The Internet is rife with stories of people enjoying six-figure incomes less than one year after launching an eBay reselling business. While in some rare instances they may be true, for the most part, they are fairy tales. However, you can still make a solid living in the business – you just need to know a few things specific to selling on eBay before you get started.
Here are eight tips to becoming a successful Internet reseller, particularly on eBay:
1. Locate Inventory
Don’t ask other successful eBay sellers how to build inventory – most won’t want to reveal their secrets. However, one good way to build an initial inventory is to look for items in your household. You might have old college textbooks collecting dust, or a range of small electronics, such as digital cameras or cell phones, that function perfectly. You can also sign up for daily deal websites like FatWallet and Woot to find inventory you can flip for a profit.
2. Start Slow
It’s a good idea to get acclimated to eBay before you jump in full force. For example, you’ll need to fully understand the eBay fee structure, as the percentage you’ll pay differs greatly depending on what you’re selling. You’ll also have to factor in the PayPal fee, which is about 3% of the amount of the sale. Start off conservatively to understand how these will affect your bottom line.
3. Choose Your Selling Platform
You have two selling platforms to choose from: a regular online auction, or “Buy It Now.” With the auction-style platform, your item goes to the highest bidder. The “Buy It Now” function, however, allows you to sell your product at a fixed price. If you like, you can also list your items auction-style and include a “Buy It Now” price, or even include a “Best Offer” option. In the latter case, buyers have the ability to offer a price less than the list price; you can then either accept or reject their offer.
4. Provide Detailed Descriptions
Clearly and fully describe your item, including all of its benefits and flaws. Nothing is more maddening than looking at a listing with some incomplete description of the item’s condition. Plus, a thorough description will reduce the amount of returns you’ll have to deal with.
If your item has a certain defect, include a photo of it. For example, if you’re listing a guitar that has a scratch on it, take an up-close photo of the scratch. This way, your buyer will know exactly what they’re getting.
5. Establish a Specific Return Policy
Many eBay resellers offer no return policy whatsoever. If that’s your strategy, then a customer may very well purchase from another seller who offers one. Therefore, consider a fair return policy. I offer a return policy of up to 30 days unless there is nothing wrong with the item, in which case it’s 7 days. Be sure to clearly explain exactly what your return policy does and does not cover. Having an effective and well-defined return policy will improve your sales.
6. Offer Stellar Customer Service
In addition to having a return policy, promptly respond to all questions and comments about your listings, and never hesitate to give a discount or partial refund to an unsatisfied customer. If the issue is minor, many times customers will keep the item as long as you show them a little love. Also, ship fast. There’s nothing buyers like more than getting their items quickly.
7. Track Progress
Keep accurate accounting records and be sure to include the shipping cost, as well as PayPal and eBay fees. This is good for tax purposes and allows you to gauge your overall profitability.
8. Report Income
As of the 2011 tax year, any eBay reseller who earns more than $20,000 in sales or completes more than 200 annual transactions will receive a 1099-K form from PayPal. This means that your sales figures are being reported to the IRS. If the IRS knows you sold $50,000 worth of merchandise but only reported $500 in profits, you could be looking at a tax audit and hefty fines.
Play it safe by being honest. Report the amount of profit you actually made and be sure to deduct all expenses associated with running your business. You may also need to pay estimated taxes quarterly to avoid penalties.
Internet reselling is not for the faint of heart. If you have no real world business experience, it may not be right for you. You’ll need to know how to manage inventory, cut costs, expand carefully, and much more. But if you can handle all that, one day you just might be able to walk away from your day job and work from home full-time.
What other eBay reselling tips can you offer?
(David Bakke runs an online reselling business and shares his tips for small business, money management, and frugality on Money Crashers Personal Finance.)