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Computer Times
August 2005

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eBay the Smart Way

eBay the Smart Way, 4^th edition, Selling, Buying, and Profiting on the Web's #1 Auction Site, by Joseph T. Sinclair, (2005: Paperback, 54 pages, ISBN 0-8144-7289-3, $17.95) is the definitive guide to smarter eBay tactics for both buyers and sellers. Now in its fourth edition, this priceless tool has changed with the times to cover the latest trends.

With sales of over 125,000 copies, the eBay the Smart Way series has helped countless eBayers -from occasional buyers to full-time professional sellers -find the best deals and maximize profits on everything from collectibles to cars to real estate.

eBay the Smart Way is the go-to resource for first-time sellers and veterans alike, with step-by-step instructions for listing products, creating attention-grabbing photos and descriptions, offering top-notch customer service, and maintaining high credibility. eBay buyers will also benefit from powerful strategies for finding the best products, bidding smarter, negotiating great deals, and more.

The author, Joseph T. Sinclair (Vallejo, CA), is the author of eBay Business the Smart Way; eBay Motors the Smart Way, Building Your eBay Traffic the Smart Way and eBay Global the Smart Way. One of the world's foremost eBay experts, he has been interviewed by Entrepreneur magazine as well as on more than 100 radio programs.

As you can see by the table of contents, shown below, this book covers just about every area of interest for both the buyer and the seller.

I. Introducing eBay

1. Introduction to eBay
2. Opportunities for Buyers
3. Opportunities for Sellers

II. Using eBay

4. eBay Basics
5. Buying
6. Selling
7. Feedback: The eBay Reputation System
8. Reporting Fraud and Recourse for Losses

III. Bidding Strategies

9. Bidding Systematically
10. Timely Bidding

IV. Selling Strategies

11. Sources of Inventory
12. Serving Customers
13. Writing eBay Auction Ads
14. Conducting Auctions
15. Running Multiple Auctions
16. Payment
17. PayPal
18. Shipping
19. Auction Management Software

V. Taking and Using Photographs

20. Taking Photographs
21. Using Image Editing Software

VI. Specialty Marketplaces

22. Specialty Auctions
23. eBay Stores
24. eBay Motors
25. Business to Business
26. Elance
27. eBay International
28. Craig's List

Appendix 1 Top 8 Tips
Appendix 2 Top 12 Tips
Appendix 3 Top 10 Tips
Appendix 4 HTML Tutorial

To give you a better feel for this book, we have included a sample chapter below.

It's true that eBay holds auctions. It's also true that eBay operates only online. So what? Well, put the two together and you start to understand the dynamic new international marketplace eBay has created. It operates 24 hours a day, 7 days a week. It's not like anything that has existed before. The possibilities excite the imagination, and it offers you significant opportunities whether you buy, sell, or sell at retail.

How exciting is it? Quite exciting! In December 2004, eBay had 135 million registered users. The following statistics come from the third annual eBay Live conference, June 2004, in New Orleans, Louisiana, and from other reliable sources.

eBay's number of registered users, last quarter of each year:

eBay members' sales for each year (in dollars):

Note: Only four national retailers sell more than eBay. They are Wal-Mart, Home Depot, Target, and Costco. At the end of 2005 the number of national retailers that sell more than eBay is likely to be only two.

Additional statistics reprinted from my own eBay books show the number of items for sale on a typical day for various months:

Not bad, considering that the longest auction lasts only ten days, with many auctions lasting only three, five, or seven days.

If you check prices on eBay, you will find that prices are often a bargain for buyers. Yet, sellers can get more money for their used products and closeout products on eBay than perhaps anywhere else. How can this be? How can both buyers and sellers come out ahead?

Markets

It's actually easy to explain. Local markets do not operate very efficiently; they're not large enough. Typically a seller takes a used product to a local dealer to sell. For instance, a seller might take a used Canon camera to a camera dealer. Because the local market is not huge, it will not include many buyers for the camera. The dealer takes a substantial risk that the camera will not sell in a timely manner. Consequently, the dealer will not pay much for the camera. The seller sells to the dealer at a low price.

On the other hand, the dealer has to charge a lot for the camera. He or she must seek a profit that covers the risk of the camera staying on the shelf a long time. The profit must also cover the cost of doing business, which includes paying rent and employing sales clerks (overhead). The buyer buys from the dealer at a high price.

Thus, a low sales price (for the seller) along with a high purchase price (for the buyer) is the rule in a local market, particularly when most of the transactions take place through a local dealer.

Sometimes a local show (or flea market) offers an exchange (or swap) that brings together buyers and sellers more efficiently, and prices grow a little higher for sellers and a little lower for buyers, particularly for transactions that don't involve a dealer. For instance, at a camera show with a camera exchange, a seller can get a higher price for the Canon camera, and a buyer can buy at a lower price than in a transaction through a dealer. Nonetheless, even in a large city, for most products except the most popular, an exchange does not create the ultimate market. It simply never has a large enough population of buyers and sellers.

eBay has established an international marketplace with no peers except a few of the stock and commodity exchanges. The eBay marketplace rationalizes the sale and purchase of used goods (i.e., provides the best deal for both buyers and sellers). This is as much as such transactions will ever be rationalized (until more people join eBay). That is, eBay always has the maximum numbers of buyers and sellers compared to other markets, all of which are smaller. The auction feature of the eBay marketplace provides a mechanism that dynamically establishes market values quickly and efficiently. The transactions do not necessarily take place through a dealer. Consequently, a seller can usually sell for a higher price than in a local market, and a buyer can usually buy for a lower price than in a local market.

You can say that the eBay marketplace promotes disintermediation. This fancy word means that the dealer (the intermediary) has been eliminated. Again, referring to the camera example, the seller should be able to sell the Canon camera for more on the eBay market than to a local dealer, and the buyer should be able to buy the Canon camera for less on the eBay market than from a local dealer.

A dealer can still fit into the eBay environment. If a dealer can count on turning over used goods quickly, the economics of his or her business practices change. Consequently, a dealer who sells on eBay can afford to pay more for used goods and sell such goods for less than in a physical location where overhead is higher and the market smaller.

Nonetheless, realize that every market is different. Dealers have been forced out of some markets on eBay and have thrived in other markets on eBay. What it comes down to, each time a dealer looks at an eBay market, is whether he or she can make money in that particular market. Sometimes the answer is yes, and sometimes it's no.

Keep in mind, too, that many dealers use eBay to sell new goods exclusively or in addition to used goods. Many dealers who sell new goods thrive. And many eBay members selling regularly have evolved into full-fledged dealers (retailers) themselves.

The more buyers and sellers for any particular product, the more the marketplace will rationalize the price. Thus, popular used items, such as common brands currently available, will be bought and sold at prices closer to the prices the items sell for at retail (i.e., at discount stores). Less popular used items, such as less well-known brands, will sell at prices well below their retail price at discount stores.

Law of Supply and Demand

Does the law of supply and demand work on eBay? Sure! When many sellers of a particular product want to sell to a few buyers on eBay, the price will go down. When many buyers want to buy a particular product from a few sellers on eBay, the price will go up. A huge market like eBay, however, has a maximum number of buyers and sellers compared to other markets. Due to the large number of buyers and sellers, the market will tend to be more balanced (more rational and stable) than a smaller market.

New Goods

Sellers sell new goods on eBay. In fact, new goods comprise about 30 percent of the goods sold today. However, sellers usually do not sell new goods at full price or even at a discount price. More often eBay is a place to sell new goods at a deep discount. Consequently, buyers can expect to get a pretty good deal. But what about sellers? Can they get a good deal too?

Yes, a seller can sell a product new that he or she has not used or has decided not to use. These mistaken purchases happen to all of us sooner or later. What about that fishing reel you unwrapped at Christmas but never took out of the box? What about that food dehydrator you bought for making beef jerky but never got around to using? It's often difficult to return such merchandise for a refund, particularly after it sits in the garage for six months (or six years). But it's new, and if you sell it, you undoubtedly will sell it at a deep discount from the full retail price. eBay provides you the opportunity to sell it at the highest price you can expect to get.

Many sellers sell retail on eBay. This means they sell new goods as a business just like an offline retailer, albeit usually at lower prices. When eBay started its fixed price program, Buy It Now, the fixed prices gave eBay retailers a substantial boost. The fixed prices enable buyers to buy immediately just as they do in a retail store.

New goods also come from sources other than wholesale, such as distress sales and closeout sales by manufacturers and retailers. These are usually bulk sales. For instance, if one can buy 1,000 high-quality baseball caps for $500 (50 cents each) at a closeout sale and sell them on eBay for $4 each, that price is substantially below the normal $8-$16 price in the retail stores. Both the seller and the buyer can conclude a satisfying transaction. The buyer buys cheap, and the seller make a reasonable profit.

Moreover, if the seller does not have a retail store and an expensive website operation, he or she can afford to sell new goods on the eBay market in the regular course of business at even lower prices than a discount store (assuming he or she buys in more than token quantities). This provides a good deal for buyers and a profitable business for sellers.

Now, if you take a look at what's happening on eBay - if you haven't already - you will see the transactions described above occurring every minute of every day. eBay has built a huge marketplace. At any moment in time, tens of millions of items are waiting for bids, and tens of millions of potential buyers look over the merchandise. If you were to put all of this in a physical setting, no building ever built could house all of this commercial activity. It would take about one hundred football fields to accommodate a marketplace of only one million people. Indeed, eBay has created a huge and rational marketplace.

An Important Insight

The interesting thing about goods is that each product has its own market. It may have a much different market than something closely related. For instance, insulated winter boots with rubber bottoms and leather tops enjoy a thriving market in the outdoor labor force. They keep feet warm and dry in winter-just what the working man or woman needs. You can buy them in stores that cater to outdoor workers. Insulated boots made entirely of leather enjoy a thriving market among skiers. They keep feet warm and dry in snowy weather-perfect for use after a day of skiing. Known as apres ski boots, you can buy them in ski shops. Although similar, these two products have very different markets.

This phenomenon holds true on eBay too. Every type of item has its own market and means of being advertised and sold. That makes it misleading to generalize about eBay. What you might say about one product may not hold true for a similar but different product. Some product sales thrive on eBay. Some don't. This phenomenon misleads and baffles many people. But don't let it baffle you.

People want certainty. They want to know how to do it. They feel uncomfortable with the facts: 22 million items on eBay and thousands of different standard ways to sell each of those items. But facts are facts. You need to become knowledgeable about any product you buy or sell to get the best deal for yourself, and you need to become knowledgeable about how such an item is bought and sold on eBay. Such knowledge leads to success. Generalizations do not necessarily lead to success on eBay.

Naturally, this book cannot cover the thousands of different ways of doing things on eBay. It has to make generalizations. Just be advised that the most this book can do is lead you in the right direction. Only your research will give you the insight you need for success with your particular products.

For instance, $300 digital cameras sell well on eBay, yet $300 couches don't. Digital cameras tend to be commodities. The one you buy on eBay exactly matches the one you might buy in a store. Couches tend to have much more variety, and you want to see them, feel them, and sit on them before you make a purchase. The $300 digital camera costs $8 to ship. The $300 couch costs $270 to ship. These differences seem obvious, but many other differences are more subtle, and only research will expose them.

The way a particular market relates to the whole market also varies. For instance, many previously successful dealers were driven out of the collectibles market by losing customers to eBay. Yet antique dealers have thrived using eBay to both buy and sell antiques. Again, research and experimentation lead to discovering the anomalies of any eBay market.

Naturally, if you are a consumer, you don't have the time to research every little thing you buy or sell on eBay. But it's undoubtedly worthwhile to research the more valuable items. However, if you are an eBay retailer selling in volume, product research is very worthwhile. Indeed, it's essential for success.

Fitting In

Where do you fit in? eBay is simple. You sign up for membership, fill in an online form with some information on an item, and suddenly you're a seller. To be a buyer, you don't even have to fill in the information for an item. Just bid on something.

Thus, the question comes up, Why a book? The answer is straightforward. The more you buy and sell on eBay, the more committed you become to making eBay commerce a part of your life. Then things become more complex. Your activities start to lead to significant dollars being at stake. Indeed, eBay commerce can add up to more than you expect whether you intend it to or not. Many readers will buy and sell in volume for one or some of the following reasons:

1. They buy and sell as part of their hobby (e.g., coin collecting).

2. They buy supplies and equipment for their business because they save money buying on eBay.

3. They use eBay as a convenient substitute for going to the local mall.

4. They wheel and deal in eBay items a little because it's fun, and there's lots of stuff.

5. They have eccentric tastes and use eBay to buy lots of offbeat stuff they can't find easily elsewhere.

1. They sell on eBay to supplement their offline retail sales business in a physical location.

2. They operate a full-time retail business selling exclusively on eBay.

This book is a basic book for people who buy or sell occasionally as well as for people who sell at retail. It's for people who want to make the most of their eBay activities. Consequently, it's more for people who take eBay seriously than for those who play eBay as a game or social activity. As you might expect, this book has a serious flavor to it. Hey! Saving money and making money is serious stuff.

Specifically, one purpose of this book is to be a primer for those who are serious about carrying on a substantial part-time or even a full-time business on eBay. My book eBay Business the Smart Way, Second Edition takes up where this book leaves off and expands on the business of operating as an eBay retailer.

If you use eBay regularly, you will soon come to realize, if you haven't already, that eBay is a way of participating in commerce that requires skills and background knowledge to achieve your personal goals (e.g., saving money or making money). Thus, the serious slant of this book will give you the edge to be successful and will thereby serve you well.

Other Online Auctions

What about other online auctions? eBay has had the lion's share of the online auction business. Most press accounts allege eBay's market share of the online auction market to be well over 90 percent. For any market to be highly rationalized, it must have a huge number of participants. As long as eBay has the major portion of the market, competitors (other online auctions) will have trouble competing effectively. The competitors will simply find it difficult to grow to a size where both buyers and sellers get the best deal. Size is perhaps the single most important characteristic of a successful online auction marketplace, and eBay got there first.

How did eBay get there first? That makes a fascinating story, but one which is beyond the scope of this book. Like other Web business success stories, eBay made customer convenience the primary goal for improving the eBay infrastructure. The result is a finely tuned system that works well and is reliable. But transactions require trust as well as procedures that work well. eBay outdistanced its competitors by using innovation to make auctions simple and effective and by creating a system that supports trust. Easy to use and trustworthy. What else do you need for a marketplace?

I encourage you to try other online auctions from time to time. Anyone can challenge eBay. Some specialty auctions will do well in spite of eBay. If someone can make a good market outside of eBay, it might be a benefit to you. But for the vast majority of consumer and general business goods, that seems unlikely.

Specialty Auctions

Because eBay has no effective competition, this book doesn't waste space covering other online auctions alleged to compete with eBay, even for comparative purposes. You can make the argument that some specialty online auctions will compete with eBay in their specific specialties. However, because market size is so important and because eBay caters to many specialty markets, you can expect eBay to dominate even individual submarkets.

Some specialized auctions are different from the general auction market because of artificial restraints. For example, to hold a legally binding real estate auction, you have to have a real estate license and satisfy real estate regulations. Consequently, eBay can't take over that particular auction market easily. Nonetheless, eBay has held nonbinding real estate auctions online for several years.

After becoming licensed in real estate in all the states, eBay has experimented with binding online real estate auctions in some states. If these binding real estate auctions work well, presumably eBay will expand its binding real estate auctions. Perhaps someday all eBay real estate auctions will be binding. But that has not happened yet, and eBay has not become a primary marketplace for real estate.

Will eBay continue to dominate? The eBay people are bright and innovative. They have well-financed potential competitors such as Google, Yahoo, and Amazon.com breathing down their neck, which will keep them running at full speed. eBay has the momentum and the market.

eBay made a successful public stock offering in September 1998. (Its stock went up 3,900 percent in value by the end of June 1999. It went down after the dot com crash but went back up to its high in the summer of 2003 and then split again in the winter of 2005.) This has provided eBay with the capital to remain successful, and eBay has been profitable. All signs indicate that eBay will continue to dominate the Web auction scene for the foreseeable future. Indeed, the Wall Street Journal declared eBay an institution in 2004, something I have been saying in my books since 1999.

A Terrific Place to Shop

eBay is a terrific place to shop. Every time I forget this and go to the mall or somewhere else to shop, I am often disappointed. Customer service is too often terrible. Many minimum-wage store clerks seem to have no motivation to learn their retail merchandise, and they are all you have to rely on besides yourself. Stores are understaffed. Inventory is incomplete. Prices are sometimes unreasonably high. And more and more a significant amount of merchandise is on the shelves without price tags. Then too, you have to drive a distance to get such a unsatisfying buying experience.

It takes a long time to break old habits. I have been buying on eBay since 1998, and every year I buy more on eBay and other online stores and less locally. Now, I think of eBay first 75 percent of the time, and the other 25 percent of the time I usually wish I had. And whatever I buy is delivered right to my door! If you're new to eBay, start training yourself to think of eBay first when you want or need something. You won't regret it.

And what a terrific opportunity for sellers! The millions of people training themselves to think of eBay first constitute a huge market - all the potential customers you could ever hope for. It doesn't get any better than this.

What's Up?

What do you make of all this? eBay is a new marketplace like none ever known before. It features an efficient market for the exchange of used goods, good news for both buyers and sellers. It also brings with it new opportunities for those who want to wheel and deal in goods on a broader scale, especially new goods. In true capitalist spirit, it brings with it new opportunities to buy for less, sell for more, or make money, lots of money.

Indeed, things happen today on eBay faster than they ever have. The rate of change is accelerating. eBay is not stabilizing, so to speak, but rather reinvents itself more often and continues to add features. A printed book cannot keep up with the changes. Therefore, I try to paint a general overview and point you in the right direction to find the current information you need to be successful. That's all a book can do today. But check the Epilogue for further sources of eBay information.

If you have a new idea about eBay or a new slant on eBay from personal observation?or an idea you dream up - and you want to share it, email me at jt@sinclair.com. If you mention it first and I use it in another edition of this book, I'll give you the credit. Thanks.

Final Word

As in every marketplace, the knowledgeable reap the profits. Although eBay is simple and straightforward, it provides the infrastructure for complex strategies and activities. And although eBay is simple to use, you need to know a lot to put it to your most profitable use. Whether you buy or sell one item, buy or sell in bulk, or buy or sell new or used goods, this book provides the information you need to operate intelligently on eBay. Even though easy to read, this book wasn't written for dummies. Indeed, it's for those who want to learn how to operate on eBay the smart way.

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