such supplies are sold at retail prices, although you might be able to negotiate quantity pricing. You might even contract with a UPS Store to do your fulfillment. They have the equipment, supplies, and shipping arrangements to do a competent job. The only question is whether they will do it at a cost that you can live with. Shippertools.com This is a delivery confirmation service for Postal Service Priority Mail. Want to know if your item got delivered? Use ShipperTools, http:// shippertools.com. You pay a reasonable membership fee. ShipWorks This is a comprehensive shipping management software package that does many things. It integrates with other software and services to fit into your fulfillment operation. You can check this out at http://interap ptive.com. Consignment Stores There are hundreds of eBay consignment stores in the planning stage and many already operating. They each need to have a substantial shipping operation. It’s my prediction that they will welcome your fulfillment business. The only question is whether they will provide costeffective fulfillment services. If you don’t want to do your own fulfillment, look for one of these stores coming to a shopping center near you. Shipping Certainty Providing your bidders with certainty about shipping costs will increase your auction success. If buyers can calculate the shipping cost in your auction ad or otherwise easily determine the shipping cost, your auction success rate should increase 15 percent. If you provide buyers with the shipping cost or put a shipping calculator in your auction ad, your communications with buyers should decrease by almost 40 percent. Keep your buyers informed—or pay the price.
CHAPTER 13 FULFILLMENT
205
Seller Center Don’t overlook eBay’s Seller Center mentioned above. eCommerce has spawned a revolution in shipping. It is still evolving rapidly, and it changes constantly. The Seller Center will help you keep up to date. Review the eBay-PayPal shipping alternatives. eBay has made deals with the Postal Service and UPS to enable you to print labels, pay for shipping, arrange for pickup, and track packages all right from your computer and all free. You will want to compare whatever equipment and services you are considering to these eBay shipping services.
Insurance Protection against risk of loss in transit is the business of the insurers in the shipping industry. The question is, When do you need insurance? Low-Value Items Insurance for shipping by mail is too expensive, quite frankly, to justify for low-value items. Most sellers leave it up to buyers as to whether they want insurance and then make them pay for it. This is total insanity! What happens when the buyer doesn’t get the item you mailed (no insurance)? No matter what you tell him, he’s going to be mad and will likely give you negative feedback unless you mail a duplicate. You really have no choice but to mail another item to the buyer. I recommend you do this on a self-insured basis. In other words, just bite the bullet and send a duplicate. Don’t pay for insurance or ask the buyer to pay for it. For unique items (one of a kind), you have a problem. You will have to replace it with a comparable item or refund the buyer’s money. But this is basic customer service. It doesn’t get much more basic. Proof of Delivery Of course where you have proof of delivery through ShipperTools or through return receipts, you don’t necessarily need to send a duplicate item should a customer claim they didn’t receive the package. Send them the proof of delivery.
206
EBAY BUSINESS THE SMART WAY
UPS and FedEx Ground UPS and FedEx Ground automatically insure parcels up to $100. You might want to consider this when you pick your shipper.
High-Value Items For high-value items, you probably cannot afford to be self-insured. You need to purchase shipping insurance. The question is, Who’s going to pay for it? Insurance can be expensive. This is something you will want to investigate carefully when you choose a shipper. Many buyers will elect to not purchase insurance. What happens when the buyer doesn’t get the item you shipped (no insurance)? The answer is the same as it is for low-value items. The buyer is going to be mad and hold you responsible. Therefore, it seems prudent to include the cost of insurance in your shipping and handling fee. Don’t give the buyer a choice. You will want to investigate two services that provide discount shipping insurance: Universal Parcel Insurance Coverage (U-PIC) This is independent of any shipper, works for all, and can save you money. If you deal with a number of shippers, getting all your insurance through U-PIC may save you hassle as well as money. Check out its website at http://www.u-pic.com. DSI Insurance This is another independent discount shipping insurance company that works for all shippers. Check out its website at http://dsiinsurance.com. Either of these services has the potential to streamline your risk management (i.e., insurance) for shipping and save you money while providing excellent customer service.
Pickup Assuming you have sufficient volume, have your shipper pick up your packages. You have to have a certain volume to justify the expense, although under some circumstances pickups may be free. Some shippers are pretty good about coming by about the same time everyday to
CHAPTER 13 FULFILLMENT
207
pick up your packages. Some others require advance notice. You can go nuts trying to deliver the packages to your shipper. Ever wait in line at the post office or UPS? One way around a lengthy wait is to have all packages labeled and paid. Then the delivery to your shipper is just a quick drop off. This makes labeling and prepayment systems worth every penny.
Ship by Truck Read carefully. This subsection was a hot tip in the First Edition and still is! The big-four couriers have limitations (weight and size) on parcels they will ship. About 70 pounds is the maximum weight (some special services handle up to 150 pounds). Everything else must be shipped by truck (or bus, see below). This creates a huge problem. How much is the trucking going to cost? The shipping cost could be a huge percentage of the value of the item or even exceed the value. For example, how much does it cost to ship a desk worth $150 from Portland, Oregon, to Miami, Florida? For shipping via the big four, you just look at a fee schedule, and you know exactly what the shipping will cost. For shipping by truck, what do you do? Therein lies the problem. The uncertainty stifles eBay business for large or heavy items. In fact, the uncertainty practically eliminates such business. If you can accurately determine easily and instantly what shipping charges will be for large heavy items (via truck), you can start selling items that no one has sold yet on eBay. You can take the uncertainty out of the shipping cost. You can perhaps find a profitable niche more quickly and easily. And you can do this with Freightquote.com (see Figure 13.3). This is simply an online service that enables you to calculate the shipping cost by truck for an item quickly, easily, and at no expense. Try it at: http://freightquote.com Freightquote.com, of course, would like to have your trucking business for its affiliates, but there’s no obligation when you use the shipping cost calculator.
Competitors to the Freightquote service are Freight 101 (http:// www.freight101.com) and a service that enables you to get bids from truckers, UShip (http://www.uship.com). Example Business Suppose you know an artisan in your town who manufactures beautiful cherrywood tables the size of office desks, which people love to use as desks in nice offices. The tables are also appropriate for dining. The tables are 36 x 72 inches and weigh 160 pounds, too large and heavy to ship except by truck. The artisan tells you he can make as many as you can sell on eBay, and he will sell them to you at a wholesale price. You can make a reasonable profit selling them for $1,200 each on eBay. The table is comparable to tables in a nice furniture store selling for about $2,200. It looks like a good opportunity, but the shipping cost makes it uncertain. For buyers, the shipping cost has to be low enough to keep the overall cost of acquisition well below $2,200, or why wouldn’t they just buy a comparable table at a furniture store? You discover Freightquote.com and decide to sell the tables. In your auction ad, you publish a list of sample trucking costs at several dis-
CHAPTER 13 FULFILLMENT
209
tances from your town. Now buyers will have more information to make a purchasing decision. Quick Check A quick check on Freightquote.com indicates that the trucking for the table will cost about $400 coast to coast, less for a shorter distance. This enables a buyer to buy the table delivered for no more than $1,600.
Convenient to Whom? For whom is this service a convenience? In the example, you could have called a local trucking company and asked for shipping costs to cities 500, 1,000, 1,500, 2,000, and 3,000 miles away and published such costs in your auction ad. That might take more time, however, than you want to spend. Freightquote.com provides a convenience to you, because you can calculate shipping costs on Freightquote.com more efficiently than calling a trucking company. Actually, estimating freight costs is not as simple as you might think. You will have to learn a few things before you can do it accurately. But you will be able to list sample trucking rates in your auction ad and then give a winning bidder an immediate quote for the specific trucking costs. Again, let me point out that it is new services like this that spawn new business possibilities and even new businesseses.
By Bus How do you ship by bus? You take the package to the bus station in your town and pay for the shipping. Your customer picks up the package at the bus station in her town. You can ship packages larger than the common shippers will accept, although you cannot ship larger packages than will fit in the luggage compartments under the bus. Try Greyhound (see Figure 13.4). It has an interesting variety of shipping services: http://www.shipgreyhound.com
By Hitchhiking You need to ship a canoe from Bangor to Savannah. You contact HitchPack (http://hitchpack.com). HitchPack finds a family near Bangor that’s going on vacation to Atlanta by car but will be visiting Georgia’s Atlantic coast on the way. The family agrees to put the canoe on their car rack and deliver it. HitchPack charges you a fee and pays the family a fee. Presumably it’s less expensive than shipping by truck. No kidding! Sounds crazy, but it might work. It’s probably going to be tough to get that canoe from Bangor to Savannah via HitchPack. But what about shipping between Pittsburgh and Philadelphia? There’s a lot of potential shipping traffic there. HitchPack just might find someone with a pickup truck that drives that route regularly and is willing to transport items to earn a few extra bucks. Hey, if you have a tough shipping problem, contact HitchPack. Perhaps the folks at HitchPack can solve your problem. I wrote in the Second Edition: HitchPack is alive and well as this Second Edition goes to press. It will be interesting to see if HitchPack is still around for the Third Edition.
CHAPTER 13 FULFILLMENT
211
Well, HitchPack is still with us, and I wish them good luck.
Again It’s the darn nickels and dimes again. A few cents for packing peanuts, for a box, for a label, for prepayments, etc. It all adds up along with all the other nominal fees (e.g., eBay fees). You had better keep tabs on all these costs. You don’t want to wake up one day to realize that half your profit is gone due to the fulfillment costs you didn’t give much attention. Online retail can be a tough business if you don’t watch the pennies.
House Spouse Fulfillment You need to do your own fulfillment for a while just to learn that part of the business. When you find yourself pressed for time, you may come to the same conclusion that many eBay businesses do, that you want to hire someone else to do the fulfillment part of your business operation. You can hire an employee. However, as advised in Chapter 3, you are probably better off hiring an independent contractor (see Figure 13.5). The house spouse down the street with a garage might be a good choice. Most stay-at-home parents, whether men or women, are looking for a business they can run at home. A fulfillment service isn’t a bad choice, even if the service has only one customer: you.
Don’t hire such a person. Suggest that they become an independent contractor. Give the house spouse information, perhaps a book, but don’t organize their business for them. Keep in mind that you cannot control an independent contractor. You can set standards, specifications, and deadlines, but in the end an independent contractor controls the management and operation of the fulfillment effort. Once an independent contractor is organized to do business, then direct them to information on the fulfillment business so that they can learn how to provide services to you. Then recommend suppliers and give them your standards, specifications, and deadlines in writing and in detail. Finally, make sure you have a signed contract with them, one that clearly spells out that they are in fact an independent contractor. There are two things that you will provide to them. First is a packing slip. It specifies all the merchandise to be shipped but contains no prices, credit card numbers, or other sensitive information. Second is a shipping label. In return, they should provide you with an accounting of the items shipped. If convenient, deliver the paperwork to them via email. Naturally, you have to deliver the inventory to them yourself or have it delivered to them. They are responsible for storing it, accounting for it, and safeguarding it. Same Considerations Although this outline of an independent contractor relationship is focused on a fulfillment operation, the same applies to any part of your operation that you might hire out.
Fulfillment Services There are fulfillment services almost everywhere that would love to do your fulfillment for you. Until you grow to a large volume, they are most likely not cost-effective. Nonetheless, it doesn’t hurt to inquire. UPS offers UPS Supply Chain logistics. You might investigate this when your business grows to a substantial volume. More relevently, UPS also offers a service that used to be called MY UPS.COM (http:// myups.com) for shipping management. Apparently the name is no
CHAPTER 13 FULFILLMENT
213
longer actively used, but the URL still works to reach the registration for the services. You will want to investigate this to see if it fits your fulfillment operation. Also investigate the paDepot fulfillment service (http://padepot.com). It enables you to set up, in effect, your own drop shipping operation. Have all your inventory shipped to paDepot. Then send your orders from buyers to paDepot for fulfillment. The paDepot warehouse takes care of the rest. As the paDepot warehouse is in Pennsylvania, the fastest delivery to your customers will be in the East. MDS Fulfillment (http://mdsfulfillment.com) also provides fulfillment services. Again, you will probably not find this service cost-effective without a substantial retail sales volume.
Administration The rest is paperwork. You need to administer the fulfillment operation even when you farm out part of it. This will entail delivering the packing slips and labels. If you use an auction management service, the service should provide a system for managing fulfillment and cranking out the paperwork. Understand that the term “labels” above can mean shippers’ labels as well as plain labels. The labels that you deliver to your fulfillment independent contractor can be shipper’s labels, even ones with prepaid postage. Whether it’s you or your fulfillment contractor, it doesn’t make sense to stand in line to process packages. One way to avoid it is to have all your paperwork (labels) and payment work done before the packages are dropped off (or picked up). Fortunately, all the major shippers now provide and support services that enable printing labels and payment via a computer. To drop off properly labeled packages with shipping prepaid requires that you have to learn something about shipping before you can pick an auction management service. You want to have a system that handles all the paperwork and payment work of the shipping with the least effort possible. Digital technology makes this feasible, but you’re the one who has to implement it. Choosing the best auction management service for your situation can make sure you integrate your shipping processes into your overall system so that everything works more
214
EBAY BUSINESS THE SMART WAY
smoothly and more easily and ensures quick delivery to all your eBay customers. The alternative is to cobble together your own computer system made up of various programs obtained here and there. That’s possible if you’re especially computer savvy. You might even get a system that’s less expensive to buy and operate (although there’s no guarantee). But why bother? An auction management service can do it all for you. That seems the least painful way to go. Finally, part of your job is to estimate a fulfillment cost per item. To do that, you need to know the cost of one box, one bag, X amount of packing filler, X amount of packing tape, etc. Each item is different. This process will enable you to estimate your handling cost for each item, which potentially can be billed to your customers.
Inventory Control If you don’t systematically account for your inventory, the business will get away from you before you know it. You can do it on a spreadsheet or with a database program. But the best way to do it is with an auction management service that includes an inventory control system. Such services will integrate this function with your other auction management functions and thereby coordinate your entire management and accounting effort. What about doing it manually? You’re not going to save money doing it manually; it will take more time; and your records will be less useful ultimately. Inventory control includes taking a physical inventory periodically. Many traditional businesses take inventory once a year. It’s a huge job. Yet for an eBay business, particularly one in the start-up phase, your inventory will be smaller with more turnover. You may need to take inventory more often to keep your records accurate. When you sell things that you thought you had in inventory but don’t, you invite serious customer service problems. Remember the feedback system?
The Digital Goal What’s the goal of fulfillment? Just-in-time inventory control. Many manufacturers and even distributors keep the minimum possible
CHAPTER 13 FULFILLMENT
215
amount of inventory in stock. Instead, they have the inventory delivered just before they need it (i.e., just in time).
Just In Time What does this require? First, it requires suppliers (vendors) that ship orders to you very promptly. Second, it takes predictable shipping times. For instance, if your distributor processes all orders and ships via UPS within twenty-four hours and USP takes two days to deliver, you can count on having new inventory in three days. Third, it requires you to be very organized with very tight inventory control. You need to know the up-to-the-minute status of your inventory, and you need to order regularly. Why is this a desirable goal? Because the less inventory you have on hand, the less operating capital you need, and the less space you need.
Customer Service What’s another goal of fulfillment? Customer service. It’s great to plan a just-in-time inventory system and operate it. But don’t lose sight of the customers, your eBay buyers. You must keep enough inventory on hand to make sure you can ship immediately to each customer. If any buyer has to wait for you to order from the distributor, that’s not good customer service, even with only a three-day wait.
Only with Software Quite frankly, I don’t know how you can manage your inventory precisely and efficiently without software. Don’t try a just-in-time system manually. Software on your computer—or better yet an auction management service via the Web—not only helps you account for money and inventory but also enables you to do things not possible without digital assistance (e.g., a just-in-time inventory system). Automakers According to numerous articles written about auto manufacturing, the automakers keep an inventory of parts measured in hours at their assembly plants. This is a just-in-time system. They do it with software and trucks. The timing is so tight, that if there’s a bad snowstorm slowing the trucks, the assembly line could come grinding to a halt.
216
EBAY BUSINESS THE SMART WAY
Quantity Buying How does just-in-time inventory work with quantity buying? Usually, when you buy in larger quantities, you get a lower wholesale price. This will increase your short-term capital requirements but presumably increase your profits too. However, it doesn’t necessarily have to interfere with your just-in-time system. Have the merchandise shipped in staggered shipments of smaller quantities, if possible, rather than all at once. Another technique is to have everything shipped to cheap storage. Then move small quantities just in time to the more expensive real estate where your fulfillment operation is located.
The Super Business Model Just-in-time inventory enables you to activate a super business model. Take advantage of it! Most retailers would be very happy to turn over their entire inventory every six months, but many don’t. Not only that, but they have to store their inventory in high-rent retail shops instead of low-rent storage space. Operating capital for inventory alone is a huge requirement. You can turn over your inventory quickly. Auctions are only 3, 5, 7, or 10 days. If you use a just-in-time inventory operation, you will need only a small amount of inventory. Your can keep your operating capital requirement low and use a comparatively minimal amount of low-cost storage space. It doesn’t get any better than this. Well, maybe it does; see the section in this chapter on drop shipping.
14 Receiving Payment Receiving payment is important to you as a seller, but believe it or not, making payment is even more important to a buyer. If you’re serious about running a business on eBay, effective customer service dictates that you offer your customers as many different ways to pay for items as you can. Each customer’s situation is different, and often there is only one way a customer can pay. If you don't accept that particular means of payment, you lose that customer.
Merchant Credit Card Account To accept credit cards, you will need a merchant credit card account. You get such an account at a bank or through an organization that has an affiliation with a bank. Although I’m not trying to sell Costco (a membership warehouse discount store operating in many states), the Costco example below is relevant because it’s a group deal, like group insurance. Consequently the fees are a little lower. Costco, because it’s a place where many small retailers buy merchandise at or near wholesale prices, offers a wide range of small business services. One such service is a merchant 217
218
EBAY BUSINESS THE SMART WAY
credit card account. This represents the low side of the range of fees you will discover when you research merchant accounts.
Costco’s Merchant Account Program As of early 2006, Costco offered the following terms to its members who elected to arrange merchant credit card processing through Costco for Internet retailing: • 2.02 percent of charge plus $0.27 per transaction • $4.95 per month fee (waived for Costco Executive members) • $8.00 per month online processing fee • For certain types of credit cards an additional cost per transaction • $10 charge-back fee This seems like a reasonable deal, although you will do well to shop around to get the best fees. Costco and the bank have made arrangements with Nova Information Systems to offer this traditional service. This arrangement is subject to bank approval, and those with poor credit may not get approval. Why Do You Need Good Credit? The bank is worried that as a merchant you will put through modest fraudulent charges to increase your operating capital or large fraudulent charges to built up your cash reserves just before you disappear.
How does this work? This example of the sale of a baseball cap on eBay shows: $9.32 (sales price of cap) × 2.02% = $0.19 $0.19 + $0.27 = $0.46 fee This is a sizeable fee for an item that sells for a low price. Indeed, it’s 5 percent of the sales price. Let’s look at another transaction, the sale of a digital camera on eBay: $151.65 (sales price of digital camera) × 2.02% = $3.06 $3.06 + $0.27 = $3.33 fee This is not such a large fee. It’s only 2.2 percent of the sales price. As
CHAPTER 14 RECEIVING PAYMENT
219
you can see, with a fixed fee you pay a premium on low-dollar sales but get a better deal on high-dollar sales. But, you know what? We didn’t take into account the cost of the processing fee. Suppose you have 119 sales per month. That’s an additional fee, in effect, of $0.07 per transaction ($8.00/119 = $0.067). Keep in mind that this doesn’t include the additional charge, if any, you will pay for a shopping-cart-checkout mechanism on your website. Of course, if you take telephone orders, you will need telephone processing equipment to handle the orders that will cost an additional monthly fee.
Your Bank You may end up getting your merchant account from your bank. Many retailers do. Your bank may not offer the lowest fees, but your credit card processing is likely to be part of a larger group of services the bank provides to you.
Online Processing Charges Electronic processing of credit card charges for online sales will cost you additional money (e.g., $8.00 per month for Costco-Nova above) over and above the merchant account charges. In fact, the charges often tend to look like the merchant credit card charges, albeit somewhat lower. But when your buyer goes to the checkout, you need the online processing.
eCommerce Software In order to handle sales online from your own website, you need ecommerce software. That might cost anywhere from $200 to $10,000. Miva Merchant is a leading example and is inexpensive for the functionality it provides. It costs around $500. You don’t have to be a programmer to set it up for your website, but it’s still not easy to do. Perhaps a better approach is to find a Web host provider that includes ecommerce software as part of a package of services. Web hosting is a competitive business, and almost every host provider offers some kind of ecommerce software for no additional fee, or in some cases, a mod-
220
EBAY BUSINESS THE SMART WAY
est additional fee. Whether such software will meet your needs adequately is one thing you will want to determine up front. There are even host providers that offer Miva Merchant free or for a modest additional fee (good deal!) and set it up for you. This is a wild software market. Look over every offering in detail to make sure it does what you need it to do and doesn’t have any hidden costs. Don’t agree to pay on a per-transaction basis for the software, and don’t agree to pay a high fee either. You don’t have to. Beware of software deals that tie you into an online mall for which an extra fee is charged. The mall is very unlikely to boost your sales. Note that the software must be compatible with the online processing service to which you subscribe. They must dovetail. For instance, Miva Merchant has plug-ins for a variety of online processing services. These plug-in are mini-programs (add-on programs) that provide Merchant with extra processing power (extra functionality). PayPal enables you to accept credit cards now both for eBay auctions and for your website through its Website Payments services. Read more about this in Chapter 20. This is a good deal and avoids the need for a merchant credit card account for most purposes.
If You Can't Get a Merchant Account If your credit isn’t well enough established to get a merchant account from your bank or via another low-cost source such as Costco, you can still get one, albeit at a higher cost. You can get one through an intermediary that provides merchant credit card accounts for ecommerce websites. A recent review of the fees charged by such an intermediary were as follows: • 2.25 percent transaction fee • $0.29 per transaction fee • $25 per month minimum • $29.95 monthly fee • $95 annual fee • $99 one-time fee
CHAPTER 14 RECEIVING PAYMENT
221
This is probably going to cost you more than a merchant account from your bank. Unfortunately, there are so many different fees involved in using a merchant account online, you will do well to analyze each offering carefully and totally. Banks and other financial services providers can be unscrupulous in dealing with novice business customers. Add up each fee including the merchant account fees, the equipment leasing cost, the online processing fees, and the cost of ecommerce software to determine what your total cost is. You may find that in some cases using an intermediary is less expensive than using your bank. Again, read about the PayPal in Chapter 20, which provides an alternative way for you to accept credit cards both for eBay auctions and for your own website sales.
Money Orders and Cashier's Checks Money orders can be a risky form of payment to accept. They can be easily counterfeited. It appears the day is coming when we will see a substantial increase in money-order and cashier’s-check fraud on eBay. This type of fraud is increasing nationally. Read Chapter 17 for more information on counterfeiting. My Bank My bank is a huge bank with branches in many states. Yet its money orders and cashier’s checks, generated by a computer on a laser printer with almost plain paper, look like they are counterfeited— poorly counterfeited—even though they are perfectly legitimate. I always wonder whether an eBay seller many miles away will accept my money order. Are these money orders and cashier's checks easy to counterfeit? You bet they are. Just duplicate them and print them on plain paper. But a counterfeiter wouldn't even bother to duplicate them. A counterfeiter might just make up his own form for a money order and put the name of any bank at the top. Who would know the difference? Do you know what a Bank of Iowa cashier's check looks like? I don’t.
Many sellers accept only money orders. They do so to protect themselves. A buyer can’t get her money back if she’s dissatisfied with the
222
EBAY BUSINESS THE SMART WAY
merchandise as she can with a credit card chargeback. So, the seller gets a sense of finality in the transaction. But I’m sorry to be the one to inform you: This practice is not good customer service.
Compared to Credit Cards Payment by credit card or through a payment service online is as easy as providing a credit card number and other information. It takes but a few seconds. On the other hand, to pay by money order or cashier’s check, a customer has to go someplace (e.g., a bank), wait in line, deal with a clerk (e.g., teller), make payment for the money order, put the money order in an envelope, mail the envelope, and wait an extra few days before the goods are even shipped. Why would anyone do this? I certainly wouldn’t. (I have done this several times in the past but would not do it again.) Still some people are used to using money orders routinely in their financial dealings and feel perfectly comfortable paying this way. If you’re interested in good customer service, you need to accept money orders and cashier’s checks. But learn something about detecting counterfeits. And, if you’re interested in good customer service, you will not limit your payment methods to only money orders and cashier’s checks. Many people just won’t buy from you (me included), and those who do may be unhappy about the payment method. Should You Wait? Should you wait for a money order or cashier’s check to clear? Theoretically, the issuer (e.g., bank) stands behind them, and you don't have to worry about insufficient funds. But what if the money order is a counterfeit? If it’s from a familiar source such as the post office, you can probably tell whether it’s real. If it appears to be like a cashier’s check from my bank, however, you better hold the merchandise until the money order clears.
Another Point of View Having thoroughly alarmed you, let me soften my point of view a little. The leading money orders are easily recognizable, and you will see many of them often enough to know when to suspect a counterfeit. In addition, a counterfeiter online leaves a trail (his Internet access
CHAPTER 14 RECEIVING PAYMENT
223
account). He also leaves a trail offline, the shipping delivery point. This normally makes it easier for law enforcement authorities to catch him (although I’ve been told by a reliable source that the FBI won’t bother with counterfeited legal instruments of less than $50,000). So, counterfeits aren’t as likely to materialize as it might seem. So, don’t refuse money orders and cashiers checks based just on what I’ve said above. But do be careful. Here are some of the leading providers: Postal Service The Post Office is the classic issuer of money orders. They are comparatively cheap if you’re talking money. They’re expensive if you’re talking time (waiting in line). One can also send money orders from the Postal Service website (http:// usps.com). Western Union Remember the telegraph? This is one of the latest reincarnations. Western Union (http://www.westernunion.com) has certainly been in the money payment business for a long time. Today you can buy a money order on line with a credit card, and Western Union will send a money order in the mail anywhere in the country and to foreign countries. They also have a money transfer service. Western Union is an expensive way for buyers to make payments. 7-Eleven This convenience store and others sell money orders. They also have ATM machines. They are one-stop financial centers. A customer can get money from the ATM and buy a money order. The 7-Eleven money orders are comparatively cheap, which is interesting since 7-Eleven offers them via Western Union. And the ATM charge for withdrawing money? Who knows? Let’s hope it’s not more than the item being purchased. Banks I get free money orders and cashier’s checks at my bank because I have a deluxe checking account. For those without a special account, the cost is outrageous for small sums. And you still have to go to the bank and wait in line to buy them. This is not a good deal. As you can see, insisting that your customers pay via cashier’s checks
224
EBAY BUSINESS THE SMART WAY
or money orders may reduce your market, perhaps significantly.
Cost Indeed, money orders and cashier’s checks tend to cost a lot. It’s a harsh policy to force your customers to use them. Nonetheless, some people live on cash and buy money orders when they need to pay by check; they use money orders like checks.
Checks Checks probably cause more problems than other forms of payment. First, counterfeits or forgeries can be a problem, although a normal check would certainly be more difficult to counterfeit than my bank’s money orders or cashier’s checks. Second, there is always the risk of insufficient funds. Even though a check written on insufficient funds constitutes a criminal offense, such an offense is seldom handled as a real crime in most locales. Consequently, checks written on insufficient funds are quite common. Most sellers on eBay know enough to wait for a check to clear before sending the merchandise. In fact, this is a good practice. Every eBay retailer who has done high volume sales has a story to tell about the merchandise they sent before the check cleared and how they got burned. Don’t let it happen to you. Wait for the check to clear. Do accept checks, however. Most of the world still operates on checks (about 60 percent), and it’s good customer service to accept them. You can also accept checks by email or by phone (possible since 1996). Here’s how that works: 1. The buyer provides you with all the relevant information from one of her checks on the phone or in an email. 2. The buyer authorizes you to write a check for the purchase (a specific amount). 3. You input the buyer’s check information into a program such as TurboCheck (http://www.turbocheck.com). The program prints a check on a check form run through a computer printer. You sign the check on behalf of the buyer and deposit it. 4. You wait for the check to clear and then send the merchandise.
CHAPTER 14 RECEIVING PAYMENT
225
The biggest problem you have with this technique is convincing the buyer that it’s OK. But it’s really no more risky for her than giving someone a check, which she does everyday. No extra information is revealed. You need to protect yourself against a potential claim of fraud by the buyer. Keep a record of the email authorization. The authorization should include a statement that the buyer authorizes you to write a check for a certain amount. If you take the check by telephone, you should make a recording and archive it. This is also good customer service. If a customer feels comfortable paying with a check this way, the customer will get the goods sooner. The period that the check would otherwise be in the mail is eliminated, and shipment is made a few days sooner. (See Chapter 19 for more information on Miva Merchant, which offers check writing as a means of payment.)
Online Payment Services Payment services are go-betweens between a seller and a customer. For example, a credit card is a payment service. With the consent of the buyer, the credit card service takes an order from the seller to credit funds in the seller’s account for a purchase and then simultaneously debits the buyer’s account. Online payment services normally work a little differently. They constitute another level of service overlaying traditional payment services. PayPal provides a good example and is the leading payment service on the Web.
PayPal Since PayPal is owned by eBay and has become such an important payment service for eBay retailers, I cover it in its own chapter. Read Chapter 20 for the details on PayPal. It’s now a complete payment service and more.
CheckFree CheckFree (see Figure 14.1) has been around for 20 years and has about 12 million customers. If you accept payments via CheckFree, you’ll have millions of eBay buyers ready, willing, and able to use it to
226
EBAY BUSINESS THE SMART WAY
pay you. It is a highly secure form of payment. The sales price is deposited directly into your bank account. And buyers without CheckFree can easily become CheckFree members. Go to MyCheckFree (http://mycheckfree.com) to learn more about this reputable old service. Sounds a lot like PayPal, doesn’t it?
Just like PayPal, CheckFree isn’t limited to use on eBay. You can use it for payments anyplace that will accept it. In fact, CheckFree has an impressive list of major companies that accept it as a means of paying bills, such as Duke Power, Macy’s, BP, Denver Water, Verizon, City of Naperville, San Francisco Chronicle, and State Farm Insurance. This is definitely a payment service to to consider.
AuctionCheckout If you have a merchant’s account, with AuctionCheckout you can provide a secure checkout that works quickly and easily for buyers with credit cards. Check out AuctionCheckout at http://www.auctionchecko ut.com. You don’t need a website to use this service for your eBay retail business. Then too, buyers are not required to become members. AuctionCheckout is not a bank-like organization, such as PayPal, and does not hold either funds or personal information.
CHAPTER 14 RECEIVING PAYMENT
227
Cash on Delivery (COD) This is an old favorite from the days before electronic credit services. It’s now out of vogue and more trouble than it’s worth, not to mention expensive. A few people may still want to use it, but this is one payment method you need to avoid unless you have a specific reason for accepting it.
Bidding Qualification When you are selling big ticket items, it cost money to hold them. Such cost is measured in interest expense (if your inventor y is financed), depreciation (some items depreciate monthly), storage cost, lost opportunity (to sell), and the additional effort required to rerun the auction. One non-paying buyer (NPB) can set you back weeks. One way around this risk is to require that bidders become qualified. The real bidders will welcome qualification, because they won’t get beat in the auction by a NPB. The NPB will avoid qualification. A useful qualification service is eDeposit (http://edeposit.com) which requires identity verification and a good-faith deposit from a bidder. This qualification does not interfere with the auction process and is done at no expense to the bidders. The service is used by US Marshals who auction goods confiscated from criminals. If you deal routinely in big ticket items, eDeposit can give you the protection you need against NPBs.
Don’t Sell on Credit If you sell on credit, it is certain that you will get burned regularly by people who will not pay you what they owe. Selling on credit can be a good business practice if you understand what the statistical risks are and are willing to set yourself up to be a bill collector. If you want to avoid all that, however, don’t sell on credit. Commercial Credit It is particularly important that you don’t sell in bulk on credit. This is the kind of sale where the demand for credit will be the most intense. Someone wants to buy something from you at a wholesale price in bulk to resell at retail. Since four out of five businesses fail in the first five years of their existence, you are likely to get burned, sooner rather
228
EBAY BUSINESS THE SMART WAY
than later, selling in bulk to other retailers on credit. The loss for a bulk sale on credit is likely to be substantial compared to credit losses on individual items. Moreover, as I pointed out elsewhere in this book, when you finance someone’s inventory, you are in essence financing their business. If there is any financing of inventory to be done, make sure it is a wholesaler financing your inventory, not you financing another retailer’s inventory. Having said that, I understand it is difficult to sell at wholesale in some industries without providing credit. If you are forced to provide credit, make sure the credit periods are short (e.g., monthly). Then keep on top of your collectables. In fact, be brutal about collecting on time. If anyone is late in paying, cut them off. Of course, before you do business with someone, let them know what to expect in regard to your collection methods. And be sure to check their credit. Consumer Credit Fortunately on eBay, most retailers don’t have to worry about collections. Consumer buyers expect to pay immediately and do not expect to receive credit. Consequently, most of your credit demands will be from retailers buying in bulk from you; that is, people who you deal with in regard to an eBay bulk sale or outside the eBay marketplace. There is a new development, however, that enables you to sell on credit to consumers, in effect, without any risk. GE Consumer Credit and PayPal have teamed up to offer PayPal Buyer Credit. Buyers can borrow money to buy items on eBay. However, this arrangement is strictly between the buyer, PayPal, and GE and has nothing to do with sellers. So, it doesn’t affect you as a seller. Nonetheless, you should ask yourself, What can I do to take advantage of this? One answer is that you can remind potential buyers in your auction ads that consumer financing is available through PayPal. Consumer financing is very popular, particularly with those who do not have credit cards. You want to make sure you do everything you can to promote this new source of consumer financing for eBay.
CHAPTER 14 RECEIVING PAYMENT
229
Tutorial? Buyers will probably not investigate the new PayPal Buyer Credit service before making a purchase, and some buyers may be a little scared of it. One thing you might do is include a mini tutorial (three paragraphs) right in your auction ad on how to get a PayPal/GE consumer loan. After reading your tutorial, buyers will have more confidence bidding and going through the checkout process.
What Should You Do? Getting set up to receive payments is sobering. Each means of payment has its advantages and disadvantages. And you need to offer multiple means to buyers just for the sake of good customer service. The big question is, Can you get by with an online payment service and forego getting a merchant credit card account? The answer is yes. Read Chapter 20 for more information. Whatever you do, consider everything very carefully. The financial arrangements for many means of payment are somewhat complex and require substantial analysis. There are so many schemes available that it would be fruitless to analyze more than a few samples. The providers will not help you sort things out either. In fact, they are more likely to confuse you hoping to sneak by those little fees—those insidious little fees that add up to big dollars. Take a look at a variety of payment schemes. Pencil out each using a range of products with different prices. Try to determine which is the least expensive before choosing one. You will be shocked at how expensive credit cards and payment services are for low-cost items. It’s tough to make a profit on products with a narrow margin. For big ticket items, the costs are a lower percentage of sales price, but they’re still significant. Auction Management Services Some auction management services have checkout devices and online processing that you can use for both your website and your eBay auctions. If one of these services will work for you, there’s no reason to duplicate it with some other service.
230
EBAY BUSINESS THE SMART WAY
PayPal gives you the flexibility of collecting payments off eBay as well as on eBay. You can now accept credit cards via PayPal, and PayPal is so popular that it may be even better than having a merchant credit card account. Indeed, one of PayPal’s services is essentially a merchant account. Merchant accounts are less expensive when you reach high volume.
15 Finding Inventory At the first national eBay conference in Anaheim, California, in 2002, the word going around the convention center among the attendees was that auction management software makes an eBay business easy to run. The only tough problem remaining is finding some inventory to sell. I believe that idea reveals a lot of insight. The auction management software (see Chapters 18 and 19) does make an eBay business a no-brainer. Finding a product niche and the inventory to fill it is where you need to focus your effort, if you haven’t found a niche already. Indeed, the word going around the subsequent eBay conferences in Orlando, New Orleans, and San Jose was that finding inventory to sell remains a primary concern for start-up eBay businesses and even for many existing eBay businesses. This chapter briefly outlines some of the sources where you can find inventory. For a complete and comprehensive explaination of the sources of inventory and information about the manufacturing, wholesaling, retailing structure, read eBay Inventory the Smart Way.
Basics Before going down the list, it’s useful to go over some basics that keep
231
232
EBAY BUSINESS THE SMART WAY
things in perspective and increase your chances of success.
Play the Field The ideal niche to find will be one in which the products sell well on eBay at a profit. Be prepared to move quickly and try new ideas. (See Chapter 26 for more information on developing a strategy for your new eBay business, including selling value-added products that may generate stable sales.)
Know the Market If you don’t know the market for the goods you buy to sell on eBay, you will be unsuccessful before you even start. Do your homework. Research eBay sales data thoroughly before you start buying inventory.
Beware the Flood You don’t want to buy from a wholesaler that is currently selling the same products to 40 other eBay retailers. That spells financial disaster.
Sales Tax License Having your sales tax license will give you more credibility with the people you approach to acquire inventory. You will want to get it before you go out knocking on doors.
Drop Ship A wholesaler’s or manufacturer’s willingness and capability to do drop shipping can save you the headache and cost of storing and shipping products.
Name, Rank, and Serial Number Don’t buy anything without the name, physical address, telephone number, and email address of the seller. You also need a human to contact at the seller. If you can’t get these—and too often you can’t get these online—move on to another seller. Legitimate sellers readily provide this information.
Shipping Whatever you pay wholesale, you have to pay shipping on top of that (unless the merchandise can be drop shipped). So, estimate the ship-
CHAPTER 15 FINDING INVENTORY
233
ping cost to get the merchandise to your storage place, and add that cost to the wholesale cost of the merchandise to calculate your cost of goods.
Yellow Pages Use your local Yellow Pages to find local distributors, wholesalers, and other sources of inventory. Use the online Yellow Pages at a website such as SwitchBoard.com (http://switchboard.com) to find distributors and wholesalers nationally as well as in specific locations.
Negotiate Retail is a fixed-price world. In contrast, wholesale is a negotiatedprice world. Negotiate every purchase down to the last nickel.
The List Here’s the list. It’s not an all-inclusive list, but it will get you off to a good start thinking about where you might find some inventory to sell. Trade Shows Trade shows are great places to search for eBay inventory for many reasons: • Many are open to those with just a sales tax license. • They are a place for new products to be unveiled. • They include small manufacturers and producers that might be difficult to find otherwise. • They are places to get good deals such as product introductions or closeouts. • They are places to make valuable contacts. Trade shows make a great place to start your trek to find products you can sell profitably on eBay. What Trade Shows?
Local trade shows can be interesting and informative. They are usually a mixture of retailers and distributors. The chances of finding wholesale sources of inventory at local shows, though, are not as great as at the regional and national trade shows.
234
EBAY BUSINESS THE SMART WAY
Exhibitors at the regional and national trade shows are mostly wholesalers. They provide your best shot at making a connection with a supplier of inventory. Such trade shows are often quite large and make a fertile ground for finding products. Finding Trade Shows
Some trade show websites where you can find trade show schedules follow: • ASD/AMD, http://www.merchandisegroup.com (exhibitor at eBay Live! conference) • Tradeshow Week, http://www.tradeshowweek.com And finally, you can purchase a printed trade show directory featuring over 10,000 trade shows in over 100 countries: • International Tradeshow Directory, http://www.iaem.org/content/ ITD.pdf Trade Organizations Every industry has trade organizations. If you commit to selling products in a certain industry, join the leading trade organization, particularly if it has a local chapter. Craftspeople and Artists It’s my observation that many craftspeople and artists create very attractive products. Some of these people will sell on eBay or otherwise market their products. For many, however, marketing is an anathema. They just don’t like it. If you can buy their products at wholesale prices, you may be able to make a profit selling such products on eBay. You can find a schedule of art and craft shows at: • Art and Craft Shows Net, http://www.artandcraftshows.net Your Business Library Your local library is likely to have a wealth of information relevant to finding inventory. Even better, if your library system has a business library, try that. You may want to familiarize yourself with the SIC (Standard Industrial Classification) system, recently replaced with the NAICS (North American Industry Classification System). Using SIC or NAICS codes may help you identify wholesalers more easily.
CHAPTER 15 FINDING INVENTORY
235
Thomson Gale (http://www.gale.com), Farmington Hills, MI, publishes a number of directories that may help you track down manufacturers or distributors (see Figure 15.1). Gale also publishes information and data on its website.
Thomas Regional (http://www.thomasregional.com), New York, publishes business resources (see Figure 15.2) including: Thomas Register of American Manufacturers The Register is the definitive directory for industrial companies. Thomas is also a great Web resource for finding industrial product suppliers. Small Manufacturers You can probably find some of these manufacturers in your own community. You may be able to sell their products profitably on eBay. The products should be unique and not directly competitive with similar top brand products. Or, the products should sell at a price point favorable to consumers. Get out and pound the pavement looking for these manufacturers in your locale.
Wholesalers Buying at wholesale and selling for a profit at retail is the name of the game. If you can identify and do business with some reliable distributors, you can turn such relationships into a powerful eBay business. Just because you’re getting something at wholesale, however, doesn’t mean you’re getting it cheap enough to make a profit selling it. Some distributors charge higher prices than discount stores, making it difficult for you to sell on eBay profitably. Vendor Financing Once you become established with a wholesaler, the wholesaler may finance your business. By extending 15, 30, or 60-day credit, a wholesaler is, in effect, providing you with free operating capital. Because you can potentially turn over inventory quickly on eBay, wholesaler financing can be a major funding source for your retailing business. In some businesses, you need equipment to facilitate selling. For instance, if you sell trophies and awards, you may need an engraving machine. Your trophy wholesaler might provide you with an engraving machine free if you do enough business. More likely, your wholesaler will lease you an engraving machine. Getting a lease for a needed
CHAPTER 15 FINDING INVENTORY
237
machine is the same, for all practical purposes, as getting a loan to buy the machine. It gets you off to a good start without having to get a business loan. Leasing specialized equipment from your vendors is a timehonored means of getting a business off the ground.
Worldwidebrands, Inc. (http://worldwidebrands.com) offers a directory at a reasonable cost that includes only wholesalers that are willing to provide small quantities of products at full wholesale prices to ecommerce retailers. It’s called the Light Bulk Wholesale Directory and includes wholsalers selling hundreds of thousands of products. Wholesale-Retail Online Networks Andale (http://andale.com), the auction management service (see Chapter 19), provides a service named Andale Suppliers at a modest monthly fee which matches wholesalers with retailers. This is a network for general particiaption and is certainly worth a try for those selling new merchanside. Online networks like this in various industries have sustained wholesalers and retailers long predating the Web and have given their participants a competitive edge. Special Mail-Order Wholesalers There are special mail-order distributors geared toward those looking for a home business. They are often something of a scam. However, if an offering is legitimate and provides you a real opportunity for profit, it’s likely to be appropriate for eBay selling as well as for mail-order. Drop-Ship Wholesalers Drop shipping is no longer just available for low-quality goods aimed at the home mail-order business. Drop shipping is becoming popular with normal manufacturers and wholesalers. Online sales in the last ten years have moved this idea along considerably. Therefore, it makes sense to always ask any wholesaler whether drop shipping is available. If you want to use drop-shipped inventory exclusively, try Doba (formerly Wholesale Marketer – http://doba.com). This company provides a drop-ship service by aggregating wholesalers willing to drop ship. It offers over 250,000 wholesale products and enables its members to access its product databases online for a modest monthly fee.
238
EBAY BUSINESS THE SMART WAY
Government Surplus Government surplus conjures up visions of Army-Navy WWII gas masks. The fact is that federal government surplus is not tied to the military, and there is surplus at every level of government from federal to municipal. The surplus could be new merchandise and supplies as well as old, used, or damaged goods. Closeouts There is a closeout (liquidation, surplus) industry that buys excess merchandise from large retailers, wholesalers, manufacturers, and even the government in bulk for pennies on the dollar and resells it in bulk to other retailers for a few more pennies on the dollar. Some closeout vendors sell goods by the warehouse pallet (4 ft × 4 ft wooden base piled about 7 feet high with goods), some by the truckload. This is a competitive industry that like any other industry requires a lot of hard work for success. Many closeout companies have gone to the Web to sell their goods in bulk to wannabe retailers who think they can sell the goods profitably online, in many cases on eBay. Some closeout companies are even selling on eBay themselves. This is a big business that covers liquidations, returns, job lots, offprice lots, overstocks, surplus, salvage, unclaimed freight, and pallet merchandise. There are closeout shows, newspapers, magazines, and websites. The closeout organizations below are special in that they have been exhibitors at the eBay Live conference and cater to eBay retailers: Liquidity Services, Inc. Via three websites, this company matches buyers (eBay retailers) with sellers (closeout retailers and wholesalers): Liquidation (http://www.liquidation.com) This is an auction site for general surplus including state government surplus. Government Liquidation (http://www.govliquidation.com) This is an auction site for US military surplus. GoWholesale (http://gowholesale.com) This is a search engine that matches eBay retailers (and other retailers) with closeout retailers and wholesalers.
CHAPTER 15 FINDING INVENTORY
239
Luxury Brands (http://luxurybrandsllc.com) This is an interesting company. It imports closeouts of European clothing and apparel, mostly in small quantities and makes them available to US retailers. Foreign Closeouts Don’t overlook foreign closeouts. You will have to import the goods once you buy them (in bulk, not one item at a time), but there are some good deals awaiting you if you have the capital to make a purchase and pay for the importation process. Local Closeouts There is another closeout game to play, a local one. You can buy your closeouts directly at any level of commitment with which you feel comfortable. For instance, suppose a local linen shop has excessively overstocked towels and has boxed them to sell them as a closeout. You buy the inventory for a good price and sell it at a profitable markup on eBay. Special Products Special products are those you see on television selling for $19.95 that you can’t get in the stores. Find out where you can buy these products at wholesale and sell them on eBay. People have already seen them on television. Special Manufacturing You can have something manufactured yourself and sell it on eBay. It could be a product that you or a friend invented. More likely it will be a custom-made version of an existing product. Special T-shirts, mugs, and the like made to commemorate an event (e.g., World Series) make a good example. Manufacturers Some manufacturers don’t use distributors but sell direct to retailers. Others sell to both distributors and retailers. As a retailer you may be able to get inventory for a lower wholesale price by buying direct from the manufacturer.
240
EBAY BUSINESS THE SMART WAY
Manufacturers’ Representatives A manufacturer’s rep is simply an independent but exclusive salesperson (or firm) for a manufacturer. A rep often represents more than one manufacturer, although reps usually don’t handle competing lines of products and attempt to make their lines complementary instead. You probably won’t get the lowest prices dealing with a rep rather than dealing directly with a manufacturer, but you can buy in smaller quantities. Remanufacturing Remanufacturing is a large industry. Many states prohibit reselling goods returned on warranty (or for other reasons) as new, even after being fixed. Consequently, such goods go through a remanufacturing process. Quality is usually high and wholesale prices are lower. Retail Excess Inventory Your local retail stores are good sources of inventory for selling on eBay. They will have some excess inventory every season. Get to know the managers of the stores from which you would like to buy merchandise. Then keep in touch. When surplus at one of the stores becomes available, negotiate the best price you can, and be ready to buy with cash if necessary. This approach differs from seeking local closeouts in two ways. Closeouts are likely to be larger and to appear unpredictably. Excess inventory is usually in smaller qualities and is predictably seasonal. Off-Season, On-Season Buy off-season and sell the next season. Everyone in the Great Lakes area knows that the best time to buy a boat at a bargain price is in October and the best time to sell one for top price is in May. This phenomenon applies to all sorts of merchandise. If you buy it in the offseason at a bargain, you can sell it profitably in the next season. Picking A picker is one who goes to sources of inventory and picks among the offerings to find something worth selling. For instance, pickers go to garage sales looking for antiques. When a picker finds an antique, she buys it and immediately sells it to an antique dealer. The dealer then
CHAPTER 15 FINDING INVENTORY
241
sells it to the public. As you can imagine, many antique pickers now are going straight to eBay to sell instead of selling to antique stores. Retail Picking A special type of picking is retail picking, and many eBay sellers practice it. It is simply going to ordinary retail stores, particularly discount stores and factory outlets, and picking merchandise to buy at a deep discount that can be sold for a profit on eBay. Designer Clothes A woman I met at the annual eBay conference is a loan closer. She’s also an expert on designer clothes. She buys designer clothes at outlet malls at bargain prices. She then sells them on eBay for a profit. I asked her why she didn’t quit her job as a loan closer and work on eBay full time. She told me that she couldn’t handle any more eBay business. I asked her why she didn’t use one of the auction management services to organize her efforts more efficiently. She said that’s why she was attending the conference. She wanted to find out about the services that would enable her to rev up her eBay business and quit her job.
Local Sources Don’t overlook local sources. If you’re picking, you have to go to local sources or else travel out of town. But there are potential local sources for every category in this chapter. Local retailers may have overordered, resulting in excess inventory that you may be able to buy cheaply and sell profitably on eBay. A local craftsperson may have a product that you can make into a hot item on eBay. Packages Put a package together and sell it. At least one person on eBay sold a home network wiring kit. He put 500 feet of Cat 5e network wire together with a crimping tool, a punchdown tool, RJ-45 modular plugs, and jacks and sold it with instructions. There’s a certain synergy going on here. He gave people the components they needed with onestop shopping and was successful on eBay selling at a higher price than he could get selling the components separately. (Of course, when wireless became popular, he had to move on to another packaging scheme.)
242
EBAY BUSINESS THE SMART WAY
Partnerships There are still a huge number of people who are computer illiterate and who may never come to use computers. Find one who is a retailer and partner with him to sell his merchandise on eBay. You do all the digital work. He supplies the inventory. You divide the profits fairly. Newspaper Your local newspaper can be a fruitful resource for identifying sources of inventory. Look through the classified ads section for opportunities to buy low locally and sell high on eBay. This is particularly true if you’re selling in a niche; you need to check only one portion of the classifieds, not the entire classifieds section. Legal notices are often required for the auctions and sales of assets or surplus from estates, government, etc. You can find the notices in the newspaper. You can even find display advertising occasionally hyping the sale of assets. And it’s in the newspaper that you’ll find out about the blowout sales that retailers occasionally hold. Consignment Sales Consignment sales offer you a lot of possibilities. You provide a service of selling the items of other people on eBay, and such people pay you fees. You don’t have any money tied up in inventory, and if any items don’t sell, you’re not stuck with them. eBay’s Trading Assistant program can help you promote this service. If you sell at retail on eBay and you having trouble finding enough inventory, consignment sales of similar items can supplement your existing inventory. Consignment selling is covered in more detail in Chapter 31. Consignment Stores A consignment store is a physical store where people can bring in items to be sold on eBay. With a consignment store, you advertise to get walk-in business. Today there are many new eBay cosignment store franchises available, but a franchise requires considerable capital. Read about eBay consignment stores in Chapter 31. Local Auctions Local live auctions are a proven means of acquiring inventory to be
CHAPTER 15 FINDING INVENTORY
243
sold at a profit on eBay. According to the National Auctioneers Associaton (NAA), $240 billion of goods and services were sold at live auctions in 2005, up from $217 billion in 2004. Unfortunately, eBay now has such an effect on local markets that auctioneers are using eBay to appraise goods and set minimum auction prices. The good deals at auctions aren’t as plentiful as they used to be. In fact, the good deals at auctions were never automatic. You have always had to know market values well to find a good deal at any auction. Many items are auctioned off at prices above market value. Don’t Overlook Don’t overlook the fact that live auctions sold $240 billion in 2005 while eBay sold $45 billion. Sure looks to me like eBay has plenty of room to grow.
eBay eBay itself can be a source of inventory for your eBay business. There are several approaches: 1. Buy at wholesale in quantity on eBay. Sell at retail one item at a time on eBay. There are plenty of wholesalers and closeout companies selling on eBay. 2. Go picking on eBay just as you would locally. You will spot bargains that provide profit opportunities. Buy an item on eBay and then immediately turn around and sell it on eBay. 3. Look for mishandled merchandise. Mishandled on eBay means auctioned with lack of competence. This can happen because an item is placed in the wrong category, is misspelled, has a poor title or auction ad, lacks a photograph, has a poor photograph, or a dozen other reasons. The result is that the item does not get bid up, and you can buy it at a bargain price. (This happens much more than you might think.) Then sell it competently on eBay. This is no fantasy. There are people doing this. 4. Refurbish or repair broken or defective items. Such items sell cheap on eBay (assuming the defects are properly disclosed). Buy an item on eBay. Repair it. Then sell it on eBay for a profit.
244
EBAY BUSINESS THE SMART WAY
5. Invent your own approach. With 50 million items for auction each week, there will always be plenty of anomalies in the marketplace with which to do something profitable. The trick to buying on eBay to get inventory is: make good use of the eBay search engine. Imports Import products and sell them on eBay US. That sounds easy enough, but how do you do it? One way is to read eBay Global the Smart Way. Let’s examine a few ways you can find items abroad to sell in the US. • Shop on eBays abroad Go shopping on eBay France. Find a cool item that you think will sell well on eBay US. Then attempt to find a source of inventory in France. • Shop in countries abroad Go shopping in another country. Find cool items that you think will sell well on eBay US. Then attempt to find wholesale sources of inventory in the country you are visiting before you come home. • Go to trade shows abroad Attend a trade show in another country. You will find vendors—presumably wholesalers— you will never see in the US. • Seek foreign closeouts Closeouts aren’t limited to the US. Look for closeouts from manufacturers, wholesalers, and closeout vendors in other countries. Manufacturing Abroad If you cannot find a manufacturer in the US to make what you want to sell, try having it manufactured abroad. There are hundreds of thousands of skilled small manufacturers abroad that can custom make or mass produce items in small quantities for you. Usually it takes a trip to another country to identify and negotiate with such manufacturers, but such a trip can ultimately be very profitable. Before You Go Manufacturing abroad is not always the last word in getting something made. Before you go to the trouble, check thoroughly in the US first. Manufacturing abroad is not always cheaper, and it’s seldom quicker.
CHAPTER 15 FINDING INVENTORY
245
Hot Tip Here’s a hot tip for finding a niche in which you can make sales. Try bulk sales. I’m not talking bulk sales such as pallets of closeout products to sell to retailers. I’m talking consumer bulk sales, a dozen of this or two dozen of that. I use lip balm almost every day with a minimum SPF of 30. (I’m outside a lot.) I can buy it at Safeway for $1.95. I can’t buy it on eBay that cheap. Sure, I can get it on eBay for $1.69 from a seller who wants $1.99 for postage for the first item and $0.99 for each additional item. He must ship by Pony Express using real ponies. I can buy it in bulk on eBay, 24 for $45 with $5 postage, about the same price as buying at Safeway one item at a time. Why can’t someone on eBay sell me two dozen at a price that will make purchasing in bulk worth the savings—and then charge a reasonable fee for shipping? The lip balm is just one of many examples of items I would buy in bulk if the items were available at good prices in consumer bulk on eBay. I keep searching, but I seldom find a worthwhile consumer bulk purchase on eBay. Even where consumer bulk purchases are available, the selection of items is usually narrow. Costco has created a powerful and profitable business model selling consumers products in bulk. You can’t buy one AA battery. You have to buy 40 bundled together. But you get a good price. If it works for Costco, it seems like it might work well for an aspiring eBay entrepreneur.
Go for It! There’s enough in this chapter to keep you brainstorming or buying for a while. Go for it! What’s the primary problem in getting an eBay business started? It’s the inventory. Finding something to sell. That’s the tough job. The rest is just busy work.
This page intentionally left blank
IV Handling the Unpleasant
This page intentionally left blank
16 Dealing with Buyer Fraud Buyers are wary of sellers who do not deliver the goods, probably the greatest fear of all on eBay. No one wants to pay for an item and then never have it arrive. But fraud is not limited to sellers. There are plenty of fraudulent buyers too. How do you, as a seller, protect yourself against them?
Fraud This is a section about various crimes and illicit practices, all arbitrarily labeled fraud here. You need to be aware and be cautious about all of these.
Non-Payment A number of eBay members think eBay is a game and don’t care that eBay is a legal marketplace. Undoubtedly, most of these are neo-postadolescents, but even some adults aren’t above acting with this kind of distain for the system too. This is a real problem for sellers, perhaps the number one problem: the non-paying buyer (NPB). If the winning bidder doesn’t pay up, an auction turns into an unpleasant task of bill collecting and has the potential to waste your time.
249
250
EBAY BUSINESS THE SMART WAY
Set up a system to notify winning bidders about shipping and handling charges and to request payment. If they do not pay after successive requests, notify eBay and relist the auction. eBay will relist free in this case. Always give negative feedback to the nonpayers, but don’t get emotional. Just state the facts. As a practical matter, if you’re selling low-price items in high volume and you routinely get NPBs, you simply ignore them and apply to eBay to relist. It may not be worth your time to file negative feedback. eBay has an NPB system. It’s called Unpaid Items. It has rules for getting fee reimbursement when buyers don’t pay. In addition, eBay has built protections against NPBs into the eBay system. Take a look at ReliaBid (http://www.reliabid.com), a digital solution to NPBs.
Payment Fraud If you don’t ship until payment has cleared, you are doing as much as you can, as a practical matter, to protect yourself. Although counterfeit checks, cashier’s checks, and money orders are easy to make, it’s unlikely that someone would use them for Internet purchases. The culprit could likely be traced both through the Internet access account and the delivery address. Nonetheless, it pays to be cautious, particularly on big orders. Realistically, you will probably ship before cashier’s checks and money orders clear. But you are taking a chance in doing so. Don’t ever ship before a personal check clears. Too many eBay sellers have been burned by “insufficient funds.” This is unquestionably the common wisdom of eBay. Nevertheless, another version of wisdom you might want to consider is customer service wisdom. Ship as soon as you receive payment. Sure, you will get bounced checks on which you can’t collect. You just factor that into the income and expense calculation. That’s what physical stores have to do everyday. You will build your customer service reputation by shipping immediately. When to Ship Deciding when to ship is not easy, considering that waiting for pay-
CHAPTER 16 DEALING WITH BUYER FRAUD
251
ment to clear is not good customer service. If you sell five dozen $25 items each week and experience only one or two bounced checks, you might opt to ship as soon as the checks are received. Your loss is small. You need a lot of customers. And it’s good customer service to ship immediately. Still, if you sell three $1,700 items a week, you might want to wait for payment to clear before you ship.
If you do get a bounced check, run it through again if it doesn’t cost anything at your bank to do so. In the end, when you have lost your patience and have not been paid, report it to eBay and give negative feedback. If the loss is large enough, pursue a remedy.
Credit Card Fraud Credit card fraud is widespread. Stolen credit card numbers abound. The most quickly growing crime is identity theft. The object of the identity thief is usually to get cash and merchandise using someone else’s credit, specifically their credit card. Nevertheless, the future for the safe use of credit cards looks brighter. The use of enhanced safety features will be much more widespread in the future. If you can use these safety features now, do so. Until you can, be careful. Here are some things you can do to detect and prevent credit-card fraud: 1. Add a message to shopping cart (or auction ad) that says, “We screen for credit card fraud.” This cuts out about half of your fraud problem. 2. Require complete information from the buyer in your checkout procedure. 3. Require the card verification number (CVV2) printed in the back of the credit card. 4. Use the Address Verification System (AVS) system. This system determines whether the address submitted by the buyer matches the address on record for the card. If the addresses don’t match, don’t sell. 5. Verify the credit card holder’s address through a Web mapping
252
EBAY BUSINESS THE SMART WAY
service. 6. Telephone the card holder’s bank for verification information. 7. Check the Bank Identification Number (BIN) for the credit card to see if the issuing bank is in the US. 8. Use HTTP_USER_AGENT and REMOTE_ADDR code in your forms that gather crucial information on buyers. 9. Check the IP address to see if it’s in the US and near the address of the card holder. Go to ARIN (http://www.arin.net) and search WhoIs. 10. Telephone the card holder to determine whether they ordered the item from you. 11. Request faxed signature with copies of front and back of credit card. 12. Don’t sell to holders of free email services such as Gmail and Hotmail, as it will be impossible to trace them. 13. Communicate with the buyer. It may uncover an undeliverable email address or a bogus telephone number. Ask for confirmation of details of the order. 14. Be extra cautious with multiple-item or high-dollar orders. 15. Be extra wary when the buyer specifies overnight shipping. 16. Don’t ship to outlaw countries (see below). 17. Also follow the PayPal list below. For PayPal, take the recommended precautions below. If you do, for payments through PayPal your fraud rate will be less than half that of credit cards. Nonetheless, PayPal isn’t foolproof. Be careful. 1. Ship only to the PayPal member’s confirmed address. Use shipping that you can track and get a receipt. 2. Check the buyer’s reputation. Duh! 3. Accept payment from only one PayPal account. 4. Limit PayPal payments to exclude credit-card backed accounts. (This is a harsh policy.)
CHAPTER 16 DEALING WITH BUYER FRAUD
253
5. Beware of buyers who are not concerned with shipping costs. 6. Be extra careful when a buyer buys items easily resold. 7. Ship cautiously to other countries. Should you do all the things on both of these lists? Probably not. Too burdensome. But pick and choose, and develop a manual review procedure. The electronic automation will not protect you very well. The use of manual reviews has increased from 48 percent of online merchants in 2001 to 73 percent in 2005. One out of every four orders is manually reviewed by small businesses (Cybersource – http:// www.cybersource.com). SET The credit card companies created a system a few years ago that is substantially more secure than the haphazard system we live with. It’s called SET (Secure Electronic Transactions). As credit card fraud continues, you may see it become more popular. MasterCard has established an aggressive policy to use it more. In general, Americans have been slow to adapt more secure personal payment systems. For instance, the Smart Card, which contains a small microprocessor, has been popular in Europe for a long time. Only recently has it started to gain a foothold in the US. The microprocessor in the card gives it additional functionality including additional security.
Credit Card Chargebacks Many eBay sellers won’t accept credit cards. They’ve been burned by unjustified chargebacks. That happens when a buyer contacts his credit card issuer and claims that the seller did him wrong. The issuer charges the purchase amount back to the seller and credits the buyer’s credit card account. In other words, the seller is forced to return the money to the buyer. The issuer is invariably a financial institution such as a bank. Some banks do chargebacks automatically or perform only a cursory investigation. Others investigate as they should. When the bank does investigate, the bank will naturally have a tendency to favor its customer, the buyer. Nonetheless, some banks favor the seller, oddly enough. It’s a
254
EBAY BUSINESS THE SMART WAY
crap shoot. But don’t let someone get away with an unjustified chargeback too easily. Contest it. Customer Service So, credit cards are not risk free. Walking out your door in the morning isn’t risk free either. There are some risks you need to assume in order to do business. Accepting credit cards is one of them. Accepting credit cards is good customer service and is well worth the risk of chargebacks. Fraud with a Valid Credit Card Here’s an example of how credit card fraud can cause a loss. The names have been changed to protect the innocent. The buyer, Mr. Slick in New York, sees Mr. Sellwell’s new computers in an eBay auction ad. He contacts Mr. Sellwell in Los Angeles by email to put in an order off eBay to buy 12 new computers to be shipped to an address in Pakistan. He gives a credit card number. Mr. Sellwell, being no dummy, gets a phone number and calls Mr. Slick to verify the order. Mr. Slick verifies the order on phone. Mr. Sellwell ships the computers. A month later the bank notifies Mr. Sellwell that Mr. Slick has charged back the purchase, claiming he never ordered any computers. Mr. Sellwell calls Mr. Slick again to find out what’s going on. Mr. Slick denies ever making the order. (Yes, it’s the same person on the phone.) Mr. Slick’s email address is now defunct. Mr. Sellwell reports this to the bank, which refuses to do anything about it. Mr. Sellwell then reports it to the Attorney General in New York State and is told the case can’t be won in criminal court. It’s just Mr. Sellwell’s word against Mr. Slick’s word. So, the Attorney General won’t even investigate the case. Mr. Sellwell has no recourse through eBay, because the transaction took place outside eBay. Mr. Sellwell has just taken a loss equal to the cost of 12 computers. This true story illustrates two things. First, sellers can be the victims of eBay fraud. Second, don’t agree to ship to an address different from that given for the credit card.
International Fraud International fraud is so prevalent that many sellers will not sell to those outside the US, at least in regard to the use of credit cards for
CHAPTER 16 DEALING WITH BUYER FRAUD
255
payment. Although you might have some workable remedy inside the US, as a practical matter, you have none outside. If you do not get payment before you ship, you are taking a substantial risk of loss. In particular, countries you should avoid include: Afghanistan Austria Belarus Bulgaria Romania Cuba Colombia Egypt Estonia Ghana Hungary Indonesia Iran Iraq Latvia Lebanon Libya Lithuania Malaysia Macedonia Mexico Nigeria North Korea
256
EBAY BUSINESS THE SMART WAY
Pakistan Philippines Romania Russia Rwanda Serbia Singapore Slovak Republic Sudan Thailand Uganda Ukraine Yugoslavia (Bosnia, Croatia, Serbia) To be fair, my cumulative list was procured second hand from the Internet for the First Edition, Second Edition, and again for the Third Edition. You need to research your own list when you plan your global sales program. Note also that PayPal is an exception, because PayPal verifies its credit card holders and also allows members to use verified bank accounts. Chapter 22 outlines strategies for safely doing export business internationally.
Resources for Fraud Information You can get additional information on fraud in order to protect yourself against loss at the following websites: • CyberSource, http://www.cybersource.com • eBay, Site Map, Marketplace Safety, Security and Resolution Center • Fraud.org, http://www.fraud.org • Merchant Risk Council, http://www.merchantfraudsquad.com • ScamBusters.org, http://www.scambusters.org
CHAPTER 16 DEALING WITH BUYER FRAUD
257
Services You might consider MaxMind (http://www.maxmind.com) if you have an ongoing fraud problem. It’s a service that uses a sophisticated database system to rate buyers as to fraud risk. Possibly, you would refuse to sell to a buyer with a high fraud risk. More likely, you would use such a warning from MaxMind to more thoroughly investigate such a buyer.
Fraud Statistics Go to CyberSource (http://cybersource.com) and download the latest edition of the Annual Online Fraud Report. It will give you a good idea of the effect of fraud on online businesses and what the trends are. The following are some statistics from the 2006 Edition. US online fraud rate 2000 – 3.6 percent; 2001 – 3.2 percent; 2002 – 2.9 percent; 2003 – 1.7 percent; 2004 – 1.8 percent; and 2005 – 1.6 percent. Keep up the good work folks. It has come down as online retailers become better informed. International online fraud rate 2005 – twice US fraud rate. It’s a dangerous world out there. Don’t let it keep you out of global ecommerce, but do be cautious. Online revenue loss 2000 – $1.5 billion and 2005 – $2.8 billion. Even through the rate is going down, the dollar amount is going up as ecommerce increases. Order rejection rate 2005 – four times the US fraud rate. This is significant because about 80 percent of the rejections are not fraud and are therefore lost customers who are undoubtedly angry. This is the price you pay for being careful. Use of manual review 2001 – 48 percent and 2005 – 73 percent. This is the percentage of retailers manually reviewing orders. It pays to have a person go over the orders to review for fraud rather than rely upon automatic electronic evaluation. The declining fraud rate indicates that increasing rate of manual review pays off. This should whet your appetite for downloading a copy of this free report for yourself. By studying the report, you’ll have a better idea of
258
EBAY BUSINESS THE SMART WAY
where you need to conscentrate your anti-fraud efforts.
Remedies? Remedies are probably not worth pursuing once you have determined a buyer has put one over on you. About the only actions you can easily take are to file negative feedback, report to eBay, and report to law enforcement authorities.
Feedback You can always file negative feedback on a fraudulent buyer who has won your auction. This is not a remedy. You won’t get reimbursed. But you will warn other eBay sellers about the buyer, as you should.
Administrative Remedies You can report fraudulent buyers to eBay. If it’s just a dispute, eBay isn’t interested. You will be left to work it out with the buyer. However, if there was fraud committed, eBay will take your complaint and maybe even do something about it. eBay will at least penalize the buyer or cancel the buyer’s account. eBay is quite serious about getting rid of criminal activity in the auctions, and it devotes substantial resources to chasing petty criminals. There’s not a great likelihood that you will get reimbursed, but you might be successful getting the buyer in significant trouble with eBay. In fact, eBay might even forward the case to a district attorney.
Legal Remedies You can always sue the buyer. If the buyer lives in your own state, you can sue him in small claims court or even in the court of general jurisdiction (which will require a lawyer). If he lives in another state, the loss will have to be huge to justify the expense of litigation in a far away place. Just write it off, and put it behind you. Assuming you prove your case, the court will award you damages. Court is one place where you can find a remedy. Unfortunately, getting a judgment against someone doesn’t guarantee payment. It just gives you the right to chase after the buyer trying to collect by using certain legal devices, such as filing liens against the buyer’s real estate, if any, or taking possession of the buyer’s personal property (e.g., vehicle).
CHAPTER 16 DEALING WITH BUYER FRAUD
259
Remedies in civil court are impractical in many instances. First, if the buyer is a petty criminal, you’re probably going to have trouble finding him. If you can’t find him, you can’t sue him. Second, the cost of litigation is too high to justify unless the loss is in the tens of thousands of dollars, or unless you handle your own case in small claims court.
Criminal Complaints A criminal complaint that results in a criminal conviction doesn’t reimburse your loss, but it punishes the buyer. It may also warn other sellers against the buyer in some cases. It’s your duty as a citizen to at least file a complaint in regard to criminal activity. The question is, Where? Online FBI, http://www.fbi.gov (see Figure 16.1) Postal Inspector, http://www.usps.com/postalinspectors FTC (Federal Trade Commission), http://www.ftc.gov State Attorney General’s Office, find URL on Google
Figure 16.1 FBI online Internet Crime Complaint Center.
I have filed several complaints at these websites (not involving eBay) and was actually called by a governmental official on my cell phone while attending a dinner party in regard to one of the complaints. It’s
260
EBAY BUSINESS THE SMART WAY
nice to know someone cares, even in the middle of dinner. Offline FBI Office (where you reside) Post Office (where you reside) FCC (Washington, DC) Police (where buyer resides) District Attorney (where buyer resides) State Attorney General (where buyer resides) For more details on handling feedback and pursuing remedies, read my book eBay the Smart Way.
Some Afterthoughts Nothing is ever simple. The eBay market is dependably honest. But every once and a while some petty misdemeanant will get you. Nonetheless, you can’t run your business as if every buyer is a potential petty criminal. You have to bend a little. Wait until someone does get you before you become unmerciful. Then focus your lack of mercy only on the perpetrator.
A Different Address For example, can you really refuse to ship to an address that’s different from the address that goes with the credit card? What about Christmas presents? Many people will want to buy online in November and December and ship to relatives. What do you do? What about providing terrific holiday customer service?
Feedback Some sellers are afraid to give negative feedback to a buyer for fear that they will get retaliatory feedback. If you present your negative feedback in a straightforward, factual, nonemotional manner, most people will see through any retaliatory feedback. If you warn people in your auction ad that you will give negative feedback to bad actors, you will scare away some of these troublesome little hawbucks. But don’t overdo the scare tactics, or you will scare away your honest customers.
CHAPTER 16 DEALING WITH BUYER FRAUD
261
Pawnshops Pawnshops in some states must submit information to the police on each item they accept for sale. This is an effort to prevent the sale of stolen property or at least account for it. In California, as this book went to press, there was an effort underway in the legislature to require pawnshops to use a new electronic system to be substituted for the existing a paper-based system of accountability. The electronic accounting system will be run by the state apparently but financed by the pawnbrokers. The proposed legislation also intends to give eBay sellers the same status as pawnbrokers. That means that an eBay seller of secondhand goods would have to pay a $295 license fee, and renew it periodically, and also pay a fee to use the state database. This would obviously affect eBay consignment sellers but also other eBay sellers of secondhand goods. This is an extra level of accountability that will soak up time and resources. In many states where similar laws already exist, it is not clear whether such laws apply to eBay sellers. The laws were made long before eBay. You will need to inquire in your state as to whether similar laws affect your eBay sales. eBay, of course, fights such legislation vigorously. Unfortunately, the accountability in the eBay system is not what it could be. If eBay would make its memberships more varifiable, and thus more accountable, and also make it easy and systematic for law enforcement agencies to get information via a routine search warrent, separate and parallel state systems may not be necessary. In my opinion, eBay has evolved into a huge national marketplace with too little of the accountability that most national marketplaces have (e.g., New York Stock Exchange). More accountability will come to eBay and its members over the next decade, whether through eBay’s volunteer policies or through legislative action. This can only help legitimate eBay retailers who perhaps more than any other eBay group routinely suffer from fraudulent activity. Just as the economic mechanisms of eBay have evolved in its first decade, and continue to evolve, the accountability mechanisms will evolve in its second decade as it matures as a marketplace.
262
EBAY BUSINESS THE SMART WAY
Indeed, accountability is not solely an eBay problem. It is an Internet problem, as you will learn when you read Chapter 17.
17 Security The time has come when a book about business on the Web is deficient without a chapter on security. Unfortunately, I am not an expert on security. Indeed, online security has become a complex and esoteric body of knowledge, and it is not my intention to keep you from seeking more authoritive information elsewhere. All I can do here is present you with what I consider a minimal level of security practices and provide you with what little background information I have. This is not be enough. The fraud threats regarding eBay (i.e., the ones outlined in Chapter 16) are now overshadowed by the security threats online but outside eBay. Cybercrime is on the rise. It is guaranteed to come to you. You will get burned. The question is, How badly? It will depend on what you do to protect your digitized eBay business operations. First the good news. The fraud rate in the US is alleged to be about the same on the Internet as off the Internet. The difference is that criminals are apparently more traceable on the Internet and get caught more often than off the Internet.
263
264
EBAY BUSINESS THE SMART WAY
Informative Reading Go to the Department of Justice Computer Crime and Intellectual Property Section (http://www.usdoj.gov/criminal/cybercrime/docs.html) for a list of criminal cases. The list isn’t long enough, but it does show that online criminals are being caught and prosecuted regularly in the US.
Consequently, you might think the Internet is reasonably safe, and maybe even getting safer as statistics in Chapter 16 show. Indeed, it might be except for one fact: The Internet is international and crime extends well beyond just ecommerce. And now for the bad news. Much of the cybercrime comes from overseas, particularly from third-world countries that do not have the same refined and legalistic transactional infrastructure as the developed countries (i.e., they tolerate corruption). Such crime is almost impossible to pursue and prosecute; and that leaves you with no relief. Your only protection is your own defensive security practices. Computer viruses, once the mischievous work of get-a-life geeks and high school kids looking for a little recognition, suddenly are a profit engine for the criminal underground. Malignant code is big business. A new breed of digitally savvy mobsters in Russia uses viruses to steal financial data and send spam without being detected. (Forbes, December 27, 2004, page 118)
Don’t underestimate this threat. Third-world countries have their share of highly trained digital experts, many of them trained in the US and other developed countries. In fact, there is no shortage of capable technology schools in many third-world countries either. Thus, there’s an abundance of digitally knowledgeable people. Those who turn to crime in such countries have a risk-free, prosecution-free shot over and over again at your bank account, domain name (website), and other password-protected assets and networked financial processes. Such criminals work at it all day, everyday. It’s their job. Sooner or later, they will get you. Think of it this way. Cybercrime has now been outsourced to a pool of international cybercriminals that’s larger than the pool of cybercrimi-
CHAPTER 17 SECURITY
265
nals in the US. Cybercrime is going to get worse every year for a long time. The problem is that cybercrime can ruin your business or ruin you. The Internet is international, right outside your front door, and there are large segments of the international community that are essentially lawless. It’s what you do to protect yourself that will minimize the damage. Technology Review (an MIT publication) reported in its December/ Janauary 2005/2006 issue (page 64) that criminal-driven security attacks increased on the Internet 50 percent in the first half of 2005. Financial services were a primary target. A survey by Carnegie Mellon University indicated that 17 out of 100 companies had been threatened with destructive attacks—hardcore extortion. In addition, there has been wholesale hijacking of people’s computers to spread spam or attack websites. The September 2005 issue of Consumer Reports said on the cover, “The odds are roughly 1 in 3 that your computer will be damaged or trashed by viruses or spyware.” This is a good issue for you to read at your local library. It contains lots of information and suggestions. On page 12: “… the Internet is no longer the urbane information motorway it was five years ago. It’s more like a no-holds-barred raceway teeming with unsavory drivers and with hardly a police car in sight.” See also the September 2006 issue featuring more information and product reviews regarding computer security. According to Consumer Reports, spyware can even eavesdrop on you via your webcam and microphone. In other words, the spyware can see you and hear you. Now that’s something to ponder!
Equipment A good start is to make sure you have the right equipment. Believe it or not, that makes a world of difference. But surprisingly, most people don’t bother to set up an equipment defense.
Modem The modem is the device (often in a box) at the end of the delivery channel. It is required to make your Internet access work.
266
EBAY BUSINESS THE SMART WAY
Telephone A telephone modem is a part-time access mechanism. When you need to get on the Internet, you dial in over your telephone line and stay on as long as you need to. Once you’re through, you “hang up” and are off the Internet. This is narrow bandwidth, about 56Kb/sec (56 kilobits per second). That means slow. Perhaps the greatest security virtue with dial-up is that most people are not online for very long (i.e., not long enough to give hackers a lot of time). That is slim security, however, and you will need to employ a software firewall. That firewall will slow down an already slow system. You use a modem by pluging a normal telephone line into it. The modem might be inside your computer or in a stand-alone box connected to your computer by a computer cable.
Figure 17.1 Telephone modem access to the Internet.
Remember: You need a software firewall. DSL DSL is also a connection that comes over a telephone line. But it is different than a normal telephone and is as fast as 1,500Kb/sec. One problem is that DSL is always on. There’s no dial-up. That gives hackers plenty of time to menace your computer. You will need a software firewall to make this system safe (or a router). You plug the special telephone line into the DSL modem, normally in a box. The box has a port into which you plug a network cable also known as a patch cord. The other end of the patch cord plugs into a Network Interface Card (NIC) in your computer.
CHAPTER 17 SECURITY
267
Remember: The least you will need is a software firewall, but a router with a firewall is better (see below). Cable Cable is similar to DSL except that the access to the Internet is via your television cable. It is always on. You will need a software firewall for protection (or a router). You will be on a network with your neighbors up and down your street. Cable bandwidth is about the same or greater than DSL depending on your provider. The television cable plugs into the cable modem. Then you connect one end of a patch cord to the modem and the other end to your NIC. Remember: The least you will need is a software firewall, but a router with a firewall is better (see below). Dish A dish system is almost identical to cable except that your neighbors are not necessarily on your network. Of course, you will need a software firewall. Dish bandwidth is usually less than DSL, unless you are willing to pay a high monthly fee. Some dish systems require a normal telephone upstream dial-up connection to work. In other words, access is only one-way (downstream) from the dish. Remember: The least you will need is a software firewall, but a router with a firewall is better (see below).
Figure 17.2 DSL, cable, and dish access to the Internet.
268
EBAY BUSINESS THE SMART WAY
Wireless You can use a wireless system with any other system. You run a patch cord from the modem to the wireless transmitter. The transmitter then transmits a signal to a wireless NIC in your computer. In other words, this system eliminates the patch cord from the modem to the NIC. Wireless systems are insecure. Anyone within a short distance of your house (or office) can get on your network. However, wireless systems can be set to use encrypted transmission. If you set up your wireless system properly, the encryption capability can make it secure. You may need help from an expert to do the set-up properly. A wireless transmitter is also a router (see below). Wireless units cost from $70 to $150.
Figure 17.3 Wireless home network.
Remember: You will need is a software firewall unless there is a firewall in the wireless transmitter. You will need to enable the encryption in the tramsmitter. Be Aware When you’re out of your office and you use a wireless network (e.g., at a hotel) with your laptop, it’s likely the network is not secure. Hotels, airports, and coffee shops are great places for hackers to hang out!
CHAPTER 17 SECURITY
269
Router What’s a router? It’s another box. While modems, DSL modems, and cable modems are often provided by your Internet Service Provider (ISP), you have to buy a router. Home routers cost from $40 to $90. You run a patch cord from your DSL, cable, or dish modem to the router and another patch cord from the router to your NIC. (Routers aren’t used with telephone modems.) Most home routers have four ports, which means that you can hook up four computers that can all have access to and use the Internet at the same time.
Figure 17.4 Home network with router.
The Internet sees the router rather than your computers. It’s difficult for hackers to hack something they can’t see. So just using a router is by itself a very good security practice. Consider it mandatory. Some routers include a firewall. This is a software firewall embedded in a chip where it runs faster than in your computer. A router that includes a firewall is a good choice and costs little extra. Routers come with a standard password that gives you access to the settings for the router. All the hackers know the standard password that’s the default setting for each router manufacturer, so be sure to change the password immediately after purchase. Make sure that the password is 12 random characters or more. And also disable “remote
270
EBAY BUSINESS THE SMART WAY
administration.” You set up a router through your Web browser. Remember: A router is your best protection, but a router with a firewall is better. Don’t forget to enter your own password for administrative access and disable remote administration.
On/Off We used to send new sailors aboard ship to go find the ONOFF switch as part of their shipboard training. The Navy uses so many acronyms that some sailors would search diligently for hours before they caught on that it was a prank. For you it’s not a prank. You can turn off your computer every night even though you have 24-7 access to the Internet via your broadband connection. Turning off your computer overnight is an extra safety precaution that will help prevent certains types of security breaches. In the Past At one time it was better to run a computer continuously than to turn it on and off each night. Turning it on and off routinely wore it out quicker. Those days are long gone. Your computer will be unbearably obsolete long before turning it on and off will wear it out. And running it continuously does require more electricity.
Moreover, you will want to use a dynamic IP (Internet protocol) number. For example, most ISPs will assign you a new IP number every time you turn on your computer (get online). This makes hacking a little more difficult. If your ISP has assigned you a static IP number, that means it’s permanent and will be more suseptible to hacking. Nonetheless, some people need a static IP address for a certain purpose.
Software Although routers and firewalls provide protection against mischief from without, they don’t provide protection against programs from within; that is, evil programs that enter your computer via email or downloading.
CHAPTER 17 SECURITY
271
Anti-Virus Computer viruses can be benign or highly destructive. In any event, you don’t want them to infect your computer. You need anti-virus software that’s always on. In addition, you need to run a complete antivirus scan of your system about twice a week. You need to use a software system, like Norton’s AntiVirus, that is updated periodically, sometimes on a daily basis. You usually pay for a year’s subscription to the updates and then renew at the end of the year. Running anti-virus software without the updates makes no sense. The anti-virus software catches the viruses and destroys them so that they can’t harm your system. The leading anti-virus software: Norton AntiVirus, http://www.symantec.com McAfee VirusScan, http://www.mcafee.com There are many others including one that Microsoft provides in the lastest versions of Windows. Always update your anti-virus software before using it.
Anti-Spyware How about little programs that sneak into your computer and track your movements (i.e., your keystrokes) and send the information to an outside spy. That’s what spyware does. You’ve got spyware in your browser everyday tracking your browser use. Most of it is benign. It’s just retailers attempting to track your movements through their websites in an attempt to understand your buying habits. Some spyware attempts to record your keystrokes and monitor your other computer activities with the intent to use the information illicitly. For instance, after it monitors your keystrokes, it sends a recording of your keystrokes to someplace on the Internet for analysis (i.e., to detect passwords and other sensitive information). Spyware gathers information and sends it to the spyware’s owner. It is a security threat that exploits your digital venerablility. Don’t tolerate it. Use anti-spyware utilities to remove it from your system.
272
EBAY BUSINESS THE SMART WAY
Here are some anti-spyware programs: Ad-Aware, http://www.lavasoft.de Spybot, http://www.spybot.info/en/index.html Spycop, http://www.spycop.com SpywareBlaster, http://www.javacoolsoftware.com/sbdownload.html I use all four of them twice a week to keep out and remove spyware from my computer. They often find something. Always update your anti-spyware software before using it. Sometimes updates are issued daily. Microsoft WindowsDefender (free anti-spyware program) was not out when I wrote this. But it promises to be effective and will be available by the time you read this.
Firewall A firewall is software that protects your computer from threats from the Internet. If you don’t use a router, you’re insane not to use a software firewall. However, a firewall will slow your computer. If you use a router with a firewall, it may be safe enough without having a software firewall in your computer too, thereby allowing your computer to run faster. Nonetheless, a software firewall that monitors outgoing transmission from your computer does give you some extra protection over and above a firewall in a router. Some ISPs offer firewall protection on their network as part of their service. This might work in theory, but I’m not convinced it’s adequate protection. When it comes to online security, I believe self-reliance is the best practice.
Operating System One thing you can do to eliminate a lot of risk is to make sure that you have deselected (turned off) File and Printer Sharing in Microsoft Windows (the default is “on”). Learn how to do this for your version of Windows, and do it. If you happen to have a small network in your office that enables your
CHAPTER 17 SECURITY
273
staff to share files on their PCs, you will not be able to deselect File and Printer Sharing unless you find another practical means of sharing. If sharing is required only occasionally, it may be best to share via floppies, CDs, or email rather than to share through your local network. When File and Printer Sharing is on, it opens your computer to sharing with others on the Internet. So does a shared drive. Not a great idea. LAN? Do you really need a LAN (local area network with two or more computers)? It is possible that no matter how much you think you need to use the various capabilities of a LAN in your office that you can do just fine without one. Make the Internet your LAN. You may not be able to share a drive, but you can do almost everything else via the Interent that you can do via a LAN. Setting up and keeping a LAN tuned up in your office takes expertise that can be expensive. If using the Internet instead will serve your purposes, why go to the trouble of using a LAN. Even special purposes such as sharing a database might be less trouble (and expense) to do via the Web than operating a LAN to accommodate them. Of course, once you network via the Internet, you need to wrestle with a different set of security problems and will need expert assistance to establish a secure set of networking processes.
Windows has been notoriously deficient in security protection. More security patches are issued by Microsoft for Windows than rain forecasts for Seattle in winter. Make sure your version of Windows is up to date by installing the most recent service pack and by subscribing to Microsoft’s automatic updates, all free. The next version of Windows (Vista), due out in the first half of 2007, is supposed to have much better security. Usually I wouldn’t recommend anyone to adopt a new version of Windows until the bugs were worked out (about a year). But security has become such a problem that a quick switch to the new version of Windows might be smart. (I should note that I had a small investment in Microsoft at the time I wrote this.) Be aware that most criminal hacking is directed at Microsoft products.
274
EBAY BUSINESS THE SMART WAY
Why? Because that’s what most people use (over 90 percent). Therefore, you can improve your security by using non-Microsoft programs. For instance, I don’t use Outlook for email and I don’t use the Microsoft browser, Internet Explorer. Other such software is more secure, and there are several free or inexpensive choices for both email programs and Web browsers. If you use Microsoft Outlook and Internet Explorer, at least use the latest versions and updates, which presumably will have the most security protection. Internet Explorer 7 (free) is due out in late 2006 and is anticipated to be much more secure than its predecessors. And you can always switch to a Mac. As a PC user, I don’t know much about the Mac, so I can’t advise you there.
Passwords Passwords protect your various accounts and services from intrusion by others. For instance, who wants a stranger using one’s bank account? Unfortunately, you can be sure that there are evildoers out there who want to use your bank account and will do anything to get online access to it. Here are the rules of secure password usage: 1. Never give your password to anyone. 2. Don’t use the same password for more than one account. 3. Use at least 12 random characters, if possible, made up of numbers and uppercase and lowercase letters. 4. Keep your password in an encrypted password database on your hard drive accessible only by password. Enable (in the operating system) password access to your computer. Don’t write your passwords anywhere. 5. Never allow your passwords to be automatically stored and used by any software (e.g., a browser) except where you have no choice. 6. Change your passwords periodically (e.g., each two months or more often).
CHAPTER 17 SECURITY
275
Don’t be lulled into a false sense of security by your home office, a place that seems very secure to you. In other words, don’t be careless just because you work at home. Yes, when I say random characters (see #3), I mean random characters, not your cat’s name. If You’re a Non-Believer If you don’t believe any of this is necessary, search for password recovery shareware (programs for discovering passwords) available online. There’s a lot of it, and it isn’t always used to recover lost passwords.
Secure Storage You can get shareware programs that store passwords (and PIN numbers) at any shareware website. Pick one that’s easy to use, encrypts the password database, and requires its own password to access. You won’t have to worry about anyone getting your password. Password Agent, http://www.moonsoftware.com Password Keeper, http://www.gregorybraun.com Password Safe Pro, http://www.passwordsafepro.com Password Security Vault, http://www.hirtlesoftware.com Password Tracker Deluxe, http://www.clrpc.com These programs are databases of passwords and other security information for each of your online accounts which require a login.
What’s Your Favorite Movie? This is a security question. If you forget your password or otherwise have a problem with an online account, this is the question you will be asked—perhaps in addition to others—to properly identify yourself. The security question is your opportunity to create another password. For instance, “Where were you born?” If you were born in Charlotte, your answer is “Charlotte,” right? After all, it’s easy to remember where you were born. Actually, “Charlotte” is the wrong answer. Someone investigating you (for social engineering purposes – see the Social Engineering section below) can undoubtedly find out where you were born in addition to a lot of other information about you.
276
EBAY BUSINESS THE SMART WAY
Thus, the security question may backfire if you don’t use it properly. The correct answer is “Portland” (or any other city or town except Charlotte). Now, how are you going to remember that? The same way you remember your 12-random-character passwords. You put the answer in your password storage program along with your password. You don’t have to remember it, and it’s always there when you need it. The classic is, “What’s your mother’s maiden name?” Well, that will take a criminal about two minutes to find out via the Web. Consequently, if your mother’s maiden name is Greenville, be sure to answer that question “Brathaus” or some such invention. Where you are allowed to make up your own security question and your own security answer, do so: Favorite lizard? Gloria
But nobody has heard of Gloria the Lizard. Exactly! You have it in your password storage program, and no one else can know it.
Logging A login name is generally public and not protected. Often a user cannot even change it at will. If you are allowed to change your login name at will, however, that can give you extra protection—almost like having two passwords. Take advantage of that capability where you can. Again, store the login in your password storage program together with your password and the answer to your security question. Once you have logged in, always log out. Don’t just close your browser. Log out first. This is the best practice, and a practice you need to follow.
Not Enough Unfortunately, once you establish great security practices (totally within your control), you are faced with much more threating security breaches outside your control (see the Social Engineering section below).
Accounts You will have various password-protected accounts online. Treat each with the same systematic security practices. A breach in one account
CHAPTER 17 SECURITY
277
could lead to a breach in another account. Yes, that happened to me.
eBay and PayPal Are eBay and PayPal secure? Maybe. You can help with secure password usage. What if someone gets on eBay with your password? They could do a lot of mischief—the kind that would tend to make you poorer and them richer. And if they get into your PayPal account, they will have direct access to your money. It’s worthwhile being careful. And by the way, the best practice once you have logged into eBay (or PayPal) is to log out after you are through. eBay takes security seriously. It has a large active security staff that works with prosecutors around the world to procute criminal activities. It even has ex-federal prosecutors on its staff. Contrary to what some commentators have said, eBay is a reasonably safe place, and undoubtedly safer than cyberspace in general. But eBay is still susceptable to outside criminal activity (e.g., password theft).
Financial Accounts The proliferation of online access to financial accounts (banks, stock brokerages, and the like) is overwhelming today. There’s hardly an account that you don’t have online access to if you want it, and often even if you don’t want it. Handling these accounts online is not an occasion for carelessness. Make sure your password usage is strict and always log out. If you have a PIN number, treat it like a password. Make it 12 numbers or more if possible. These online accounts are a great service, particularly to eBay retailers. They make running your business easy. But they require a high degree of responsibility that’s similar to a physical store. You don’t leave the safe open in the store, and you don’t leave the front door to the store unlocked after hours.
278
EBAY BUSINESS THE SMART WAY
It Happened Like This I have an account at a large national bank. I was sitting in my home office (in the San Francisco Bay Area) and got a call from a security rep at the bank who asked if I was making ATM withdrawals in Los Angeles (almost 400 miles away) that day. I said no and that I was at home. Then suddenly the rep asked me if I was making a withdrawal in Mexico at the very moment I was talking with her. I said, “I don’t think so.” She immediately shut down my account. She cancelled my ATM card and issued a new one. She told me that criminals get ATM numbers and PIN numbers by sticking a small electronic recording device that no one notices on an ATM machine. Ironically, the only ATM that I ever use is the one at the bank. And by the way, at the time I got this call, $1,300 had already been stolen from my account. (The bank covered it.)
As you’re thinking right now, it isn’t always going to happen this way. Indeed, it is very unlikely to happen to me this way again. Next time I will be the one to discover the theft from my account–not the bank– and it will be a hassle to get it straightened out. Better check your bank account often. Don’t put any more in an online account or have credit limits on your ATM and credit cards than you can afford to lose. Use at least one account that doesn’t have online access. In other words, don’t get too carried away with online financial convenience.
Domain Name and Website Are you building up your brand on eBay with a good business name and an identical domain name for your independent website? What happens if your domain name gets stolen (hijacked)? It turns out that this is a fairly common occurance. Someone stole a valuable domain name from me in spite of my sound security practices (see the Case Study below). It’s a huge ordeal to get back a stolen domain name. Sometimes it’s impossible. Someone can substitute their identical website for yours. They collect the money from the sales, but they never ship any merchandise. That leaves you with a lot of irate customers and less money in the bank. Or someone substitutes their porno website for your retail website to take advantage of your traffic. Farfetched? Unfortunately, not unusual!
CHAPTER 17 SECURITY
279
You need to discuss with your domain name registrar and your host ISP what steps you can take to ensure the security of your domain name and website. One way to take security seriously is to always think in terms of money. What do you have to lose if there’s a breach? Usually, when you think about it, there’s money at stake (or wasted effort) even for online accounts that one doesn’t normally associate with money— such as a domain name account.
Social Engineering When all is said and done and you have followed all the advice above, you’ve done a lot in regard to the technological aspects of security. Unfortunately, most security breaches are human, not technological. Some breaches are caused by carelessness, most by social engineering. What is social engineering? Well, let’s say I want to get your bank account password at the National Bank of Pine Ridge. I would sniff around different places in an attempt to get information on you. I would use the Internet or the telephone. It’s amazing what you can find on the Internet. It’s amazing what people will tell you on the telephone if you just ask. Let’s say I hit about a dozen sources that have information on you. At a few, I won’t learn anything. At the others I will learn just a little bit. Let’s say there are seven places where I learn a little bit about you. Seven little bits of information often add up to a lot of private information. I take the seven bits of information about you and call the National Bank of Pine Ridge. I am now impersonating you. I have enough private information about you to convince the person at the other end of the telephone that I am you and that I forgot my password and need it right away for (whatever). I am given your password. I take your password, get into your bank account, and send a money wire transfer to my account in Barbados set up under a bogus name. You get the idea. Most of the breaches of security you hear about are caused by social engineering, not necessarily by improper software, equipment, or password usage. A little known fact is that the great hackers of our age rely primarily on
280
EBAY BUSINESS THE SMART WAY
social engineering for success, not technical expertise. In other words, you have to be a con artist to be a great hacker. Do you have any control over the resistance to social engineering? No. That’s up to your bank, ISP, or domain name registrar. Even a welltrained customer service rep is going to make a mistake occasionally, and poorly trained customer service reps will make a lot of mistakes. (Hint: You need to train your own staff not to give out information.) So I will stick by what I said earlier in this chapter. You will get burned. The question is, How badly? OK, let’s see if you’ve learned anything. What the the best way to choose an online account provider (i.e., bank, registrar, ISP)? The answer is: The one that has the most resistance to social engineering! Memorize this. Stay away from any online business that has a reputation as a careless operator. Social engineering will get you into trouble much more often than any technological breaches of security.
Phishing Phishing is the practice of sending fraudulent emails to people asking them to provide sensitive information under false pretenses. In other words, the criminals are fishing for your sensitive information (e.g., password, Social Security number, PIN number, and the like). This is a form of social engineering they work directly on you. Never respond to an email asking for sensitive information. Legitimate Web businesses never ask for information to be transmitted by email. They direct you to their website to login and provide sensitive information, and they only do so on rare occasions. Never use the hyperlink in an email to login to a website. It could be the phisher’s imitation website where your information will go directly into the hands of the phisher. Always go to a website—independently of the email—using a URL you know to be authentic. You will get legitimate emails from your bank, PayPal, eBay, and others routinely asking for information. You need to be particularly alert to distingush between those that are legitimate and those that are criminal.
CHAPTER 17 SECURITY
281
You’re likely to get stung sooner or later. You’re simply going to be tired and in a hurry that day and therefore careless. I have a friend who made such a mistake regarding his bank account. He was in a hurry. He realized his mistake within seconds after making the final click to submit the information. He immediately called his bank. Within the three-minute time frame it took to start talking with someone at his bank, the criminal managed to make a $2,500 charge against his account. Excellent English Phishing is a daily event for anyone who has an active email account. At one time phishing was obvious. It was usually done in English that wasn’t quite right (written by criminals from outside the US). But it’s obvious that the phishing criminals from overseas have now outsourced their writing to the US. This makes their emails very believable.
Free Email To get online, you need to have an Internet Service Provider (ISP). You pay your money and get your serivce. You are connected locally to the ISPs network. You pay by check or credit card. In other words, you’re traceable. On the other hand, anyone can get a free email account. The free email provider doesn’t provide your connection to the Internet or collect a fee. It just provides email servers where you can send and receive messages from any connection to the Internet (e.g., a public library in Nashville, Tennessee, or Lubbock, Texas). Free email accounts are easy to get. Users are typically not verified, and no accurate information is required to open a free account. Most online crimes are committed using free email accounts. Therefore, treat anyone with a free email account as guilty until proven innocent. Be extra careful. A free email account is your warning. So you get a gracious email from [email protected]. He thanks you for your contribution to Republican causes in the past and wishes your family well. And by the way, he just happens to have a special fund going to help elect local Republicans that needs your
282
EBAY BUSINESS THE SMART WAY
small contribution. Won’t you help out? Hey, this won’t work on Democrats. What about Republicans? A certain percentage will answer with a contribution. Who is [email protected]? It could be Osama bin Laden. Who knows? Google (which provides Gmail) doesn’t even know. Here are some well-known free email systems: Gmail Hotmail Yahoo Hey, there’a a lot of good people with these email addresses—and some people not so good.
Safe Transactions Now we’re talking about the checkout function at ecommerce websites. It must use the security capability in Web browsers and also a secure Web server. For the protection of your customers, make sure that your checkout mechanism is is secure. (Security means that the information transmitted is automatically encrypted.) Secure servers use the protocol https:// instead of http://. Look in the address window at the top of your browser. That’s how you can tell whether you are using a secure server. You can also tell by seeing the closed padlock icon in the bottom right-hand corner of your browser. If the padlock does not show or is unlocked, the connection is not secure. Naturally, when you are buying something at a website, you will want to make sure that the website uses a secure server for its checkout.
Case Study I had a domain name I registered in 1994, worth a substantial amount of money. It was paid several years in advance, and locked at my domain name registrar. My password to my account at my domain name registrar was known only to me and stored in an encrypted password database file. On January 27, 2006, someone using the bogus Google email address
CHAPTER 17 SECURITY
283
[email protected] (not me) was able to gain access my account and change the password and registration information. Then with another Gmail address, the registration was switched to a different registrar outside the US. There the registration information appeared as an Arab name with an address in Tripoli, Libya, and yet another Gmail address. I had been distracted from building my new website for several weeks by the normal run-of-the-mill family events. When I resumed building on February 13, 2006, you can imagine my surprise to find that my valuable website appeared to be in the hands of someone in a country that has been known to support terrorism. Of course with domain name registrations, we don’t know anything for sure, so the named Arab may actually have been George Bush hijacking my website to sell for the purpose of raising money for Republicans. Or maybe it was John Kerry? In any event, I had to work on getting my domain name back for the next 12 days, full-time and overtime. I wrote dozens of emails and a dozen letters (sent overnight). It also cost me a significant amount in attorney’s fees. I was lucky to catch the hijacking early. Two more weeks and I might been out of luck. What happened? The hijacker staged an elaborate technological scheme, involving five ISPs and registrars, to ultimately get my password for both my domain name account and my email account through social engineering (see the Social Engineering section above). It even involved the phony registration of a domain name similar to mine. Was anyone interested in this hijacking? No! If $50 is stolen from a local 7-11 with a water pistol, law enforcement will spare no effort and no expense to catch the culprit. The theft of a high-worth domain name doesn’t even get you an acknowledgement or a phone call for more information from law enforcement agencies. The fact that the asset might be going to a terrorist cause (who knows whether it really was?) apparently makes little difference either. I notified the FBI, my local police, the local police where the registrar was located, the state police where the registrar was located, and Homeland Security. No acknowledgement or discernible interest came from any law enforce-
284
EBAY BUSINESS THE SMART WAY
ment agency until I got a call from the FBI six weeks later. Indeed, it was like pulling teeth to get the various ISPs and registrars to take any action to resolve the security problems and restore my registration. When I say 12 days of full-time work, I mean it took a huge effort. My registrar finally got it straightened out by establishing a timeline of traceable online events. At the beginning of the timeline was the holder of an email account in Malaysia. Fortunately, my registration was restored exactly three weeks later. Relevance? If you don’t have a domain name or website to be stolen, you may think this example is not relevant to you. However, think eBay account, PayPal account, or bank account online, and the relevence hits close to home. This could happen to you. In fact, it’s likely to happen to you sooner or later.
This is not an isolated incident. Hundreds of valuable or high-traffic domain names have been hijacked just as thousands of online bank accounts have had security breaches resulting in losses. Once you go online, no one cares. It’s too abstract. A cybercrime like this one doesn’t hurt anyone physically. You’re on your own whether $5 or $5 million is at stake. Lack of ready law enforcement online, even in the US, is your plight in the new century. And good luck to you. You’ll need it. OK, this sounds a little harsh. But let it inspire you to beef up your security before you have to learn the hard way.
Backups You’re in the big time now. You must preserve your business records. That an essential responsiblity for you as a businessperson.
Simple Keep your backup system simple. For instance, I keep software and content on separate hard disks. I back up the software occasionally. I back up the content regularly. Software can be replaced. Content cannot be replaced without a backup.
CHAPTER 17 SECURITY
285
Content (Word files, transaction data, Web auction ad templates, business records, and the like) should be resonably small in size. (I have only 12 GB to show for 20 years’ work, and some of that is redundent.) That makes it easy to back up. Don’t include your photographs in your business backup. Do that separately. Photographs take a lot of space and make backing up more tedious. I have 64 GB of photographs to show for five years. If you make your backup procedure simple, then you’ll back up more often and be more secure. In other words, don’t do more than you have to.
Two Types There are two types of backup. The first is a backup medium physically onsite. The second is a backup medium physically offsite. The first will protect against the failure of hardware and software. The second will protect against fire or theft. Make your backups regularly and then take them offsite to a safe place. Easy Backup The easiest and perhaps best backup today is a USB 2.0 external case with an IDE hard disk. The case costs about $50. A new hard disk can cost as little as $45 depending on size. Connect the external hard disk to your computer using a USB 2.0 cable. Use Windows Explorer to back up your computer hard disk completely onto your external hard disk. Disconnect the USB cable for the external hard disk and store the external hard disk offsite. I use a very small USB 2.0 external case (narrower than a CD) with a 36 GB laptop hard disk. (Laptop hard disks cost a little more, but they’re smaller.) I make a complete backup of my computer hard disk in about a half-hour (12 GB). Then I take the external (backup) hard disk offsite to a safe place. I happen to have a special requirement for smallness regarding storage. A larger case with a normal size hard drive is just as handy but less expensive.
A data CD made by a CD recorder (CD-R) makes a good backup for recent content (data). You can buy a CD recorder (CD-R) for as little as $40. Make sure you get CD recording software bundled with it. If
286
EBAY BUSINESS THE SMART WAY
you buy the software separately, it may cost more than the CD-R. The blank CDs cost as little as 30 cents each. For huge amounts of recent backup, you may want to use a DVD recorder. Before committing yourself to such backup, however, you need to research the latest DVD recording standards and make sure you buy a recorder that handles a permanent standard. The DVD manufacturers have been bickering over standards for years. The result is confusion. Nonetheless, DVD recorders that record multiple standards have become inexpensive and popular. Even double-layer DVD recorders are available for around $100. Note that a CD holds about 650 MB, a single-layer DVD about 4.7 GB, and a double-layer DVD about 8.5 GB.
The Last Mile It’s great to have a backup on hand. If your hard disk crashes, you can run out and buy another hard disk, restore your data from the backup, and be back in business in a matter of hours. But what about fire and theft? Not a Surprise Think talk of theft is a little far-fetched in your experience? Might be, depending on where you live or have your office. But what about travel? Losing your laptop or having it stolen while traveling would surprise no one because it’s so commonplace.
You can store your backup hard disk in a fireproof box (about $40) onsite. But it’s better to go the last mile and store it offsite. Realistic protection against fire and theft require that you keep a backup in another place that’s safe. If your office burns down, if your office gets robbed, or if your laptop disappears, your backup won’t be affected. You can keep a backup at your sister’s house, at a friend’s home, in a safe-deposit box, in a storage unit, in a data depository online, or whever you think the backup will be secure. Your entire eBay business is in that data. Better not lose it.
CHAPTER 17 SECURITY
287
Counterfeits I have been talking about counterfeit checks, cashier’s checks, and money orders (called legal instruments) for years in my eBay books but had never run across a victim. Unfortunately, I now have two situations to report. First, my attorney, who is a commercial attorney, tells me that the FBI won’t give you the time of day if you report a counterfeit under $50,000. Obviously, he doesn’t speak for the FBI, and the situation varies, I’m sure, between FBI offices. Nonetheless, you get the idea. You may have a loss as high as $50,000 without any interest from law enforcement authorities. With high resolution laser and color printers, the counterfeit business has been enjoying a grand renaissance. Second, I recently learned of a person who got burned on $40,000 worth of counterfeit money orders. It was an intricate online real estate scam involving 40 different money orders, all counterfeit. Needless to say, it was very painful for the victim, but local police and the FBI showed no interest in the case. It’s virtually impossible today to detect a counterfeit instrument, unless it’s a really bad counterfeit or unless you are familiar with the legitimate instruments of the issuing financial institution. Your best protection is for it to clear before you ship the merchandise. Unfortunately, banks often don’t clear checks as fast as they claim, leaving you stuck to cover the loss. Check the routing number on the instrument to make sure the routing number matches the financial institution named on the instrument. You can check routing numbers at: http://routingtool.com A typical counterfeit instrument might have printed on it: Bank of West Phoenix Phoenix, Arizona The magnetic routing number (first nine digits at the bottom), however, might be to a bank in: Millinocket, Maine
288
EBAY BUSINESS THE SMART WAY
If you deposit the instrument in a Tucson, Arizona bank assuming one-day clearance, you might be surprised when the bank notifies you a week later (or two weeks later) that the check didn’t clear. (Hint: The routing number automatically routes the counterfeit check to the Millinocket, Maine bank for clearance.)
Disaster Plan It’s not a matter of “if,” it’s a matter of “when.” You’d better have a disaster plan ready. Whether your website disappears, the money in your bank account disappears, someone hacks into your client database, or your hard disk crashes, a plan to stay in business will help you cope rationally and perhaps even save your sanity. Your disaster will come at the worst time possible. Mine (domain name hijacking) came just at the time I was leaving to go on my daughter’s high school senior trip to Washington, DC. I missed the trip, missed a tour of the White House, and spent a miserable week at home with only my seven-year-old son to console me.
Security Checklist You can use the checklist below to maximize security. But don’t stop there. Also take precautions against social engineering. Checklist Here’s a minimal checklist to maintain security: 1. Use a firewall. 2. Use a router. Change the administrator’s password for router access and disable remote access. 3. If you use a wireless transmitter-router, enable system encryption. Understand that the wireless networks you use traveling away from home are not secure. 4. Turn off your computer at least several nights a week. Make sure you have a dynamic IP number. 5. Use anti-virus software continuously. Do an anti-virus hard disk scan several times a week. 6. Do an anti-spyware hard disk scan several times a week. Use
CHAPTER 17 SECURITY
7. 8. 9. 10. 11. 12.
289
several different anti-spyware programs. Turn off File and Printer Sharing in Windows, and don’t use shared drives. Update Windows regularly. Use non-Windows software for browsing and email. Follow recommended password practices. Enable password access to your computer (operating system). Store passwords in an encrypted database program for passwords. Use phony answers to security questions. Store the answers with your passwords.
13. 14. 15. 16.
After logging in, always log out. Stay alert and don’t become a phishing victim. Beware of those who use free email accounts. Make sure you are using the security (https://) in browsers and servers for online transactions. 17. Back up recent content, general and archival content, and software. Store backups offsite. 18. Be careful with payment via legal instruments, especially for large sums. Make sure clearance is final before shipping. 19. Create a disaster plan. Gosh, what a long list! But what choice do you have? There’s nothing on the list that’s optional. Engineering Defense But how do you defend yourself against social engineering? That’s a good question to which I have only a modest answer: Check your accessible assets online several times a week. That way it will never be more than three or four days between checks. Your best protection is to be able to notify your provider (i.e., bank, ISP, registrar) within a short time after a loss. That’s your best shot at getting back what has been stolen.
290
EBAY BUSINESS THE SMART WAY
Consequently, after I run anti-spyware scans several times a week, I check my online accounts for irregularities. It’s just part of a weekly security routine.
Summary Beware! What I’m suggesting may be totally inadequate. Security is a topic for your ongoing research. “Just because I’m paranoid doesn’t mean they aren’t out to get me.” You’ve got to have this attitude to achieve a reasonable level of security. And it’s going to get worse. Buckle up. It’s a long rocky road ahead. Like I said at the beginning, I’m not a security expert. And you need one. Make it a point to read all you can about security. It’s your money, your assets, and your business at stake. To sum up this chapter, just let me say, “Paranoia is a good thing online these days. Embrace it.”
V Making It Work
This page intentionally left blank
18 Software Features Software to manage auctions, business processes, and accounting for an eBay retail business is a prime ingredient for success. Don't think about trying to do without it. First think about what you need, and then find the software or a software service (auction management service) that satisfies your needs. I have listened with total astonishment to hear eBay businesspeople complain about the cost of auction management software services. They must lack experience running a business with employees. Indeed, the software services are very inexpensive for what they do: eliminate employees.
Auction Management Software In recent years, auction management software has migrated from CDs to websites. This presents you with some new facts of life: 1. You don’t buy the software, you rent it. 2. You use the software through your browser. 3. The software services are easier to use with a broadband connection. They’re slow with a dial-up connection, maybe too slow.
293
294
EBAY BUSINESS THE SMART WAY
4. Most services offer a comprehensive but integrated package of features for running your entire eBay business. As they say, the problem today is not running an eBay business—the auction management services do that—the problem is finding a niche in which to sell something. Auction = eBay Many auction management services handle auctions besides eBay auctions. I do not consider this an important feature, although it may be for some people. I consider the word “auction” in “auction management service” to be a substitute for “eBay,” and it’s used to keep from confusing it with eBay’s own auction management software.
Desired Features This chapter will consider some of the features you need in a software package to run your eBay business. The next chapter will review one sample auction management service to see how it measures up. Inventory Control For most people, selling on eBay as a business entails selling lots of items. You need an inventory control system perhaps not so much to save money but to retain your sanity. Inventory control is not optional, and if you do it with paper, it’s a lot of trouble. It’s an essential part of an auction management service. Presentation You can’t make individual webpages for each auction on a custom basis. You just won’t have the time. You can use templates to save time, but that’s still inefficient. Best is to use a system that incorporates webpage templates. (If you can customize the templates, so much the better.) This is a typical feature of an auction management service and a welcome one. Auction Listings Management Auctions are just like inventory, numerous. You need to keep track of them. In addition, you need to have them uploaded to eBay automatically at times that you schedule. Software to do this takes much of the
CHAPTER 18 SOFTWARE FEATURES
295
busy work out of your eBay business. This is an essential function of an auction management service. Customer Communication Potential bidders, bidders, and customers will contact you about one thing or another. It’s convenient to keep track of these communications separate from other matters in your business or personal life (i.e., separate from your other email). Auction Follow-Up Rather than contact each winning bidder personally with the requisite information to close the purchase transaction after an auction, the software should contact the winning bidder automatically via email. Transaction Checkout A transaction checkout device, just like one at an ecommerce website, makes paying easy for a winning bidder. The checkout should be able to handle a variety of payment choices. This is a highly desirable feature of an auction management service. And it should be able to offer PayPal. Shipping Having the checkout handle shipping with the same automation as payment is important too. As you may recall from Chapter 13 on fulfillment, the shippers provide the requisite information on their websites that auction management software can tap into for the correct up-to-date shipping charges. In addition, a process for tracking shipping can reduce unnecessary communications with customers. Again, the shippers provide tracking service requiring only a tracking number to use. An auction management service should print the package label with the tracking number and otherwise provide the tracking number where needed (i.e., sent to the customer via email). Documentation Documentation should include an email receipt for customers, an email notice that their account has been charged, a packing slip for the package (and to instruct warehouse personnel), a mailing label for the package (printed to the specifications of the shipper), prepaid ship-
296
EBAY BUSINESS THE SMART WAY
ping, email instructions regarding tracking shipment, and the like. All documentation should be automated. Auction management services cover many of these requirements. Feedback Management Buyers like to get positive feedback. You want to make sure you give it to them in a timely manner—but not before they deserve it. A feedback management system can save you time and effort while making your customers happy. Sales Reporting You will have a lot of data that when summarized and analyzed will be useful to review. Software should do this for you. Consignment Sales Management (Optional) This is a special type of inventory control that you will need only if you do consignment sales. Write Once A person (employee) should never have to enter any data into the auction management service more than once. Data entry should be quick, easy, and convenient. In addition, an employee should never have to rewrite information submitted by a customer in digital form. Prime Feature This is a prime feature of any software system and an absolute requirement. Don’t overlook your basic need for a “write once” feature.
Accounting Dovetail A record of each transaction and each customer must be stored in an archive (database) for future reference. The archive system should dovetail with your accounting software to enable you to seamlessly use such records in your accounting system. Database Applications Most applications that contain lists, directories, catalogs, transaction records, inventory items, and other groups of data are database applications. At their core is a built-in database. Auction management pro-
CHAPTER 18 SOFTWARE FEATURES
297
grams are database applications too. They process data, use data for processing, accept the input of data, archive data, and export data to other applications (e.g., accounting systems). Catalog eBay is a catalog, a catalog of current auctions. If you operate an eBay Store, that’s a catalog. If you operate an independent ecommerce website, that’s a catalog. Software should create a catalog for you or should enable you to create a catalog. For example, you don’t want to use software that can’t easily create an eBay Store for you. Then too, you don’t want to use software that does not enable you to export the data that will create catalog webpages for you at another ecommerce website. Datafeed A datafeed has become a very important ecommerce tool as Chapter 21 covers. Consequently, your software needs the capability to export data, that is, do a datafeed. The software needs to do certain datafeeds automatically and also enable you to manually initiate other datafeeds. Read Building Your eBay Traffic the Smart Way to learn more about how to increase your sales with little additional effort or expense by using datafeeds.
eCommerce Software eCommerce software for small businesses is generally thought to include a catalog, shipping cart, and a checkout device. Invariably, this is a database application. In fact, it has some overlap with auction management services, but it is not exactly the same. If you are going to operate a website where you sell inventory, it would be especially useful to be able to integrate your ecommerce system with your auction management system instead of running separate systems. Indeed, you may be able to use an auction management system in place of an ecommerce system. If an auction management service provides a catalog, a shopping cart, and a checkout device, you can probably use it on your website. Two for the price of one!
This page intentionally left blank
19 Software Assistance Running an eBay business requires a lot of paperwork. To make it easy you need to do two things. First, you need to use a system to manage the paperwork. Second, you need to turn as much of the paperwork as possible into digital work. eBay provides some programs for you to use in managing your eBay business. They’re competent and mostly free, and you may be able to get by just fine using them. Some vendors, however, provide comprehensive auction management services that make managing an eBay business almost automatic. Keep in mind, when considering software, that delivery via the Web may be preferable to using software residing on your own computer. Here are some attractive features for Web software services: • No maintenance required • No updates to install • Continually updated by vendor • Low monthly cost • Files saved in a system that’s backed up each day
299
300
EBAY BUSINESS THE SMART WAY
• • • •
Can store redundant files on your computer too No strain on your operating system (fewer crashes) Use all software in Web browser Can use anywhere and on any computer connected to the Internet I can tell you (as one who wonders why Microsoft’s own programs don’t run on Microsoft’s operating systems as well as Adobe programs do, who has to reinstall Microsoft Office occasionally to keep it working, and who has endured many weary years of pampering his bizarre Windows operating system), I am a believer. Software services via the Web are a godsend. I’m looking forward to the day when all I need is an operating system and a Web browser, and I can get all my programming from the Web. That’s why I think auction management services are terrific. However, you do need a broadband connection to make software services work well. They sputter along on a dial-up connection. On the Desktop Some digital tasks just work better offline on the desktop (in your computer) than online over the Internet (in your browser). For instance, when you can enter auction listings on a spreadsheet-like display offline quickly and easily, the work goes faster than entering the auctions online in a form in a browser. That’s why most auction management services provide an offline listing program, even when the most of their programming is delivered in a browser.
eBay's Programming Aids You don’t have to go any further than eBay to find help with your selling tasks, and many sellers don’t. The starting place to decide on what software services to use is on eBay. Review what eBay offers and then compare it to what vendors have to offer.
My eBay This is a free system that keeps track of your active and completed auctions. It has been around for a long time, and some sellers find it
CHAPTER 19 SOFTWARE ASSISTANCE
301
perfectly adequate. It offers lots of features. Give it a look before you decide you need something more. You can find it on the eBay menu bar under My eBay. The good news is that eBay is touting this service now as My eBay 2.0, a new version. It’s good for sales of up to 1,000 items per month. For greater sales, you might want to try software that’s more heavy-duty.
Picture Service eBay offers its own picture service. You get one photograph free per auction. You pay for a variety of additional services. One additional service is inclusion in eBay’s Picture Gallery where bidders can shop by picture. The photograph also appears beside the auction listing in a thumbprint. For some items, this is probably worth the extra fee.
Management Software eBay’s management software originally was not very good. But many vendors were very innovative and created wonderful auction management services. eBay bought one of those software developers and developed its own vastly improved software. Today it is competitive. eBay Selling Manager This is a service available only online for a monthly charge of $5. It enables you to schedule listings, monitor bidders, send customized mail to customers, relist items, tracks unpaid items, send bulk feedback, and print invoices and shipping labels. It also keeps sales records. It does not create new listings. It’s comparable to Blackstone Basic but does more. eBay Selling Manager Pro This is also an online service and costs $16 per month. It does what Selling Manager does and more, including inventory management, listing statistics, email, feedback, reporting, and NPBs (non-paying buyers). It’s comparable to Blackthorne Pro but has more features. Incidentally, the reporting features of this service are very robust and present an opportuity to analyze your eBay business well. Blackthorne Basic This is an offline program (use it on your computer) similar to Selling
302
EBAY BUSINESS THE SMART WAY
Manager but without as many features. The price is $10 monthly. The price includes a subscription to Selling Manager. You get it both ways: in your browser and on your desktop. Blackthorne Pro This is a beefed up version of Seller’s Assistant Standard for $25 per month. It offers additional features comparable to eBay Selling Manager Pro. You use it offline on your computer. The price includes a subscription to Selling Manager Pro. Turbo Lister This is a free listing program you can use offline for both individual listings and bulk listings. Used together with one of the other eBay management programs, you will have a great deal of auction management capability. Entering bulk listings offline can be faster than online (see Figure 19.1). Once you’ve entered the listings into Turbo Lister, the program then uploads them to eBay.
Turbo Lister is more than just a submission vehicle. Once you have entered your listings, you can look at your auction ads and further tune them before submittal. Turbo Lister has a WYSIWYG (what you see is what you get) interface that enables you to tune up your auctions ads. It also has HTML templates to give your listings some extra appeal.
CHAPTER 19 SOFTWARE ASSISTANCE
303
Turbo Lister can also import and export standard comma delimited data files (also known as .csv files or .txt files). This was a breakthrough. For years, eBay didn’t accept standard data files. One had to submit bulk listings in HTML pages, a rather awkward and arcane format for data submission. Indeed, in past eBay books I presented an elaborate and cumbersome database-mail-merge scheme to automate the bulk listing process as much as possible. The significance of this capability (Turbo Lister was new in 2002) is that you can now use your own database application and export the data in comma delimited format into Turbo Lister. Then you can make a bulk submission to eBay. The database application might be one that you created yourself, an off-the-shelf inventory management program that you’ve used, or even a point-of-sale (POS) program for your bricks and mortar store. Most business-processing software uses a built-in core database. Now through Turbo Lister, you may be able to use such software to export the data necessary to create eBay listings (auction ads). This is particularly relevant to businesses that have a physical store and use traditional retail software. If this is you, check with your software vendor to determine what new possibilities now exist for integrating your existing business software with eBay processes via Turbo Lister. And also read Chapter 29 on integration. For those who have built or want to build their own database applications to manage their eBay activities, Turbo Lister now enables you to submit bulk listings easily and almost directly with data exported from your database. File Exchange This is a new eBay service that enables you to bypass Turbo Lister and submit listing data directly from a database application. You have to have at least 50 active listings a month to use it. It enables you to use the data processes discussed above for Turbo Lister but without using Turbo Lister. In other words, it provides additional efficiency. Picture Manager This is a management serivce for your photographs similar to many other services you can find on the Web (some of them free). This ser-
304
EBAY BUSINESS THE SMART WAY
vice costs $5 per month for 50 MB of storage and more for additional storage. Sales Reports eBay provides free sale reports that will help you understand your business better. But you have to make the effort to subscribe or else you will not receive them. Accounting Assistant If you use one of the paid eBay services or eBay Stores, you can use Accounting Assistant free. It helps you transfer your eBay data to QuickBooks easily. CARad This is a listing tool designed for dealer vehicle listings on eBay Motors. It costs $10 per listing or $300 per month for unlimited listings. CARad Express is for individuals at $10 per listing. eBay Checkout The eBay checkout system used to be overlooked by most sellers, probably because it wasn’t so good. After eBay purchased PayPal, the checkout improved substantially, and today many sellers use it. You can find information for sellers about the checkout system under Help. The checkout setup for an auction gives you plenty of opportunity to establish a custom checkout for your items. Note that PayPal also provides a checkout service now that includes a shopping cart. eBay Solutions Directory eBay has put together a comprehensive list of a variety of vendor services that can help not only with your auction management but with many other tasks too. Go to Sell, Selling Solutions, Small Business, Seller Central, eBay Solutions Directory.
PayPal Extended Oddly enough, PayPal has emerged as an ecommerce management service. Or, maybe that’s not so odd. After all, there are millions of people using PayPal who don’t use eBay. Consequently, PayPal keeps adding ecommerce management services, and you can use it for other online business operations as well as for eBay. See Chapter 20 for more
CHAPTER 19 SOFTWARE ASSISTANCE
305
information on PayPal’s relatively new extended services.
Andale Andale is one of the auction management service leaders. Reviewing software is better done by current magazines than books, and this should not be considered a critical or even a complete review of Andale. Rather, Andale is presented here as a good example of an auction management service. By taking a look at some of Andale's leading features, you can better understand auction management services and can better choose one that’s right for you. This section does not even attempt to cover all of Andale’s features, which are truly extensive. You are encouraged to visit the Andale website to more fully appreciate the extent of Andale’s potential support for your eBay business. But keep in mind also that Andale has some energetic and capable competitors, and you need to carefully review what they have to offer too.
Andale's à la Carte Andale (http://andale.com)offers its features as individual components priced individually. Taken altogether, the Andale components provide you with a comprehensive eBay management service. Research Tools The research tools are available for modest monthly fees, and they comprise an amazing set of services: What’s Hot Tells you what categories and what items are hot sellers. This can help you find lucrative selling niches. Research You enter an item, and Andale automatically researches the sales in the eBay archives. It returns the following: Average selling prices Conversion rates Opening and reserve prices Number of listings Listing categories
306
EBAY BUSINESS THE SMART WAY
In addition, it provides further analysis of the auction statistics. These are valuable tools for determining value and for developing tactics to sell a particular item. Rare Information eBay started out providing current statistics regarding eBay auctions on its home page. Over the years such information has gradually disappeared. Today we are stuck with the statistical information that eBay releases in its annual report in February and perhaps some new statistics released at the annual eBay Live conference in June. No one else has accurate statistics on eBay. But eBay now makes its archival data available via an API (application program interface) to vendors. Consequently, certain vendors such as Andale can enable you to tap into both general and focused everyday data (statistics) that can help you run your eBay business better.
Sales Analyzer This is reporting software. You can analyze your eBay business and develop strategies for improving sales. Suppliers This free service helps you find inventory. It matches those selling goods at wholesale with retailers buying goods to sell at retail. These services help you get off to a good start with your eBay retail business. Auction Tools Once you’re in business, Andale provides another suite of tools for auction management: Images Andale offers an image service comparable to many others. The primary advantage to Andale’s service is that it’s integrated with Andale’s other ser vices. This makes it quite convenient to use if you use other Andale services. Lister The heart of an auction management service is the listing service. The listings are the auction ads. Andale claims that you can create an auction ad in 30 seconds in contrast to 3 minutes on eBay. The service even provides a spell
CHAPTER 19 SOFTWARE ASSISTANCE
307
checker. You have 100 themes (templates) from which to choose to make your auction ad look professional. You can also schedule the ads to appear on eBay at any time for many months in advance, and the service includes a bulk listing feature. An inventory manager is part of this useful service too. This very robust service has a monthly charge. Lister Pro for businesses with more volume is also available and includes shipping functions (see below). Counters This free service counts the visitors to your auction listings and enables you to analyze the numbers. Andale charges for a more robust service, Counters Pro. Gallery The Gallery is an add-on feature. That is, it is automatically added into eBay auction ads, emails, and other presentations. It includes four visible items (from four other auctions) with one thumbnail photograph each (see Figure 19.2). This is a cross-promotion tool, which now has competition from eBay itself. See Appendix IV for more on cross promotion. Checkout Providing winning bidders with a checkout device can save you a substantial amount of time that you would otherwise spend exchanging email. The Andale checkout can handle twelve payment methods (works with PayPal) and can automatically calculate shipping charges. It generates invoices, packing slips, labels, and reports. See Figure 19.3. And you can use it anywhere you want to, not just for your auctions on eBay. What a Deal! Want to avoid running separate ecommerce software at your website? Andale’s checkout might be what you need. Check out Andale’s total offerings, including the Andale store, to determine what you can use for ecommerce at your website.
Customer Manager This program enables you to manage your customer communications more efficiently and effectively. Have you always wanted to SPAM? Andale gives you your oppor-
308
EBAY BUSINESS THE SMART WAY
tunity. Actually the email goes only to your customers, past and present, so it's not really SPAM. But it does give you the means to easily communicate with everyone in your Andale database. Promote new products or wish everyone a Merry Christmas. This is an easy way to keep in touch with your customers. Does this violate eBay policy? I don’t think so. These are your customers, not potential customers. Reports This is a powerful reporting system that will give you useful analysis on financial performance, customer behavior, costs, and channel efficiency. This is the core tool set for getting your auctions under control. This is where the rubber meets the road.
Store Tools Once you’re ready to move into fixed-price sales, this special set of Andale tools will help you expand your sales: Store The store is similar to the listing service and features catalog pages for auction items. It’s a substitute for the eBay Store. In addition, you can use your Andale store for anything, not just for eBay sales. Indeed, you can use it as a catalog in a separate website—or as an independent website. It includes a shopping cart and a checkout device. It also offers both inventory and sales management. Store Builder is a WYSIWYG program you can use to create your custom storefront.
CHAPTER 19 SOFTWARE ASSISTANCE
309
Another Chance to Save Time and Money Using your Andale store as a catalog on your website or as your independent website can potentially save you the effort and cost of separate ecommerce software. Focus on the effort potentially saved. Who wants to run two programs that do the same thing, one for your eBay auctions and one for your website? Use Andale in both places.
Andale Plaza This is Andale’s online mall, similar to eBay’s online mall it calls Stores. eBay is having a difficult enough time making Stores a viable marketplace. Andale doesn’t have much chance of making its Plaza worthwhile. However, you should not confuse this observation with the fact an Andale Store can be very useful on or as your independent website. Advertise This service submits your ads (for your Store) to Google’s Adword advertising program, enables you to manage all Google ads from a single interface, and reports ad performance (e.g., click-throughs). Although Web advertising is beyond the scope of this book, the Google Adword program is probably worth a try for you. You can limit your expenditures and experiment to see if it works to increase your sales. Distribute This is an important datafeed operation, a valuable service. See Chapter 21 for details on datafeeds. This service even enables budget management for advertising fees at ecommerce portals that charge for including your products. Andale’s single inventory system enables you to keep track og your inventory wherever it is sold. Reports The Andale reports provide analyses of your operations. These are mostly financial analyses. It’s like having a CPA working for you. This is the kind of information that can keep you from making dumb mistakes and can show you the way to greater profitability. Read Them Many people who subscribe to analytic reports on their business oper-
310
EBAY BUSINESS THE SMART WAY
ations have a tendency to put them on the shelf for later reference, even though most analytic reports are not cheap. Don't make this mistake. Set aside an hour or two each month to review the latest reports on your operations. It's tough to do when you're busy, but it's smart. Think of it as keeping score in a game, and keeping your eye on the score. The sooner you respond to your business statistics, the more money you will make.
Lister Pro Those with high sales need more efficient tools. Andale offers the following: Lister Pro Andale does it all for you. But there's one thing that Andale or any other software cannot do for you: data entry. You or an employee must enter the information about products, prices, and the like. In a well-designed auction management system, you need to enter the requisite information only once. But you do have to enter it at least once. Data entry online via a dial-up connection can be slow. With a broadband connection it goes faster. It goes the fastest, though, on your own computer in the rows and columns of a database table. Lister Pro is a free Andale program you use on your own computer to enter and then upload data to your Andale services. It looks like a database table or a spreadsheet. It makes data entry easy and efficient! Without this program, the work you have to do to make Andale services work would be more tedious. Learn how to use it. In a Table Don’t underestimate the efficiency of data entry or changing data in a table format rather in a form format. You or your data entry employee (independent contractor?) can do much more in much less time.
As you can see with this sampling of Andale’s programming services, you can get a lot done with minimal effort.
CHAPTER 19 SOFTWARE ASSISTANCE
311
Broadband With programs (used on your own computer) being replaced today by services (which you use through a browser), you need a broadband connection to the Internet. A DSL phone connection, cable Internet service, or even satellite Internet service is up to 30 times faster than the fastest dial-up modem. In addition, broadband connections are full-time connections. You are always connected. There’s no waiting for a connection to be made as there is with a dial-up modem. You don’t necessarily need a powerful computer for your eBay business, as I’ve stated elsewhere in this book. But a broadband connection is a real convenience. Go Broadband and Save As mentioned in Chapter 4, if you use a voice-over-IP phone service, you may be able to save enough in long distance telephone charges to pay for the a DSL line or cable Internet access.
Auction Management Services and Software Below is a list of auction management services: Andale, http://andale.com AuctionHawk, http://www.auctionhawk.com AuctionHelper, http://auctionhelper.com Auctiva, http://auctiva.com AuktionMaster, http://www.auktionmaster.net ChannelAdvisor, http://channeladvisor.com CoreSense, http://www.coresense.com Dealtree, http://www.dealtree.com DEK Auction Manager, http://www.dekauctionmanager.com InkFrog, http://www.inkfrog.com Kyozou, http://www.kyozou.com ManageAuctions, http://manageauctions.com
312
EBAY BUSINESS THE SMART WAY
Marketplace Manager, http://www.infopia.com MarketPlacePro, http://www.marketplacepro.com MarketWorks (formerly AuctionWorks), http://www.marketworks .com Meridian, http://www.noblespirit.com Mpire, http://www.mpire.com StoreFront, http://www.storefront.com Total Auction Management, http://totalauctionmanagement.com Truition, http://www.truition.com Vendio, http://www.vendio.com Y.E.S. Software Suite, http://www.yukonsoft.com Zoovy, http://zoovy.com Some of these services include software that you use on your own computer. If you would rather use software exclusively on your own computer, check out the following software offerings: Auction Messenger, http://auctionmessenger.net AuctionTamer, http://www.auctiontamer.com Auction Wizard 2000, http://auctionwizard2000.com Blackmagik utilities (for Mac), http://blackmagik.com Cricketsniper, http://cricketsniper.com Easy Auction, http://auctiontools.net EZLister, http://www.ezlister.net MarketBlast, http://marketblast.com (see Figure 19.3) NetSuite, http://www.netsuite.com ShipWorks, http://interapptive.com ShootingStar, http://www.foodogsoftware.com SpoonFeeder, http://spoonfeeder.com
CHAPTER 19 SOFTWARE ASSISTANCE
313
Stone Edge Order Manager, http://stoneedge.com Timber Creek Sold!, http://www.timbercreeksoftware.com
As you might expect, there is free software available from some of the vendors above that might prove useful. However, I recommend that you do not look at price when it comes to auction management. Auction management software can save you so much time and effort that you need to choose a service or software package that feels comfortable to you. This software niche is very competitive, and the prices are reasonable. Also visit StrikeIron (http://strikeiron.com) to find other Web services that can help you with your eBay retail business. Choose the service or software that you want to use, not the least expensive. Re-Advisory As reported in Chapter 1, my bias is for auction management services. For most people making a livable business on eBay, an auction management service is a godsend. So is eBay’s current array of software. Chapter 1 gives a call to action. It advises a trial period of eBay selling using your own system to keep track of your merchandise, auctions, and sales. Once the trial is over, however, don’t continue on with a patchwork system. Even before your volume picks up, get started with an auction management service. You won’t regret it.
314
EBAY BUSINESS THE SMART WAY
Be aware that certain software vendors offer sales analysis programs, which can aid you greatly in developing sales strategies and tactics. Chapter 11 covers such software, so the coverage won’t be repeated here. But be sure to go to the Analytic Research section of Chapter 11 to review what’s available.
Custom Programming If you find yourself paying for custom programming, you should have a specific reason for using such programming. Generally speaking, off-the-shelf programming, such as Miva Merchant and a service such as Andale, is competent to handle everything you need to do in your eBay business. There is no reason to pay to reinvent the wheel. Custom programming can be very expensive when you use it to recreate functions already available in off-the-shelf programs. Still, it can often be surprisingly inexpensive when you use it to create a minor function that’s otherwise not available. Consult with a freelance programmer if you need a special function. It can’t hurt to ask.
Accounting Software As long as we’re considering software, take a look at Intuit, http:// intuit.com. You can do your accounting now with Quicken (personal accounting), move up to Quicken Premier Home & Business, and finally to QuickBooks (business accounting). Many of the auction management services and software dovetail with QuickBooks (as does Miva Merchant) making it seamless for you to integrate your operations with your accounting. It even dovetails with PayPal. This type of overall system 15 years ago would have cost you a few hundred thousand dollars and would have required three full-time employees to operate it. Today it costs peanuts, and you can operate it by yourself. And you can use various QuickBooks services such as Payroll to save yourself a lot of work or a lot of expense. If You Have Employees If you need to have employees, you will need competent services or software to do your payroll. Intuit offers payroll service as do other sources. This makes having employees bearable. Don’t try to do your payroll manually.
20 PayPal Today PayPal (http://paypal.com) is the largest Internet payment service and was purchased by eBay in late 2002. In the summer of 2006 it had 100 million members. Initially, PayPal verifies that the credit card the buyer is using belongs to the buyer by going through verification procedures that most retailers don’t use. PayPal also enables a buyer to have her bank account debited (like writing a check), and PayPal verifies the account. Once a buyer has set up a PayPal account, she can use it just like a credit card with any seller that will accept it. The payment notification is actually emailed from PayPal to you (seller). You can place a PayPal link in your auction ad to take a winning bidder directly to a payment page at PayPal to make payment. It’s a checkout device. The PayPal payments you receive as the seller are held by PayPal in your account at PayPal. You can have the money electronically deposited directly into your checking account, or PayPal will send you a check. You can also keep money in your PayPal account for making payment on things you buy online. A buyer can make a chargeback, which comes back to you. If so, you
315
316
EBAY BUSINESS THE SMART WAY
will pay a fee just as you do for a merchant credit card account chargeback. Being a seller for PayPal is only free when a buyer uses his bank account as a source of funds. In fact, if you receive money via PayPal, you pay a fee (like a merchant account fee) if the buyer uses a credit card as a source of funds. PayPal fees for receiving payment (when a buyer uses a credit card for the source of funds) are 2.9 percent + 30 cents for the standard rate and 2.5 percent + 30 cents for the merchant rate. To qualify as a merchant, you have to have sales volume in excess of $3,000 per month. PayPal has a Seller Protection Policy to protect you against chargebacks and fraud. You can review the details at the PayPal website (http://paypal.com). To get protection, PayPal requires that you ship only to confirmed addresses. Be aware that PayPal has its own style of feedback system. It keeps track and publishes how many PayPal transactions you’ve done. PayPal works very well and has been very popular. It even integrates with QuickBooks (accounting software). The PayPal fees include transaction services fees, making this service very competitive with a merchant credit card account. PayPal is available to buyers in 53 (and growing) countries; and outside the US PayPal pays in 6 (and growing) foreign currencies (see Chapter 22). I speculate that eBay intends to make PayPal the first international online currency (to use a broad definition of the word). It already works well within the US. It has the potential for making international trade for small businesses safer and easier. If eBay can pull it off, PayPal will dramatically increase eBay’s international business. PayPal has expanded its services dramatically and continues to do so. Most of the expanded services are for sellers, primarily eBay retailers and other online retailers. Some of the services parallel what eBay is doing, but PayPal may offer you advantages. And keep in mind that you can accept payment via PayPal anywhere online, not just on eBay. This book cannot keep up with the ongoing PayPal innovations and new services, so you need to review PayPal periodically to see what’s
CHAPTER 20 PAYPAL TODAY
317
new that it can offer you. Indeed, you may find that PayPal makes a suitable auction management service for you. And if it doesn’t today, it may tomorrow after introducing additional services. With the above in mind, it will be worthwhile for you to study PayPal and use PayPal. Feeling comfortable with PayPal will, I predict, pay many dividends in the future. The Latest eBay claims that 95 percent of the current auctions now accept PayPal as a means of payment. Just because 95 percent of eBay sellers are willing to accept PayPal, however, doesn’t mean that 95 percent of eBay buyers are willing to pay via PayPal. But it does show that PayPal is well accepted.
Extended Services Here are some of PayPal’s other features (but not all): • Custom payment pages Now you can make your PayPal payment page the way you want it—within certain parameters. • Promotions You can use Buy Now buttons anywhere in webpages and email. When a buyer clicks, it starts the transaction process. You can also offer coupons redeemable by buyers. • Shopping cart You can use this shopping cart anywhere. On eBay, it enables buyers to buy multiple items from the same seller (i.e., at multiple auctions or in an eBay Store). • Checkout The improved checkout accepts credit card payments from non-PayPal members. • Integrated shipping PayPal integrates shipping into the checkout process and enables you to make labels and prepay shipping to the Postal Service, Canada Post, or UPS. • Sales tax When you need to include sales tax in the checkout, PayPal will calculate it. • Instant payment notification When the auction is over, PayPal will immediately notify the buyer. • Subscriptions Now you can accept recurring payments. PayPal
318
EBAY BUSINESS THE SMART WAY
collects periodically with no further transaction arrangements. • Multi-user access More than one person in your organization can now access your PayPal account. • ATM/debit card With a PayPal ATM/debit card, you can use the funds in your PayPal account just like a bank account. • Mass pay This feature enables you to substitute PayPal payments for written checks. • Auction management tools PayPal provides auction management and post-sale management tools (including invoicing) that you can use on eBay. • Account management You’ve always been able to use your account records on PayPal, but now the software has more features. As this payment/management service continues to expand its features, you may find you don’t need much other software to get the job done.
Website Services Keep in mind that PayPal is not limited to use for eBay. You can use PayPal on your website. The website payment system features are similar to those featured for eBay.
PayPal Website Payments Standard This is the basic plan for your independent website. You don’t even need approval, and there’s no charge for the system, although you do pay normal transaction fees. Customers shop on your website and pay on PayPal with either their PayPal account or a credit card. They actually don’t even need a PayPal account to use a credit card. You can even take credit cards in person or via email, phone, or fax with Virtual Terminal for which you will be charged a monthly fee. You can also use the free PayPal shopping cart if you don’t otherwise have a shopping cart. Again, there’s no charge for this system and no setup fee. What a deal!
All that’s required to set this system on your website is simple HTML and ten minutes.
PayPal Website Payments Pro This offers the same features as the Standard system except that customers pay on your website instead of on PayPal. The monthly fee is charged. The Virtual Terminal is included at no additional cost. The transaction fees are slightly higher. Because this is essentially the equivalent of a merchant account, you will need to be approved. The setup may be considerably complex, requiring technical expertise, if you do not use a shopping cart that has integrated Website Payments Pro.
Other PayPal Payment Systems PayPal also enables you to accept PayPal payments with your existing merchant account or bill customers by email and accept credit cards as well as PayPal payments.
PayPal Shipping Center The free PayPal Shipping Center enables you to create shipping labels with postage paid, calculate shipping costs, print a packing slip, track
320
EBAY BUSINESS THE SMART WAY
shipments, and use Customs forms. The postage is prepaid via PayPal’s partnership with the US Postal Service, Canada Post, and UPS.
Summary With services like this, PayPal really is your pal. PayPal has covered a lot of bases with its extended services. It’s not a complete auction management service yet, but it seems to be headed in that direction. Using PayPal for a shopping cart, checkout, and means of payment is a great system for those starting their eBay retail businesses and for those with low sales volume. eBay retailers with considerable sales volume may need something with more horsepower. However, the capability to use PayPal in place of a merchant account may save you money regardless of your sales volume.
21 Expanding Your Market with Datafeeds You enter 20 auction listings into Turbo Lister (eBay) or Lister Pro (Andale), and what do you have? Well, each listing is composed of standard blocks of information such as price, title, auction ad text, etc. What you have is a database. Indeed, a built-in database program is the core of most business software from inventory control to financial accounting. The auction management services are essentially elaborate and specialized database programs. So, when you use Turbo Lister or Lister Pro, you’ve got the data. Turbo Lister and Lister Pro enable you to use the data to enter eBay auction listings or eBay Store webpages. Is that the end of the story? It doesn’t have to be.
Datafeed Markets If you’ve got the data to create eBay auction listings or eBay Store listings, you can use the same data to list products in other online marketplaces. eBay is essentially an online catalog of products currently up for auction. An eBay Store is essentially an online catalog of products cur-
321
322
EBAY BUSINESS THE SMART WAY
rently for sale. When you send data to eBay or eBay Stores from Turbo Lister, Lister Pro, or another auction listing program, you create a catalog page by filling a template with information. The template for eBay is the standard auction webpage. The template for eBay Stores is the standard Store webpage. How about sending the data elsewhere to create listings or catalog pages? No reason you can’t do so, and it’s a great idea if you can do it cost-effectively.
Google Everyone knows Google (http://google.com) is the most popular search engine. eBay considers Google its hottest competition. Indeed, many people use Google to shop. Name a product you want, plug it into the keyword entry, and Google will give you plenty of places to buy it online at a good price. I’ve used it that way many times myself. eBay is acknowledged to be the number-one selling machine on the Web. But it may not be. Although it would be difficult to prove one way or the other, since statistics are not available, more merchandise may sell on the Web via Google. Because it’s the number-one Web search engine by a substantial margin, a huge number of people find their way to merchandise via Google, and many more via Google than through the other search engines. Indeed, the number one Web marketing technique is to get your website “found” by the search engines, particularly Google. Many ecommerce business owners spend a lot of money to do this. But you know something? The leads you get on Google for finding merchandise online are mixed in with everything else related to the item for which you are looking. For instance, plug in Marantz PMD222, a journalist’s audio recorder for interviews, and you will get reviews, public information, foreign-language websites, research results, and almost anything. If you just want to buy a PMD-222, everything else except vendors that Google lists are just folderol. That’s where Froogle comes in.
Froogle Froogle (http://froogle.com) was well established in an 18-month beta test when it became permanent in March 2004. It works amazingly
CHAPTER 21 EXPANDING YOUR MARKET WITH DATAFEEDS
323
well. What does it do? In a search, it generates only commercial websites. With Froogle, you get only the products. It’s a powerful purchasing mechanism, a new ecommerce phenomenon. Froogle is taking over Google ecommerce as more and more people discover it. This is great news for buyers. You can find more, easier, on Froogle. But what about sellers? What does this new phenomenon do for sellers? Surprisingly, quite a lot. You don’t have to have your website found by Google. You can enter your catalog (items) directly into Froogle via the Froogle datafeed to have your items be found by Froogle. And it’s free! Alas, what can we make of all this? In my most recent eBay books, I have advised people not to get a website (to accompany their eBay operations) but to get an eBay Store instead. (Remember, eBay outlawed a link from an auction ad to a website soon after eBay Stores were introduced.) For most small businesses, an eBay Store enables more efficient marketing than a separate and independent website. eBay Stores sell fixed-price merchandise. Using the Froogle datafeed, you can export your eBay Store items right into Froogle for a super powerful one-two marketing punch. This is quite easy to do with the right software setup. Still, we have to return to the database idea to understand how this works. Your eBay Store is just a catalog of your items for sale created from your database (Turbo Lister, Lister Pro, or the listing program from any other eBay auction management software). From your existing data for eBay you can export a set of data for the Froogle datafeed. Go to the Froogle webpage and look for Information for Merchants to get the details about selling. If you operate your own database system for your eBay business, you’ll know what I’m talking about. And now for the good news. Froogle is free. That makes Froogle hard to beat as a supplementary online market to eBay Stores. Auction Management Software Your auction management service (or software) will include a Froogle datafeed feature soon, if it doesn’t already. Regardless, one way or another, you can use your eBay Store as a website, export its catalog entries to Froogle with little extra effort or expense, and thereby easily
324
EBAY BUSINESS THE SMART WAY
tap into a vast marketplace that may be larger than eBay itself. Opportunities like this don’t come along often. If You Can’t Fight Them Under the theory “if you can’t fight them, join them,” eBay has embraced Google and Froogle. eBay is a heavy advertiser on Google. And now eBay is doing a datafeed to Froogle from eBay Stores. Unfortunately, relying on eBay to get your products on Froogle puts this important marketing technique out of your control. This is something you will want to check closely. If your eBay Store items don’t appear consistently on Froogle, you will need to do the Froogle datafeed yourself. Therefore, I advise you to be sure to do your own datafeed to Froogle regardless of eBay.
If you operate an independent website and use ecommerce software for a catalog, shopping cart, and checkout, your software vendor should include a feature to create a Froogle datafeed. For instance, Vendio (http://vendio.com) was one of the first auction management services to offer a Froogle datafeed. WCW-FASTFEED (http:// www.mvcool.com/mm5.mv) is a Miva Merchant plug-in for creating a Froogle datafeed. It seems clear that one way or another, as an eBay seller you will be able to substantially increase (double?) your marketplace. Froogle Requirements Let’s take a look at the current Froogle requirements for being indexed: • Must be a US vendor • Products must fit into a Froogle category • Must sell at fixed prices • Must sell goods (not services) • Must ship your products (i.e., affiliate websites not permitted) • Must apply to Froogle to open an account To apply to open an account, you submit the following information: • Contact information
CHAPTER 21 EXPANDING YOUR MARKET WITH DATAFEEDS
325
• Vendor information • Name • URL • Product information • Number of products • Product categories If you are permitted to open an account, you can submit your datafeed as often as once a day and must submit it at least once a month. The datafeed columns are as follows: product_url name description image_url category price
Column (field) 1 contains the URL of the product webpage where the product is for sale. Column 2 contains the name of the product. Column 3 contains the description of the product. Column 4 contains the URL of the image of the product. Column 5 contains the Froogle category in which the product belongs. Column 6 contains the price of the product. There are also other columns you can use if you need to run a more complex selling operation. The Froogle datafeed is a normal tab-delimited data file (database text file) that you can export from any database. You simply upload the file to Froogle, and that’s the datafeed. For more information on this exciting breakthrough in ecommerce, try some of the following resources: CartKeeper, http://www.cartkeeper.com/froogle.htm Froogle, http://froogle.google.com/froogle/about.html Search Engine Optimization Consultants, http://www.seoconsulta nts.com/articles/archive/2004
326
EBAY BUSINESS THE SMART WAY
SiteAll, http://siteall.com/froogle/guide/datafeed.htm Somacon, http://froogle.somacon.com Subia, http://www.subiainteractive.com/froogle.html Venue Communications, http://www.venuecom.com/Design/ Froogle_Data_Feed.htm We b s i t e G e a r, h t t p : / / c o n t e n t . w e b s i t e g e a r. c o m / a r t i c l e / froogle_optimization.htm
Google Book Search Google Book Search, now in a beta test, enables you to find books to buy. Amazon, watch out! If you are a bookseller or publisher, you can send a datafeed to Google to have your books listed for sale.
Google Local If you sell in your locale from a physical store, you can register with Google to be included in Google Local. For instance, Go to Google and click on Local. Then at the top of the page, enter the search criteria pizza morgantown wv. You will get a listing of the pizza parlors in Morgantown, West Virginia, together with a map showing where they are located. If you are a local merchant, chances are that your store is already included (from the phone book). But if not, you can register.
Google Base This is Google’s new online classified ad listings, now in a beta test. Check it out at http://base.google.com. And guess what? You can use a datafeed (bulk upload) to get your products listed. However, this is currently experimental and is beyond the scope of this edition. It’s difficult to predict what potential this will have for eBay retailers until the service matures. But it’s another potential marketplace to keep your eye on.
Google more Go to Google and click on more. That will take you to a listing of Google features. Check this listing occasionally to keep alert for new marketing opportunities on Google. Google marketplaces have a special appeal to eBay retailers. Why? They’re free and just a datafeed away.
CHAPTER 21 EXPANDING YOUR MARKET WITH DATAFEEDS
327
Yahoo Shopping It’s called Yahoo Shopping (http://shopping.yahoo.com). It isn’t a warmed-over version of Yahoo Stores, which has never become popular in a big way. It’s similar to Froogle. And guess what? It takes a datafeed. For more information go to https://productsubmit.adcentral.yahoo. com/sspi/us/index2. Does Yahoo constitute a third major marketplace (after eBay and Google)? Google has over 50 percent of the search engine market. Yahoo has only 20 percent? Will Google gain more market share at Yahoo’s expense? Or vice versa? Will Froogle dominate search-engine shopping? Or, will Yahoo get a significant share? The jury is still out. The bad news is that Yahoo charges, and it charges per click for its shopping system, not per sale. It can be expensive, and you will have to carefully evaluate its potential cost-effectiveness before signing up. It doesn’t look like a good deal to me. Nonetheless, it works for many retailers, and I encourage you to make your own decision as to whether it is something that will work for your ecommerce business.
Amazon Does Amazon.com (http://amazon.com) constitute another major marketplace? It seems more like an online department store than a diversified marketplace. Will Amazon be able to maintain or increase its market share in a contest with eBay, Google, Froogle, and Yahoo? Who knows? The question is, Can you sell on Amazon too? The answer is that Amazon is only a datafeed away. You can become an Amazon merchant or zShop subscriber. But like Yahoo, it will cost you. Get further information at http://www.amazon.com/gp/ browse.html/ref=gw_bt_si/104-5510517-4378341?node=3309511. Or, go Sell Items at the bottom of an Amazon webpage. Again, I encourage you to make your own decision as to whether Amazon is a marketplace that will work for your online business.
Shopping.com Shopping.com (http://www.shopping.com) is an example of a comparative marketplace where vendors are displayed on a list along with their prices for a particular product (see Figure 21.1). This is similar to Froogle in that it takes a datafeed, but it’s not free. Go to Shop-
328
EBAY BUSINESS THE SMART WAY
ping.com, and at the bottom of the page you will find a link Join Our Merchant Program, which will lead you to information about selling. eBay bought Shopping.com in 2005, so it’s now part of the eBay family of ecommerce companies.
Below are just a few of the major comparative marketplaces that are of interest. You can review Shopping.com as an example. Or take a look at these: BizRate, http://bizrate.com BottomDollar.com, http://www.bottomdollar.com MySimon, http://www.mysimon.com NexTag, http://www.nextag.com PriceGrabber, http://www.pricegrabber.com
Datafeed Marketing I’m fishing around for a term to describe this type of marketing (using
CHAPTER 21 EXPANDING YOUR MARKET WITH DATAFEEDS
329
datafeeds to establish exposure for your products in different marketplaces). Perhaps the best term is datafeed marketing. Thus, the question becomes, What can you do in the datafeed marketplace to expand your sales? Well, you can do the following: 1. Evaluate every datafeed marketplace opportunity. You will want to know how large the marketplace is, what the cost is, and how appropriate the marketplace is for your products. Then sign up and use the datafeed marketplaces of your choice. 2. Use an auction management service that enables you to do datafeeds automatically to a variety of major marketplaces including Froogle. You will also want the capability to do custom datafeeds to specialized marketplaces you think will generate healthy sales for your particular products. 3. Use an auction management service that will enable you to track your sales regardless of where your products are being sold and recall catalog entries when products are out of stock. You don’t want to get caught selling products in your eBay Store that you don’t have in stock. And there you have it! You can expand your sales easily with little effort and in some marketplaces with no expense (e.g., Froogle). Look at FillZ (http://www.fillz.com), which specializes in selling your books in multiple marketplaces. Some auction management services provide similar distribution for all products.
Craig’s List This successful local online marketplace, covered in Chapter 11, does not accept a datafeed. Alas, as an aggressive eBay entrepreneur, you will have to slow down a little for Craig’s List. It works well in local markets but is not meant to be a retail selling machine as are most of the national marketplaces covered in this chapter. Nonetheless, Craig’s List has emerged as an important ecommerce site for the 200+ cities in which it has created an online marketplace. If you have a need to sell locally (e.g., large items) and live in one of the 200+ cities, take a good look at Craig’s List and figure out how you can use it efficiently.
330
EBAY BUSINESS THE SMART WAY
Summary You might read my book Building Your eBay Traffic the Smart Way. It covers datafeed marketing in more depth as well as other marketing techniques and opportunities. For now, this chapter will get you off to a good start in considering how datafeed marketing can expand your sales. Remember, your first datafeed goes to eBay. Your second datafeed goes to eBay Stores. Where’s your third datafeed going to go?
22 Selling Internationally Believe it or not, many American goods are in high demand outside the US where people cannot buy them or cannot buy them as inexpensively as they can in the US. For instance, in Europe computer books are normally about three times as expensive as in the US. Consequently, Europeans like to buy computer books in the US, and what better place to buy them than eBay or Half.com. Well, what about language? That’s certainly a barrier to commerce. Keep in mind, however, that English has become the international business language. And it’s growing. According to the Foreign Language Department of the Curso Experimental Bilingue, Sao Paulo, Brazil, (http://the_english_dept.tripod.com/esc.html), about 750 million people speak English as a second language. Another 390 million speak it as a native language (about 290 million in the US). If you’re wondering whether those abroad can use eBay (in English), there are hundreds of millions of people who can, if they have a computer.
331
332
EBAY BUSINESS THE SMART WAY
English in Hyderabad? What’s one of the official languages of India, a country with a billion people? English! India has 17 major native languages and so many dialects that even many schools are conducted in English, the common denominator.
There is a huge market around the world for American goods, a market that can speak English, just waiting to be tapped via eBay. This is an exciting opportunity for eBay businesses that want to expand their markets. My book eBay Global the Smart Way provides lots of information on selling to consumers abroad and can help you realize greater sales.
Selling When I started selling some of my eBay books on eBay, about onethird of the buyers were from abroad. They sent cash in envelopes to make purchases. Don’t ask me why. I suppose it was the easiest means of payment for them, and they didn’t want to be refused the merchandise. This is not a practice you want to encourage. If the envelope gets lost or comes without the money (certainly a possibility), the buyer will become frustrated and perhaps angry. You may be in danger of getting negative feedback. Give buyers abroad a specific means (or several means) to make payment.
What’s the Difference? What’s the difference between selling here or abroad? Communication, shipping, payment, and fraud. Communication Sometimes the communication can become a little difficult because most people abroad don’t speak English as well as you do. But you can usually work through that. Most people who learn a language academically can often write better than they speak. So, be persistent with email. Don’t overlook digital online translators to communicate in another language. They are alleged to work haphazardly. Nonetheless, I found
CHAPTER 22 SELLING INTERNATIONALLY
333
Babel Fish Translation at AltaVista (http://babelfish.altavista.com) to be reasonably accurate, and free. Unfortunately, doing translations with Babel Fish is a labor-intensive activity—not great for ecommerce. The telephone is still not cost-effective for calls abroad, perhaps, but occasionally it makes sense to use it anyway. VoIP Vonage, the excellent voice-over-IP telephone service mentioned in Chapter 4, provides low-cost telephone rates to many countries abroad. Skype, a voice-over-IP telephone service now owned by eBay, is a potential means of effective communication. It’s free when connected computer to computer. See Chapter 4 for more information.
Shipping Although shipping is not as complicated as you might expect, it’s a little more difficult to manage than domestic shipping. Here are some possibilities: Canada Post, http://canadapost.com DHL, http://www.dhl.com Federal Express, http://fedex.com Postal Service, http://usps.com Purolator, http://www.purolator.com (owned by Canada Post) UPS, http://ups.com You can get help with a variety of shipping and export issues on some of the websites above. These shippers (couriers) ship to most countries. Modern international shipping is more convenient, faster, and more dependable than in yesteryear. The expansion of modern transportation around the globe has really revolutionized shipping and opened great new opportunities for international trade. eBay is firmly planted in the middle of this revolution. Unfortunately, international shipping via many of the shipping companies above is relatively expensive.
334
EBAY BUSINESS THE SMART WAY
Payment Receiving safe payment is the most difficult problem to resolve for international sales. Many eBay sellers just forego the opportunities rather than deal with the complications and the rampant international credit card fraud. Fortunately, some reliable and safe payment methods are falling into place. Read eBay’s website section on international trading under Sell, Sell Globally. It’s a good introduction, available free. eBay provides a currency converter too. Western Union
Western Union enables people in other countries to send you payment via wire for an auction item purchased on eBay in the US. Whether Western Union’s price is reasonable is the question. But it’s possible, and it’s secure. PayPal
Remember, PayPal is not limited to eBay. Today it has 100 million members in a variety of countries (summer 2006). I believe eBay sees an opportunity with PayPal to establish the leading international online currency (i.e., means of payment) for consumers. And, of course, that’s good for global eBay business too. PayPal is now available in the following countries: Anguilla Argentina* Australia* Austria* Belgium* Brazil* Canada* Chile* China* Costa Rica*
CHAPTER 22 SELLING INTERNATIONALLY
Cyprus Czech Republic Denmark* Dominican Republic* Ecuador* Estonia Finland* France* Germany* Greece* Hong Kong* Hungary Iceland* India* Ireland* Israel* Italy* Jamaica* Japan* Luxembourg Latvia Lithuania Malaysia* Malta Mexico* Netherlands*
335
336
EBAY BUSINESS THE SMART WAY
New Zealand* Norway* Poland Portugal* Singapore* Slovakia Solvenia South Africa South Korea* Spain* Sweden* Switzerland* Taiwan* Thailand* Turkey* United Kingdom* Uruguay* Venezuela* * withdrawals allowed Keep in mind that PayPal is relatively safe. The PayPal credit card holders are verified, and many PayPal members use their verified bank accounts instead of credit cards. In regard to the countries above, PayPal has a variety of arrangements. The arrangements are changing— improving—and PayPal will bring more countries into the fold soon. Don’t assume that all PayPal features are available in every country. PayPal must meet local banking and financial regulations. Doing so is a long process in many countries. With some of the current countries listed above, PayPal doesn’t expect the process to be complete for about three or four more years (i.e., 2010).
CHAPTER 22 SELLING INTERNATIONALLY
337
Could it be that PayPal will end up being the tail that wagged the dog? Remember, PayPal is not limited to use on eBay, and eBay with all its success is still only one marketplace. But PayPal can potentially go everywhere online. This is particularly important in international markets. Things are moving fast for PayPal globally. Take some time and research PayPal’s international services; make it a point to refresh your understanding periodically. It’s your license to international sales. Even with PayPal Even with PayPal you are going to have to learn about international financial transactions and currencies. If you’re going to export, learning is the price of admission. For instance, PayPal claims to have less expensive currency conversion rates than its competitors (primarily banks). What does that mean? It means when someone pays you in Euros, you naturally want the Euros converted into US dollars (unless you’re planning a trip to Europe soon). There’s a significant fee for the conversion. International Money Orders
International money orders are available to locals from banks and post offices in foreign countries to make payment for eBay auction items. This is a traditional means of payment and is secure. But beware of counterfeits, and require payment in dollars. Checks
Yes, they use checks abroad too. And you can accept them. But wait until they clear before shipping. That is, make sure they clear. Don’t just wait a certain number of days. This will cause a long delay, of course. And that’s not optimal customer service. But when it comes to receiving payment, export can be a risky business if you’re not careful. If the check is in a foreign currency, you will want it converted to dollars. Between the time it is sent to you and you receive it, the conversion rates can change, perhaps significantly for some unstable currencies. That has the potential to lower your profits. Cash
Don’t deal in cash; that is, refuse to accept payment in cash. You’re
338
EBAY BUSINESS THE SMART WAY
just asking for trouble. What happens when a buyer abroad sends you an envelope full of cash, but the envelope gets to you without the cash? That can turn into nasty business. The problem is that many buyers abroad will send cash if you accept payment that way. Fraud Unfortunately, beyond the payment methods above, it’s risky to sell abroad. International credit card fraud is too widespread, and Americans make good targets. In Indonesia, middle-class college kids make a sport out of Internet credit card fraud. It’s a rite of passage. They get credit card numbers when tourists use their credit cards. They also get them online from the Internet, hacking here and there. Smart business people online refuse to do business with Indonesians, and smart tourists use travelers checks in the islands, not credit cards. Other countries you will want to avoid in regard to accepting credit cards are listed in Chapter 16. Just refuse to do business with people in such countries who insist on paying with credit cards unless they comply with some of the new protections that credit card companies offer.
Export You need to learn the export business just to sell in foreign countries. For instance, you have to include documents with your shipments to satisfy customs in other countries (e.g., commercial invoice, shipper’s export declaration, certificate of origin, and NAFTA certificate of origin – some of these, but not necessarily all).
Get a Local Partner You’re always going to have better luck selling abroad when you can sell locally in the local language rather than English and sell via someone who can provide local customer service. If you are a niche seller on eBay, you may be contacted by people from abroad desiring to make an alliance with you to sell your products in their locale. With this sort of an arrangement, you become something of a wholesaler, in effect. This is a great way to increase sales volume abroad, albeit at perhaps a lower sales price than selling directly. This of course is not an eBay idea, but your eBay business may generate the contacts that enable you to do business this way.
CHAPTER 22 SELLING INTERNATIONALLY
339
Buying to Sell And how about finding lots of cool things abroad—via eBay in a country abroad—that aren’t on the market here in the US yet. Fabulous opportunities! Want to write off your next trip to Paris? Find something in France that you can buy on eBay there and sell on eBay in the US (see Figure 22.1). Voila! You’re in the export-import business. Then go visit the French seller in Paris.
What’s the catch? You need some knowledge of the language. It’s tough to decipher those French eBay auction ads without knowing French. As this book went to print, eBay had auctions in the following countries: Australia Austria Belgium Canada China France
340
EBAY BUSINESS THE SMART WAY
Germany Hong Kong India Ireland Italy Mercado Libre (minority interest) Argentina Brazil Chile Colombia Ecuador Mexico Uruguay Venezuela Malaysia Netherlands New Zealand Philippines Poland Singapore South Korea Spain Sweden Switzerland Taiwan UK What a wonderful way to buy exotic foreign goods that you would never see otherwise without a visit! This is a great way to look for merchandise abroad without an expensive plane ticket. Keep in mind that eBay auctions in the UK, Philippines, Australia, Canada, Ireland, New Zealand, and India are in English. You may be able to find something to buy and then resell on eBay in the US.
CHAPTER 22 SELLING INTERNATIONALLY
341
Make an Alliance If you can buy in France and resell in the US for a good profit, you can attempt to establish an alliance with a French retailer. She supplies you in quantity at a low price, and you sell in the US on eBay. The possibilities keep growing.
Buying You just want to buy merchandise or machinery at low prices for your business, and there are some attractive purchases available abroad that you’ve heard about. Why not look for them on eBay? Alas, we again run into the language barrier. Buying on eBay in foreign countries requires familiarity with the local tongue. Or does it? I mentioned above that Babel Fish, an online translator, was labor-intensive. That’s impractical when you’re trying to sell items in volume. It’s not so impractical when you’re buying new items to use or to test for possible inclusion in your retail inventory. So, give Babel Fish a try, and buy something on an eBay abroad.
Merged Markets eBay has merged some markets into one. The antique market, prior to eBay fragmented by geographical borders, now stretches across borders into a global market. It has substantially changed the market for antiques. In the future, this will happen again and again in market after market as eBay emerges as a huge and truly international marketplace. The old barriers preventing mergers of markets from different countries were communication, distance, and language. The Internet has provided easy and inexpensive communication. It has also done its part to make distance seem irrelevant to international commerce. New aggressive shipping companies such as FedEx have made shipping more convenient. The last barrier still standing is language. As mentioned above, language works in the favor of those who speak English, the international business language. It works reasonably well when we want to sell something abroad. There are hundreds of millions of people who speak English. Many of them are able to buy on
342
EBAY BUSINESS THE SMART WAY
eBay in the US. But it doesn’t work perfectly, because hundreds of millions more don’t speak English and never will. The large number of English-speaking people abroad who decide to sell us something on eBay in the US can put up auction ads in English, and we in the US are willing, waiting, and understanding buyers. But we have little control over what they offer. We can take control by going to eBays in foreign countries to shop. It’s when we go to buy on eBay in another country that the language barrier is the greatest disadvantage. We need to know the language to buy on a foreign-language eBay. Thus, when you discuss the merger of markets, the question arises, Merger for whom? For Americans buying on eBay in foreign countries, there’s little merging. The language barrier is a real obstacle. For English speaking people abroad buying and selling on eBay in the US, the merger is real. The language barrier is of little import. Consequently, for all we have said about the wonderful opportunities to sell our goods abroad to the vast numbers of English-speaking peoples of the world, we are still at a disadvantage when we go to buy abroad on eBay in foreign countries. But, again, give Babel Fish a try. There’s a Difference There’s a difference between buying and selling abroad for an eBay business. When you’re buying on a foreign eBay, you can take the time to purchase items you think might have potential to sell in the US. Using Babel Fish is practical. You are shopping. Purchasing is limited and low volume (i.e., you buy one item at a time). Selling in volume on a foreign eBay is possible using Babel Fish too. But it’s not practical. Using Babel Fish would take too much time for each sale. Volume will be high (hopefully). Using Babel Fish will be too labor-intensive for volume sales.
New Yankee Traders in Force Thanks to eBay, the new Yankee traders (eBay businesses) are going international in force. We have lots to sell that the world wants. Don’t be left out of the international markets. Be careful and learn to cope. For additional information read eBay Global the Smart Way. Also visit
CHAPTER 22 SELLING INTERNATIONALLY
343
the World Trade Press website for additional information on import/ export. http://www.worldtradepress.com For more on eBay import/export, check http://baysidebusiness.com from time to time to see what’s new. Look for Trade Affiliates (http://tradeaff iliates.com), which brings businesspeople from different countries together to do business.
This page intentionally left blank
23 Customer Service Why is customer service so important? Because there isn’t anything else. If you can’t keep your customers happy, you won’t have any future selling on eBay. Customer service is getting more robust on the Web. Another way to put this is that the trend is toward more and better customer service. Commerce on the Web is very competitive, and much of that competition takes place in the customer service realm. If you think you can just sell something on eBay and that’s the end of it, you are in for a surprise. When you sell something on eBay, that’s only the beginning of it. I suppose as an individual selling occasionally on eBay, you might be able to avoid being concerned about customer service. But even that notion is dubious. And when you make a business of selling on eBay, customer service must hold your continual attention. Is this something new, invented online? No. The offline businesses that give the best customer service are among the most successful. Business online or on eBay is no different than offline. The name of the game is customer service. The customer is always right. Always!
345
346
EBAY BUSINESS THE SMART WAY
Feedback Your indoctrination to customer service on eBay is the feedback system. This can be a harsh introduction if you’re not careful. The customers (buyers, bidders) get to speak out if not treated well. And they will. The feedback record is permanent and public. Your mistakes can stay with you for a long time. It’s better to think things through from the beginning and develop a customer-oriented approach to your business. That will help keep your feedback record positive. But that may not be enough. You really have to buy into the customer service philosophy. You have to believe that providing good customer service is the right thing to do in the retail business. You have to be a believer. With such an attitude, you won’t have to worry about getting negative feedback. Make no mistake. The feedback system works. Potential bidders not only check the feedback of sellers, but they avoid sellers with significant negative feedback. Having a positive feedback record is essential to your success. Read Trust Among Strangers in Internet Transactions: Empirical Analysis of eBay’s Reputation System, 02/05/01 draft, http://www.si.umich.edu/ ~presnick/papers/ebayNBER/RZNBERBodegaBay.pdf, and visit the author’s (Paul Resnick) webpage at http://www.si.umich.edu/ ~presnick/ if you like an academic flavor to your eBay information. The conclusion of the paper is that sellers with better reputations are more likely to sell but not likely to get a higher price. Also read Daniel Reeves’ paper, cited in the beginning of Chapter 27, which concludes that an increase in a seller’s positive feedback yields an increase in auction prices.
Credit Card Chargebacks Anyone who pays with a credit card and is dissatisfied with a purchase can ask for a chargeback (a refund to their credit card account). Banks issue credit cards. Some banks routinely honor a chargeback request without any investigation. Some investigate. Of the banks that investigate, some will seem to favor the buyer and some will seem to favor the seller. This is not a game you want to play. Your customer service should pre-
CHAPTER 23 CUSTOMER SERVICE
347
vent chargebacks. If a customer makes a chargeback, your customer service has failed. Design your customer service from beginning to end so that customer dissatisfaction never goes as far as a chargeback.
Guarantees The most analogous industry to ecommerce is the mail order business. How do mail order firms talk people into buying merchandise, often sight unseen, from faraway places? They give guarantees. That’s what you need to do too. Look at it this way. Whether you want to or not you will have to exchange merchandise with or make refunds to unhappy customers. Otherwise you won’t do well on eBay. Why not turn that fact of life into a positive instead of a negative? Guarantee what you sell. Mail order firms do it. Leading offline merchants do it. Why not you? Now, there are situations where manufacturers handle the guarantees or warranties (e.g., consumer electronics), and you don’t have to do it. There are situations where guarantees aren’t appropriate and aren’t expected (e.g., used goods sold “as is” with fully disclosed defects). But if you sell something after saying that it is in good condition or that it works, it better be in good condition or it better work when it gets to the buyer. The feedback system is too powerful for you to carry a lot of unhappy customers on your back.
Types of Product Guarantees Different guarantees go with different industries. Here are some possibilities for product guarantees: Not DOA (dead on arrival) This is a guarantee popular with some retailers (e.g., computer hardware retailers). It means that the hardware is guaranteed not to be DOA. So long as it works when it gets to the buyer, the guarantee is valid. If it breaks a day later (or an hour later), there is no guarantee. This seems reasonable for used computer hardware so long as it is well explained. (Reminder: Don’t use abbreviations in your auction ads.) Short-term This is a guarantee with a specific short time limit (e.g., 90 days).
348
EBAY BUSINESS THE SMART WAY
Long-term This is a guarantee with a specific time period of longer duration. Limited This limits the reasons justifying the return of the merchandise (e.g., only if defective). You want happy customers, but there’s a limit to what you can do. The least you can do is a short-term, limited guarantee; and that may be enough. The fact that you guarantee your goods at all will put your potential customers at ease. Take a look at what your competitors are doing both online and offline. Go them one better if you can.
Satisfaction Guarantee The ultimate guarantee is a satisfaction guarantee. This is not a product guarantee. This is a purchase guarantee. If your customer isn’t satisfied with the purchase for any reason, she can return it for a refund. This is essentially what the leading merchandisers guarantee offline (e.g., Target, Costco). This is a very powerful guarantee to give on eBay. It’s the ultimate in customer service. It’s not appropriate for all merchandise, but you need to seriously consider giving this type of guarantee. Many leading eBay sellers do.
As Is What does “as is” mean? You see this used a lot on eBay. Is it used by a seller who sells something that works well, who wants the maximum price, but who doesn’t want to take any responsibility? Or, is it used by a seller who is not sure whether the item works well, and who expects a lower price? Who knows? This is an expression you want to avoid using in your auction ads. If you’re the first seller (above) who doesn’t want to take responsibility, you're going to have a tough time on eBay, and you’re going to get a lower price for the item in any event. If you’re the second seller (above) who doesn’t know about the item and is willing to take a lower price, you might be mistaken for the first seller. You can’t win. Give it up! My advice is that if something doesn’t work well or is not in good condition, don’t sell it. Or sell it for parts only. Why ask for trouble?
CHAPTER 23 CUSTOMER SERVICE
349
If you want to insist on selling something “as is,” make sure that you provide complete information on why you are doing so. Selling something “as is” can be legitimate in some cases, but it requires full disclosure. It should never be a routine abdication of responsibility.
Warranties For many consumer hardware products sold new, the manufacturer provides a warranty. If something goes wrong, the customer returns the product to the manufacturer for repair or replacement, not to you. For instance, if you sell a name-brand DVD player new and it malfunctions, the buyer will usually return it to the manufacturer. If you give a satisfaction guarantee, however, the buyer may return the defective DVD player to you requiring you to replace it. You would then send it to the manufacuturer. There’s no reason for you to get in the middle of this so long as the manufacturer provides good customer service. Thus, for items that have a strong manufacturer’s warranty, you may not have to provide any guarantee. For appropriate used items, either you or the buyer can purchase a warranty. Usually the buyer pays for it, but it’s nice to be able to offer such a warranty to buyers. In many cases, you can earn a comission selling warranties to your customers. eBay and NEW Customer Service Companies (http://newcorp.com) offer two warranty plans: Standard Service Plan This is for products not covered by an existing manufacturer’s warranty. It goes into effect for one year starting 30 days after the purchase. Extended Service Plan This extends an existing manufacturer’s warranty for one year. Make your buyers aware that that legitimate warranties are available, and you will increase your sales.
Payment Different means of payment are not conveniences for you, they’re for your customers. You need to be ready to accept payment as many ways as possible. At the very least you need to accept the following:
350
EBAY BUSINESS THE SMART WAY
PayPal It’s the leading payment method on the Web. If you accept credit cards, you can probably get away without accepting PayPal until you grow large. Credit Cards Visa and Mastercard are a must, but it’s nice to accept American Express and Discover too. If you use PayPal, you can probably get away without accepting credit cards until your volume grows. Electronic Checks Accepting electronic checks is easy to do. Learn to do it. Checks Most of the world still runs on checks. Money Orders and Cashier’s Checks Some people deal strictly in cash, and this is as close to cash as they can get short of sending currency. People (customers) are creatures of habit. Others are fussy. Whatever the reason, some people will not purchase unless you offer their chosen method of payment. Don’t be foolish. Don’t throw away a significant portion of the market. Be flexible in regard to accepting payment.
Escrow.com This is the eBay recommended escrow service for completing eBay auction transactions in escrow. Should you agree to closing a transaction in escrow? No seller wants to use escrow. Sellers perceive that as long as they don’t have to deliver before they get paid, why bother with escrow? Sellers know they’re honest. They don’t need an escrow closing. Unfortunately, that attitude completely ignores the point of view of the buyers. Every buyer has a line that he or she will not cross. It might be $50, $500, or $5,000, but at some price a buyer will simply not pay a seller without some assurance that the item will be delivered. Just for reference, my threshold is about $1,000. I can buy something more expensive than that, but I wouldn’t unless the seller agreed to an escrow closing or a comparable arrangement. If you don’t agree to an escrow for your $1,400 item, you may eliminate me as a potential bidder. And
CHAPTER 23 CUSTOMER SERVICE
351
dozens of other potential bidders too! (You’ll never know the people you’ve eliminated.) Consequently, I recommend that you agree to an escrow closing upon request. Who pays? Escrow closings aren’t cheap. For the $1,400 transaction at Escrow.com, the fee is 3.25 percent. That’s $45. There is an additional charge for using a credit card for payment. I recommend that the buyer and seller split the escrow cost. That’s fair and what is commonly done in real estate transactions. What’s in it for you? First, it increases your credibility. If you offer it, the buyer may decide not to use it. If you refuse it, the buyer may insist upon it (or just not bid). Second, it gives you protection against a chargeback on a credit card transaction. It will be difficult for the buyer to argue that the merchandise is unsatisfactory after a successful escrow closing. After all, the seller isn’t paid until the buyer accepts the merchandise. So, go to Escrow.com (http://www.escrow.com) and learn about escrow closings. You don’t necessarily have to offer it for high cost items, but agree to it, if asked, and agree to split the cost. This is basic customer service. eBay also recommends escrow services for foreign transactions, which makes sales abroad more feasible. Of course, there are other online escrow companies, and you might want to search for one and use it. (But read Chapter 16.) I’m sticking with eBay’s recommendation, because this is a risky matter for which eBay’s recommendation carries some weight. Licensed Dealer If you are a licensed dealer (e.g., motor vehicles), you can argue that the state regulates dealers and their transactions. Therefore, the buyer has protection and doesn’t need an escrow closing. Licensed dealers normally are obligated to go through a state-sanctioned procedure to close transactions. And a buyer can check up on licensed dealers ahead of time through the licensing state.
Bonding Customer service comes in all sorts of subtle nuances. How about
352
EBAY BUSINESS THE SMART WAY
offering your customers a bond for your performance? If you you don’t perform (deliver the goods), the bonding company will reimburse your customers their loss. The bonding program is named BuySafe (http://buysafe.com) and offers a bond as high as $10,000 in partnership with the Hartford Insurance and Liberty Muntual Insurance companies. Great idea, but the fee is a little pricey. It’s one percent of the sales price, if you qualify to be bonded (must have good credit and no criminal record). This service is probably most desirable for eBay businesses that sell big ticket items. And how about this odd combination? BuySafe and Western Union have teamed up. Western Union will reimburse the BuySafe one-percent fee, if you received payment with a Western Union AuctionPayment money order. Now if every payment system would do that, the bond wouldn’t look so expensive. Bonding is a nice touch and definitely has a place in eBay retail. Whether it will work for you will depend whether it makes a difference to your customers, but it has considerable potential for certain retail situations, particularly the sale of expensive goods.
Square Trade If you get in a dispute with a buyer, Square Trade is a lifesaver to settle the dispute fairly. Mediating the dispute is done online and by other means of communication. Hopefully, nobody goes home mad, and everyone keeps their reputations intact. This is essentially a service you offer to buyers with a notice (seal) in your auction ad. Go to the Square Trade website for details. http://www.squaretrade.com This is not a major expense and is one you will do well to offer.
Authentication Services If you sell collectibles, art objects, and various other items that buyers expect to be authenticated, you need to provide authentication. The authentication simply states that the item is what it purports to be. Various items are authenticated in different ways, but the idea is that experts do the authentications. When you’re dealing in items that
CHAPTER 23 CUSTOMER SERVICE
353
require authentication, line up the proper experts to do the authentication for you.
Returns Set up a policy and system for returns and inform your buyers. This will give you some control. You don’t want returns coming in that you can’t identify or about which you have no information. Publish your policy in your auction ads. You need to coordinate your return policy with your guarantees. Both should be explained to your customers. For instance, if you allow the return of defective merchandise only, you need to require your buyers to state the defects when they return something.
Communication Handle all communications with customers immediately. Face and resolve all problems immediately. If a customer isn’t happy, it’s a burden—to the customer. Get that burden off their back as soon as possible. Make it right. This is how you build a business. It has been my experience in talking with successful eBay retailers that usually about the second employee they hire is one to handle customer communications. Part-time? No. Full-time. By the time you make enough money to hire employees, you will have considerable volume. And you will need someone to handle customer communications— customer service—full time. The alternative, of course, is that you spend considerable time handling the emails and telephone calls yourself.
Full Information Always provide full information on the items you sell. It’s a convenience to bidders, it will result in more bidders, and it will save you time (i.e., less email from potential bidders). If you don’t take care to do so, it makes you look like you’re in a hurry or don’t care. Either interpretation signals that you will probably be difficult to deal with if something goes wrong, a signal not well received by buyers. Full information is especially crucial for used or defective merchandise. People want to get the full story. They won’t appreciate surprises.
354
EBAY BUSINESS THE SMART WAY
Software Use software wherever you can to streamline and automate communications and customer service. A good example is to follow up an auction immediately with an email to the winning bidder. However, know when to handle communications on a personal basis. It’s difficult for software to handle the unique problems that arise from time to time. Seek new ideas in customer service software. You need to review the customer service software market at least once a year to discover what’s new. Go to trade shows that focus on customer service. Note that much customer service software is expensive and designed for large businesses. Seek inexpensive customer service software designed for small businesses. It’s not necessarily inferior. It’s just designed for a smaller-scale retail operation. You might investigate InTouchSys (http://intouchsys.com) and Parature (http://parature.com) as potential customer service systems. Auction management services contain customer service software. Keep up to date on this type of software and stay aware of new features being offered.
Offline Customer Service Just because you have an online business doesn’t mean you need pay attention only to online customer service. Always keep in mind traditional (offline) customer service and combine it with what you do online. The goal is to keep your customers happy. For instance, sometimes you need to use the telephone to resolve a problem. Email just doesn’t get the job done. Sometimes even a letter (on real paper) is appropriate.
Experiment Online customer service is being invented now. Review what your competitors and retailers in other industries are doing. Imitate some procedures. Reject others. Experiment with your own ideas. eBay and other successful ecommerce operations are not yet well seasoned processes that have reached maturity. They are early experiments. Invent something to make your customers’ online experience more satisfying.
CHAPTER 23 CUSTOMER SERVICE
355
Amazon.com Amazon.com continues to be the model of effective retailing online. It is 100 percent customer service. Review what’s going on at Amazon periodically. You will get some ideas you might be able to incorporate into your own retail business. Off the Ground The founder of Amazon.com, Jeff Bezos, could have been up and running in two months in 1996 with quite powerful existing ecommerce software. Instead he chose to create his own system. He spent a year in a garage with several programmers inventing Amazon.com before the website went online. The rest is history. Amazon.com has invented at least half of the leading ecommerce customer service techniques and continues to be innovative.
Take Advantage eBay offers a lot of digital devices that provide customer service. Aggressively experiment with all of them. Use the ones that work for you and your customers. If you have a website, your host ISP will have a bag of digital tricks you can use free. There are CGI scripts and perhaps JavaScripts to be incorporated into your webpages. Some of them will be appropriate for customer service. An example is a guest book where customers sign in. Their name goes on a mailing list for a newsletter or future promotional emailings.
Know Your Customers Sellathon’s ViewTracker (http://sellathon.com) is a great tool for getting to know your potential customers (bidders). It tracks the visitors to your auction ads. Here’s some of the voluminous information it records: 1. How many visitors. 2. How a visitor searched on eBay. 3. IP address of visitor. 4. Where visitor is from.
356
EBAY BUSINESS THE SMART WAY
5. Time of visit. It also gives robust statistical data useful for understanding your visitors. This is the type of “must have” data that can not only help you with customer service but that can provide the solid information you need to plan a marketing or sales campaign. Tracking Magic It’s tough to track people (customers) offline. Online it’s easier, as software like ViewTracker demonstrates. It’s tough to track sales in the market offline (except your own sales). The services that attempt to do so tend to be expensive. Online it’s easier, as software like that reported in Chapter 11 demonstrates (e.g., DeepAnalysis). These online analytic services provide a fantastic opportunity for you to conduct an intelligent, customer-data-supported retail business. These services are relatively inexpensive. Cheap really! eBay retailers who take advantage of these services will have the edge over those who don’t. As an online retailer, you can get data inexpensively that offline retailers would kill for. Don’t overlook this great opportunity not only for better customer service but for marketing and sales too.
Not Just This or That Customer service is the sum total of what you do for your customers to make things easy, convenient, and satisfying for them. It’s your accounting, your procedures, your communication, your eBay advertising, your policies, and many other things. Think through everything you do with your customers in mind.
VI Operating Smart
This page intentionally left blank
24 Storefronts So you want to have a storefront where you can sell more items than you auction! eBay provides a good place to start. If you want more than eBay offers, the second half of this chapter will give you some ideas. First, however, we’ll stick to a discussion of the eBay seller auction listings and eBay Stores.
What Is a Storefront? Before we consider the eBay offerings, it’s useful to discuss what a basic storefront is, and then see how the eBay offerings measure up. A storefront is a website that sells products. In other words, it’s an ecommerce website. eCommerce websites or storefronts can be plain or have a lot of character. For instance, Costco.com sells discount merchandise on the Web (just as it does in its physical stores). That’s pretty straightforward (plain). Many ecommerce websites, however, include some type of attraction or perhaps even entertainment. For example, Amazon.com has book reviews on its website. This is not only relevant to selling books but ver y useful to buyers. The Fly Shop website (http:// www.theflyshop.com) has a catalog of fly fishing equipment and sup-
359
360
EBAY BUSINESS THE SMART WAY
plies, its primary business. It also offers fly fishing trips abroad, local guide service, fishing in local private waters, a fly fishing school, and a kids camp. The kids camp portion of the website features a memories section for the camp going back four years and includes photographs for each year. The overall website furnishes plenty of information about the area where the physical shop is located, which is a national destination area for fly fishing (Redding, California). The customer service spans from the physical location right onto the website. Regardless of what else an ecommerce website might offer, the ecommerce portion of the website inevitably offers a catalog, a shopping cart, a checkout, and occasionally other functionality.
Catalog A catalog is essential to ecommerce. It’s simply a list of products available for purchase. It might appear as one product per webpage with some scheme of hierarchical navigation; a list of products to be browsed; a list of products resulting from a search; or even a combination of these. A well-done catalog contains a photograph of each product, a description of each product, and the price of each product. It might also contain choices for the product. For instance, an article of clothing might contain a choice of four colors and eight sizes. Some catalogs are elegant with artwork that will knock your socks off. Others are rather plain. The most desirable feature of a catalog, however, is usability. It must be easy to navigate and easy to use. Because 90 percent of ecommerce websites miss the mark, that’s worth repeating: The most desirable feature of a catalog is usability.
Shopping Cart A shopping cart is a digital device that accumulates purchases as the buyer browses through the catalog much like one throws products into a shopping cart as one goes through a supermarket. One can check the cart to determine what’s in it and can even take products out (delete them).
Checkout When the buyer finishes shopping, he goes to the checkout where he
CHAPTER 24 STOREFRONTS
361
gives his name, address, and credit card information (or other payment information). The digital checkout device usually calculates sales tax, if any, and adds shipping costs. Then it collects the total payment.
Other Functions An ecommerce website may have other functions, too, such as enabling a buyer to rate the product (review it). Other buyers can view the rating to assist them in making purchasing decisions.
Informal eBay Storefront The eBay seller’s auction list is like a catalog. The catalog list contains all the current auction items and Buy It Now auction items for a seller. eBay generates such a list automatically for each seller. A link to the seller’s list of auctions appears near the top of the auction page near her eBay ID. Many bidders are aware of this link. At the top of the auction list, three tabs enable a buyer to use the list conveniently. One tab presents all auction items. Another presents all Buy It Now items. And one presents the combination of the two. When a buyer clicks on an item on the list, the auction ad for the item appears exactly the same as in the normal eBay auction scheme. This is not a fancy catalog (see Figure 24.1). Indeed, it’s exactly like the remainder of eBay. There are no visible shopping carts and no special functions. The checkout device is the normal eBay checkout device (see Chapter 19). It’s not much, but it’s free and may be adequate for your eBay business. It’s functional and easy to use for buyers and may be all you need.
Fee There is no additional fee for the list of all your current auctions. The eBay system automatically generates the list.
About Me The one thing your eBay auction list lacks is information about you and your business. You can take care of that, however, by making a brochure website on your About Me page on eBay. This is discussed in Chapter 8 at more length. With a little HTML (see the tutorials in Appendix V), you can make your About Me entry on eBay a long webpage providing information on both you and your eBay business. The link to your About Me webpage appears beside your eBay ID (login name) on an auction webpage. It’s great for your business whether you promote the eBay auction list or not. And it’s free.
eBay Stores eBay Stores are strictly for fixed price items that are not current auctions. These items appear only in your eBay Store. Your eBay Store items are not necessarily listed in the eBay auctions (see exception in sidebar). However, all your current auctions and Buy It Now auction items are automatically listed in your eBay Store.
CHAPTER 24 STOREFRONTS
363
Supplement If an auction search yields 10 items or less, eBay supplements the listings with items from eBay Stores. If a search yields more than 10 items, eBay puts a single link at the bottom of the page (matching items found in other eBay areas) to additional Buy It Now items from eBay Stores.
Your eBay Store is listed in a certain category in the eBay Store directory. Buyers can also find you in an advanced eBay search using the Stores tab. The normal eBay search, however, does not take buyers to Store items, only to auction items.
Cool Storefront eBay Stores have more pizazz than seller auction listings, and eBay enables you to exercise more control over the look of your Store. You can put together an attractive custom storefront using eBay design elements or create your own storefront using HTML. You can even customize catalog pages. The possibilities are much greater than when Stores were first introduced. The listing pages for Store items are similar to eBay auctions listings.
Custom Search You can set up your own custom search for your Store with your own custom categories. This is a navigational aid and works only in your Store. It helps your customers find what they are looking for.
Traffic An eBay Store puts you where the traffic is and doesn’t cost much. That’s a good combination. It’s as easy as eBay to use. And it’s likely to be more cost-effective than operating your own website. A link (red icon) under the heading Visit seller’s Store in your auction listings goes directly to your eBay store. Look for the traffic for Stores to increase over the years as more and more buyers catch on to the Stores. The eBay Stores make up the eBay mall, in effect, and have the potential to become another major focus of buyers’ attention someday soon. But what about today? Well, eBay claims that your sales will increase 25 percent in the first three months that you have a Store. Stores have lower fees than auctions too. This is an interesting combination: a
364
EBAY BUSINESS THE SMART WAY
substantial boost in sales and lower fees. It’s worth a try.
Website Is your eBay Store a website? OK, so your eBay Store isn’t exactly as spectacular as a leading ecommerce website. But it’s easy to create and easy for buyers to use and navigate. Ever y one of your auction webpages links to it (i.e., via the red icon). You can even use your eBay Store URL to link to your Store from elsewhere on the Web. Not a bad deal!
Internet Marketing Remember that when you use an eBay Store, you have little marketing burden. It’s all done for you. You are taking advantage of eBay’s tremendous Internet marketing power. In addition, you can enhance your marketing by writing good copy for your auction ads and Buy It Now ads. That is, you can include almost anything you want in the auction ads. This is one of the great benefits of an eBay Store—no huge marketing effort. Carrying on your online retailing business beyond eBay to Web storefronts or malls is not advisable in many cases, for reasons that this chapter covers later. The primary reason is a marketing consideration. eBay reduces your need to market considerably. The minute you step out of the eBay system, marketing will consume 50 percent of your time, money, and effort. This is probably a situation you can wisely avoid without shortchanging your online retailing effort.
Internal Marketing Marketing is not completely eliminated by eBay. You need to market internally, this is inside eBay. There are four great techniques that you can automate. First, use auctions to promote your eBay Store. Auctions get more buyers than Stores. Run auctions to bring buyers to your Store via links. Remember the Store red icon link at the top of your auction listing webpages? That’s not enough. In your auction ad template put a link(s) to your eBay Store. Remember, your Store has a unique URL (Web address) that you can use to link to it from anywhere. Second, eBay now offers you, as a Store owner, a banner ad (custom
CHAPTER 24 STOREFRONTS
365
listing header) that goes at the top of every auction you run. You decide what the ad will look like and do. You will want it to advertise your eBay Store and link to your eBay Store. This is a great addition to the eBay Store system. Use it! Third, eBay now offers cross-promotions for eBay Stores. A small gallery of products (four items) from your Store goes on all of your item, Bid Confirm, and Confirmation pages near the bottom. You can control what appears in this small gallery. See Appendix IV for comments on cross-promotion. Fourth, you can use your About Me page to promote yourself and your eBay business. Link to it from all your auction ads and all your Store catalog pages. Note that this marketing is mostly automatic. You simply set it up (e.g., put a link in your auction ad template), and it works in the eBay system without further attention. Reduced Fees eBay will reduce its fees for items sold to buyers who are referred by links from your independent website. Look for the details on this arrangement if you have an independent website.
Reports eBay gives you sales and traffic reports along with your Store that will help you run your business and enable smart marketing. The data is organized to be easy to use and understand. It includes general eBay marketplace data for comparison as well as the data for your business. These reports (also offered by many auction management services) are essential to managing your business and remaining competitive. You can bet that your competitors are using them.
Search Engines eBay claims that Stores is optimized for the search engines. This is a nice feature, but it will work differently for every Store. Unfortunately, getting found by the search engines is not something that can be done by a system (i.e., eBay) well for multiple websites. Thus, eBay’s effort may not work for your Store. Nonetheless, you are still free to do
366
EBAY BUSINESS THE SMART WAY
whatever you can do to maximize your Store to get found by the search engines. As covered in Chapter 21, you will want to get your products listed in Froogle via a datafeed. Stores is supposed to do this for you. In the meanwhile, I advise every Store owner to check Froogle. If your items are not there (as a result of eBay’s reputed datafeed), you will need to provide the datafeed yourself via your auction management software or otherwise.
Levels So what level of Store do you want to have? For about $16 per month you can have a basic Store. This is a great deal! For about $50 per month, you can have a Featured Store. This includes more benefits such as more reporting and a subscription to Selling Manager Pro. For about $500 per month you can have an Anchored Store with additional benefits, most of them promotional benefits within eBay. You will want to take a close look at the Featured and Anchored Stores to decide whether the additional benefits are worth the additional cost for your business. Item listing fees are in addition to the monthly fee, but the listing fees are substantially less than listing auctions. Understand that Stores are evolving steadily, and by the time you read this, eBay will be offering more features. Even if you have been using Stores, you need to occasionally review what eBay is offering with Stores not only to keep yourself up-to-date on new features but also to reevaluate your need for old features you’re not yet using.
Bullish on Stores I said it as soon as Stores were offered by eBay, and I’ll say it again. I’m bullish on Stores. They have realized some of their potential but have a long way to go. eBay is moving forward with intelligence to improve them. Look for Stores to grow in features and become an integral and increasingly important part of the eBay marketplace. Stores is here to stay, and I believe that, for many if not most eBay businesses, Stores eliminates the need for independent websites. eBay indicates that there are now 383,000 Stores. Don’t be the last one
CHAPTER 24 STOREFRONTS
367
in your category to jump on this moving-along bandwagon.
An eBay Business Before I cover storefronts off eBay, let’s take a look at a successful eBay business, Bob and Debbie Kitchener’s Dangerous Threads.
Dangerous Threads Bob and Debbie had been in the retail business for 15 years selling clothing and leather goods (Dangerous Threads) when I first talked with Bob in early 2003. In 2001, they had closed their store in Nashville and focused on building up their eBay retail business, primarily in leather goods. Previously, they had manufactured the leather goods sold in their store. In 2003, they had the leather goods manufactured to their designs and specifications. They also distributed the leather goods and components to a few hundred retailers and wholesalers nationally. And they sold the leather goods on eBay to consumers (see Figure 24.2). Bob said in early 2003 they were to the point where just the eBay retail sales were enough to support them without taking into account the manufacturing and distribution businesses.
Bob and Debbie did everything themselves in regard to the eBay sales. That’s incredible considering that they ran 1,500 auctions a week.
368
EBAY BUSINESS THE SMART WAY
About 30 percent resulted in sales. That was about 450 items a week to be accounted for and shipped. They used a combination of a manual system and eBay’s auction management services to keep track of everything. They also used Andale’s Gallery. They were interested in using more of Andale’s services, but did not have the time to fully investigate and learn to use new software. They did take the time to carefully write copy for their auction ads and to carefully photograph their auction items with a digital camera. About half their business was sales via Buy It Now on eBay. About 5 percent of their winning bidders didn’t complete the purchase transaction. They give a satisfaction guarantee, in effect, even though they don’t necessarily advertise it. They didn’t experience any buyer fraud or credit card chargebacks and did most of their transactions through PayPal. They operated a separate website but made only a small percentage of their sales from that website. Their seller’s list of auctions on eBay was a huge catalog by itself. Bob and Debbie did not have an eBay Store. Bob said they had reached the point where they needed employees to break through to the next level of eBay retailing. As Bob told me, “Today, we don’t have any employees. But call me back in a month, and we might have ten employees.” He ran his manufacturing and distribution businesses using independent contractors exclusively.
Dangerous Update I talked with Bob again in the summer of 2004, about 18 months after the first interview, to find out what has changed for Dangerous Threads. Bob and Debbie are still doing everything without employees, although they do use independent contractors. They are now running 2,500 to 3,800 auctions each week. They use eBay auction management software exclusively. Again, they would like to use something more sophisticated, but they don’t have time to learn new software. They now use the eBay cross-promotion device. Their latest project, only a few weeks old when I talked with Bob, is an eBay Store. They are in the process of stocking their Store with inventory. Although it’s too early to tell, it appears that their Store is well on its way to being a success, and they’re pleased with the results so far. They like the reporting feature of eBay Stores and find it useful.
CHAPTER 24 STOREFRONTS
369
Bob says that he thinks the key to success is quick fulfillment. They fill orders, ship immediately, and have very few problems. They are able to handle all customer communications themselves. Due to immediate shipping, their customers usually receive the purchased items before they think to inquire when the merchandise will arrive. Bob says that he and Debbie can get away for a weekend quite easily. But they haven’t taken a longer vacation together in four years. At the time I talked with Bob, Debbie was out of the country on a trip while he was minding the shop. He said that to go on a trip together, they would have to close shop for a while. Interestingly, Bob says he really gets bored with retail quite easily after having operated retail businesses for years. But he says eBay is different. In almost four years, he has never been bored in their eBay retail operation. He says things change so fast that it’s challenging to keep up. There’s always something new.
Marketing Read Chapter 1, which briefly mentions the role of marketing in any successful business. eBay is one of the only ways to beat the 50 percent rule. The 50 percent rule states that 50 percent of your time, effort, and resources in any business will be devoted to marketing and selling. So, if you want to sell outside of eBay, you need to be ready to devote the necessary resources to your marketing and selling efforts. Suppose you create a nice website for your business with all the appropriate ecommerce software. How are you going to get people to come to your website? Here are some things you can do: Search Engines Get found by the search engines; that is, get near the top of the list on the first page of the search results. There is only one way to do this successfully. Hire a competent consultant who knows how to make it happen. (You will find that just identifying such a consultant is tough.) It will cost you between $5,000 and $10,000, and in addition, it will require a huge amount of your time. There are no shortcuts here. This is online marketing at its most effective, perhaps, but it isn’t cheap.
370
EBAY BUSINESS THE SMART WAY
Don’t Believe Don’t believe anyone who tells you that they can get you to the top of the search engine lists for a $100 registration fee, by subscribing to a monthly newsletter, or by paying a modest monthly fee. This will never happen. The process is tedious and expensive.
Banner Advertising The word is out that banner advertising is not effective. That’s not true. Advertising on other websites can be effective if part of an intelligently and professionally run advertising campaign. Unfortunately, it costs a lot. On eBay itself, the banner advertising is like a keyword advertising system (e.g., like Google Adwords) and is not necessarily so expensive. AdWords You pick the keywords. When people search on Google and use one of those keywords, your ad with a link appears on the right side of the page. When someone clicks on the link, you pay. Similar keyword advertising systems can be found on other portals such as Yahoo and even eBay. This is not as expensive as banner advertising, but it’s not free either. Trading Links Trading links with other websites will work. You can do it yourself. But you need a lot of links, and each takes time to arrange. It’s doubtful that this alone is enough to sustain an online retailer. Joining a link-exchange group will help, but oddly enough that will hurt you in the search engine sweepstakes. Affiliates Get affiliate websites to sell your merchandise. To do this effectively, you need affiliate software. modStop (http://modstop.com) makes inexpensive affiliate software that plugs into Miva Merchant (see below), so cost is not a barrier here. Nonetheless, you will spend a lot of time arranging affiliate relationships. Offline Advertising Can’t beat this. But it sure is expensive. And you had better be ready to take the telephone orders that this approach will generate. The telephone orders are likely to be greater than online orders. Email You can build mailing lists (takes a long time) or buy a
CHAPTER 24 STOREFRONTS
371
spamming campaign (requires huge numbers and can cost a lot). This can be effective. But various governmental agencies are moving toward controlling spam, making the future for even focused email marketing doubtful. Try distributing your newsletter in the form of a blog instead (See Chapter 33). Discussion Groups Participation in discussion groups is another effective marketing technique for some merchandise, not all. But participation often takes a huge amount of time. Community Participating in the eBay community is not a prerequisite to success on eBay. Neither is participating in a community relevant to what your sell. But at least the latter has the potential of generating some sales. Only you can decide the best use of your limited time. If you do participate in a community (forum, discussion group, listserv, mailing list, etc.), go lightly. Don’t flood the group with thinly veiled sales information. Most groups frown upon crass commercialism. The groups use email in one form or another to communicate. Use email carefully. Email tends to be direct and abrupt, and it often seems rude. You can unintentionally offend other participants quite easily.
These are not the only marketing techniques you can use to promote a website business. The sampling here illustrates that marketing requires large resources of time, effort, and money. It’s likely your website will not get the traffic required to sell a reasonable amount of merchandise without effective marketing. Selling from a website is a much different business than selling on eBay.
Website To be effective for ecommerce, a website must meet certain criteria. It should be attractive and have a professional look. It requires ecommerce software, including a catalog, shopping cart, and checkout device. It also requires the coordination of the business arrangements with the use of the software. And the website must be usable for website visitors.
372
EBAY BUSINESS THE SMART WAY
Your Own Website Unless you can do most of the construction yourself, you’re going to pay a few thousand dollars at least to build a commercial-quality website. Even if you can afford the money to construct it, you will have to pay additional money to operate it effectively. This is not a lightweight undertaking. You had better make sure you really need it before jumping into such a major project. Can You Do It Yourself? You can create your website yourself if you want to take the time to learn and experiment. Using HTML (Hypertext Markup Language) is not programming. Anyone can learn it easily, and webpage authoring programs minimize the amount you’ll have to learn about HTML. See Appendix V for an HTML tutorial.
A Mall There are a lot of malls on the Web. The idea is that they attract business just because they have a lot of stores. They usually provide webpage templates to use for storefronts and the usual ecommerce software. The problem is that they don’t really attract many customers but many charge fees as if they did. As a marketing method they perform poorly. The few malls that do have effective markets, such as Yahoo and Amazon, charge a lot of money; and you have to decide whether they are cost-effective. On the other hand, if you don’t use your website for selling, creating a simple business-brochure website in an obscure but inexpensive mall may prove cost-effective for customer service.
A Business Brochure If you listen to Web gurus, you will learn that a website that’s nothing but an online business brochure is worthless. That’s crazy. It depends on what you want to do with it. If the idea is to attract customers, the gurus are right. It won’t work. However, if the idea is to provide customer service, a brochure website can work just fine. A printed business brochure explains the business, features the key
CHAPTER 24 STOREFRONTS
373
personnel, provides some color pictures, includes the address and telephone numbers, and perhaps even provides references. A brochure website does the same. For a physical location it might even include a map to your store. It’s easy and inexpensive to construct this type of website, and it works. Customers want to know something about your business. It helps them decide whether they want to do business with you. They want to know how to contact you. And local customers want to know where to find you if you have a physical location. Even Internet customers want to know your actual physical location. This makes things easier for your potential customers. Voila! This is a low-level customer service. And you can provide it even without ecommerce software. You can refer your customers there just to learn more about you and your business, and if you have a good story to tell about yourself, so much the better. About Me About Me serves this purpose on eBay and for an eBay Store. About Me isn’t infinite, but just one webpage gives you a lot of leeway in creating an online business brochure.
I like brochure websites and About Me, but they do not by themselves generate any new prospective buyers.
eBay ProStores eBay ProStores would seem to have some connection to eBay. However, they don’t. This is simply an ISP (Internet service provider) website host service competing with hundreds of other ISP host services. It’s an impressive service and does help you manage your eBay auctions and eBay Store, but it is not part of the eBay marketplace. It’s a competitive service in a competitive industry, but you may find another host service that offers you more robust features for a more modest price. Check out ProStores for sure if you need a website, but don’t overlook the competition.
eCommerce Software If you sell from your website you will need to use ecommerce software.
374
EBAY BUSINESS THE SMART WAY
Such software is available at virtually every host ISP. However, there are dozens of different ecommerce software programs, and you will want to find one you can stick with. If you use whatever is available today and then change to another host ISP tomorrow, you may have to start over again. That would be very painful. It’s better to find ecommerce software you like and then find a host ISP that operates that particular ecommerce program. If you grow to dislike the ISP, you can switch to another ISP that supports your ecommerce software.
Features The typical features included in an ecommerce software package are a catalog, shopping cart, and checkout device. That seems simple enough. However, the software features for creating a catalog vary greatly. A shopping cart is reasonably straightforward. But a checkout device can potentially run dozens of different processes, which may or may not be included. Therefore, it pays to compare ecommerce software packages carefully to know exactly what you're getting.
Miva Merchant Miva Merchant (http://www.miva.com) has evolved to be one of the leading ecommerce software packages for small businesses. It features the requisite catalog, shopping cart, and checkout device. Its features, as is, are very robust. In addition, Miva has designed Merchant to accept plug-ins so that third-party software developers can write addon programming for it. As a result, you can buy plug-ins (add-ons) to make Miva do almost anything except dance the polka at a German restaurant. One of the plug-ins I like best is one that creates an affiliate marketing system for you. What’s the significance to you? With Miva, for an inexpensive price you can create an ecommerce system that equals the features of a corporate enterprise system costing hundreds of thousands of dollars. This is a terrific advantage for you once you build up some business volume. Merchant on eBay eBay, with all its catalog programming expertise, chose Miva Merchant to operate the eBay Store for a few years. This is where eBay sold T-
CHAPTER 24 STOREFRONTS
375
shirts and other eBay souvenirs. Today it has been renamed the eBay Shop and operates on a different system.
It quite possible for a nonprogrammer to install Miva Merchant, but it isn’t the easiest thing you’ll ever do. Once set up, it’s very stable. It accepts uploads from a database to populate (fill) the catalog. This is the best way for a small business to operate a website catalog. Note that eBay’s Turbo Lister, for instance, is a database, which you can use to populate a Miva catalog. Miva Host ISP For you to use Merchant, your ISP has to have a Miva server. Over 200 ISPs run Miva servers, so you have choices. You can also find a Miva host ISP that will provide Miva Merchant to you so that you don’t have to buy it. In other words, the host ISP sets up and operates Merchant for you, leaving you only to populate the catalog with merchandise from a database. This can save you a lot of work and perhaps some money too. Miva Website I’m not trying to sell you Miva Merchant, but it’s worth reporting to you just because it’s such a robust program, particularly as extended by all the plug-ins written for it. A visit to the Miva website (http:// miva.com) can be very educational because everything you need for ecommerce is there. If Miva doesn’t provide it, Miva provides a link to it. And, of course, you will want to check out Merchant’s competitors.
Database A catalog for products is the heart of every ecommerce program. Invariably an ecommerce catalog is a database. You enter data about your products, and the software turns the data into (populates) a catalog. Using an ecommerce catalog database can be slow and tedious for a small business using a host ISP. If you have a lot of items in your catalog (i.e., over 100), you will probably find it easier to maintain your catalog database offline in a database manager like Microsoft Access. You simply enter data and make changes on your own computer and then export the data in a data file (in an ASCII delimited file). You
376
EBAY BUSINESS THE SMART WAY
upload the data file into Merchant. That updates your website catalog. Uses a Database Andale Lister Pro (see Chapter 17) is essentially a database that works just as described above. You use its table easily and quickly offline and then upload the data to create your auction ads or eBay Store ads. eBay’s Turbo Lister is similar.
A large business uses a database on a dedicated server system that also powers its website online. This is not cost-effective for a small business. Instead, using a database on your own computer is fast and efficient. Then uploading the updated data to an ecommerce application is quick and easy (once you catch on to the routine). What’s the difference between a database for a large business and one for a small business in regard to use online? It’s not necessarily the number of records (rows) and fields (columns). There is one very small business I know of that uses Merchant for 9,000 different products. Rather, the difference is the number of concurrent users (the number of website visitors downloading catalog webpages at exactly the same time). Database systems for large businesses are built to handle many more concurrent users. Concurrent Users In general, you can think of databases handling concurrent users according to the following estimates: Access 4 Microsoft SQL Server 100 Oracle 10,000 Remember, the concurrent users are just a small percentage of the people visiting your website at any time. Visitors are using your webserver only while they're downloading a webpage, not while they're reading it.
Merchant has its own built-in database. There is no relationship between how Merchant performs online and what database you happen to use on your own computer to maintain your data.
CHAPTER 24 STOREFRONTS
377
Auction Management Service If you use an auction management service to manage your eBay business, you may be able to use its ecommerce devices on your website. Such services often provide both database listings (catalogs) and checkout devices. By using the same system for both your eBay auctions and your ecommerce website, you will save a lot of confusion and eliminate a few learning curves. With that in mind, you might compare Miva Merchant directly to a service like Andale.
Bonding to eBay If you can bond your ecommerce website to your eBay auctions, your website might produce significant sales. Notice that I didn’t say “link.” eBay no longer permits a link from your auction ad to your website. Consequently, to bond your auction ads to your website to generate traffic, you have to figure out some clever way to do so that doesn’t break the eBay rules. One way to get your URL into your auction ad is to include your email address, which eBay does not specifically prohibit. [email protected] Before you construct your own website with the idea of bonding it to your eBay retailing, you need to ask yourself, What am I trying to accomplish that I can’t accomplish with an eBay Store? If you simply want to sell more of the same items, beefing up your eBay Store is likely a better strategy. You need a special situation for the bonding idea to work well. Suppose your core business is selling items in bulk, say a dozen at a time or a gross at a time. If you sell just individual items on eBay, it can act as a lead-in to selling the same items in bulk on your website. For example, suppose you sell doorknob-locksets to residential construction customers (e.g., do-it-yourselfers, fixer-uppers, or small residential contractors). You offer one model in an eBay auction each week and make it apparent in your auction ad that you have plenty more available. A potential bulk customer using the eBay search engine will find your auction ad and presumably find out about your bulk business.
378
EBAY BUSINESS THE SMART WAY
The customer will then attempt to contact you or find your website to buy a dozen sets for a construction or rehab project. In other words, the auction ad is a lead-in for larger sales. If you can make this work, you may be able to justify the cost of constructing and operating a website without doing the immense amount of marketing it takes to promote a website. Again, you need to review the eBay rules to make sure you’re not breaking them with any scheme you implement. In this example, the buyer has circumvented the purchase of one doorknob-lockset on eBay but hasn’t broken the rules regarding the other 11. Although this strategy seems to violate the spirit of the eBay rules, the eBay rules don’t address specifically address this situation yet. Indeed, this is one area in which the eBay rules have been evolving and getting stricter. About Me You can still put a link to your website in your About Me page. And you can put a link to your About Me page in your auction ad. Be sure to do it.
About Me Webpage When all is said and done, you may want to forego doing your own ecommerce website. Everyone is different. Every eBay business is different. And every situation is different. This chapter about Internet storefronts gives you some alternatives for creating a full-fledged ecommerce website. This chapter also sends you the message that you may not need an ecommerce website. It just may not be worth the time and effort because of the marketing effort you will have to expend to make it work. One thing is clear. It is worthwhile to do a good presentation on your About Me page as mentioned in Chapter 8. This is your opportunity to have a one-page business brochure website right on eBay, free. You will have to know a little HTML (see the HTML tutorial in Appendix V) to do reasonable job of publishing your information, but it’s well worth the effort. And unlike the auction ads, you can include a hyperlink to your website in your About Me. One great thing about About Me is that eBay links to it from your auc-
CHAPTER 24 STOREFRONTS
379
tion ads and from your eBay Store ads. Regardless of what other website you create, be sure to put up a generous About Me page. Then link to it from everywhere, even outside eBay. It may be all you need.
eBay’s Hidden Market The eBay market is $45 billion per year as eBay reported (2006), right? Not exactly! The eBay market is larger, although how much larger is difficult to say. Here’s a real life example. We were buying network equipment (new) to build a network for our new charter high school campus. We needed fiber optic cable. We found three reels on eBay from one source, enough to wire our entire campus. The eBay transaction was $1,200 for three spools. Incidentally, this was a savings of about $9,000. We drove to San Jose (from the northeast San Francisco Bay Area) to pick up the cable and were very happy to save so much money for the school. The seller was a digital company that was getting out of the wiring business. The seller had a huge surplus inventory of new network parts. While picking up the reels of cable, we vowed to return with a wish list and purchase network equipment and odds and ends. As construction projects often go, ours changed. A trench was rerouted to save $5,000 in construction costs. Unfortunately, it required our Tech Committee to install fiber optic cable runs for an extra 500 feet. In addition, cabling experts advised us that we needed a little more cable for our original runs. The bottom line was that we needed a lot more fiber optic cable. The cost was to be about $20,000 (to save $5,000, right?). Fortunately, the original seller had plenty of additional fiber optic cable. Our cost to purchase it was only $2,300. This transaction resulted from a few phone calls and happened off eBay. (The seller had not diligently pursued selling the additional cable on eBay.) When we drove down to pick up the next few reels of cable, we took our wish list of network parts. We spend almost three hours going through the seller’s inventory. As a result our total purchase for the day was about $3,800 (including the cable). On the $2,500 (list price) of new network parts we bought, we saved about $1,000. Again, this happened off eBay.
380
EBAY BUSINESS THE SMART WAY
Out of Compliance? Was our $3,800 second purchase in compliance with eBay rules? Yes. The additional cable was not currently offered on eBay. The new network parts, such as cable organizers and RJ-45 jacks, were not currently offered on eBay. Indeed, we didn’t know whether these items had ever been offered for auction on eBay. The eBay rules did not govern our second transaction, even though it was three times as large (in dollars) as our first transaction.
Implications What are the implications for off-eBay sales? First, you must consider them as an important part of the eBay market. Second, the implication for eBay is a loss of potential revenue. Third, any seller can aggressively pursue off-eBay sales (resulting from eBay) to maximize profits. However, if you get too blatant about it, you may be violating an eBay rule.
The Hidden Market Exists The hidden market exists. It’s an important market. It results from bringing a buyer and seller together for one transaction, who later do another transaction not necessarily via eBay. Although impossible to estimate accurately, the hidden eBay market may be a signficant percentage of the visible eBay market.
eBay’s Loss of Potential Revenue There are two aspects to eBay’s loss of potential revenue in regard to the hidden market. First is the loss on transactions that break the eBay rules. This happens when a buyer contacts the seller about an item being auctioned and then buys it outside the eBay auction process denying eBay its fee (see Rules below). This is indefensible. Second is the loss on transactions between a buyer and a seller introduced to each other by an eBay transaction, who proceed to do additional business with each other regarding items not auctioned on eBay. eBay will never be able to do much about this hidden market. The only way it could attempt to control this market is through the honor system, and that would never hold up for transactions involving items that were never even offered on eBay. Nonetheless, you have to sympa-
CHAPTER 24 STOREFRONTS
381
thize with eBay. It misses collecting revenue for a huge number of transactions between buyers and sellers that it introduced to each other through its online auction process. Because eBay has created a huge new market that offers wonderful new opportunities to us, it’s in our best interest to take into account the eBay hidden market when considering eBay fees. We need to make sure that eBay continues to do a great job of regulating and expanding this huge new market, and to do so eBay needs adequate revenue. Keep this in mind the next time you complain about eBay fees and regulations. In other words, don’t violate eBay’s rules.
Pursuing Off-eBay Sales One of the themes of this book is to communicate the importance of customer service. It motivates buyers to do business with you again in future auctions. In a real sense, you continually build your brand on eBay. A better brand (a better reputation, better feedback) sells more online just as it sells more in a bricks and mortar business environment. Additionally, the hidden market (off-eBay) is an omnipresent opportunity for you. For instance, let’s say you purchased a carton of baseball caps and are selling them one at a time in individual auctions on eBay. A buyer buys a cap at one of your auctions and likes it so much that he contacts you about buying ten more of them for his baseball-fan buddies. This is the type of purchasing that you want to encourage. Let’s say that when the buyer requests to buy ten more baseball caps, you are currently running four auctions selling individual baseball caps on eBay. Do you have an obligation to eBay to refer the buyer to your auctions? Perhaps not. The buyer may not even know about these auctions. The buyer may only know about the one completed auction in which he bought the first baseball cap. He’s not trying to get around eBay. He’s just trying to buy more caps. And he’s probably going to ask for a quantity discount. Even if you referred him to the current four auctions, he would still be six caps short. Your obligation to eBay is to not make a sale outside of eBay in regard to a specific auction that has introduced (or reintroduced) the buyer to you. In this case, you have no knowledge that any of your current four
382
EBAY BUSINESS THE SMART WAY
auctions has introduced (or reintroduced) this buyer to you. As mentioned above, the buyer may not even know about these auctions. The buyer was introduced to you via a prior completed auction wherein eBay received its requisite fee. This buyer is simply approaching you to buy something (a bulk purchase) not offered on eBay. Therefore, this is a potential transaction that may not be out of compliance with eBay rules. Reintroduction The hypothetical buyer seeking to purchase ten baseball caps is different from the buyer who previously bought a T-shirt from you and now seeks to buy a baseball cap. She sees one of your baseball cap auctions. Instead of bidding, she contacts you directly and requests to purchase a baseball cap. The baseball cap auction has, in effect, introduced her to you, and you are obligated to sell to her through the auction. This is, in actuality, a reintroduction, but it would violate the spirit of the eBay rules to treat it as anything but an introduction. Difference of Opinion Keep in mind that eBay—or someone else—may have a different interpretation of the eBay rules than the author of this book.
You can see from this legalistic discussion of off-eBay transactions that you always have an obligation to eBay to determine whether you are in compliance with eBay rules. But certainly there are huge numbers of situations where you can make sales resulting from contact with eBay buyers that do not violate eBay rules. These sales can be a profitable and routine part of your eBay operations. Selling additional items (particularly bulk items and expendable items) is a strategy you need to back up with promotions and advertising. It’s all part of building your brand.
Rules When a buyer contacts the seller about an item being auctioned and then buys it outside the eBay auction process, it denies eBay its fee. This is a breach of a member’s agreement with eBay and is unconscionable. Biting the hand that feeds you (denying revenue to the organi-
CHAPTER 24 STOREFRONTS
383
zation that has created this wonderful new market) is not a sound business strategy. Nor is it a morally defensible business strategy! Everyone should follow the rules, and pay eBay the fees it deserves. One can sell a series of items on eBay that lead into more sales off eBay for which one doesn’t have to pay an eBay fee. And one can do it without breaking eBay rules. Why would anyone break the rules to stiff eBay for its fee on one of the auctions they ran on eBay? Not nice. eBay is a wonderful marketplace. Everyone should do their share to support it. Follow the rules and pay eBay its fees.
Advertising In your advertising, you can expand your business by appealing to the hidden market. For instance, when you sell one item on eBay and have many more in stock, you can offer to sell multiple items in your eBay auction ad. Sample: Buy this high-quality Yankees baseball cap and wear it for years. It’s made from a cotton-polyester blend that keeps you cool and yet is highly durable. The triple-sewn visor has a waterproof stiffener that will not melt in the first rain. Contact us at [email protected] for team availability and quantity pricing.
In eBay the Smart Way I suggest that one can use an eBay auction as a form of advertising. In the early days of eBay, you could even put a hyperlink to your ecommerce website right in your auction ad. Today eBay outlaws the link for most auction ads (real estate is one of the exceptions) but doesn’t specifically outlaw advertising words that express an email address. When you have only one item to sell (i.e., for advertising purposes), you can still advertise your email address (with the URL the same as your website) in your auction ad. You want people to be able to get ahold of you easily; it’s part of good customer service. And when you have inventory in addition to the item in the auction ad, you will want to advertise that more items are available upon request. When you do this, the advertising can be effective. One item always being auctioned with an effective auction ad can be a terrific ongoing advertisement and will help you sell more items off eBay (or in an eBay Store) than in eBay auctions. But be sure to include your email address.
384
EBAY BUSINESS THE SMART WAY
In Practice In order to generate a reasonable number of off-eBay bulk purchases or even individual purchases, you will need to have a considerable number of eBay auctions.
Buyers As an eBay businessperson, put yourself in the place of a buyer. You find a set of steak knives you need in an eBay auction ad. But you need more than one set because you’re buying for your bridge club of 225 members. Unfortunately, eBay tends to cater to individuals rather than bulk buyers. In addition, many sellers shoot themselves in the foot by putting a bare minimum of information in their auction ads. So, you get ads like this: Set of six deluxe stainless steel steak knives with brown wooden handles.
A much better ad, at a bare minimum, to generate both individual purchases and bulk purchases might include the following: Set of six high-quality stainless steel steak knives with 5” blades and extra-large oak handles lacquered to a lustrous golden brown. These knives will look good on any table and will never rust. Just the right size for gracious dining. Money-back guarantee. Contact us at [email protected] for quantity pricing.
eBay Stores Again Ironically, you can probably take the most advantage of the hidden market using an eBay Store instead of a separate website. In this case, eBay gets its fees. I think for many eBay businesses, an eBay Store is a better and less expensive investment than a separate website. You can use your Store like an independent website, and you can freely promote it with links from your auction ads. This is fantastic marketing power.
Summary The combination of an eBay Store and About Me has become an excellent substitute for operating an independent website. Check out your options thoroughly. Your business is unique, and your business needs
CHAPTER 24 STOREFRONTS
385
are unique. Only you can decide what’s best for your business. At one time, I was advising that an independent website and operating eBay auctions made made up a powerful online marketing strategy. But times change. Today an eBay Store offers marketing advantages that you will find difficult to duplicate inexpensively elsewhere on the Web. Indeed, an eBay Store will help you tap into eBay’s hidden market.
This page intentionally left blank
25 Determining Your Profit Calculating your profit (net income) is more than arithmetic. It’s knowing what to include in income, and more importantly what to include in expenses. Then it’s knowing what to compare your profit to. After all, you do have other choices; you can get a job or keep the job you already have. To begin this chapter we’re first going to consider the question, What other opportunities should you compare your eBay business profit to? That will make you more sensitive as to what expenses to include in your net income calculations, to be discussed later in the chapter.
How Are You Doing? You go on vacation to a pleasant beach town in Florida (see Figure 25.1) and find a local bike rental company doing a booming business renting the old fat tire bikes from the mid-twentieth century. You inquire where they get the bikes. It turns out they purchase them in bulk from the Kingstown Bike Company in Layton, Oklahoma. Kingstown makes a business of selling these old-fashioned bikes—adult versions only—in fleet quantities to resort town bike rental places.
You get the idea that perhaps you can sell the bikes one at a time to baby-boomers who are starting to reach retirement and may be nostalgic for an old fashion bike to ride around in their retirement resort towns. Kingstown agrees to sell you these bikes individually at wholesale and drop ship them disassembled via UPS inexpensively. You don't like Kingstown’s incomprehensible assembly instructions, so you provide Kingstown with your own version (that you write) to be sent along to your customers. Then you get on eBay and start auctioning them. As you anticipated, you are very successful. You currently work at a normal eight-hour-per-day job where you make $30,000 a year with two weeks of vacation. This is 2,000 hours a year, a nice round number to use for standard calculations. You are making $15 per hour. As you become more successful on eBay, you have less and less time for yourself. Your eBay operation takes up your evenings and weekends. You start keeping track of the hours you spend on your eBay auctions. When you look at your eBay income, you see that it’s getting close to $15 per hour. You anticipate that in two months it will be up to $15 per hour as you streamline your eBay operating procedures. If you quit your job in two months, you anticipate you will be able to work at
CHAPTER 25 DETERMINING YOUR PROFIT
389
least 40 hours a week on eBay auctions. Your plan pans out. You quit your job. You are still making $30,000 per year but now you’re doing it retailing on eBay. You are able to work a schedule that suits you, and you don't have to listen to your boss yak at you any longer. Although your sales (auction) revenue has leveled off, you figure that you will be able to find other things to sell on eBay eventually that will provide additional income. How are you doing?
Not Very Well The benefits on your regular job included some—perhaps all—of the following: • Health insurance • Dental insurance • Disability insurance • Worker’s compensation • Unemployment insurance • Life insurance • Life insurance for spouse • Profit sharing • Pension fund • FICA Your employer made major contributions to all the benefits while your contributions were minor. Typically the benefits for a good job from an employer’s point of view cost about 10 to 40 percent of an employee’s salary. Assume the benefits on your job cost your employer 15 percent. Thus, you were really making $34,500 on your job if you include the value of the benefits. So, right now making $30,000 for a 40-hour week on eBay, you are actually behind, not even, with your old job. What’s the point? The point here is to compare apples to apples when comparing the profit of an eBay business to the compensation of a job you now have or a job you can get. Don’t kid yourself.
390
EBAY BUSINESS THE SMART WAY
Do You Really Need These Benefits? The benefits that employers typically offer are sometimes perceived as irrelevant by young people. However, when you get married and have a family, these benefits become much more important. Indeed, the benefits that employers offer are based on demand from mature employees who do have families. They offer a greater measure of security than a simple salary. Health Insurance Without health insurance, the medical care that you may need one day may not be available to you. If it is available to you, it may bankrupt you. Health insurance is not a luxury item. You need this regardless of whether you have a job or are making your living on eBay. Specifically, you need group health insurance that costs less and has fewer restrictions than individual health insurance. Fortunately, eBay now has a health insurance program in which you can enroll (available to PowerSellers). If that doesn’t suit you, there are thousands of business organizations and associations that offer group health insurance plans to their members. Join one to get the group health insurance usually at a lower cost than individual insurance. Dental Insurance A dental problem won’t bankrupt you, but it can sure put a dent in your disposable income. Dental insurance typically pays only half the cost of most dental procedures, but that’s a welcome relief when you need a filling, crown, or something more serious. Just as it is for health insurance, a group dental plan is usually less expensive than an individual plan. Disability Insurance Disabilities come in different flavors. One is an injury incurred while performing your job (e.g., broken ankle – see Worker’s Compensation). Another is a general disability not caused by your job (e.g., prolonged disease). Some disabilities are temporary, some permanent. General disability insurance tends to be expensive. It is designed to provide income for people who become disabled as a result of any injury or illness whether job-related or not. Since most people are rea-
CHAPTER 25 DETERMINING YOUR PROFIT
391
sonably healthy until they get past retirement age, disability benefits are not as widely offered by employers as other benefits. Self-employed people also tend to overlook this risk until later in life. Worker’s Compensation Worker’s compensation covers injuries incurred on the job. However, to get worker’s compensation coverage, which is state regulated, you may have to be an employee or find comparable non-employee coverage. Worker’s compensation insurance is not terribly expensive in many states because most employees don’t get injured on the job unless they are in hazardous occupations. This insurance provides money as compensation for injuries. Unemployment Insurance This is provided and subsidized by government. It lasts for a limited time and is available only to employees. Life Insurance Life insurance is reasonably inexpensive if acquired via a group policy. When you’re young, you need to have enough to bury yourself so as not to be a burden on your relatives. When you have a family, you need to have enough to get them off to a good start financially without you, should you die early. It’s not fair to your family to leave them scrambling financially for survival after your early death. So, life insurance is a real need. Pension Fund It’s impossible to retire comfortably on Social Security. You need to start putting something away early in your career in order to have a decent retirement. The tax laws allow a variety of individual retirement plans that can work well if you start when you’re young and don’t miss your annual contributions. If you start when you’re older, you’re already behind. But it still makes sense. For instance, if you’re 50 and have no retirement fund yet except Social Security, you have only fifteen years (until age 65) to salt something away into a tax-deferred retirement fund, right? No. You probably won’t be able to afford to retire at 65. Consequently, you will have extra years to contribute to your retirement fund. Suppose you retire at
392
EBAY BUSINESS THE SMART WAY
72. You will have 22 years to contribute to your retirement fund from the age of 50. That’s a substantial amount of time. Rollover If you have pension benefits from a corporate job that you left, you may need to rollover the funds into a new pension account. Contact Fidelity (http://www.fidelity.com) for more information. Fidelity has participated in the eBay Live conference and offers a wide variety of investment services.
FICA Your employer pays a portion of your Social Security and Medicare taxes. When you’re self-employed, you pay all. So, your pretax income for your eBay business will have to be higher than your base salary on your job in order to reach the same take-home earnings.
Expenses In order to determine your profit, you need to know your expenses. Your expenses are the sum of everything you spend to get products into the hands of sellers. Everything!
Estimating Expenses Make an estimate. Nothing formal. When you get started, your accountant will help you set up a chart of accounts for your bookkeeping. For now, just make a few estimates to help determine whether an eBay business is for you. Employees Wages are a considerable expense when you have employees. Speaking of benefits, if you have employees, you may be expected to provide many of the benefits (above) to them, substantially increasing your employee costs. This is particularly true for full-time and loyal longterm employees. Consequently, an employee’s wages are not your only employee expense. (If you have no employees, you still need to provide the necessary benefits for yourself.)
CHAPTER 25 DETERMINING YOUR PROFIT
393
Independent Contractors These are employee substitutes. You need to pay them for services rendered. Once you get rolling, you can’t do everything yourself. Real Estate So, you’re working out of your home now in your eBay business, and it doesn’t cost you anything, right? No. It does cost you, and you should use the value of your real estate use (rent) in your expense calculations. Calculations that include free real estate can be very misleading when it comes to comparisons to other businesses. You may also be kidding yourself regarding your home. You’re now using a bedroom for your office, so you decide to convert the back porch into a room. After all, your mother needs someplace to sleep when she visits. It suddenly appears obvious that the cost of converting the porch into a room is the real cost of having a home office. Whether it’s a bedroom, garage, or study that you use for your eBay operations, take into account the market value of the room. (Note: This is a different idea than taking depreciation on your home business area for income tax purposes.) If you are using real estate other than your home, include the rent in your calculations. Equipment If you already have the requisite equipment you need to carry on an eBay business, you still need to include its cost in calculating your profit. You will have to replace it someday. Don’t forget software, which is a type of digital equipment. Supplies You will start consuming office supplies and other supplies at a greater rate for business than for normal nonbusiness activities at home. Transportation If you need to use a vehicle a lot in your eBay business, include the expense at the IRS allowed mileage rate.
394
EBAY BUSINESS THE SMART WAY
Utilities You need to include electricity, heat, water, telephone, Internet service, and other ongoing services in your expense calculations. For a home office, some of these will have to be prorated. If you leave them out because you’re already paying them, you will be kidding yourself. Advertising This can be a huge cost for most businesses. Fortunately, for an eBay business, it can be quite low. Fulfillment Running a fulfillment operation is almost like running a separate business, and you need to include the costs for that. General Other overhead costs that you incur in running a business. Cost of Goods This is the wholesale price of your goods plus the cost of transportation to your place of storage. Direct Costs This is the cost of selling each item (e.g., eBay fees). Since different items may have different direct costs, this portion of your overhead is tied to what you sell. Shipping and Handling Don’t forget, you can charge a shipping and handling fee to buyers. Whatever shipping and handling costs you over and above what you charge buyers is an expense. If it costs you less than you charge buyers, it is additional income. Benefits Don’t forget the cost of benefits discussed earlier in this chapter.
Accounting It isn’t the purpose here to give you a basis for your accounting. Your accountant or bookkeeper can do that and provide more accuracy than this chapter provides. Rather, this chapter is intended to raise your
CHAPTER 25 DETERMINING YOUR PROFIT
395
consciousness of what to include in your expenses to estimate your profit. You can make a reasonable estimate of your expenses before you ever get to the point of hiring an accountant or bookkeeper—or before you learn to do the bookkeeping yourself. Write a list of expenses that you learned about in this chapter together with a list that is relevant to your own situation. Estimate them. Add them up. That’s about what it’s going to cost you to operate your eBay business.
Profit Estimate your income. If your estimated income is greater than your estimated expenses, you’ve made a profit. Well OK, it’s just an estimated profit, not a real profit. Nonetheless, you can compare the estimated profit to your other earning opportunities. This chapter is simple and straightforward, but even seasoned eBay sellers often delude themselves as to what their total business expenses are. This chapter adds some reality.
Your Time As a Resource In order to determine cost-effectiveness for those situations that require your time, you need to determine what your time is worth. There are several ways to do this.
Alternative Employment This is a calculation that almost everyone uses when they consider starting an eBay business. Suppose you are making the equivalent of $20 per hour ($40,000 per year). Most people don’t want to quit their job and make less money as an eBay retailer. They want to make at least as much money now with the promise of making more in the future. If you quit your job to sell on eBay but later had to get another job, presumably you could find a comparable job paying $20 per hour. Consequently, your time is worth $20 per hour. This may be the most realistic way to value your time.
Current Profitability Once you’ve been an eBay retailer for a while and your business is sta-
396
EBAY BUSINESS THE SMART WAY
ble, you can calculate what you’re making as a businessperson. Suppose you’re making about $36,000 per year (net profit) from your eBay business and you work a 40-hour week. That means you’re making $18 per hour. Since this is your current job, this is a meaningful hourly rate to calculate. This is a good way to value your time.
Consulting Value Suppose you are doing well in your eBay retail business, and word gets around town that you’re an online retail expert. A local shop wants to sell online, and the owner offers you a $75 per hour consulting fee to help her get set up to sell some of her inventory routinely on eBay. Does that mean that your time is worth $75 per hour? The answer to that question depends whether you look at it from an ego point of view or a financial point of view. By all means, brag to your friends that your time is worth $75 per hour. But financial analysis indicates a different story. Suppose a consulting firm hires a consultant and charges $75 per hour for the consultant’s time. What does it pay the consultant? Typically a consulting firm will mark up a consultant’s salary 200 percent or more. That means one-third of the consulting fee goes to the consultant and two-thirds go to the consulting firm to cover marketing, overhead, and profit. That’s what it takes to make a successful business out of consulting services: marketing, overhead, and profit. Consequently, your service as a consultant is worth only about $25 per hour. In other words, consulting is an alternative employment for you, which pays about $25 per hour. If your time as a consultant is worth only $25 per hour, why is someone willing to pay you $75 per hour? Because $75 per hour is the market rate. However, this particular consulting job is a windfall for you. You didn’t do any marketing or have any consulting overhead to get the job. Windfalls are nice, but you can’t live on them. Were you to actually go into the consulting business and generate ongoing consulting work, you would have marketing and overhead costs that would substantially decrease your gross income. Consequently, if you want to value your time by what you would make as a consultant, use one-third of the market rate.
CHAPTER 25 DETERMINING YOUR PROFIT
397
Using the Value Use the value of your time to make decisions. Suppose your time is worth $25 per hour and your net profit is 15 percent of gross sales. Is it worth 10 hours of your time ($250) to produce $1,000 in sales? No. Your profit for $1,000 in gross sales is $150 ($1,000 x .15 = $150). Clearly, you will lose money, in effect, if you spend 10 hours to produce $1,000 in sales. You will use $250 of your time to produce $150 of income. This is a simple straightforward calculation. Most calculations that involve your labor are more complex and easy to overlook or avoid. Yet if you don’t make these cost-effectiveness calculations routinely, you may be squandering your time (i.e., losing money) without realizing it. Your time is also a consideration when contemplating the employment of other prople. For instance, if you can contract with (or hire) someone to do your fulfillment for $10 per hour rather than do it yourself for $25 per hour, you will save $15 per hour.
Don’t Take Yourself Too Seriously I have seen many people in business, retail and otherwise, take on a false self-importance once they have achieved some success. They decline to perform tasks that are “beneath” them, that is, tasks that command a lower hourly rate than their profit. That attitude has some pitfalls. For instance, suppose you are doing your own fulfillment alone out of a small warehouse building that you rent cheaply. At the end of each day, it requires 15 minutes of janitorial work to get ready for the next day’s work. You can hire a janitor for $15 per hour or do it yourself for your hourly rate of $25. Which will it be? Well, it’s only 15 minutes. If you hire someone, they will probably take longer by the time they arrive on the scene, do the janitorial work, and leave the premeise. Their service may actually be an inconvenience to you (e.g., waiting for them to finish before you can leave the premises). Then there’s the ordeal of finding and hiring someone and then firing them or having them quit. Seems like it would just be easier and less expensive to do it yourself, even if it’s something you don’t
398
EBAY BUSINESS THE SMART WAY
want to do. Eventually when you hire someone to do your fulfillment, you can assign the cleanup work to them. Suppose the fulfillment work takes one person two hours per day, and you know this before you start your eBay business. You can find someone to do your fulfillment for $10 per hour. Packing items in boxes and slapping on shipping labels is not your idea of fun. Yet in the early days of your business before sales get revved up you do have time available to do the fulfillment. What do you do? If you find someone else to do the fulfillment, you may be spending money unnecessarily at a time when your business needs all the money you can raise. In addition, you are missing an opportunity to learn a part of the business that is crucial to your success in the long term. The more you can learn about fulfillment firsthand by doing it, the better you will be able to manage it in the future. Entrepreneurs typically learn and do many different tasks and procedures, both blue collar and white collar, in the process of becoming successful. You shouldn’t consider any job beneath you, regardless of your hourly rate. Use your judgment to determine what’s most costeffective in the current situation. If you have to do the fulfillment this month, it’s not the end of the world. Perhaps next month you will be in a situation in which it makes more sense to hire someone else to do it. Entrepreneurs aren’t afraid to get their hands dirty. Yet at some point on the road to success you will be likely make the best use of your time managing others rather than doing it yourself. It’s a judgment call, not an ego decision.
Summary Estimating the profit you will make in your eBay business will help you make decisions. First, it will help you make the decision as to whether it’s worthwhile for you to quit your job and pursue an eBay business full-time. Second, determining your profit once your eBay retail business is going well will help determine what your time is worth. Knowing what your time is worth will help you make decisions about cost-effectiveness, such as whether to hire employees or pay independent contractors to do some of your work.
26 Developing a Strategy There are a number of considerations in building a strategy for creating and operating an eBay business. First is building a product profit model. Finding inventory (finding a niche) follows. Predicting the future and planning for the future are important too; you may not have much time before the future comes moving in at a digital-age speed. Finally, handling growth becomes a serious consideration after you become successful. This chapter looks at the big picture. What’s missing from this chapter is what’s taken for granted. It is taken for granted that you will run a well-organized and efficient business on eBay by using the requisite digital equipment, auction management services, and ecommerce software. This chapter is not about cost-cutting and becoming more efficient.
Building a Product Profit Model The first profit estimate (Chapter 25) has to do with your personal finances. The second has to do with the ideal product. Both are important to you. This section is about building a product profit model.
399
400
EBAY BUSINESS THE SMART WAY
Using Numbers To make comparative calculations use the following: • 2000 work hours per year • 50 work weeks per year (assumes 2 weeks vacation) • 250 work days per year These numbers are not absolutely accurate, but they’re close enough. They assume you work a 40-hour week.
Personal Finances Chapter 25 helps estimate the expenses to be charged against income in order to estimate the profit that you need to live off an eBay business. You also need that information to help you determine what products will help you achieve your desired profit. For the purposes of discussion, let’s say you need a profit of $35,000 per year to pay yourself and fund your benefits.
The Ideal Product The ideal product is one you are willing to handle for the profit it generates. Some people will gladly ship and account for 40 items a day to make a profit of $140 ($35,000 per year). Others wouldn’t get into an eBay business where they had to handle 40 items per day and didn’t make enough money to hire someone else to help. But how can you afford to hire someone else to help you on only $35,000 a year and still have enough left over to make a decent living? Everyone is different and in different circumstances. Each product is different and requires a different degree of care in marketing and handling. You have to decide what your product profit model is. It’s not that you’re going to be able to do business exclusively with products that fit your model. Business is not that simple. Nevertheless, your product profit model is something against which you can measure all the opportunities you come across for selling inventory on eBay. Would you handle 40 prepackaged mass-produced items (commodity items) a day? All you have to do is paste a mailing label on them and have UPS pick them up. Of course you have to do the accounting for them, too, and work with a wholesaler to keep the inventory coming
CHAPTER 26 DEVELOPING A STRATEGY
401
in. In addition, that’s 200 auctions a week that you have to run on eBay. But this probably isn’t too much. This is probably an attractive business for many people for $35,000 per year. You have to make $3.50 profit per product (($35,000 ÷ 250) ÷ 40 = $3.50). Would you handle 40 antiques (not commodity items) a day? You have to pack them for shipping and have UPS pick them up. You have to do the accounting for them. And you have to keep finding more to purchase for your inventory. In addition, you have to run 200 auctions a week. Antiques are unique and require communication with bidders that’s more intensive than usual. This seems impossible for one person to do, and you might decide you wouldn’t even attempt it for $40,000 per year. You might want to pay at least two people $30,000 a year to help you, and you would want to make at least $50,000 a year yourself to manage such an operation. That requires an average profit of $11 per antique (($110,000 ÷ 250) ÷ 40 = $11). (See the ideal product in Figure 26.1.)
Figure 26.1 This is the ideal product for someone, somewhere. What’s your ideal product?
If you have a bad back, you probably don’t want to handle large heavy items. If you have an uncle who owns a local trucking company, you may feel perfectly comfortable selling large heavy items, because the
402
EBAY BUSINESS THE SMART WAY
family connection (large scale shipping) provides a competitive advantage for you. If you love accounting, you may be willing to handle 40 items a day or even 80 items a day (with the help of software, of course). If you can’t stand accounting, you may be willing to handle only five items a day. Your garage size may limit what you do. Your working hours may limit what you do. Do you watch after the kids all day and start working only after your spouse gets home from a job? You must take all things into consideration in building a profit model for the ideal product. You begin by determining how much you want to make per year. Then you decide how many items you can handle per day and under what circumstances. Then you can calculate how much profit you have to make per item. The ideal product is the one that makes the most profit for the least amount of work within your notion of what is acceptable.
Example You need to make $35,000 a year but want to handle only five items a day. Each item can take more than an average amount of communication with bidders, but not a lot more. You’re willing to order inventory, but you don’t want to have to find inventory. Finally, you want to work a 40-hour week. You need to find products that you can order from a wholesaler and on which you can make an average profit of $28 (($35,000 ÷ 250) ÷ 5 = $28). This calculation gives you a guideline for decision making when considering inventory opportunities. Another Slant on the Product Profit Model The product profit model doesn’t take passion into consideration. If you are passionate about the cell phone accessories business, for instance, then you might be better off pursuing that business for two reasons. First, your passion will fuel your motivation, and you will be more likely to be successful. Second, cell phone accessories have a bright future. Nevertheless, doing a product profit model, or multiple models, for cell phone accessories will help you better formulate how to operate profitably in that particular market niche.
CHAPTER 26 DEVELOPING A STRATEGY
403
Calculating Profit Calculating the profit on a product is simple yet complex. The ideal is simple. You subtract from the sales price the cost of the product and the amount of overhead allocated to the product. The remainder is your profit. Unfortunately, estimating the amount of your overhead is complex (but not impossible). Here’s a simple example: Sales price $83 Cost of product
$47
Direct cost to sell product
$5
Overhead allocated to product
$9
Profit per product
$22
Time Shouldn’t the product profit model consider time? Yes. It’s assumed that you will estimate the time spent handling each product and include it in your evaluation. In fact, you might want to take a systematic approach and consider your time methodically, even going so far as taking time measurements for the various handling tasks. (You should assign a dollar value to the time required for an employee to handle a product and include that as an expense.)
What About Your Current Sales Plan? You are an expert on digital voice recorders, transcription, and creating audio records. You have a current plan to sell voice recorders and related software and equipment on eBay. You perceive that there’s a growing market for it. You don’t need to do a product profit model, right? Actually, a profit model will give you a lot of insight into what you are doing or are about to do on eBay. Should you decide to create a product profit model for digital voice recorders, you might come to one of several different conclusions. Here are some possibilities: 1. Your business will be profitable and reasonably easy to manage well. 2. You should sell software and equipment related to transcription
404
EBAY BUSINESS THE SMART WAY
but only voice recorders designed for professionals. 3. You should sell all voice recorders but not related software and equipment. 4. You should look for another niche on eBay. A product profit model is just another way of looking at the numbers. And each different way you can look at the numbers will bring additional enlightenment. The Calculation Changes When you grow, several things are likely to happen. Your overhead will increase because you will need more help both from people and possibly from additional software and equipment. You will need to readjust the overhead component of your profit-per-item calculation to keep it accurate. This is important to do to see where you’re headed (see Handling Growth below).
Finding Inventory Looking for inventory before you determine a product profit model is not going to be as fruitful as looking for it after you have such a model. There’s plenty of inventory available. The trick is to find something that will sell and will at the same time satisfy your product profit model.
Wheeling and Dealing There are those who wheel and deal. It’s almost a profession. You buy low and sell a little higher. You solve someone’s problem by buying something from them at a good purchase price, and you turn around and present it as an opportunity to someone else. eBay is the perfect home for the wheeler-dealer. It’s a huge unlimited marketplace. The possibilities are infinite. Not Derogatory Wheeler-dealer is not a derogatory term. Most wheeler-dealers think of themselves as honest and straightforward. They pride themselves on putting together deals that help people, just as insurance agents pride themselves on selling insurance that protects people. It takes a certain mentality to be a wheeler-dealer, but it is not necessarily a dishonest
CHAPTER 26 DEVELOPING A STRATEGY
405
mentality. Wheeler-dealers play an important role in most industries.
Wheeling and dealing is clearly a viable eBay business strategy. Buy whatever you can, wherever you can, at less than market price, and turn around and sell it on eBay at a higher price. If you’re a wheeler-dealer, your biggest problem on eBay is deciding whether to be a generalist or a specialist. Even as a specialist, however, you will not confine your business activities to one niche. Your outlook will always be broader. As long as you’re careful and study your markets, you will have great success on eBay. Realistically, most of us are not wheeler-dealers. Most of us cannot tolerate the uncertainty of wheeling and dealing. We look for something more reliable. If you’re not a wheeler-dealer, in order to be successful on eBay you need to pick a niche. That is, you need to restrict your selling efforts to a market that you understand and have confidence in. The trick is to find that niche.
Finding a Niche Most people find their eBay niche naturally. If you sell voice recorders and related software and equipment as your job, it’s a natural to quit your job and go into business for yourself selling the same stuff on eBay. Many people have been successful on eBay in a business based on a hobby, a job, a skill or profession, or an area of interest in which they have acquired some expertise. This is a time-proven way to get off to a good start on eBay. However, it isn’t foolproof. You need to add some hard business judgment to your evaluation of any niche that you consider on eBay. First, the niche must be big enough to make a profit. In other words, the niche must have enough people in it that you can expect enough sales to make money. Second, the niche can’t be too big. If it’s too big, it will attract a lot of competition. It will contain a lot of potential customers, and the potential sales will be huge. It might be uncrowded with retailers today, but it will soon be overcrowded. In our example, selling voice recorders for dictation and transcription is a large enough niche to potentially make enough sales for a consid-
406
EBAY BUSINESS THE SMART WAY
erable profit. It’s not so large that it’s likely to attract everyone and their brothers to sell in the niche. On the other hand, if this niche were to be defined as audio recorders (including tape recorders, digital recorders, and other recorders intended for music), it would be a rather large niche with large potential sales. In fact, the music recording niche is large and does attract plenty of competition. If you can find a way to quantify the niche market you’re considering, that will help you make a decision. Andale (http://www.andale.com) offers software that squeezes statistics out of eBay by categories, products, and sellers. Andale’s software works via its website (i.e., in a browser) and is reasonably priced. There is also competing software covered in Chapter 19. In addition, you need to consider whether your product profit model will work with the products to be sold in the niche. That’s an important consideration covered at length earlier. Another consideration is the expertise threshold necessary to sell products in the niche. If extensive medical expertise is required, for example, that will keep most people (sellers) out of the niche. Let’s face it. Picking a niche intelligently is the toughest part of getting an eBay business going, particularly for those who don’t naturally fall into a niche based on their hobby or their expertise. Don’t take this process lightly. It’s worth spending some time on. Pick the right niche, and you’ll get off to a solid start on eBay.
Making Arrangements Once you decide what your niche is going to be, you need to make arrangements to buy low and sell high. You need to find a supplier to keep your inventory replenished. For some sellers this will be a manufacturer. For others it will be a distributor. For some it may even be a discount retailer. And for some it may be a new source for every purchase. Going to a trade show associated with your niche is perhaps the best way to get off to a quick start. The reference section of your library is another place to get off to a quick start. You can find directories of trade associations, manufacturers, wholesalers, and retailers as well as
CHAPTER 26 DEVELOPING A STRATEGY
407
much other useful information in the massive volumes in the reference library (see Chapter 15). The Web is another good place to find sources of inventory. Do some intensive searches to see what you can find. Find the contact information for the sales staff at manufacturers and distributors. When you have identified some sources of inventory, do a few dry runs; that is, make some trial contacts with wholesalers. Call to ask whether you can become a retailer to sell a product. Find out what the requirements are. Each industry is a little different. Find out what special equipment, if any, you need. Learn about the hidden expenses in the industry. When you’re ready to get serious about finding suppliers you will be able to put your best face forward. You’ll sound like you know what you’re talking about. Some suppliers are fussy about who they will sell to. Sales Tax License Before you start serious communications with suppliers, make sure you have your sales tax license. See Chapter 3.
Play the field. Seek the suppliers that offer the best deals. Don’t commit to exclusives or take the first deal that you come across. Most industries are very competitive. If you run into a roadblock, work around it. For instance, if a wholesaler won’t sell you the products you need because it has given an exclusive to another retailer in your area, look for other sources. The retailer that has the exclusive might be a source. A retailer three states away might be a source. There may be a wholesale gray market for the products. If you base your selection of a niche on whether you can easily find suppliers, you may miss good opportunities. Base your selection of a niche on other analyses and then make a determined effort to find suppliers.
Commodity Products Commodity products are mass-produced consumer products widely available. A Panasonic DVD player is a good example. When you buy
408
EBAY BUSINESS THE SMART WAY
this DVD player, you’re likely to buy it where you can find it at the lowest price instead of a retail outlet to which you are loyal. Perhaps the best value-added attribute a retailer can offer for this product is a satisfaction guarantee. (In a section toward the end of this chapter, we will cover value-added products, which are in some ways the opposite of commodity products.)
Predicting the Future There’s a reality to selling on eBay that you need to figure out for your particular business. Let’s take the business of selling voice recorders (price range: $39 to $390). You decide to sell them on eBay because most places today sell them at full price on a 40 percent margin. You figure you can make a good business out of selling them on eBay on a 20 percent margin. You are 35 years old and have two children and a spouse to support, requiring you to make a certain minimum income each year. You start your eBay business, and it proves to be successful. What happens when a 25-year-old with no children and no spouse comes along and decides to sell voice recorders on a 10 percent margin? And let’s say that in every respect your business and the newcomer's business are equal except that the newcomer charges less for the products. Or, what happens when a 65-year-old retiree with no children at home but a spouse to help with the business comes along and decides to sell voice recorders on a 10 percent margin? And let’s say that in every respect your business and the newcomer’s business are equal except that the newcomer charges less for the products. Clearly if the newcomers don’t put you out of business, they may reduce your profits to the point where the business is no longer attractive to you. It just becomes too difficult to make enough money. Isn’t that what business is all about, including eBay business? It’s competitive. To the lowest-cost operator go the spoils. Now, eBay claims to provide a level playing field for individuals and corporations, the little guys and big guys alike. It’s supposed to be a “democratic” marketplace. And I think that’s right. It is a level playing field today. Logically that means that eventually the lowest-cost operators will sell
CHAPTER 26 DEVELOPING A STRATEGY
409
almost everything. And a 25-year-old or a 65-year-old can sell at a lower cost than you because they don’t have dependents and require less income. Theoretically, every niche on eBay will eventually belong to 25-yearolds, 65-year-olds, or perhaps 18-year-olds. The question for you (assuming you’re not an 18-year-old) is, What happens when this trend comes your way? Here are some possibilities: 1. You are waiting for it. You spot it quickly. And you close down your business and cheerfully move on (perhaps to another eBay business). 2. It takes you by surprise, and your business falls off a cliff. You are devastated psychologically, and your finances aren’t in such good shape either. A real bummer and not an experience you would intentionally seek. Of course it has happened already. Hardy businesses offline have been replaced by small businesses on eBay. Hardy businesses on eBay have been replaced by lower-cost operators on eBay. It’s not a new story. For instance, how many collectibles dealers have been put out of business by eBay since 1995? Quite a few. The ones that have survived are the ones that have learned to integrate eBay into their businesses enough to keep afloat. But the collectibles business isn’t what it used to be. The new collectibles dealers are individuals on eBay, many quite young. Future Shock You need to develop a strategy for the future when the lower-cost operators on eBay affect your eBay business adversely. First, you need to recognize what’s happening as soon as possible when it starts to happen. You have to have planned your business response. And you need to have an exit strategy in the event that the most prudent course is to close down your business. Events tend to move fast in a digital environment, and without a strategic plan, you may not be able to respond quickly. There is not a certainty that this will happen to you and your niche. Every market is different. Every product is different. Some niches last a long time for some people. But you have to keep your eyes and ears
410
EBAY BUSINESS THE SMART WAY
opened to the possibility that your niche will be invaded someday, and you need to be ready for the consequences. Customer Service Again Certainly, first-rate customer service can go a long way toward protecting any business in a competitive environment. Providing good customer service on eBay can extend your profits in your niche for the longest possible time. Make customer service part of your business strategy.
The Ultimate Strategy Perhaps the ultimate eBay strategy is to always be ready to change niches. There will always be new products and new opportunities. For instance, when digital cameras first used flash memory (SmartMedia and CompactFlash), there were a few sellers on eBay selling a large volume of upgrade memory modules. Cameras typically came with 8 MBs of memory, and the upgrades contained 32 MBs, 64 MBs, or 128 MBs. It was a great market. Today that market is spread pretty thin among many sellers. It’s a mature market now, but for perhaps a year or two it was a good opportunity for the quick and nimble. Jumping from niche to niche can be devastating psychologically as well as financially unless you prepare for it. For instance, you can think of yourself as a voice audio expert. When your eBay business selling voice recorders dries up, you might easily be devastated. On the other hand, if you think of yourself as an eBay business expert, your attitude will be a lot different when the voice recorder business is taken over by lower-cost operators. You’ll think, “Boy, it was a great run and I’m glad I was able to start my selling career on eBay in a field I know, but now it’s time to move on to another eBay business.” If you can spot new niches and move into them quickly, you will always have opportunities on eBay. In order to do so, however, you must have a great curiosity about things in general and about new industries and new products in particular. That’s why I believe going to regional and national trade shows is so important. That’s where you see what’s coming down the road. Indeed, there might be something coming down the road in your own niche that will enable you to stay in it profitably for a few more
CHAPTER 26 DEVELOPING A STRATEGY
411
months or a few more years. If so, you’ll probably see it first at a trade show. And if you don’t see it first, someone else will. And who is to say that you can’t go back to working for someone else again as an employee for a year or two until you find your next eBay niche. Your strategy doesn’t have to be 100 percent eBay.
Handling Growth Growing larger is usually a sign of success. Thus, it’s thought to be good to grow as large as possible. However, you need to look at growth cautiously in light of some of the issues covered above. The bigger you are the harder you will fall on eBay should your business be undermined by a lower-cost operator. Don’t get me wrong. I’m not antigrowth. You should grow as fast as you can and as large as you can on eBay under most circumstances. But do it smartly. How do you grow smart? You maintain flexibility and keep fixed costs as low as possible. For instance, if you can grow to the point where five people are helping you but all five are independent contractors, it will be easier for you to cut back operations when sales slow down in your eBay niche, easier than if you had employees. If you maintain two weeks of inventory, you will be able to cut back easier and faster than if you have four months of inventory. If you have a month-to-month rental arrangement for your warehouse instead of a two-year lease, you will be able to cut back without a huge loss. Unlike most offline businesses, many eBay businesses are vulnerable to being hurt immediately by new lower-cost operators. That means to operate smart and to grow smart, you must be smartly flexible to the point where you can expand and contract your retail operation like an accordion. Growth and Profits The product profit model is handy to analyze growth. If you can grow and increase your profit per item, you have a potentially great business. If you can grow and keep your profit per item the same, you will make more money even after paying others to help you or after buying more software and machines. If your profit per item decreases as you grow, you can still make more money, but there’s a limit on your
412
EBAY BUSINESS THE SMART WAY
growth. You better find out what that limit is before you grow so much that the risk and effort to run your business is no longer worth the profit.
Value-Added Products For discussion purposes, a product to which a retailer can add substantial value is not a commodity. Value can be added in simple ways. It can even be automated. Or, value can be added in more complex or labor-intensive ways. Adding value provides you an opportunity to develop a stable market of customers that a low-cost operator cannot take away from you.
Mass-Produced Products? Is it possible for mass-produced products to be value-added products? Sure. Products that require expertise to purchase, operate, and eventually sell have the potential to be value-added products where the retailer provides expertise and after-market services. For instance, a mass-produced $2,000 violin is less likely to be a commodity than a $69 Sony Walkman. Why? First, the market for a Sony Walkman is much bigger. A Sony Walkman is inexpensive. People purchasing a Sony Walkman are likely to purchase it without getting any advice (from a retailer) and will seek the lowest price. People buying a $2,000 violin, however, are likely to seek advice on the purchase. Often the best source of such advice is the retailer. There are a limited number of places one can buy a $2,000 violin because the market is small. So, it is less likely one will find a wide range of sellers competing on price. Second, usually the only aftermarket relationship between buyer and seller for a Sony Walkman is the manufacturer’s guarantee. If the item fails, the retailer replaces it and returns the defective item to Sony. In some cases, the retailer simply instructs the customer to return the item to Sony directly. Can you get a Sony Walkman repaired? Unlikely. Any substantial repair would cost more than the original purchase price. A Sony Walkman is susceptible to being instantly obsolete. Next year’s model is better and less expensive. Then too, when you’re ready to sell your used Sony Walkman, you won’t find a retailer to do it for you. Most likely it will end up in your closet or the
CHAPTER 26 DEVELOPING A STRATEGY
413
trash unless you take the trouble to sell it yourself. The aftermarket relationship between buyer and seller of a violin is likely to be more complex and enduring. A violin is unlikely to fail but more likely to get damaged. A retailer that can provide musical instrument repair services is a valuable resource. A violin, theoretically, will never become obsolete. When you are through using the violin, you will probably try to sell it. It’s too valuable to keep in the closet. A retailer that deals in used musical instruments, again, is a valuable resource. Thus, you can see that some mass-production items are not necessarily commodities. If they require extensive information to purchase, can be repaired, don’t become instantly obsolete, and can be sold eventually, they can become value-added products in the hands of a competent retailer.
Unique Products Unique products tend to be one of a kind (not mass-produced), are made in small production runs, or are the survivors of old mass-production runs (e.g., antiques). They are often repairable, expensive, and sometimes encourage an ongoing relationship between buyer and retailer. Unique products tend to be value-added products. In other words, unique products are the opposite of commodities.
To Add Value Takes Resources Adding value to products requires your resources. Take a violin, for example. To sell violins credibly, you have to know something about music and something about violins. That experience and expertise is one of your resources. It’s a resource that few people have and one that takes a lot of time and energy to acquire. Your expertise adds value to the product when you give customers advice on what to buy and then assist them to use the product effectively. As a musical instrument retailer (dealer), you will have contacts with competent and reliable instrument repair people to whom you can refer your customers. This is valuable to a customer who needs to repair an expensive instrument and wants it repaired properly. When your customer stops using an instrument and wants to sell it (her son graduates from high school, goes into the Marine Corps, and
414
EBAY BUSINESS THE SMART WAY
doesn’t need the violin any longer), you provide a market for it by buying it from your customer and then selling it. In fact, you provide a choice for your customers in the first place by offering them new or used instruments. Moreover, you arrange a longterm musical instrument rental program with the local high school music department for those who cannot afford to buy their own instruments. In other words, this business is not just a matter of getting some inventory and selling it on eBay. It’s creating a retail environment that accommodates the customer from purchase to sale. It takes extra time, effort, and even money. The musical instrument business is one that is likely to have a presence offline as well as on eBay. That’s why businesses that sell unique products in a physical location can go online and increase their business on eBay. No one can drive them out of the market with low prices because the typical customer needs the value-added features or services. Businesses that sell commodities in a physical location may find, conversely, that they can’t compete effectively in the low-price wars on eBay.
Don’t Neglect the Cost When you create the product profit model, you generally don’t consider your own time and effort as part of the expense. The profit is your reward. And that’s as it should be. However, when you add value that costs money out of your pocket, plug such cost into your product profit model as an expense.
Predicting the Future Again With value-added products, anticipating the future takes a different twist. The dire prediction above that the 25-year-olds and 65-year-olds will take over eBay suddenly doesn’t seem so threatening. That’s more likely to be a phenomenon of the commodity product markets rather than a phenomenon of the markets for value-added products. What’s Your Thing? If you can combine your interests with your eBay retailing, that’s likely
CHAPTER 26 DEVELOPING A STRATEGY
415
to be a satisfying business for you. Unfortunately, if your interests dictate that your retailing effort consists of selling commodity products, you may eventually find yourself in price wars that may not be profitable. On the other hand, if your interests coincide with retailing products to which you can add value, you can avoid price wars and build an enduring business. I encourage you to pursue your passion in regard to retail rather than to strictly seek a product that meets your product profit model criteria. Your passion will bring a sense of enthusiasm and authenticity to your retailing that will be an added value by itself. At the same time, be forewarned that the merchandise commodities markets are extremely competitive and ultimately may not produce a level of profit you can live with. In such cases, you are better off seeking products to which you can add value and sell profitably today and many years from now. Add Value Unlike the commodities markets where the 25-year-olds and the 65year-olds will win the price wars, retailing products to which you can add value makes a great business strategy. It’s a great strategy because it enables you to build a durable business on eBay and it potentially enables you to follow your passion permanently. The catch is that you have to be willing to apply your passion to add value to your products for the sake of your customers.
Customer Service Can you sell a Sony Walkman and add value? Perhaps. You can provide great customer service. If you build your brand (reputation) on eBay for providing solid customer service, bidders who recognize your brand will be willing to bid a little higher on your eBay items. Whatever Helps What is great customer service? It’s whatever helps the customer make a good purchase decision and helps the customer use the product effectively. In a market where price competition is fierce, good customer service doesn’t get you much more, but the little bit extra it does get you might be the business edge that enables you to win out over your competition.
416
EBAY BUSINESS THE SMART WAY
Guarantee Perhaps the best customer service to offer on commodity products is a satisfaction guarantee. The mail order business has done very well by offering satisfaction guarantees. People feel more comfortable buying with a satisfaction guarantee than they do without, particularly when purchasing from a distance.
Time Is time a factor in the product profit model? Sure. If you have to sell 800 items per day by yourself to reach your profit goal, you’ll probably find that impractical. So, you’ll have to do some evaluation of the time it will take to handle each item sold. For commodity items, the time requirement usually has to be minimal. Value-added products tend to encompass a wider range of time commitments (i.e., your time) than commodity products. Again, you may want to systematically consider time requirements for your products, particularly when the way you add value is by contributing your labor. That is, rather than guessing how much time it will take you to handle a product, you might want to ascertain how much time it will take by systematically reviewing and timing each step in the process of handling the product. Remember that the product profit model is based on your financial goals and management style. But it’s useful to add a time component to it too.
Not the Same Dividing products between commodity products and value-added products is artificial. Every market is unique. Within every market, every product has its differences. eBay consists not of millions of similar products, but of tens of thousands of products different from each other. Few products are purely commodities just as few products are purely unique or absolutely require value to be added. Many products and their markets have attributes of both commonality and uniqueness. The point of this chapter is to help you analyze your own situation and match your aspirations to products with which you can carry on a satisfying and profitable eBay retail business.
27 Education Education is the key to success for an eBay businessperson just as it is for other endeavors. Fortunately, there is much eBay education from which to choose. When I was writing this chapter for the First Edition in Oklahoma City during a holiday visit to my in-laws’ home, I was informed that a local community college offers two courses on eBay. Today such courses are commonplace. But you don’t have to go to college to learn about eBay. There are other opportunities. Keep in mind that eBay is here to stay. It’s a permanent commercial institution like the New York Stock Exchange. Dave Barry, the Miami Herald columnist, has described the national economy as a horse with four legs (December 2002): 1. Government spending 2. Business spending 3. Consumer spending 4. eBay And so it is. Thanks, Dave. I like getting insightful information from easy-to-digest business columns in the newspaper. But the academic
417
418
EBAY BUSINESS THE SMART WAY
side of me requires that I also cite other authoritative sources. Fortunately, a graduate student at my alma mater (Go Wolverines!) has already done research about eBay as part of the PhD program in the School of Information. Read Pennies from eBay: the Determinants of Price in Online Auctions, January 2000, http://www.u.arizona.edu/~dreiley/papers/PenniesFromE Bay.pdf, and note that Daniel Reeves is one of the authors. Daniel referred me to Axel Ockenfels (http://ockenfels.uni-koeln.de/person.php? i=2) who has done a research paper about eBay. Try Late and Multiple Bidding in Second Price Internet Auctions: Theory and Evidence Concerning Different Rules for Ending an Auction, http://ockenfels.uni-koeln .de/download/papers/ockenfels-roth.pdf, a paper on sniping? Read it and find out. He also has other relevant papers on his website. (See another academic reference in Chapter 23 in the Feedback section.) There will be more and more academic education available about eBay as the years go by. And more PhD papers. Gadzooks, I hope my editor doesn’t require me to read them all.
eBay University eBay University, sponsored by eBay, gives seminars in major cities all over the country. Check the eBay website for the schedule. Recent offerings in Beyond the Basics included the following topics of interest to eBay businesses: • Start and grow an eBay business • Use the right listing format • Write compelling listings • Learn the eBay listing tools • Promote your eBay business • Organize your listings • Set up your fulfillment operation • Use PayPal The seminars are inexpensive, but be sure to sign up well in advance on eBay’s website.
CHAPTER 27 EDUCATION
419
Books About eBay Now here’s a subject dear to my heart. There are a variety of eBay books, and most are reasonably inexpensive. In the future they will get more specialized, and you will have the opportunity to learn more and more about less and less, as the wags say. I am an avid reader of nonfiction books, including business books. If I can find just a few new ideas in a book or even reinforce a few old ideas that have proven successful, I think the book is worth reading. There will be more books about eBay worth reading in the future, and there are plenty in print already. Here are my recommendations, all published by the American Management Association (AMA) and written by me: • eBay the Smart Way, Fourth Edition • eBay Motors the Smart Way • eBay Global the Smart Way • Building Your eBay Traffic the Smart Way • eBay Photography the Smart Way • eBay Inventory the Smart Way However, read more about eBay books in the eBay Live section below.
College Extension Courses Many community colleges, colleges, and universities now offer eBay courses in their extension programs (non-credit adult education). Although this is a recent phenomenon, it is already widespread. It presents a good opportunity to learn in a quasi-academic environment.
eBay Audios Don’t overlook eBay audios, particularly if you commute. You can learn about your next career during the wasted time each day that you spend commuting to your present job. There are several publishers producing eBay tapes and CDs.
eBay Videos A number of eBay training videos have become available on DVD or
420
EBAY BUSINESS THE SMART WAY
VHS. If you like to learn this way, look for these at eBay Live, advertised in magazines, or sold on eBay.
eBay WBT Tutorials Web-based training (WBT) is the wave of the future, and some of it is compelling. Barnes & Noble University offers free WBT tutorials on a variety of topics. eBay has been included in the past (my WBT course). Look for other online tutorials about eBay. They are generally free. The current fad is to call them webinars. Of course, don’t overlook eBay itself. eBay offers a variety of WBT tutorials on the eBay website under Help on the menu bar. eBay also sponsors online workshops on specific topics. You can attend them live (about two hours) or read them in the archives.
Business Seminars The commercial seminars given in every field in these United States are some of the great invisible assets of the nation. The universities have a high profile, but commercial seminars cruise in below the radar. They have to be good for two reasons. They’re often pricey, and many operate to make a profit. If they weren’t good, they wouldn’t exist. It’s a very competitive business. Look for national business seminars given from time to time in your nearest major city. Spend the money and take the time to attend. Look for topics that will help you improve your business today. You will often learn more than you expected to. Many of these seminar series are sponsored by professional organizations. Get a list of professional organizations that serve your segment of retailing or just business in general, and visit the websites. Often you will find seminars coming to a city near you. In your local library you can find: • National Trade and Professional Associations, Columbia, Washington, DC, http://www.columbiabooks.com • Encyclopedia of Associations, Gale, Detroit, http://www.gale.com The publisher of this book is a division of the AMA. You can find AMA’s offering of business seminars at:
CHAPTER 27 EDUCATION
421
http://www.amanet.org/seminars/index.htm A few are of interest to eBay businesspeople. Try the Web too. You can find eBay, retail, and business seminars advertised on the Web by using a search engine.
Business Books Most bookstores have a robust business book section where you can find books on specific business matters about which you worry everyday. Buy a book and relieve your worries. And find new things to worry about. If you don’t happen to have an academic background, you will find many of the books easy to read. Most are not written for college courses.
Web Development Tutorials Many eBay businesspeople do much of the busy work themselves required for eBay business success. If you want to learn a little HTML (Web development) to brighten up your auction ads, find one of the many free HTML tutorials on the Web. Here are a few: • Getting Started with HTML (World Wide Web Consortium), http://www.w3.org/MarkUp/Guide • HTML Basics (WebMonkey), http://hotwired.lycos.com/webmonke y/teachingtool • HTML Code Tutorial, http://www.htmlcodetutorial.com • HTML Primer (HTML Goodies), http://www.htmlgoodies.com/ primers/basics.html • HTML Tutorial (W3 Schools), http://www.w3schools.com/html/ default.asp • Introduction to HTML (Case Western Reserve University), http:// www.cwru.edu/help/introHTML/toc.html HTML is easy to learn, and you don’t need to know much to make better auction ads. See Appendix V for an HTML tutorial.
Web Development Books If you don’t mind paying for your Web development education, there
422
EBAY BUSINESS THE SMART WAY
are also good books available on HTML and Web development, many of which are very easy to read. Browse through your local bookstore and find one you like.
Community Don’t overlook the eBay community when it comes to education. Taking part in an eBay discussion board (e.g., eBay Stores) can be an ongoing educational experience. Perhaps more valuable, however, is your capability to join an eBay discussion board just to ask one question. There are many experienced participants waiting to give you a good answer based on their practical experience. Before you ask your question, however, you should search the discussion board archives to see if your question has been asked before. There may already be an answer awaiting you. Go Community, Discussion Boards to access the boards. Some are Community Help Boards, Category Specific Discussion Boards, and other useful boards.
eBay Live This is the annual eBay conference (inexpensive) held in June. It offers a healthy list of courses, seminars, and other educational events. Many vendors exhibit, and a lengthy meander through the exhibits can be a premier educational experience. Then too, you will meet a lot of people from around the country who can provide you with practical experience beyond your own. And it’s fun as well. This is a “must attend” event for serious eBay business people. Go to the eBay site map and look for the conference announcement. The first was in Anaheim in 2002, then in Orlando in 2003, in New Orleans in 2004, in San Jose in 2005, in Las Vegas in 2006 (about 15,000 in attendence from all 50 states and 35 countries), and in Boston in 2007. I have yet to talk with someone at the conference who regrets they attended. The primary drawback of the eBay Conference is that although it is essentially an informational event (as all conferences are), it’s unfortunately a flawed one. I have been reluctant to discuss this issue in my eBay books before because it appears to involve a strong element of self-interest on my part. Nonetheless I am a strong advocate of businesspeople attending trade shows and conferences for the purpose of learning (as elaborated at length in my book eBay Inventory the Smart
CHAPTER 27 EDUCATION
423
Way), and I can’t contain my comments any longer. The problem is this. eBay restricts the selling of books at its conference. Even publishers that pay high fees to have“booths” on the exhibition floor are not allowed to sell books. Why? At many trade shows, a bookstore such as Powell’s in Portland is invited to set up shop and sell relevant books. Such a bookstore brings in a smorgasbord of relevant books and enjoys profitable sales. Because attendees get to see a relevent selectionof books that they will never see in their hometown bookstores, sales are brisk. As this book goes to press, there are over 100 books about eBay. Why should sales at eBay Live be strictly limited to two or three in the official eBay Live store? Not Hurting Me I can live with eBay’s policy. My publisher, AMACOM, gets my books into the bookstores. Most eBay books don’t get into the bookstores. (Have you ever seen more than a few eBay books in a bookstore?) Therefore, exposure of attendees to a wide selection of eBay books at eBay Live would subject my eBay books to more competition. And who needs that?
But my concern goes well beyond eBay books. Everyone in business, novices and the experienced alike, can use books to advance their professional skills. eBay businesses are retail businesses, and eBay retailers can benefit from a broad range of business books appropriate for learning more about the various aspects of retail business and business in general. Let’s look at just two publishers, John Wiley and AMACOM. John Wiley publishes the Dummies series of eBay books as well as dozens of other business books relevant to retailers, a few under the Dummies brand and most not under the Dummies brand. AMACOM publishes my the Smart Way series of eBay books as well as dozens of business books relevant to eBay retailers. Why shouldn’t attendees at eBay Live have the opportunity to buy from a broad selection of such business books? (Other major publishers also offer the same.) Were a wide selection of eBay books and business books to be offered
424
EBAY BUSINESS THE SMART WAY
at eBay Live for sale by either a bookstore or in the publishers’ booths, attendees would have valuable choices they don’t normally get in their local bookstores. In other words, the restrictive eBay book sale policy at eBay Live shortchanges attendees (eBay retailers) big time. Makes you wonder what else eBay excludes from the eBay Conference, doesn’t it? Attend an eBay Conference and find out. The talk around the conference can be very informative.
Summary College graduates on the average make considerably more money in their lifetime than do those who do not attend college. But what does that have to do with eBay retailing? You don’t have to have a college degree to sell on eBay. That’s true. But I’ll bet that those eBay retailers who make a point to learn more about the retail business over the years will make much more money on eBay than they would otherwise. Don’t shortchange yourself. Learn everything you can about eBay anyway you can. Then learn everything you can about the retail business anyway you can. You will put in a lot of time—a lot of hard work—making your eBay business successful. Make the most of it. Get educated and conduct your business the smart way.
VII Other eBay Business
This page intentionally left blank
28 Selling Services on eBay This chapter is about services; that is, experts providing informational services or physical services for a fee. A lawyer is a good example. A lawyer gives advice, drafts documents, and occasionally goes to court. Another example is a landscaping service. A person or team with landscaping skills visits your property and takes care of the foliage. This chapter is not about branded services such as a vehicle oil change, lube, and checkup. Such services are essentially products and can be marketed as products on eBay. This chapter remains speculative. Today you will find the growth of services being sold on eBay slow. This is likely due to four factors. First, some professional organizations have prohibitions on self-promotion. Rules covering marketing and advertising are strict. In regard to nonprofessionals, few people are aggressively trying to sell services via eBay. They haven’t persistently pushed the envelope, so to speak. Second, service providers who have tried have not been visibly successful. They haven’t figured out productive techniques. Third, due to a paltry offering, people don’t look on eBay for services. They aren’t conditioned to do so yet. Fourth, selling services is primarily a local endeavor. Until eBay figures out how to do local auctions effectively,
427
428
EBAY BUSINESS THE SMART WAY
perhaps services will not come into their own on eBay. Consequently, this is an opportunity waiting for the further evolution of eBay. Because the idea of selling services on eBay is speculative, this chapter is a collection of speculative ideas, not proven techniques. It just seems to me that selling services should not go unaddressed in a book about eBay business. eBay used to include a special auction, Elance, devoted to certain types of services (covered below). However, it was not a runaway success. So, no one seems to have found the magic formula yet. Note that Elance is not owned by eBay; it simply has had a traditional link on the eBay home page.
Advertising Selling services on eBay is essentially a marketing campaign, not a money-maker. It’s a opportunity for a provider (to use a generic term) to meet potential customers. The nature of the typical service project is that it’s open-ended. Until the customer’s problem is pinned down, it is difficult for a provider to even propose a course of action or set a price. Indeed, in some cases, the problems are so complex that it’s impossible to even predict the duration of the service or the outcome. The bottom line is that few services are packaged and priced. In other words, what does a provider have to sell on eBay? The answer is, not much that’s specific. To create a package of services (i.e., a product) might be a good approach. Some Service Packages Do Exist Certainly some services are packaged and priced. A residential real estate appraisal, for instance, is normally a uniform product with a uniform price performed by a knowledgeable real estate professional. But as soon as a particular residence falls outside the normal parameters of residences, it becomes a special case. The appraiser has to do extra work and will charge a higher fee.
Where services are packaged, you can attempt to sell them on eBay like any other product. Such an effort might turn into a money-maker
CHAPTER 28 SELLING SERVICES ON EBAY
429
with some experimentation and marketing savvy. Still, it’s more likely to be a loss-leader and only justified as advertising. eBay essentially delivers an opportunity for providers to advertise. The advertising will be ineffective unless it falls into a general marketing scheme. But a unique opportunity exists to reach a market of exactly the potential customers you need to reach and at a bargain marketing cost. Unfortunately, you have to sell something in order to use eBay for advertising. If you’re a provider, what do you sell?
What to Sell? To sell services on eBay, you might try turning a certain set of services into a package. That is, you need to create a product. This is not a new concept for providers. Every profession or trade has their bread-andbutter money-makers. Many lawyers, for instance, offer annual checkups for small corporations. The lawyer prepares the minutes for the annual meeting, holds the meeting, and reviews any matters of importance for the year. This is a perfunctory service of minimal importance for most small businesses for which lawyers often charge a set fee. It’s not an unnecessary service because the corporate owners are required by law to do certain things every year. But it is normally a routine and uneventful, almost a ceremonial, occasion. You can bet when the annual meeting is anything but routine (e.g., two stockholders fighting) and grows into an substantial effort for the lawyer, the lawyer will start charging an hourly fee, not a set price. Service providers often create packages where the work is quantifiable and predictable. Often a set fee goes with the package. Providers do little work for some customers who purchase the package and more work for other customers who purchase the package. The idea is that it will all average out into a product that is profitable. This chapter focuses on creating service packages for marketing purposes only. As such, the packages don’t have to be profitable. In fact, they can be loss-leaders. The goal is not to make money on the packages but rather to get new customers who are willing to pay for your services repeatedly.
430
EBAY BUSINESS THE SMART WAY
But If You Can If you can put together a service package that's profitable to sell, and you sell it regularly on eBay, it will be a money-maker. But in effect, you will be selling a product just like anyone else who sells a product. If so, you should focus your attention on other chapters in this book more relevant to selling profitably. This chapter is essentially about advertising.
Packages How do you design a package of services for marketing or advertising purposes on eBay? Saleable The product has to be something that people will buy. To have your auctions go without bids again and again is an embarrassment and probably doesn’t do your business image much good. Low Cost High-cost products attract fewer bidders. You will probably want to offer packages at entry-level pricing. No Obligation There should be no financial obligation over and above the price of the package for the customer purchasing the package. Geographical Limitations You should be realistic about geographical limitations. A lawyer in Baltimore is not likely to give a potential client in Albuquerque adequate advice on real estate legal matters in New Mexico. A landscaping service in Baltimore cannot provide a potential customer in Albuquerque with the work needed. It’s physically impossible to do cost-effectively unless it’s a big contract. Painless Using the package should be as painless as possible for the customer. Recurring Offering The package needs to be offered on a regular basis to have adequate advertising impact. Specific Service The package should offer a specific service or a specific group of services, not a broad range of services.
CHAPTER 28 SELLING SERVICES ON EBAY
431
eBay Category The package needs to appear in the proper place (in the proper category) on eBay. If there is no obviously logical category, it’s a waste of time to make the offering. Choose another package that has a category on eBay.
Information Products Books, booklets, pamphlets, reports, white papers, references, lists, directories, audio tapes, video tapes, CDs, DVDs, and software are all saleable information products. Service providers have traditionally used these to promote their businesses. Why not sell them on eBay? Again, it is important to distinguish between creating information products to make money and creating them to drum up business. If they are legitimate products with commercial potential, then create them and market them to sell well. In other words, get into the publishing business. Use ISBN numbers and UPC numbers and spend some money to give your products an attractive and commercial appearance. If you offer the products just to promote business, and not to make money, design them differently. They will cost less, and you will have more flexibility in selling them on eBay. For example, a security consultant might write a book, How to Make Your Office Secure, to sell for $25. It might cover physical security, computer security, and personnel securityin 230 pages. Now that’s a book a lot of people might buy. Print it commercially, have a threecolor book jacket designed, copyright it, and get an ISBN number for it (you have to register as a publisher). Sell it on eBay to make money. The same security consultant might write a report, “How to Choose an Electronic Security System for Your Office” (35 pages), to sell for $5. Print it with a laser printer, bind it with a standard office binding, and sell it on eBay. Don’t bother to register a copyright. You have a copyright automatically just by creating it, albeit with fewer rights. In fact, you might want to include permission with each copy for the purchaser to make copies of it for friends, relatives, and colleagues so long as no one sells it. Remember, you’re trying to get business, not make money.
432
EBAY BUSINESS THE SMART WAY
1-2-3 Review Ideas for service packages are limited only by your imagination, but here’s one that might work well. Suppose you are an advisor who charges $100 per hour for your time. Offer a review package. The first hour costs $25, the second $50, and the third $75. After that your normal rate applies. The buyer gets charged only for the time she uses. The goal of the package might be to identify the customer’s problems and recommend a course of action to solve the problems. If the customer has a simple problem, another part of the goal might be to start to solve the problem. In fact, some problems are simple enough to be solved in three hours or less. Here’s what this package does for you: • Introduces you to a potential paying customer at a reasonable marketing cost. • Gives you an opportunity to solve a customer’s simple problem and turn the customer into a salesperson for you and your services. • Gives you the opportunity to make a longer-term proposal to solve a customer’s problems using your consulting assistance. • Gives you an opportunity to ask for referrals. Here’s what the package does for the customer: • Limits the customer’s financial obligation. • Enables the customer to understand her problems better. • Reveals a workable course of action to take to solve the problems. • Gives an opportunity to solve a simple problem at a low cost. • Enables the customer to decide whether she wants to work with the advisor further. There is one other feature this package should offer: timeliness. Make this an impulse purchase. Promise a quick appointment for consultation (e.g., within the next twenty-four hours). But this is virtually impossible for a busy advisor, right? Not necessarily. What if you limit the consultation to the phone and only one half-hour at a time? Offer to give the consultation outside of normal office hours. Under such
CHAPTER 28 SELLING SERVICES ON EBAY
433
circumstances, even a busy advisor can probably give the first halfhour of consultation sometime within the next twenty-four hours. Many customers will be less threatened by a telephone review than an actual face-to-face meeting (advisors are sometimes intimidating – e.g., lawyers) even though they may eventually want to meet you in person. Outside Office Hours The social value of this type of after-hours offering cannot be underestimated for certain situations. People don't always need a advisor during business hours. Sometimes the distress impulse occurs outside the 8-to-5 workday. A physically abused spouse seeking legal assistance is a good example.
The example given assumes a fixed price (Buy It Now). What about payment? Payment should be made the normal way for the full amount. In the example, the payment is $150 ($25 + $50 + $75). It could be charged on a credit card or paid through PayPal. The consultant is obligated to refund the cost of the unused portion, if any, of the consulting package. If you have to make a partial refund, you will be unable to recover any portion of your eBay fees. But that’s OK. This is a marketing idea, not a money-making idea. And the fee isn’t much. Without a Fixed Price If this is not to be a fixed price auction, the bidder should be bidding on the entire three hours with the idea the first hour is to be charged at 16 percent of the final value, the second hour is charged at 33 percent of the final value, and the third hour is charged at 51 percent of the final value.
There are dozens of variations on this idea. Certainly many advisors (e.g., lawyers) offer an initial free consultation, and you can even work a free hour or two into the formula. Be Creative You can turn a traditional free consultation into a paid consultation on
434
EBAY BUSINESS THE SMART WAY
eBay. Set the minimum bid for a one-hour consultation at $1. Offer this deal often enough so that the bidding never goes to more than a few dollars. This is essentially a free consultation that you sell on eBay.
Task Packages Where does that leave the landscaper who provides mostly physical labor rather than information? Package some landscaping tasks. Put 10,000 square feet of lawn mowing together with five bush trimmings and three dozen flower plantings into a Welcome Spring landscaping package to be sold on eBay. Again the likelihood of a customer needing such a service might be remote. Who has 10,000 square feet of lawn, five bushes, and wants a dozen flowers? Most people need custom landscaping services. But the object is to advertise on eBay. And the Welcome Spring package has possibilities.The following press release illustrates how eBay might be used to sell merchandise that is difficult to sell on eBay: soft drinks. It’s an analogous situation to selling services on eBay. PLANO, TEXAS, Feb. 6, 2003 - Dr Pepper/Seven Up, Inc. today announced that it has entered into a strategic alliance with eBay, the World's Online MarketplaceTM, to develop a comprehensive marketing platform for brands such as Dr Pepper, 7 UP, Sunkist, A&W Root Beer and Canada Dry. In an effort to forge stronger relationships with consumers, Dr Pepper/Seven Up will work with eBay to develop an extended loyalty program, advertise brand news within the eBay community and drive trial sampling of new products.
Will Dr Pepper/Seven Up be successful on eBay? Who knows? But you can’t fault them for not trying something new.
Strategy There is no magic formula for selling services on eBay. It will take a lot of experimentation to find something that works. It’s an advertising campaign and should fit into an overall marketing plan. Your customer service needs to be superb; the offering is just the bait to get a customer. Timeliness is often essential to success. Follow-up is important. This cannot be a disorganized fishing expedition. This is serious business.
CHAPTER 28 SELLING SERVICES ON EBAY
435
Location If your service business is tied to a state or locale where you are licensed or need to meet people face-to-face, explain that in your auction ad. If instead, you can provide informational services via telephone and email that aren’t tied to a state or locale, develop your marketing strategy to create a national clientele. Then move to Maui, Sedona, or Sanibel Island, where you can run your business and have fun too.
Online As covered elsewhere in the book, you can sell on eBay without any other online presence. In fact, that may be the most productive approach for selling most products. Still, I think services are an exception to that notion. Build a website, not to sell your services but to provide customer services. As mentioned earlier, even a brochure website has value to potential customers. Start out doing some simple things for customers and then build on it. Remember, the Internet is an informational medium, and many services are informational in nature. The two make a nice fit. Take advantage of that. Even services that are not informational in nature often require more explanation to customers than a typical product. Do you expect a person selling refurbished Canon digital cameras to have an independent website? Probably not, so long as he can get all his inventory into his eBay Store. Do you expect a lawyer to have an independent website? Sure. The website is a psychological substitute for an office. The website should look good and provide good customer service, even if the customer service is something simple. Do you expect a landscape service to have an independent website? Yes. It sure would help to know something about a landscaper’s capabilities. There are so many different kinds of landscaping tasks, from architectural design to mowing grass.
Information Don’t spare the information. The Internet is an informational
436
EBAY BUSINESS THE SMART WAY
medium. Your auction ads need to be brimming over with information. Your offering needs to be simple and understandable. However, if it interests potential customers, many will want to know a lot more details, not only about the offering but about you too. Don’t disappoint them by being cryptic. Give them a lot to read. Don’t get me wrong. I am not advocating that you bore your potential customers to death. You can arrange your information in such a way as to show the priority of its importance. This gives people the option to keep reading and learn more or to quit reading and go on to something else. Here’s a potential format for use in your auction ad: • Offering Simple, all text, about 50 words. • Detailed Explanation of Service Text and possibly photographs, 200 to 1,000 words depending on complexity. • Resume Text and photographs, as much as 2,000 words and a half-dozen photographs. Covers people or business, or both. • Referral Referral to About Me, all text, about 25 words including a link to About Me. Your About Me webpage should include a link to your independent website). • Transaction Details How to pay and that sort of thing, all text, about 100 words. Hey! This isn’t a classified ad. This is the Internet. This is eBay! Provide plenty of information. In the format outlined, the progression of information goes from the simple to the more complex. For those who need lots of information to make a decision, give them something to chew on.
Elance Elance is a special auction for white collar services. It works a little differently than eBay and is somewhat narrow in scope. But if it fits your skills, it’s worth a try (see Figure 28.1). Over the Years Elance has experimented offering various services over the years including some professional services (e.g., engineering, legal). Many of the offerings have not panned out. The offerings that you see today are
CHAPTER 28 SELLING SERVICES ON EBAY
437
the services that can be sold successfully online.
Auction Procedure Customers who need white collar services post their projects on Elance. You bid on doing the projects for them. In other words, it’s a reverse auction. The low bid wins the project, theoretically. However, the customer is not obligated to accept the low bid and can pick a provider with a higher bid. This auction has these main categories: • Web Development • Software & Technology • Management & Finance • Graphic Design & Art • Writing & Translation • Administrative Support • Legal • Training & Development • Architecture & Engineering
438
EBAY BUSINESS THE SMART WAY
• Multimedia • Sales & Marketing Thus, if you offer a service providing data entry for businesses, you would list yourself (or your company) under Administrative Support. You would be one of about 4,779 listed providers for that particular service (May 2006). A customer looks at the Administrative Support list of providers. She can take one of two approaches. She can go through the list looking at the details of each provider and choose one (or more) to submit her project for bidding, or she can put her project up for bid to the entire list. Listed providers can choose to bid or not to bid on any project available for bidding. Elance claims that it has over 50,000 providers ready to work (May 2006).
One good thing about Elance is that it’s not necessarily a free-for-all.
CHAPTER 28 SELLING SERVICES ON EBAY
439
You have to qualify. You don’t have to compete against people who allege they are qualified but are not.
Fees The fee charged to be listed varies with the category and the duration of the period to be listed. In addition, there is a transaction fee. There is an additional bid fee for the number of projects bid over a certain free monthly allowance. The average amount paid on projects appears to be somewhat low, which raises the question as to whether this auction makes economic sense for providers. It seems to me that this auction makes more sense as a device to introduce you to potential customers with whom you can do repeat business rather than as an opportunity to obtain significant and profitable projects. It is not self-evident that this auction will be profitable for you, and it appears that the only way to find out is to learn how it works, try it, and work it intelligently.
Profitable? The fact that I’ve devoted most of this chapter to speculating about how services might be sold on eBay (authors often get carried away on evangelistic crusades) and less on how Elance works reveals my skeptical point of view about Elance. But don’t let that deter you from trying Elance from time to time to determine whether it can work for you. Clearly Elance has got something going here, and it’s certainly worthwhile to give it careful consideration. Advertising If you look at Elance as an advertising opportunity and you do some loss-leader bidding, you will be following the ideas discussed earlier in this chapter but on Elance instead of eBay. It might work! Historical Note eBay featured a link to Elance on its home page for many years. Had Elance been a runaway success, it’s likely eBay would have bought it.
440
EBAY BUSINESS THE SMART WAY
Buying Services on Elance Take yourself out of the selling mode and put yourself into the buying mode, and Elance looks great! It provides you with a great opportunity to get the white collar services you need at a reasonable cost for your eBay retail business. It introduces you to professionals who may not be available in your community. In short, Elance looks to me like a buyer’s market. When you need special services to get your eBay business off the ground, keep Elance in mind. And as long as we’re talking about buying services, you might note that Monster (http://ebaypostajob.monster.com) was a sponsor of the 2004 eBay Live conference. Monster offers a special price to eBay businesses that need to fill jobs and hope to fill them by advertising.
Summary OK, selling services on eBay is a nascent idea; that is, it’s still in its infancy. I keep touting it in all my eBay books, probably because I would like to get consulting jobs, make the big bucks, and retire in luxury. But for whatever reason, I am keeping this chapter in the book. I do think selling services on eBay has potential. eBay upper management thinks that selling services on eBay has potential. I encourage people offering services to experiment and explore this potential. And I predict that someday we will see this potential realized.
29 Integrating eBay with Offline Retail You have a bricks and mortar store, but you don’t want to be left out of the online action. What do you do? That’s a question a lot of retailers have been asking for several years now. And the answer is: experiment. You are operating on a different level than someone starting an eBay business. You already have inventory, equipment, employees, space, and income. First, you need to determine who is going to maintain your eBay operations. Give the responsibility to one person. Then you need to determine how you are going to manage your auctions during a trial sales period.
Trial Just like a start-up eBay business, you will want to conduct trial auctions. Existing businesses often have more trouble conducting trials than start-ups, because existing businesses are narrow-minded. They know what works and what doesn’t, right? Nope. Unfortunately, it’s often different when you get online, and you have to relearn your retail business. You are a start-up online. You learn through trials.
441
442
EBAY BUSINESS THE SMART WAY
Accounting Naturally, you have to account for everything from inventory to fulfillment in your online trials. Don’t do it with a paper system that you invent, as I have recommended for start-ups. You are more affluent than a start-up eBay business, presumably, and will do well to immediately start using an auction management service. The difference between you and the start-up is that as soon as possible you will integrate your eBay auction management system into your existing accounting system.
Division of Labor Although one person (one employee) can potentially conduct a trial, you may need several people to conduct your normal eBay operations. The trial period is a good time to consider who you will have do what once your trial is done, and what tasks you will outsource.
Combined Accounting The real meat of integration—after your trial is successful—is integrating your eBay auction management with your retail management and accounting. Once the trial is over, why have two business systems? The key here is database technology. You need to read Chapter 21 first to grasp the concepts in this chapter.
POS Software For a retail business, you probably have a point-of-sale (POS) system. That is, your hardware (cash register) is integrated with your software so that your accounting is more or less automatic. Whatever is rung up at the checkout counter is also the entry into the accounting system. This entry goes into a database. The inventory control part of your software is a database too. The software works its magic by accounting for everything from inventory to sales tax. Write Once An automatic system is write-once system. An entry never has to be made a second time. This idea is the goal of an integrated system too.
Thus, with a POS system or any digital inventory control system, you
CHAPTER 29 INTEGRATING EBAY WITH OFFLINE RETAIL
443
already have a database of products. It’s just a matter of using that data to create eBay auctions or eBay Store catalog items (item webpages) instead of doing so in a separate system. For transactions, you need to have the capability to accommodate online transactions as well as instore transactions. In the early days, you would have had to hire a programmer to integrate your retail accounting system with your online (ecommerce) system. You may still have to do so in some cases. But there is plenty of accounting software that provides ecommerce capability today just as there are auction management services or software that accommodate POS operations. The best idea is to use software that takes care of both your retail operations as well as your ecommerce operations. If that’s not a reasonable option for you, you may have to hire a programmer to create some level of integration between your retail accounting system and a separate auction management service.
Auction Management Software Surveying POS software and other retail accounting systems is beyond my expertise. I will leave that to you and your retail accounting software vendors. However, I can report that certain auction management services and software packages offer POS capability or integration (with your existing system). Marketplace SuperManagement, http://www.kyozou.com Y.E.S., http://www.yukonsoft.com Survey the software vendors in Chapter 19 to compile a more up-todate list of auction management software that will integrate your POS system. More Likely There’s more to a good auction management service than just accounting for numbers and inventory. There’s also customer communications (e.g., email) and auction listing management (e.g., scheduling) as well as other features. An auction management service that also has POS capability is more likely to provide what you need for eBay
444
EBAY BUSINESS THE SMART WAY
than POS software that also has token ecommerce capability.
Data Transfer If all else fails, you can do a data transfer, at least for creating eBay auction listings or eBay Store webpages. Export the relevant inventory data from your retail accounting system as an ASCII delimited file (plain text data file). Import that data into eBay’s Turbo Lister or Andale’s Lister Pro or a comparable program, and you’re in business. It may not be as effortless an an automated system, but at least you don’t have to write twice. Of course, this does not address the problem of integrating eBay transactions into your retail accounting system.
Dual System And who is to say you can’t live with a dual accounting system, one for POS and one for eBay sales? Integrate them where you can with a data transfer as suggested in the previous section, and operate them in parallel. This is particularly feasible when you run your eBay sales effort as a separate department or business, which you should.
A Special Business You need to run your eBay sales as a separate department or a separate business. The essential idea here is to put someone in charge and enable her to do what she needs to do to be successful. An eBay operation with no person accountable for its success is an impending disaster. Why? Because for ecommerce in general and eBay in particular, customer service is the name of the game. Unfortunately, if you don’t believe this, the eBay feedback system will make you a believer sooner or later—probably sooner.
Customer Service As I’ve said elsewhere in this book, it seems to me from talking with a lot of eBay retailers that usually the second person they hire as sales grow is someone to handle customer service. In this case, customer service means customer communication. When your eBay volume gets to a certain point, you need someone working full time just to handle the email and telephone traffic. An eBay sales program isn’t just a software-automated freebie. You need to devote resources to it.
CHAPTER 29 INTEGRATING EBAY WITH OFFLINE RETAIL
445
In particular, you need to devote personnel resources to it.
Summary After a test sales effort—assuming it’s successful—your next goal is to integrate your POS system with auction management capability. Fortunately some POS systems today can provide auction management (ecommerce) services, and some auction management services today can provide POS capability.
This page intentionally left blank
30 Using eBay for Marketing And you thought eBay was just for buying and selling. On the contrary, eBay may be your best marketing tool. What better way for you to promote your business than to get your name out in front of people who are motivated to buy what you have to offer.
Compared to What? If you run an ad in a newspaper, your target market (potential customers) may be 1/10 of 1 percent of the readers. You pay the same advertising rate as another business that has a target market of 5 percent of the readers. What if you could inexpensively appeal to a market where 100 percent of the “readers” were potential customers? That would give you a significant business advantage. Suppose you sell authentic Japanese prints (reproductions) for an average price of $85 each. If you advertise in the newspaper in your community of 200,000, the ad will be expensive, small, and the potential customers few. You will have to entice them with an appealing ad. You’ll be looking for those few out of 200,000 who are ready to buy Japanese prints today. Those people will then have to travel to your place of business to purchase the prints.
447
448
EBAY BUSINESS THE SMART WAY
In contrast, on eBay the people come to you (your auction) because they are interested in buying Japanese prints and have found you through eBay’s directory system or search engine. It is only a very small percentage of the people using eBay, but a small percentage of 181 million people is still larger than a small percentage of 200,000 people. And the cost of the ad is much lower.
The Plan Now, let’s say you have 200 different prints in stock. If you put 50 or 100 in separate auctions at eBay, that’s a retail sales plan that will be relatively expensive in regard to eBay fees (still inexpensive compared to newspaper advertising). If you put only one print up for auction, that can be a marketing plan. How do you turn one auction into a marketing plan? Let’s consider the retail plan first. If you put 100 prints on auction, that seems like a huge collection. In fact, art sells according to taste, and 100 choices are not very many, particularly if the prints are high-quality copies from several historical periods or artists (as is true with Japanese prints). Chances are most of the potential customers will choose to pass on the current collection. But they will be likely to return to see what you have to offer next time, and most will buy prints from you sooner or later. Nonetheless, this time most will pass. Therefore, sales may be disappointing. If you auction one print, you’ll still attract the same people, but the time, trouble, and cost will be less. It’s your job to leverage the visits to your one auction into multiple sales. You can do this with ingenuity if you realize that you’re conducting a marketing plan instead of a retail sales plan. I’m not going to tell you how to conduct your marketing plan because there are many potential strategies. Invent some. Nonetheless, there are a few obvious ones worth mentioning.
Four Steps First, you want people to see your entire collection, all 200 prints. You need to have an online gallery, a Web storefront. Your task then becomes enticing the potential bidders at your eBay auction to visit your website gallery. Second, you have to make it very easy for your potential bidders to leave eBay and go to your website. Third, you
CHAPTER 30 USING EBAY FOR MARKETING
449
have to make it very easy for potential bidders to navigate through your website to buy something. Fourth, you have to make it easy for potential bidders to return to the eBay auctions. Let’s take these steps one at a time. Entire Collection People must be able to see your entire collection. That’s the way to sell art. You need to have a website gallery. Setting up and operating a website is easier and less expensive than operating a real art gallery. It’s also perhaps easier than running 200 auctions four times a month on eBay. If you already have a website, I don’t have to sell you on this idea. Unfortunately, eBay no longer permits a link from your auction ad to your ecommerce website. One alternative is to have a link to About Me where you can have a link to your ecommerce website. But that extra step is a killer that defeats an effective marketing program. Another alternative is to have an eBay Store instead of an independent website. Great idea! You can link from your auction ad to your eBay Store directly. How are you going to entice people to leave your auction and go to your eBay Store? I’ll leave that up to you. One simple method is to ask them to. Quick Link Once you have talked bidders into going to your eBay Store, you have to make it easy for them. A link in your auction ad in the appropriate place accomplishes this nicely. For an ecommerce website, it is necessary to link to About Me and then to your website. For an eBay Store, you can argue that the link already exists. There’s a red icon in the auction listing if you have an eBay Store. But that’s not enough. Put a link to your eBay Store right in the copy for your auction ad. Website Your website needs to be attractive, up to date, and well operated with easy navigation. Chapter 24 covers what a basic ecommerce website looks like. You need to offer all means of payment and make it easy for people to complete a transaction. With an eBay Store you don’t have a huge amount of flexibility, but
450
EBAY BUSINESS THE SMART WAY
you have more in 2006 than you did when eBay Stores was first available. eBay Stores is evolving. So, upgrade the look and feel of your eBay Store as much as possible. eBay is committed to making eBay Stores better and more attractive in the future as well as to giving sellers more digital control over their Stores. Eventually, eBay Stores will make up an attractive Web shopping portal that will grow busier. Return Link from Website There should be multiple return links in your website to make it convenient for potential bidders to return to your auction on eBay. You will have to revise these links for each new auction (i.e., each new auction has a different URL). That’s extra weekly work. If you do this, you have effectively made eBay auctions part of your website. If you don’t provide return links to eBay, you’ll have fewer repeat visitors to your website in the future. People don’t like to be left stranded. Note that your eBay auctions will automatically appear in your eBay Store. But this is not the same as having links out of your eBay Store listings back to an eBay auction listing.
In the Long Term This is a long-term marketing plan. You want to make the appearance of your auction consistent so that people recognize it. You want to make the link to your About Me webpage consistent so that people will learn to feel comfortable leaving eBay to visit your About Me webpage and then your website. And you want to make the return trip consistent too. Alternatively, you want to make the link to your eBay Store consistent so that people come to recognize it.
Repeat Auction You need to run the auction constantly; as soon as one auction is over, another should be in place. Naturally, you should change the Japanese print being auctioned each time to maintain interest in your auctions. As a practical matter, if you’re marketing on eBay, you may find it costeffective to run multiple auctions in different categories as part of your marketing campaign. Usually, one auction at a time doesn’t achieve the market penetration you can achieve by a more ambitious approach.
CHAPTER 30 USING EBAY FOR MARKETING
451
Serious Auction Is this a serious auction you’re running? From one point of view, it’s just a token auction to keep your business before the print-buying public as part of a marketing plan. Nevertheless, you have to take the auction itself seriously. A sale at each auction will definitely help your marketing plan. If potential bidders get the idea that it’s a phony effort, they may resent it, and your marketing plan will not be as effective. If you do not make a sale at most of your auctions, you may be conveying the impression that you’re making a bogus effort. In fact, your price may be too high. Sales are crucial to your marketing plan. Take your auctions seriously.
Other Businesses Keep in mind that the Japanese print business is just one business. Each business has its own peculiarities. For instance, suppose you sell nine models of electric guitars ranging in price from $200 to $4,500. Rather than offer a different electric guitar at each auction (like the different Japanese print at each auction), you might offer the low-end guitar at each auction at an attractive price as a strategy to attract entry-level customers to your retail sales operation at your eBay Store or your website. Each business will have a different strategy, and even businesses selling the same products will have different strategies. A variety of strategies will work, and some won’t. Experiment.
Marketing, Not Retail The thing to remember is that a marketing effort on eBay is different from a retail sales effort. The objective of a marketing effort is to use eBay auctions as a promotional or advertising vehicle. The sales are not necessarily made in eBay auctions, and in some cases, sales will be made off eBay at an independent website. The objective of a retail sales effort (not a marketing effort) is to sell merchandise on eBay. If you keep these two efforts separate in your mind and pay attention to details, you will be more effective in whichever strategy you choose to pursue. Confused planning regarding marketing and retail sales may yield disappointing results.
452
EBAY BUSINESS THE SMART WAY
Retail and Marketing Retail sales and a marketing effort on eBay can also be one and the same in some circumstances for some businesses. As long as you understand the difference between a retail sales effort and a marketing effort and decide to combine the two in a creative way, a combined effort might prove very successful for you. For instance, rather than sell one Japanese print, you might sell 15 each week on eBay but do it in such a way that it promotes marketing as well as retail sales volume. But a retail sales effort is not automatically a marketing effort, and a marketing effort can be something very different.
Institutional Advertising Normal advertising sells specific products. Institutional advertising sells companies. Because the scope and cost of services are often difficult to pin down in advance, specific advertising or promotion is difficult to devise. That’s why institutional advertising is common for services. For instance, if you can sell someone on the idea of doing business with you or your accounting firm, you can negotiate the specific accounting services and fees after a consultation session. What brings the client to you in the first place is institutional advertising, that is, the firm’s name. Unfortunately, institutional advertising doesn’t seem to fit in on eBay where specific goods and services are auctioned. That’s where the package of services fits in (covered in Chapter 28). The package seems to be specific, but even after someone buys it, it may turn into something else due to most people’s need for custom services. It’s a hybrid idea. It’s a package that interests people in doing business with you, but it’s a package that most likely will turn into something else when the services are actually performed. It seems to me that selling packages of services on eBay is similar to the institutional advertising you need.
eBay User Agreement When using eBay for marketing, be careful that you don’t violate the eBay User Agreement. It requires that you do not sell an item on a website linked to your About Me webpage for the same price or a lower price than the reserve price (or minimum bid) for the same item being
CHAPTER 30 USING EBAY FOR MARKETING
453
auctioned on eBay at the same time—not unreasonable. eBay seems to like the two-way-street approach. It allows links to your website (subject to the eBay User Agreement) from your About Me webpage, but it likes to see links from your website to eBay in return. It seems to me that this is a sound marketing approach for both you and eBay.
Summary Theoretically, you can use eBay to support a marketing or advertising plan. And so long as you keep the ideas of an eBay retail sales effort and an eBay marketing effort separate, you can do either successfully. You can even combine them creatively. eBay provides you with a substantial marketing opportunity. Don’t abuse the opportunity. Abide by the eBay policies that put certain restrictions on what you can do to link to your ecommerce website. And those restrictions seem to change from time to time. Integrate your ecommerce website with your eBay auctions using links that run in both directions and through About Me. Even better, use About Me as a robust webpage for institutional advertising. Use an auction to bring attention to your About Me. Finally, even better yet, use an eBay Store as your website. Use auctions to advertise and market your eBay Store. This is great marketing at a reasonable price. Really great and really reasonable!
This page intentionally left blank
31 Consignment Selling and Other Businesses Selling on consignment is simply selling an item for another person for a fee. In other words, it’s a service. Specifically, it’s selling an item on eBay. Consignment selling is a good service to offer in a variety of situations. Although eBay buying and selling is widespread, there are still plenty of people who don’t have the motivation or skill to sell used merchandise on eBay. Yet eBay has emerged as the primary marketplace for used merchandise. Thus, there is a significant opportunity to provide such a consignment selling service in every community. eBay has emerged as more than an online marketplace. It’s an industry. The eBay industry now has thousands of vendors ready to sell products and services to eBay members, primarly eBay retail businesses. I’m not going to suggest you go into the software business and invent a new auction management service, although dozens of eBay members have done exactly that. Rather, I’m going to highlight several ancillary business ideas for the eBay industry that may interest you.
455
456
EBAY BUSINESS THE SMART WAY
Find a need and fill it. Chances are that if you can fill it for one eBay business in your locale, you can fill it for others too. With 724,000 eBay retailers, there is no shortage of potential customers.
Consignment The question is, What does a consignment service look like? Here are some variations: 1. Part-time, sideline business supplementary to an eBay online retail business. Look upon consignment selling as a way to find inventory. The inventory has a fixed profit and requires no capital. 2. Part-time, sideline business supplementary to an offline service store. For instance, the store could be a UPS Store providing shipping services and office services. (UPS Stores used to be Mailboxes, Etc.) 3. Full-time business on eBay working out of a home office. The overhead is low. 4. Full-time business on eBay working in a physical consignment store where you get walk-in traffic. The overhead is high. There are currently several franchise opportunities. Consignment selling is widespread and is a hot idea in the eBay industry. Sales Volume According to Nashvillecitypaper.com (March 10, 2004), eBay estimates eBay consignment sales will reach $10 billion annually.
Casual Let’s take a look at why this is a good idea in a variety of situations. First, consider the part-time situations 1 and 2 above. This is casual consignment selling. You just wait for people to bring you stuff, and then you sell it for them. It’s not your primary business. But it can be a profitable sideline business. You need to be set up to handle the business efficiently, but beyond that it does not take significant additional resources to provide eBay consignment selling services.
CHAPTER 31 CONSIGNMENT SELLING AND OTHER BUSINESSES
457
Dedicated Second, for the full-time situations 3 and 4 above, the consignment business is your primary business. You must get set up to handle a significant volume of business. If you work out of your home, you will have to get out and find enough business to make a living. Consequently, you will have a marketing burden that you don’t have with most eBay businesses. Where can you get business? Here are some ideas: • Garage sales (the stuff that didn’t sell) • Group presentations (speaking engagements to explain eBay) • Individuals (whatever’s in the garage or attic, and vehicles) • Artists and craftspeople (galleries often sell on consignment) • Charities (donated items) • Retail stores (excess inventory) • Estate lawyers (estate assets) • Bankruptcy lawyers (bankrupt estate assets) • Businesses (equipment, excess supplies) • Agriculture (equipment, excess supplies) • Government (equipment, excess supplies) • Real estate (assist with advertising on eBay) You will find that some of your clients are local retailers (e.g., antique store). Some will need you only once a year or once a season to handle excess inventory. Others will have an ongoing need for you to sell their merchandise. It can be a tough business, handling items one at a time. Rather, you want to find clients who give you ongoing repeat business in significant volume. A franchise that may help you get consignment business is Assist2Auction (http://assist2auction.com). It bills itself as the “mobile eBay franchise,” and does not require a physical store. It does require a suitable vehicle such a van or SUV, however, and it’s expensive—but not as expensive as a storefront consignment franchise. You will want particular attention to the laws of your state. For
458
EBAY BUSINESS THE SMART WAY
instance, it may be illegal to assist someone to sell a vehicle without having a license to sell vehicles. There may also be laws that cover the sale of secondhand goods requiring certain burdensome bureaucratic accountability. And you may be required to get an auctioneer’s license.
Storefront If you operate a physical store or a franchise store dedicated to consignment sales on eBay, you will have to spend a lot on advertising and promotion to generate walk-in traffic. And then there are rent and employees. If you get a franchise, you may need as much as $100,000 in capital to get started. Here is a list of current franchisors for eBay consignment sales storefronts: AuctionDrop, http://auctiondrop.com (UPS Stores) Auction and Go, http://www.auctionandgo.com Auction It Today, http://auctionittoday.com eAuction Depot, http://www.eauctiondepot.com iSoldIt, http://i-soldit.com Online Outpost, http://www.theonlineoutpost.com QuickDrop, http://www.quickdropfranchise.com SnappyAuctions, http://snappyauctions.com AuctionBytes (http://auctionbytes.com) has a comparison of consignment businesses around the country and their fees at http://auctionbyt es.com/cab/pages/consign. Some of the businesses are franchisors. One of the primary reasons to have a physical storefront is to capture walk-in traffic. But you will still have to go out into the community and hustle business to be successful. Consider that there are over 3,000 UPS Stores that can do consignment sales on eBay if they choose (with the AuctionDrop system) and a host of already-established normal consignment stores that can add eBay consignment sales easily if they choose. Where does that leave another consignment storefront with high start-up costs? Is a storefront worth the investment? Is an eBay consignment franchise worth
CHAPTER 31 CONSIGNMENT SELLING AND OTHER BUSINESSES
459
the investment? These are all good questions. Better think about them carefully. Ancillary Consignment Sales PostNet (http://www.postnet.com) is a franchise that competes with Kinkos (duplication and desktop publishing services now owned by Federal Express) and also provides packaging and shipping services. It’s been in business for 11 years and has over 900 locations. Its sales pitch (to sell you a franchise) is simply, Why bet the farm on an unproven eBay consignment franchise? Buy a PostNet franchise, a proven franchise, and do eBay consignment sales as an ancillary business. This is what some of the UPS Stores are doing. Sounds like a safe business strategy to me.
For information on opening a non-franchised consignment store, try The Consignment-Shop-Store (http://consignment-shop-store.com), a book. This is not specifically about a consignment store for eBay sales, but it will provide you with much useful information about opening a physical consignment storefront. For a more specific book, try How to Start and Run an eBay Consignment Business, Skip McGrath, McGrawHill Osborne Media, 2006.
Operations There are a number of things to keep in mind: • Use a written consignment agreement. • Make sure each customer understands all the eBay fees and other costs are to be paid in addition to your consignment fee. If you pay all such fees and costs, you will have to charge a higher consignment fee. • Reserve the right to refuse an item due to an unreasonably high price or for other reasons. Help customers set realistic prices. • Reach an agreement with each customer about guarantees to buyers. You need to be able to provide good customer service (e.g., guarantees), but you can’t be liable for the cost of fulfilling such guarantees. • Handle the item as if it were your own merchandise. Create good
460
EBAY BUSINESS THE SMART WAY
auction ads, take good photographs, and communicate with buyers. Even though none of the inventory is yours, you are still building your brand. And what does all this boil down to? The only thing different about an eBay consignment business compared to a normal eBay retail business is that you get your inventory a different way. Otherwise, it’s business as usual.
Software Some of the auction management services have a specific consignment sales component. Some of the ones that include consignment sales features are listed below: Store Manager G2, http://www.auctionwagon.com Liberty 4 Consignment and Liberty 4 Trading Assistants, http:// resaleworld.com/tradeassist.php Meridian, http://www.noblespirit.com But I have not done a complete survey, and I expect that many auction management services offer consignment sales features now.
Fees What do you charge? That depends on the scope of your service to a specific customer. Talk with other people in your community doing consignment sales. Look at what auction houses charge and what services they perform. Find out what other eBay businesses are charging by hanging out in the various eBay communities and asking questions about consignment sales. If all else fails, 15 to 40 percent of the sales price seems to be the range of contingent fees. (“Contingent” means that you don’t get paid unless the item sells.) Also, people will expect you to lower the fee as the value goes up. Thus, you might charge 25 percent for a $50 item and 5 percent for a $5,000 item. Take a look at the comparisons of consignment businesses on AuctionBytes mentioned above.
Trade Assistants Consignment selling is recognized by eBay, and eBay offers assistance to consignment sellers with its Trade Assistants program. This pro-
CHAPTER 31 CONSIGNMENT SELLING AND OTHER BUSINESSES
461
gram may actually bring in some business for you. Look for it on the eBay sitemap. In other words, if you become an official eBay Trade Assistant, you will gain credibility.
Other Businesses Assume that there are 500,000 Americans each conducting a serious retail business on eBay (estimates vary). That means in a town of 100,000 population there are about 160 eBay retailers in town. You only have to land a percentage of those as customers to run a profitable eBay services business.
Fulfillment It’s no accident that I use the house-spouse garage fulfillment center in Chapter 3 an an example of what you might do to take care of one of your most tedious tasks as an eBay retailer. In fact, anyone starting an eBay fulfillment center in their garage can probably get plenty of business from local eBay retailers. The only problem is finding the eBay retailers. As the eBay local Groups, now in their infancy, mature, they will be fertile grounds for finding fulfillment service customers. (Unfortunately, the local eBay groups don’t seem to be maturing very quickly, and I question their viability.)
Photography Photography is an ongoing chore for busy eBay businesses. If you can provide convenient photography services on a production line basis and upload the photographs to the Internet where they can be used, you just might create a career for yourself. You would have to have a portable studio and make the rounds of your customers routinely, but it seems a likely business for some industrious soul. Indeed, a primary portion of the Auction123 service mentioned below is just that: taking photographs (of vehicles).
Picking This service is mentioned in Chapter 15. You make the rounds of garage sales, estate auctions, discount stores, etc. to buy items. You immediately sell the items to eBay retailers at a markup. This low-tech business activity long preceded eBay, but it works well.
462
EBAY BUSINESS THE SMART WAY
Buying If you can pick, you ought to be able to buy. Why not provide a merchandise buying service for eBay entrepreneurs? You find wholesale sources and prepare orders for products to be purchased by eBay retailers for subsequent auction on eBay.
Systems Set-Up and Maintenance eBay retail businesses need computer hardware and specialized software to operate efficiently. Specialize in setting up and maintaining eBay software systems. This can even include software training for employees. As you know, auction management software is very specialized. Although it doesn’t normally take an expert to set it up and run the software, it does take time and energy to learn and manage the software. Busy eBay retailers don’t have an excess of time and energy. Thus, there’s a business there waiting to happen.
Managing Auctions Auction management is a huge job. Fortunately, auction management software can help bring efficiency to this important task. But it still takes time. Provide a service to manage the auctions and transactions of eBay retailers.
Managing Communications Someone to handle the email is typically the second employee many successful eBay retailers hire. This is so important to an eBay retailer that she would have to be crazy to outsource it. Nonetheless, if you provide an excellent service (and provide excellent references), an eBay retailer might come to trust you enough to try your service. Keep in mind that if an eBay retailer can’t afford a full-time employee to handle customer communications, she might be inclined to contract the communications tasks to you. Once you’re got the business, you have an opportunity to keep it long-term.
Running Customer Service For many eBay retailers, managing communications is their customer service. But there is often more to good customer service than just communications. Again, this is a sensitive operation that any eBay
CHAPTER 31 CONSIGNMENT SELLING AND OTHER BUSINESSES
463
retailer would be crazy to outsource. But by doing a great job for someone who will give you a great reference, you should be able to get additional contracts. There are plenty of customer service activities, schemes, and software programs worth using (see Chapter 23). These require more specialized skills to manage than communications. By developing an expertise in this area, you may be able to find a lot of business.
Bookkeeping It’s not so easy to find a reliable bookkeeper. It’s more difficult to find one who specialized in eBay businesses. This is a normal business service, but one that you can turn into a unique service by specializing in eBay businesses.
Motors There a number of potential services you might provide to those who want to sell vehicles on eBay Motors, particularly dealers. It’s a huge market (over 1,500,000 vehicles sold in 2005). There is one company, Auction123 (http://auction123.com), which provides photography and listing services, primarily for auto dealers. You can become a Dealer Assistant and sell these ser vices to dealers in your area. The Auction123 auction ads for eBay Motors are very attractive and useful. This is a booming business.
Use Elance Read Chapter 28 and take a look at Elance. Elance might be a good way to sell your services to eBay retailers.
This page intentionally left blank
32 Buying on eBay Now is the time for all good buyers to come to the aid of their company. Finally, we get to the buyers’ portion of this eBay business book. Can buyers save money for their businesses by buying on eBay? Absolutely! Certainly, there are bargains on eBay, even for businesses. The real test of buying for business on eBay, however, is to do it consistently and efficiently. Whether that’s possible for your business will depend on some of the considerations covered below.
Normal Buying Normal nonbusiness buying on eBay is part recreation, part frugality, and part convenience. Time is seldom the prime consideration. Normal buying is casual. When you’re in business, however, casual work is usually not costeffective, and time is money.
Buying for Your Business When you buy for your business, the considerations are different from normal buying. It’s not recreation. It needs to be cost-effective. Fur465
466
EBAY BUSINESS THE SMART WAY
thermore, it needs to be effective. The business reasons to buy on eBay are usually to buy inexpensively or to buy something you can’t find anywhere else.
Cost of Buying When you buy on eBay for business, someone has to do the buying. If that’s you, you need to be able to put a price on your hours so that you can calculate exactly what the process of buying on eBay is costing you over and above your normal buying practices. If an employee does the buying, you can use her hourly pay to calculate the price per hour. First, you need to make the simple calculations explained in all basic eBay books to determine whether you’re getting a bargain when you buy something for your business. For example, did you include the cost of the shipping in your calculation? Do you have to pay sales tax? In addition, for business you need to take the price-per-hour for your time or an employee’s and apply it to the extra time, if any, it takes to purchase on eBay. In other words, is the savings you get by purchasing goods on eBay enough to pay for the extra time you or your employee spends on eBay doing the buying? Extra Time? Does eBay take extra time to buy something compared to normal buying? Until you analyze your buying practices, you don’t know. eBay might save you time.
Whatever is bought from any source has to be bought by someone. For business, it’s common for an employee to buy out of a catalog, from an office supply store, or from a salesperson who comes calling. This process is what you compare to buying on eBay. One has the notion that eBay can potentially take more time. After all, tending your bidding can be time consuming; and when you lose an auction, it’s wasted time. You have to start over again. So, you need to do a cost analysis to determine the portion of time spent buying on eBay that exceeds nor mal buying time. Once you’ve estimated the difference between buying on eBay and normal buying, apply the price-per-hour to the excess time. That’s the
CHAPTER 32 BUYING ON EBAY
467
extra cost of buying via eBay. Average time to buy normally:
12 minutes
Average time to buy via eBay:
19 minutes
Difference:
7 minutes
Items per week:
18
Total extra time per week:
126 min (2.1 hrs)
$ per hour employee cost:
$14
Total extra cost:
$29.40
If you saved more than $29.40 by buying the 18 items on eBay, then buying on eBay starts to make sense. If you or your employee normally has to drive somewhere to buy or pick up goods, eBay will probably take less time rather than more time compared to your normal buying. The real opportunity lies hidden in the way we think of buying on eBay. If there is a way you can set up guidelines to make buying on eBay more efficient, it’s possible that buying on eBay might be significantly less expensive than buying via other means.
Minimizing the Cost of Buying Here are a few guidelines you may want to consider: 1. Have one person do all the buying on eBay. She will presumably hone her skills and be able to do it more efficiently than other employees without well-honed skills. 2. Don’t play the bidding game. Use proxy bidding. You put in one bid. You will be notified by email whether you won. You have as good a chance to win the auction as anyone, and you won’t pay more than you want to. 3. Set up an easy-to-use payment procedure internally to make it easy for the employee to pay for items. 4. Use auction management software for buyers, if available. 5. Use Buy It Now (fixed price) when it provides a significant savings.
468
EBAY BUSINESS THE SMART WAY
This not only keeps your costs down but gives you a shot at making your eBay buying cost less than normal buying.
Business to Business eBay has a business-to-business (B2B) section that may make eBay buying even more attractive if your industry happens to be well represented. The B2B auctions have developed more slowly on eBay than consumer auctions, but they are growing. Someday soon eBay will be an effective B2B marketplace for small businesses. (See Chapter 12 for more information on B2B auctions.) Many businesses get a huge savings buying expensive equipment on eBay. This is one type of eBay buying that makes sense on its face without any analysis. There have been a lot of success stories.
Local Auctions eBay auctions for which the sellers are located in your area are fertile grounds for business purchases. For instance, it’s difficult to buy a $150 desk in Omaha when you live 600 miles away in Louisville. The transportation cost renders such a transaction expensive. If you’re in Omaha, however, the desk may be a real bargain.
Bulk Supplies Although the bulk sales auctions (a type of B2B auction) are also growing slowly on eBay, they continue to offer more and more possibilities. A metal fabrication business owner in Alabama was able to buy drywall for a new building cheaper (even after shipping costs) in Tennessee via eBay than locally. It pays to check eBay first before buying elsewhere.
For Inventory Buying via eBay is not confined to goods you need for your business. You can also buy for your inventory. If you can buy cheap on eBay and turn around and sell for a profit on eBay, there’s nothing wrong with that. Although eBay is an efficient marketplace, it’s not a perfect marketplace. Opportunities for buying and selling at a profit on eBay certainly exist.
CHAPTER 32 BUYING ON EBAY
469
International The international markets for business have tremendous potential. They are big now and will get bigger. You may be able to enjoy great savings by buying abroad. Unless you are in the import-export business, however, there is no simple way to buy abroad other than to travel. eBay is an exception. You can buy in the UK quite easily because the eBay website is in English. For the other foreign eBay auctions, you will have to use the local language. As mentioned before in this book, try using Babel Fish (http:// world.altavista.com) or another free Web translation service to translate language in auction ads and email. You can use PayPal, Western Union, etc., to pay abroad as well as your credit card (see Chapter 22). Euros Anyone? PayPal now pays in six currencies. Want to buy something in Europe with Euros? Pay via PayPal, and it’s not a problem.
Buy It Now eBay’s fixed price device can be helpful for buying in two situations. First, if you’re in a hurry, you can buy immediately. Second, if the fixed price represents a reasonable savings for you, you can purchase costeffectively. It’s just like buying out of a catalog.
Organizing Your Buying Beyond determining whether eBay is a cost-effective means of purchasing for your business, you also need to set up your buying in an organized manner.
Accounting You need to work with your bookkeeper or accountant to account for your purchases. Whatever system you use is likely to work with eBay purchases as well as normal purchases. In addition, you need to manage and account for your payments and your bidding.
470
EBAY BUSINESS THE SMART WAY
Payment It’s essential that a practical payment procedure be set up for purchasing on eBay. If you are doing this yourself, it’s nice to have a routine so you don’t have to think how you’re going to pay with each auction. It’s also easier for accounting purposes, after the fact. But a payment procedure is most essential when an employee does the purchasing. The payment method needs to be widely acceptable (e.g., PayPal) and easily auditable. This will give you confidence that an employee is not embezzling (small-time embezzling is much more widespread than most small businesses realize), and it will also give the employee the confidence to buy flexibly, aggressively, and in a timely manner. We bought about $10,000 of fiber optic network cable on eBay for our charter high school for $1,200. This would not have been possible without using a school credit card. Public school accounts payable systems, holdovers from the Civil War era, are not supportive of online purchasing. Fortunately, I had insisted (as a board member) that our school get a credit card. The school eventually bought more cable and saved about 88 percent ($26,500) on just one set of purchases. Being able to pay in a practical way seems like a small matter, an obvious requirement. Nonetheless, it’s an important key to successful buying online and particularly on eBay. Think it through. Make it easy for an employee to pay. What happens when the seller requires a method of payment outside your immediate capability? You need to have a policy in place for this. The obvious policy is not to buy from buyers who do not accept the means of payment you use. You might consider modifying such a policy with two additional procedures. First, contact the seller to see if she will make an exception and accept another method of payment from you. Second, set up a special in-house procedure for handling payments in a way that’s outside your normal payment practices.
Tracking Purchases Many sellers ship via shipping that you can track, such as Federal Express. If you have the tracking number (obtained from the seller), you can look up the package on the FedEx website and find out where it is in transit (see Figure 32.1). This is usually a waste of time and is
CHAPTER 32 BUYING ON EBAY
471
not necessary. Occasionally, though, tracking may be important for a purchase, and it’s helpful to be able to do it. If it’s important to your purchasing efforts, make a point to deal with sellers who use shippers that provide such a capability.
Auction Tracking You need to account for purchases on eBay, just like you do for any purchases. Since buying on eBay does not necessarily happen instantly, however, you have additional accounting to do; that is, you need to manage your bidding and your transaction arrangements. If you can find an auction management service that will do this for buyers, that might be your best bet. Otherwise, you’ll have to devise a system of your own.
Buying Details There are number of bidding techniques listed in my book eBay the Smart Way. Most are for active bidding. Active bidding is perhaps costeffective for big-ticket items, but it isn’t for normal business buying. Your best bet to make eBay business buying cost-effective is to automate the buying process as much as possible.
472
EBAY BUSINESS THE SMART WAY
Bidding Technique Use proxy bidding to buy for business. It’s easy. Just enter your bid once. It’s effective. It will never bid more than you want to pay, and it will always bid as low as possible to win an auction. It’s built into the eBay system, and you don’t have to do anything to activate it other than enter as your bid the highest amount you’re willing to pay. It’s automatic. You bid once and wait to know the results when the auction is over. This is the ideal bidding for a business buyer and perhaps the best bidding technique for anyone. Keep in mind, that if someone is willing to pay more for the item than you are, all the bidding techniques in the world aren’t going to help you much to win the bidding. Don’t waste your time or your employee’s time with numerous bidding strategies for business buying. Just use proxy bidding. When you bid on expensive items, of course, it might be cost-effective to spend some time using other bidding techniques that require ongoing attention to the bidding. For instance, if you’re bidding on a milling machine you think is worth $19,000 and you believe you can buy it for $14,000 via active bidding, then risking your time or an employee’s time to bid actively might be worth the chance to save $5,000.
Feedback Feedback, as always, is a two-way street. First, you need to check the feedback of every seller. It takes only a few seconds, and you never know what you might find. Occasionally, you will find sellers that seem too risky to bother with. Second, you need to tend to your own feedback. You can’t afford to have significant negative feedback. Some sellers will refuse to sell to you. Think carefully whether you want to use the same eBay account (eBay ID) to both buy and sell for your eBay business. The considerations are as numerous as there are eBay businesses. Weigh the pros and cons and make a choice. If you are an eBay seller and you make a lot of purchases on eBay too, there might be reasons to keep your buying and selling separate for not only feedback purposes but accounting purposes as well.
CHAPTER 32 BUYING ON EBAY
473
Let the Seller Manage Don’t go to the trouble of trying to manage individual auctions. This will not only take extra time and energy but will also confuse the seller or upset the seller’s operations. Let the seller manage the transaction. That’s part of the seller’s job. Wait for the seller’s communications and answer them in a timely manner. Then again, if the seller doesn’t do his job properly, you may have to step in and make a request. For instance, if the seller doesn’t provide a receipt, you may have to ask for one.
Guarantee On certain purchases, such as for expensive equipment, you will want a guarantee from the seller that the equipment works and is in workable condition. I bought a used book binding machine that retails for $3,295 from an eBay seller for $710. The seller guaranteed that the unit would not be DOA (dead on arrival). When I got it, it didn’t work. Not even the local dealer’s service department could fix it. I was able to return it and get a refund from the seller. If the seller doesn’t give a guarantee in the auction ad, ask for one. If you can’t get a guarantee, be cautious about buying. You should at least have a representation in the auction ad that the unit does work; and there should be no disclaimer such as: buyer buys “as is.” One problem with buying from a consignment seller is that you are not buying from the actual owner. The actual owner is more likely to know the true condition of a piece of equipment, particularly a complex piece of equipment. When you get information secondhand from a consignment seller, it may not be as reliable as getting it straight from the owner. In addition, you will want to check carefully the return policies of the consignment seller. If you can’t return equipment that doesn’t work, you’re stuck with it.
Services Can you buy services on eBay? Your best bet is Elance, an auction for professional ser vices. In times when the national economy is depressed, you can find a lot of bargain services via Elance. Even when the economy is hot, there are always plenty of independent con-
474
EBAY BUSINESS THE SMART WAY
tractors ready to do short-term and even long-term work. For Your New eBay Business When you’re starting out, need some professional work done, and can’t afford to hire an employee or a local firm, you might be able to find an inexpensive freelancer on Elance to get the job done.
Software Yes, there was software for buyers. In fact, software for eBay buyers was commonplace at one time not too long ago. But it didn’t sell well, and most software vendors discontinued it. AuctionTamer (http:// www.auctiontamer.com) still has software for buyers, and your survey of the auction managemenet software might turn up additional software that includes buyer features. A newcomer, Nabit (http:// www.nabit.com), also offers software for buyers, and it’s free.
We Have Stories We’ve all heard stories about who bought what on eBay and saved a ton of money. Many of those stories are about expensive items purchased for business. They tend to make it seem like buying on eBay is a no-brainer; that is, you can always do better buying on eBay. When you’re running a business, though, you have to establish your purchasing operations on facts and projected costs that make sense. For ordinary business buying, the jury is still out on whether a business can buy on eBay more cost-effectively. Indeed, many corporations are reducing their traditional purchasing programs and giving employees credit cards to do the buying ad hoc for a wide range of supplies and even equipment. It’s more cost-effective than using a managed purchasing operation. So, there are no easy answers as to how eBay purchasing compares. Experiment with your own business to find an answer that fits your operations. Again, it should be acknowledged that for expensive items, many businesses have saved money buying on eBay. It seems to be worthwhile to put in the time and energy to buy (bid) carefully and actively for potentially large savings.
33 Marketing Media It seems appropriate to cover new Web marketing devices in this book that are not covered substantially in my eBay marketing book Building eBay Traffic the Smart Way. There is one new technique that is made to order for eBay retailers and another that requires a higher level of ambition but promises to be effective too.
Blog A blog was originally a Web log (posted on the Web) of a person’s dayto-day experience including one or many topics. Indeed, it still is today. Web Log Blog derives from “weblog” shortened to “blog.” A log is simply a notation—a record—of something that took place. In this case, what took place might be a thought or stream of thoughts if not a record of daily events. The blog is an ongoing record of one’s thoughts and comments or events posted on the Web.
But it has taken on another configuration of greater importance for
475
476
EBAY BUSINESS THE SMART WAY
eBay retailers. The blog configuration that is of interest to us has a journalistic or educational character. For instance, many popular blogs are essentially newspaper columns posted on the Web. That is, they cover timely topics, are typically written by journalists or wannabe journalists, and are heavy with personal opinion. Another way to look at this is that many people who used to write newsletters are now writing blogs. Newletters are a time-proven way to market and promote a wide range of products and services. It is this configuration of blogs that provides you with the most promise for effective marketing.
Great Opportunity This is a great opportunity for you. Let’s look at newsletters. To publish a newsletter, you have to: 1. 2. 3. 4. 5.
Write it. Have it typeset. Print it. Distribute it via a mailing list. For a newsletter distributed by email, leave out steps 2 and 3 but not 4. You don’t have to be sober to look at the above process and understand that it tends to be an expensive one and often time-consuming. The Web version of a newsletter is perhaps less expensive. It resides on your website. You have to: 1. Write it. 2. Convert it to a webpage (HTML). 3. Post it on your website. 4. Generate traffic to your website. This isn’t entirely satisfactory, however, depending how much traffic you can get to your website. Only people who visit your website will see it. Consequently, if your website is not maximized to be found by the search engines—a signficant start-up and ongoing expense—a very limited number of people will read your newsletter.
CHAPTER 33 MARKETING MEDIA
477
A blog can, in effect, be your newsletter that gets much broader exposure to the public than your website. You have to: 1. Write it 2. Post it to your blog People interested in your topics will find you more easily via a search engine or a blog search, and writing a blog is a very convenient means of publishing. A blog makes publishing easier, more effective, and less expensive than ever. And publishing can promote your business. Don’t overlook this important and exciting new means of marketing.
What to Do First, you don’t want your blog to be a personal stream of consciousness. You want it to be structured writing regarding something of relevance to the products or services you sell. A newsletter is a good prototype to keep in mind. Second, the newspaper column is also a good prototype for a blog. The difference between a newspaper column and a newsletter is that a column is usually more opinionated. There’s nothing wrong with being opinionated so long as you don’t overdo it. And being opinionated is no excuse for sloppy writing. Newspaper columns and newsletters are usually written with more skill than newspaper articles. Third, your blog should not be promotional. It should be instructive. If you sell coffee makers, blog articles about different kinds of coffee, choosing coffees, drinking coffee, coffee recipes, and snacks that go well with coffee might be attractive topics for the coffee-loving public to read. Just the fact that you are providing the information will promote your business without you having to promote it within the articles. Fourth, your blog should contain occasional references—hyperlinks— to your eBay business website (e.g., eBay Store), but don’t overdo it. Fifth, your blog should have limited interactivity, if any at all. You can set up your blog as a read-only presentation. You will spend your time only writing the articles for your blog. Or you can set up your blog for readers to come in and make comments. This will take your time
478
EBAY BUSINESS THE SMART WAY
because it’s likely you will have to edit or remove certain comments. If, in addition, you respond to comments, you can potentially spend a significant amount of time tending your blog, and such activity may not be cost-effective. In fact, if you allow your blog to become a interactive forum for your website visitors, you might be better off setting up a real forum instead of a blog. Successful forums require a substantial amount of your time. What the Pros Do Make the contributions to your blog periodically (e.g., once a week or once a month). Write several installments at a time, and always have a few installments on hand. That way you won’t miss an installment or be late, and your readers will come to look for your articles routinely.
Take a look at my blog: http://BaysideBusiness.com/blog It will give you some ideas regarding what you might do with your own blog to bring in new customers.
Figure 33.1 BaysideBusiness blog on Google’s Blogger. This is the initial version prior to the addition of custom art.
CHAPTER 33 MARKETING MEDIA
479
eBay starting offering blog services to members just as this book went to press. My Blogger blog is also duplicated in the eBay blog system as an eBay blog. At the eBay Live conference, eBay teaches how to use a blog to promote your business and increase your sales.
Podcasting You make an audio recording. Convert it to an MP3 audio file (.mp3). Then post it on a podcasting website where people can find it. Users download it and play it on their iPods. Apple iPods have been one of the best selling electronic gizmos in recent memory, and any MP3 player can play podcasts too. Most MP3 files contain music. But more and more, you can find informational podcasts too. The same guidelines that apply to blogs apply to podcasts. Do a professional job of presenting relevant information. An important question for podcasts is length. You will probably get more listeners with ten five-minute podcasts than with one 50-minute podcast. Nonetheless, publishers are starting to put long informational presentations into the podcasting format. People listen while commuting, jogging, exercising, or doing similar mindless activities. There are new generations coming of age that put less value on the written word and more value on the spoken word than before. It started with radio in the 1920s, and it’s here today with podcasting. In a few more generations, perhaps reading will be outmoded. In the meanwhile, you can easily publish information that will promote your retail business using this new audio medium that already has a large audience.
Recording Recording your podcast goes right to the heart of quality. You need to make a professional recording. Sloppy doesn’t cut it when you’re promoting your eBay retail business. Many people who make recordings for instruction or promotion use a professional studio. That’s probably unnecessary for most of us. However, a cheaper studio is a small local radio station that has a side business making professional recordings. You can even make a professional recording yourself with the proper equipment and quiet environment.
480
EBAY BUSINESS THE SMART WAY
Equipment At the least you will need a good microphone and your computer. A condenser microphone that requires a battery (as little as $150 at the Guitar Center and other such stores, or buy one used on eBay for less) will provide a strong enough signal when plugged into your computer to make a good recording. Other high-quality microphones may not provide a strong enough signal. You don’t have to record on your computer, however, and a tape recorder may be a better way to record (see explaination of headroom in the next section). A tape recorder that has a level control is what you need (as inexpensive as $75 at Radio Shack). With a tape recorder, a decent microphone, and a quiet room, you’ll be surprised at the quality you can achieve. You may be able to get by with an inexpensive microphone (about $50 at Radio Shack). A step up would be to use a professional recorder such as the Marantz PMD-222 (about $480), which radio journalists use for doing interviews in the field. The Marantz and a condenser microphone make a good combination. Keep in mind that we’re talking about recording voice, not music. It is always better to record two people rather than one. The interaction between the two adds a lot of interest and tends to keep listeners’ attention better than one person. For instance, for educational purposes, you can play the role of the instructor while the other person plays the role of the interviewer, moderator, or student. When you record two people, you will need two microphones and a mixer. (Even for one person, it is always better to record using a mixer, which provides more flexibility and a stronger signal often resulting in better sound.) A low-budget mixer is about $45 at Radio Shack. With a professional recorder use a professional mixer (about $150 and up). Software When you record directly onto your hard disk, you will need a software recorder. Such recorders are typically bundled with hardware and other software. Or you can buy a software recorder. The software recorder records directly from the microphone into memory on your hard disk.
CHAPTER 33 MARKETING MEDIA
481
The problem to be aware of is the headroom. You cannot allow the microphone signal to distort. If you do, it will sound terrible in a digital recording (unlike an analog recorder). Therefore, you will need to watch the signal level meter carefully as you record. This fact makes it more difficult to create a strong signal. When you record with an analog tape recorder, you can allow the signal to distort occasionally. A tape recorder is very forgiving, and the distortion doesn’t sound bad, so long as it is just occasional and not excessively intense. This makes it easier to get a strong signal. If you have recorded with a tape recorder, you need to send the signal out of the tape recorder (by playing the tape recorder) into your computer to be recorded by your software recorder. Again, you must make sure that the signal never distorts during the recording. Software recorders typically include robust editing capabilities, which come in handy to edit and clean up your recordings for a more professional presentation.
Publishing First, you use your software recorder to conver the recording files to MP3 files. Then you upload the MP3 files (podcasts) to the websites where you expect the public to find them. There are a number of public repositories for podcasts (e.g., Apple) where people can search and find the information (or music) they are looking for. They download the podcasts and play them in a player such as an Apple iPod. You can even enable your potential buyers to download podcasts directly from your eBay auction ads or your website so long as you don’t break any eBay rules.
Summary OK, let’s review it one more time. Your publishing, whether blogging or podcasting, must be informational and valuable to customers. If it is just promotional or just hype, it’s nothing more than a magazine ad or a radio commercial. And no one wants to read it or listen to it. But just by the process of providing valuable information to people, you are promoting your eBay retail business in a time-proven manner.
482
EBAY BUSINESS THE SMART WAY
Good luck with your marketing and good luck with your eBay business!
Matters of Interest I appreciate your interest in my book and hope it has assisted you to reach your eBay business goals. For more information in the future, check http://BaysideBusiness.com and http://BaysideBusiness.com/blog where matters of interest to eBay businesses will be posted from time to time.
Appendix I The Top 10 Tips for Beginning an eBay Business Top 10 tips for beginning sellers who intend to establish and operate a business on eBay. 1. Financial Needs Determine your personal financial needs. 2. Profit Model Create a product profit model. 3. Niche Find a niche market with products that satisfy your product profit model and, if applicable, your personal passion. Line 483
484
EBAY BUSINESS THE SMART WAY
up some wholesalers. 4. Name Choose your business name and use it everywhere. 5. Business Form Choose a business entity and get a sales tax license. 6. Accounting Set up your accounting software and chart of accounts after meeting with an accountant. 7. Trials Run some trial auctions. 8. Auction Management Subscribe to an auction management service and set up your business from beginning to end. Integrate your accounting with your auction management. 9. Help Find people to help you (as independent contractors) with your business tasks. 10. Customer Service Plan general and specific customer service policies and programs.
Appendix II The Top 12 Tips for Seasoned eBay Businesses Top 12 tips for current eBay businesspeople who want to expand their sales on eBay. 1. Analysis Analyze your existing eBay business using the product profit model to see where you can improve efficiency, profits, and personal satisfaction. 2. Auction Management Start using an auction management ser-
485
486
EBAY BUSINESS THE SMART WAY
vice to run your business from beginning to end, unless you are already using something comparable. 3. Accounting Integrate your accounting with your auction management service. 4. Name Coordinate all the business names you use (name on eBay, eBay ID, domain name, email address, etc.) That is, make them all the same. Start with a new name if necessary. 5. Top 10 Review the Top 10 Tips for Beginning an eBay Business to make sure you’ve covered all the bases. 6. Delegate Start delegating more work to others (independent contractors) and take the time to develop strategies to improve your business. 7. Customer Service Expand your customer service effort. Invent a new online customer service technique. 8. Copy Writing Read a book on copy writing to improve the wording in your auction ads. 9. Trade Shows and Conferences Attend the national trade show(s) for your industry. Go to the annual eBay Live conference. 10. Website Evaluate your ecommerce website objectively, if you have one, and make a determination as to whether it’s cost-effective or otherwise worthwhile to continue operating it. If not, open an eBay Store as an alternative. 11. International Learn about exporting and international finance; review PayPal’s international services; and expand your business internationally. 12. Expand Grow your market through datafeeds to other online marketplaces.
Appendix III The Top 9 Tips for Business Buyers Top 9 tips for businesses that want to buy equipment and supplies on eBay to save money. 1. Employee Have an employee (or yourself) start buying routine equipment and supplies on eBay and keep detailed records including time records. 2. Cost-Effectiveness Do a study to determine whether buying on
487
488
EBAY BUSINESS THE SMART WAY
eBay is more cost-effective than other means of purchasing. 3. One Person Designate one employee to do the buying on eBay. 4. Easy Payment Set up an easy, practical, and accountable means of payment for the use of the employee doing the buying. 5. Procedures Develop accounting procedures for eBay buying, including auction management. 6. Categories Take the time to match your buying needs to the corresponding eBay categories. Don’t overlook eBay’s B2B auction, the Business Marketplace. 7. Equipment The next time you need to make a major equipment purchase, investigate the possibilities and ramifications of buying such equipment on eBay. 8. Professional Services Check Elance as well as eBay when you need professional services. 9. eBay Retailer Don’t forget that when you’re an eBay retailer, you’re a potential eBay buyer too. You can save on equipment and supplies for your office and fulfillment operation by reviewing the offerings on eBay.
Appendix IV Cross-Promotion Example When you add purchasing suggestions for other products, either before a sale or after a sale, it’s a cross-promotion. Generally, there two types: Upsell Used before a sale to suggest that the buyer buy a bigger, better, and more expensive product in place of the one being considered (e.g., eBay Store cross-promotion at bottom of item listing pages). Cross-Sell Used after a sale to suggest additional purchases of 489
490
EBAY BUSINESS THE SMART WAY
accessories, supplementary products, ancillary products, or otherwise related products (e.g., eBay Store cross-promotion at bottom of Bid Confirm and Confirmation pages). The cross-promotion below is a cross-sell. It suggests a supplementary book to the one you are now reading. eBay the Smart Way Already in its fourth edition and to be published in a fifth, eBay the Smart Way covers the eBay basics. The book you are now reading assumes you know the eBay basics, and as part of the Smart Way series, it does not repeat much that’s covered in eBay the Smart Way. Thus, if you feel you’re missing something in your current reading, you may find it in eBay the Smart Way. Here are some of the highlights for eBay business readers: • How eBay works • Reputation (feedback system) • Remedies and recourse for fraud • Selling basics • Creating an eBay auction ad • Handling multiple auctions • Basic customer service • eBay’s Business Marketplace • Using Web authoring software And there you have it, an example of a cross-promotion (a cross-sell) that I hope you will take to heart.
Appendix V HTML Tutorial You can learn Hypertext Markup Language (HTML) easily. It’s not programming, although many Web developers now call it coding. This tutorial does not attempt to give you a comprehensive grasp of HTML. It does give you a good start on using HTML to do the basics. Sometimes using a Web authoring program you just can’t get things quite the way you want them. If you know HTML, you can tune up your webpages more precisely. Sometimes you see a webpage you really like on the Web. You can copy it to your hard 491
492
EBAY BUSINESS THE SMART WAY
disk. If you can read HTML, you can look at the markups to see how the webpage is constructed. Although copying the content of someone else’s webpages may be a copyright infringement, copying layout and typesetting is not. For a more thorough introduction to HTML, you might try any one of a number of handy books readily available in many bookstores. The angle bracket characters (< >) indicate markups. The markups instruct the browser how to display the content (text, graphics, etc.). The markups also enable some interactive functions such as links. Markups are not case-sensitive; that is, you can use either upper- or lowercase characters inside the angle brackets. As you can see, I prefer lowercase markups; I can read them faster. Terms Some people call the markups tags. Some people call using the markups coding just as they would call writing a program with a programming language coding. Tags and coding are misleading terms, but we’re stuck with them.
Some markups stand by themselves.
Most require a closing markup. content
The forward slant indicates the closing markup. Spaces HTML doesn’t like spaces unless you specify them. Therefore, it will change two or more consecutive character spaces into one space. It will change redundant line spaces into one line
APPENDIX V HTML TUTORIAL
493
space. See the markup later in this appendix for a way to increase spaces.
Defining a Webpage You use markups right from the beginning to define a webpage. This is just perfunctory work. The real job is marking up your content which falls between the markups.
The entire webpage falls between these markups. This markup tells the browser that this plain text document (ASCII file) is an HTML page.
This markup designates the head of the document. The head of a webpage can contain all sorts of information that is well beyond the scope of this book, but the head need not contain anything. The browser does not display the information in the head.
Whatever you put between these markups will show at the very top of the browser.
The browser displays the content between these markups. This markup sets the specifications for the entire body of the webpage
494
EBAY BUSINESS THE SMART WAY
such as background color and text color. To set the specifications, you can use attributes which fall inside the markup itself.
Attributes, such as the background color attribute above, are beyond the scope of this tutorial, but you can learn about them in any basic HTML book.
Typical Webpage Setup You can use the typical webpage setup that follows, without anything additional. You put your content between the markups. Name of Page content
Use the above as a template for doing basic webpages. For instance, the following webpage is simple. All you need to do is provide the content. The Slickhorn Trek Don’t underestimate the ruggedness and remoteness of this area. Inexperienced canyon hikers will find the terrain demanding, and you won’t see many people, if any. This is not as rugged as many off-trail places in the Grand Canyon, but some portions are nearly as strenuous. Plan your water carefully. If you find yourself about to depart on your trek during a
APPENDIX V HTML TUTORIAL
495
drought year or during a dry spell, you should first undergo a psychiatric evaluation! Follow the advisory published by the Monticello BLM office.
The browser shows the one-paragraph webpage as indicated in Figure A5.1.
Figure A5.1 The browser displaying a simple webpage.
Markups Alphabetically This section presents the remainder of the basic HTML markups in alphabetical order. All the HTML markups are not included here, just the most useful ones.
496
EBAY BUSINESS THE SMART WAY
This is the markup which creates bold type. The browser will render the text inside the markups as bold. Consult Chapter 8 for the proper use of bold in typesetting.
This handy markup enables you to put a margin on both sides of a block of text (see Figure A5.2). If you want to use it to do a real block quote (a long quotation), you may want to reduce the size of the type one increment. But otherwise it makes a good layout tool.
We had started out of Mexican Hat about 3:30 PM. By the time we started down the trail off the mesa, it was about 6:00 in the evening. The shuttle of vehicles between the trailheads at Slickhorn Canyon and East Slickhorn Canyon is about four or five miles, and you can make good time driving it in good weather. We carried ten gallons of water in each vehicle (five in each of two containers) as recommended in my pamphlet Desert Hiking Essentials.
It is essential to have extra water in your vehicle both for off road and back road travel and as a replenishing source at the end of the hike. Two five-gallon containers per vehicle (four people) is adequate for many situations.
We took one five-gallon container
APPENDIX V HTML TUTORIAL
497
out of the vehicle at each trailhead and stowed it in the bushes. This is an arid area. If your car is stolen at the trailhead, you don’t want to come out of the canyon to find no water.
Figure A5.2 A quote in the text.
Double will double the size of the margin on each side of the content. content
This is a case where knowing some HTML will enable you to author more effectively. For instance, if you use
498
EBAY BUSINESS THE SMART WAY
with the webpage illustrated earlier, you will create margins on both sides of the text block (see Figure A5.3). The Slickhorn Trek Don’t underestimate the ruggedness and remoteness of this area. Inexperienced canyon hikers will find the te rrain demanding, and you won’t see many people, if any. This is not as rugged as many off-trail places in the Grand Canyon, but some portions are nearly as strenuous. Plan your water carefully. If you find yourself about to depart on your trek during a drought year or during a dry spell, you should first undergo a psychiatric evaluation! Follow the advisory published by the Monticello BLM office.
Figure A5.3 The markup creates left and right margins.
APPENDIX V HTML TUTORIAL
499
Use this markup to create a line break. This differs from the
markup in that a blank line does not follow the line break. Charlie Craft Wilderness experience: 21 years Canyon experience: 10 years 779-341-8533 Ext. 409
See Figure A5.4 to see how this looks in a browser.
Figure A5.4 Use for line breaks not followed by a blank line.
This markup makes a list of terms and definitions like a dictionary with words and definitions. The markup creates the list. The markup marks the term. And the markup marks the definition of the term.
500
EBAY BUSINESS THE SMART WAY
term definition term definition
The term is displayed flush left. The definition is displayed indented (see Figure A5.5). Petroglyph A design made on rock by pecking, scratching, or carving. Pictograph A design painted or drawn on rock.
Figure A5.5 A list of terms and definitions.
APPENDIX V HTML TUTORIAL
501
This makes a good markup to use for general layout purposes too. For instance, suppose you want to make an unnumbered and unbulleted list. You can use the and markups (see Figure A5.6). You will need the following 7.5 minute topographical maps for the Slickhorn trek. Slickhorn Canyon East Slickhorn Canyon West Pollys Pasture You can obtain these maps at your nearest US Geological Survey office.
Figure A5.6 An unnumbered unbulleted list.
Note that the indent is on the left side only, not on the right side.
502
EBAY BUSINESS THE SMART WAY
This markup creates a term in a list. It is flush left. It must be used with the markup.
This markup creates a definition in a list. It is indented. It must be used with the markup.
This division markup by itself is not much use. Its attributes make it useful. Use this markup (with attributes) to lay out a section of text. The section can be a heading, a paragraph, or multiple headings and paragraphs. For instance, one attribute is align. You can use this to center a heading or other text (see Figure A5.7). Slickhorn - East Slickhorn Loop, Utah
Figure A5.7 A heading centered with the markup.
For other attributes of the markup, consult an HTML book. Note that for the above example, you can also use the markup. But the HTML standards committee wants to discontinue the markup, so use the markup instead with the align attribute.
Like the markup, this markup is on the way out. But in the meanwhile, you may find it handy to use because there is no substitute except Cascading Style Sheets (CSS), another markup language for advanced Web typesetting. Use the markup to change a typeface or a type size. Chapter 8 indicates the limitations of simple webpage typesetting. You can use the markup to create a heading (see Figure A5.8). Slickhorn - East Slickhorn Loop, Utah
Figure A5.8 Use the markup to change the typeface and type size.
Note that the attributes such as face (typeface) and size make the markup useful.
504
EBAY BUSINESS THE SMART WAY
Use this markup for headings. It comes in six sizes: 1-6. For most uses, only sizes 1-3 prove useful (see Figure A5.9). Sizes 4-6 are too small for normal use. Slickhorn - East Slickhorn Loop, Utah Slickhorn - East Slickhorn Loop, Utah Slickhorn - East Slickhorn Loop, Utah Slickhorn - East Slickhorn Loop, Utah Slickhorn - East Slickhorn Loop, Utah Slickhorn - East Slickhorn Loop, Utah
Figure A5.9 Six different headings.
APPENDIX V HTML TUTORIAL
505
The headings display in bold with a blank line before and a blank line after. The markup is convenient to use, but you can also use the markup to make a line of text (heading) larger and the markup to make it bold.
Use this markup to make a line (a rule) across the page. The attributes control how the rule looks (see Figure A5.10). We took one five-gallon container out of the vehicle at each trailhead and stowed it in the bushes. This is an arid area. If your car is stolen at the trailhead, you don’t want to come out of the canyon to find no water.
Figure A5.10 Use the markup to create a rule.
The rule shown in Figure A5.10 is 300 pixels wide and 2 pixels thick.
506
EBAY BUSINESS THE SMART WAY
This is the markup which creates italic type. The browser will render the text inside the markups as italics. Consult Chapter 8 for the proper use of italics in typesetting.
To include an image in a webpage, use this. Place the URL of the image file in the scr attribute. The URL can be local or somewhere else on the Web. The image displays at the location of the markup.
The src refers to an image file, which must be a GIF or JPEG. (The PNG file format is acceptable too.) Use the attributes of the markup to control how the image displays in a browser. Note that the URL for the image file can be anywhere on the Web. It doesn’t have to be at the same URL as the webpage.
This markup makes a list of numbered items. You do not specify the numbers. The items are numbered in order. You must use the
markup to designate the list items.
item
item
item
APPENDIX V HTML TUTORIAL
507
The list is indented. For example, the earlier unnumbered list displays with numbers when you use the markup (see Figure A5.11). You will need the following three 7.5 minute topographical maps for the Slickhorn trek.
Slickhorn Canyon East
Slickhorn Canyon West
Pollys Pasture You can obtain these maps at your nearest US Geological Survey office.
Figure A5.11 A numbered list.
508
EBAY BUSINESS THE SMART WAY
This markup creates a list item in a numbered or bulleted list. It must be used with the or
markups.
Use this markup for all your paragraphs. The difference between this and the markup is that the
markup adds a blank line of space before and after (see Figure A5.12).
To find the ruins, you have to speculate. (It helps to know they are there.) Look for a place where there might be ruins (under an overhang). Then climb up and look. In most cases, you will not be able to spot the ruins from the canyon floor.
We traveled about three-and-a-half miles for the day, not exactly a death-defying pace. The wet potholes, although still small, appeared more often. It’s evident that without recent rain, and particularly in a drought year, there would be no water in the canyon. Even with water present, we topped off at almost every wet pothole not knowing whether it would be our last.
We camped at another wide place in the streambed with flat rock and small potholes with fresh water. Ravens and lizards seemed to be the only wildlife in the canyon.
APPENDIX V HTML TUTORIAL
509
Figure A5.12 Use the
markup for all your paragraphs.
Note that today just the beginning markup
is enough, and you don’t need the end markup
. But soon the browsers may require the end markup, too, and you don’t want to have to go back and add the end markups sometime in the future.
<sub> This markup makes a subscript, such as in scientific notation (see Figure A5.13).
The handiest solvent is H<sub>2O (water).
510
EBAY BUSINESS THE SMART WAY
<sup> This markup makes a superscript, such as in mathematical notations (see Figure A5.13).
The equivalent of 4<sup>5 is 1,024.
Figure A5.13 Use HTML to create subscripts and superscripts.
Use the
markup to create a table. The
markup (table row) indicates a row (record), and the
markup (table data) indicates a column (field). The following is a two-column table with three rows.
data
data
APPENDIX V HTML TUTORIAL
511
data
data
data
data
For example, the following table shows three products (topographical maps) and their current prices (see Figure A5.14).
Slickhorn Canyon East
$4.00
Slickhorn Canyon West
$4.00
Pollys Pasture
$4.00
512
EBAY BUSINESS THE SMART WAY
Note that to create some space between the data of this table, you need to use the attribute cellpadding to add 10 pixels of padding within each cell. The default use of
uses no border as Figure A5.14 shows. To add the border, add the border attribute set to 1 (see Figure A5.15).
Figure A5.14 The
markup makes attractive tables.
Figure A5.15 A table with borders.
APPENDIX V HTML TUTORIAL
513
As you can see, the
markup is handy for tables, but most of us don’t use tables very often. However, tables provide another tool in creating attractive layouts. Although CSS does a better job of layout than tables, until you learn CSS, you can use tables for layout purposes. As Chapter 4 explains, you can use tables to lay out a readable text column. The following one-cell table 480 pixels wide creates a convenient reading environment (see Figure A5.16).
To find the ruins, you have to speculate. (It helps to know they are there.) Look for a place where there might be ruins (under an overhang). Then climb up and look. In most cases, you will not be able to spot the ruins from the canyon floor.
We traveled about three-and-a-half miles for the day, not exactly a death-defying pace. The wet potholes, although still small, appeared more often. It’s evident that without recent rain, and particularly in a drought year, there would be no water in the canyon. Even with water present, we topped off at almost every wet pothole not knowing whether it would be our last.
514
EBAY BUSINESS THE SMART WAY
We camped at another wide place in the streambed with flat rock and small potholes with fresh water. Ravens and lizards seemed to be the only wildlife in the canyon.
Figure A5.16 Use the
markup for special layouts such as a text column.
This is a good example of how with a little imagination you can use the
markup creatively to concoct a variety of layouts.
This markup creates a row (record) in a table. It must be used with the
markup.
This markup creates a column (field) within a table. It holds the data (content) for one table cell. Used with the
markup.
APPENDIX V HTML TUTORIAL
515
This markup makes a list of bulleted items. You must use the
markup to designate the list items. Figure A5.17 shows how the browser displays this list. You will need the following 7.5 minute topographical maps for the Slickhorn trek.
Slickhorn Canyon East
Slickhorn Canyon West
Pollys Pasture
You can obtain these maps at your nearest US Geological Survey office.
Figure A5.17 A bulleted list.
516
EBAY BUSINESS THE SMART WAY
A browser eliminates redundant spaces between characters or between text blocks. In other words, a browser allows only one space between characters and only one blank line between text blocks. This particular markup establishes a space that will not be eliminated by a browser (see Figure A5.18). Charlie Craft Occupation: Wilderness Trekker
Figure A5.18 Use to extend spaces.
To use this markup effectively for blank lines, use it with the markup (see Figure A5.19). Charlie Craft Occupation: Wilderness Trekker
Topper Craft Occupation: Wilderness Trekker
APPENDIX V HTML TUTORIAL
517
Figure A5.19 Use the and markups to create extra blank lines.
You can leave instructions (reminders) to yourself or to others who will be working on the authoring of your webpages.
