Saturday, October 18, 2008

How to lose money on eBay - shopping has evolved to warfare...

How to lose money on eBay - shoppers have evolved, and sellers beware!

This data isn't for Power Sellers on eBay, who have already established themselves years ago. This is a simple 2-step guide about how to get started on eBay and use the current scene (until Xmas this year) to get some real returns.

The days of being able to make a killing on eBay are just about over. It's incredibly hard to get started at making a viable living on this platform, particularly when they killed all the digital downloads.

Here's some simple data, based on my last few months of hands-on research:

eBay has been oversaturated with sellers for years. The more recent (last couple years') advice for buyers has been to wait until the last day. So sniping was created.

Shopping tools have evolved to perfect the concept of sniping. Not only do they limit what a buyer wants to spend on any particular item, but they can search out items which no one is watching - no competition=better deals.

With eBay's recent move to protect buyers from being rated by sellers, buyers have been moved to a "protected species" category and so have considerable leverage over sellers. Sellers almost can't keep buyers away from their sales by rating and have to result to blocking them based on a shared list of problem buyers.

Used to be a nice community where you could move second-hand stuff. Now it's got a considerable amount of corporate interests like Buy.com who can take nearly unlimited amounts of auctions out on a nearly unlimited amount of goods.

So the bottom has fallen out of several areas such as books, DVDs, CD's. Which is why eBay is running a special on these right now, such that you can list them for 5 cents each - for 30 days at a fixed price.

The result: buyers and sellers are at war. Sellers have to fend off big-box stores and greedy buyers. It's no longer offering an heirloom and being able to find buyers who will pay anything to get it.

2 simple strategies for getting leads from eBay and making money

Overall, realize that you don't make the real money on eBay, you make the real money by getting customers from eBay and onto your own site. So whatever you do on eBay, you need to get their email address and get them to opt-in to your mailing list, plus becoming regular customers at your own online store. (And it's far cheaper to host your own online store and maintain it than it is to host it at eBay. Period. Same goes for Amazon.)

1. Realize that you can't directly compete on price for bulk goods against the big-box stores. Use eBay as a lead generator. Find an object that you can create (like ebooks on CD), and under-price everyone else out there - .99 list and enough shipping to cover your actual expenses. Then send them a CD with an autorun HTML sales page that includes a free offer if they join your newsletter mailing list. Do this for your fixed-price 30-day listings.

2. Run only one-day regular auctions on the stuff you have that runs routinely well. Use (free or low-priced) analysis software to find the best days and times - not the most popular, but seek out the less-traveled path. You'll still expect to be only 40-50% successful, but figure this into your S/H costs to cover your expenses. Set your starting prices up at what the market will bear - because shoppers generally won't pay more than they have to - eBay is supposed to be a bargain. This strategy is supposed to make you money and get you leads.

Notes:
This is all limited data. eBay has tried to perfect its silo for years so that people can't move to other platforms. Factually, this has screwed over the community and driven people away - both buyers and sellers. So they are trying to limit your access to the buyer's email address - both for their stated "security" reasons and also to limit anyone's ability to move buyers to other platforms.

A point above is to keep your fees low. This is the hole in eBay's system. They charge low fees on anything below a buck (mostly). This is supposed to encourage bidding. But since the buyers watch and snipe, a lot of sales go cheap - and the seller loses. Another way of avoiding high fees is at the end. eBay takes out a final-value fee based on your final auction price. I've said to keep your S/H enough to cover your costs. Practically, you want to stay under $4 to keep off eBay's radar, as well as be reasonable to your buyers. Don't fall for the "free shipping" ploy eBay's currently offering. They've increased their final value fees to make up for the special low listing fees.

This is why the simple list-generation ebook item is the winner. You're looking for savvy buyers who can scope out the real great deals. Those are your smart buyers who you can turn into paying leads. Set out one-day .97 auctions with $.3.95 S/H. They buy, they opt-in, you both win. Give them great service and they'll stay.

Now, these defenses are against the random, average buyer who is using advanced sniper (and other software) tools to keep your prices low. Once you have that buyer, she's gold to you. So treat her as such. If they won't opt-in, or quickly opt-out - figure you at least made your costs on getting them as a lead. No loss. The one's that stay are your real platinum ones. So treat them like the regal royalty they are - and they'll keep buying from you nearly forever.

This is all limited-time data. eBay is changing constantly as they see their profits drop and Amazon's continue to rise. Until they figure out how to re-build their community (trust), they'll continue to sink. So this strategy above will change in a few months. I predict it will become more cut-throat as they continue to pit buyers against each other and all sellers against the buyers. Essentially - eBay is heading to being only big-box stores and established Power Sellers (who are essentially big-box stores for their niche). It will take you years to establish yourself and make a regular living off eBay under the current scene.

So go the easy route and snipe back - pull out leads and keep them happy at your own ecommerce store.

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Your views on this? Am I full of it or do I speak sooth?
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