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Guide to make money via Online Auctions: EBay and Beyond for individuals want to quit their jobs and start their careers as an entrepreneurs are as follows:
Description of Job
• Sell nearly anything to almost anyone over the Internet.
• Choose your method of sale: auction to the highest bidder, fixed price, or
Dutch auction of multiple items to multiple bidders.
• Use automated processes to bill buyers, collect payment, and prepare shipping
labels and computer-generated postage.
The Need
From the dawn of time, humans have bought and sold nearly every imaginable
product and service. Commerce started as one-on-one sales from growers or artisans
to individual buyers. It moved on to retail stores and later catalog companies
that brought together inventories of goods to sell to many individuals. Built into
the price of everything sold were the costs of showcasing goods in a store, printing
and mailing catalogs, and paying the salaries of salespeople and telemarketers.
With the advent of the Internet, though, came an incredibly efficient, lowcost
marketplace that blew down nearly all of the costly walls that stood between
seller and buyer. The champion—and one of the few great successes of the Internet
age—is eBay. Launched in 1995, the value of goods traded through its web
site was expected to exceed $24 billion in 2004. More than 105 million users
around the world buy and sell items in more than 50,000 categories.
As sellers, eBay and similar sites, including Amazon Marketplace and Yahoo!
auctions, allow you to clear out your attic, empty your closets, and conduct a virtual
yard sale, offering items to anyone with a connection to the Internet and a
mailing address. Don’t limit yourself to the idea of a yard sale; tens of thousands
of businesses exist entirely as storefronts on eBay or other services. They buy new
items at wholesale, used goods at other people’s tag sales, whole collections from
hobbyists, and antiques from estates, dealers, and individuals.
Challenges
As with any business, you have to find a way to buy low and sell high. The proceeds
for items sold at auction should include your cost for the item, the cost of
listing it with the service, computer costs, shipping costs, and a reasonable profit
for your time and effort.
Before you go out and buy a truckload of bobble-head dolls to resell on eBay,
make sure there’s enough of a market for that item at a profitable price. Here’s an
example of how these online services can help you run a very efficient business:
You can easily check the success of other sellers offering similar items. You can
watch the progress of an auction, from its opening bid to its final selling price,
and even determine the number of bidders.
Depending on the type of item and the auction site you use, you may have to
deal with a certain percentage of returned merchandise and an occasional bad
check. (Many sellers use the services of the auction site to collect payment by
credit card, or insist on money orders or bank checks as payment.)
Know the Territory
The biggest and most successful online auction company is eBay. You can learn
about its services and fees and browse through tens of thousands of items by
going to its web site at www.ebay.com.
As eBay has expanded beyond its original auction-only business, it now
offers several choices of selling methods:
• Auction. You set an opening price and promise to sell your item to the
highest bidder above that floor.
• Reserve price auction. You set an opening price, which is published on the
site, and a reserve price, which is not disclosed to bidders. If the highest bid
does not meet or exceed the reserve price, you are not obligated to sell the
item.
• Dutch auction. If you have multiple identical items, you can sell them in a
single Dutch auction. Bidders offer a particular amount for one or more
items, and all items sell for the lowest successful bid. For example, if you
have three clocks for sale, all three will sell for no more than the third highest
bid.
• Fixed price. You can offer items for sale at a fixed price, without an auction.
• Buy it now. You can set a buy-it-now price that will halt the auction if a
buyer agrees to that price.
You can select the time limit for each type of offering. The standard run for
an item on eBay is usually seven days.
Yahoo! auctions are listed at http://auctions.shopping.yahoo.com.
Amazon offers a service allowing sellers to list new and used books and
many other items for sale at a fixed price. Listings for these products appear on
the same pages as prices charged by Amazon and major retailers. Currently (as
of 2004), there is no charge to list an item in the Amazon Marketplace; fees are
levied only on actual sales.
Amazon also offers Amazon Auctions, which functions similar to eBay’s
offering. For information, consult www.amazon.com.
How to Get Started
Spend time trolling the sites of all of the online auction sites. There is no charge
for electronic window-shopping.
Look at the sorts of products that are offered for sale. Most sites, including
eBay, allow you to see the opening price and the progress of bids over the course
of an auction.
If you see lots of people selling the same sort of product you hope to sell,
that’s not necessarily bad news; it probably means there is a healthy market for
that item. Only you can decide whether you can make a satisfactory profit at the
going prices.
If you cannot find similar products for sale, proceed cautiously. It may mean
that there is no market for the item you want to sell, or it may mean that you have
something that is extremely rare.
Up-front Expenses
You will need access to the Internet. There are no advertising and promotion
costs associated with most auction sites.
Depending on the type of product you are selling, you may want to post a
digital picture with your ad; you can purchase or borrow a digital camera or a
scanner to create a file.
How Much to Charge
There are five elements to consider here: (1) the price you receive for the sale of
the item, (2) the listing fee from the auction site, (3) the final fee based on the
actual selling price for the item, (4) the cost of shipping the item to the customer,
and (5) charges for accepting payment from your customer by credit card or debit
card.
The beauty of an auction—if you are reaching the right audience for your
product—is that you are participating in a relatively pure form of capitalism. The
price you receive is the highest any of the bidders is willing to pay.
Of course, in most cases you don’t want to sell items at prices that are lower
than your costs or significantly below what you think the item is worth. There’s
bad news and good news here. In a standard auction, you are bound to sell the
product to the highest bidder, which could be at too low a price.
The good news is that most online auction services allow you to set a reserve
price, a floor below which you are not willing to go. For example, you could
offer a used camera for sale and allow opening bids of $10 to get the process
going. As part of your listing, though, you may set a reserve price of $100. Bidders
are not informed of the reserve price, but the site will notify them if their bid
is below the reserve.
Online auction sites generally charge a listing fee and then an additional
charge based on the actual selling price of the item. You can also choose extracost
services, including featured positions, boldface or color listings, and multiple
photos.
We’ll use as an example some of the elements of eBay’s plan; others are similar.
Currently (as of 2004), the insertion fee for items with an opening-bid price
of less than $25 is about 60 cents; the fee for items with a starting price of $50 to
$199 is about $2.40; and items with a price starting at $500 or more have an
insertion fee of about $4.80.
If you register a reserve price with eBay, the company adds a fee of as much
as 1 percent of the reserve price. If the item sells (which means it is purchased at
a level above the reserve price), the additional fee is refunded.
Then there is a final value fee. As of late 2004, eBay charged 5.25 percent of
the closing value for items that sell for $25 or less. For items selling for as much
as $1,000, the final value fee is 5.25 percent of the initial $25 plus 2.75 percent
of the remainder. Items selling for more than $1,000 are assessed a slightly lower
overall percentage of the selling price.
For most online auction sales, you should add a set fee to your product to
cover shipping. Spend the time to research actual costs, and list a realistic price
for shipping. If you set the fee too high, you will scare off knowledgeable buyers;
if you set the fee too low, you will reduce your actual profit. Most of the auction
companies, including eBay, offer guidance on shipping costs and may even
have links directly to the U.S. Postal Service, United Parcel Service, and FedEx
to help you calculate costs and arrange for shipment.
Finally, you may have an expense associated with accepting credit cards or
direct debit from checking accounts. In 2004, eBay’s affiliated company Paypal
charged about 3 percent of the total amount (including selling price and shipping
costs) for its services.
You do not have to use a company like Paypal, although there is great value
in receiving immediate payment for orders. If you deal directly with buyers, you
may want to ask for bank checks, postal money orders, or other forms of guaranteed
payment, or delay shipment until personal checks have cleared.
Legal and Insurance Issues
Special notes: The online auction site will require you to agree to its seller’s
agreement; there is little if anything you can do to modify it. You will likely have
to give the company an active credit card account number or a debit account for
direct payment, and the company may reserve the right to assess charges or
penalties for actions that violate the agreement.
If you plan to make this an ongoing enterprise, consult an accountant to
determine the proper form of business for your operations. An insurance agent
may recommend a business owner’s policy.

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