It’s not just about price

Competing on price on EBay is a sure way to disaster. Sellers who employ this strategy will find themselves at best working for nothing and at worse losing money. The eBay market place is full of different types of sellers who are all employing different strategies to achieve their goals. There is, for example the big players. These are guys who own large businesses and will use eBay to dump stock on. They may not be bothered about making a profit they just want rid of their stock so they’ll sell it at a low price.

You also have the big players who use eBay to attract customers to their websites. They will sell products below the market value knowing that once they hook a buyer they will then up sell other products to make a profit.

You also have people selling personal items that they no longer want, or unwanted gifts so they will sell these for a low price and of course you will have people selling products illegally, copies etc. For a new seller to enter this market place and try to compete on price is business suicide.

I write from experience as well as thorough reviews and experiments. In my early days of trading, I did try to compete on price and I paid the price for that folly. I run an online arts store www.artscraftsandhobbies.co.uk and I have my own eBay store Arts, crafts & Hobbies. A part of my inventory consists of painting instruction DVDs. When I first started trading, I started on eBay and I priced the DVDs low at £10.00 each. Now art instruction DVDs are quiet expensive, they retail for between £18.00 up to £60.00. I had a supplier who provided me them at a good price.

As I said, I originally priced them at £10.00, which didn’t leave me much of a margin but I was naïve,and as you know we all have to pay to learn. After engaging in quiet a lot of studying and experimenting, I saw that price increases didn’t affect my sales at all. So, I took the decision to raise my prices substantially. For example, I increased the price of my DVDs from £10.00 to £14.99.

Now this is a substantial increase but in reality, it’s around what I should have charged originally. My reasoning was simple I would have to take a huge hit on sales to actually lose revenue, I worked out it would have to be something around a 35% drop. If sales did drop by that amount then I would be still earning the same income level from less work. Sounded like a good deal to me.

Now here’s the strange thing. My sales in the first month of the price increase went up. I sold more DVDs that month than any previous month since I had started trading. And they have remained steady. I also sell plenty of products in my store that other sellers sell cheaper.

I do not try to compete on price. When I add a new product to my store I don’t even look at what others may be selling it for, I’m not interested. I price the product using my own system, which takes into account eBay and PayPal fees and gives me my profit margin. I’m not doing this to make eBay rich or to give things away. I’m doing this to build up an income for me and my family. I want rewarding for the work I put into my business otherwise it’s pointless.

So if you’re thinking about entering the eBay marketplace don’t get fixated on the prices others are charging for their products. Take your cost price and add eBay and PayPal fees then add your profit margin and that’s your selling price. Be professional and focused. People don’t just buy on price and you probably don’t want to do business with those who do. Other factors come into play like how well you have listed your item, feedback and trust. Experiment a little and see what happens.

Keep Trading

Paul

Don’t Let Your Margins Slip Away

Don’t let your margins slip away.

I was just reading a post in a forum about an eBay trader who was bemoaning the fact that she’d been selling some items at a loss without realising it. I have to confess that in my early days of trading I also made the same mistake on one or two items. Believe it or not it’s an easy mistake to make. In my case I was so busy uploading products as I increased my stock from about twenty items to around two hundred and fifty items that I didn’t apply enough attention when listing the products.

As soon as I realised what I’d done I went through each product and ensured it was priced correctly. The woman in the forum had made the mistake of equating turnover with profit. It’s an easy mistake to make; you are busy so you must be making money right? Wrong. You need to ensure you have your profit margins just right. This is easy if you are selling through your own website because you have no fees to pay apart from PayPal. The rest is free.

It can be a little bit trickier on eBay though because of the fees eBay charges. If you’re not careful the only people who are making a profit are eBay, they get their fees no matter what. So what’s the best way to set the right price for your product? There’s a number of strategies that you can employ to ensure you receive maximum value for your time.

To begin with don’t view eBay as a hobby. It’s a market place and you should enter it like you would any other marketplace, that’s professionally. Your eBay shop may not be bricks and mortar but it still performs the same function. Your objective is to make a profit. You need paying for your time and you need wealth to grow your business and achieve your plans.

You must be aware of all the costs eBay imposes on you to sell your products. These costs have risen over the last year and it’s easy to fail to take some things into consideration. For example if an item doesn’t sell and you relist it you have incurred another listing cost, this has reduced your profit margin.

A good way to ensure you keep on top of your product listings, and this does get complicated if you have a few hundred listings, is to make a spreadsheet. On the spreadsheet list your product, how much you paid for it, your eBay costs and your profit. If eBay costs rise then you have to decide whether to absorb them yourself or pass them on. Personally I pass them on to maintain my margins.

My own pricing strategy is simple, it’s;

Cost price + profit margin + 8% (eBay final value fee for bronze power seller) + listing fee + PayPal fee = Selling Price.

Of course when I sell through my website the only fee I have to pay is the PayPal fee. Make sure you’re aware of all the eBay fees you will incur and ensure you take them into account when listing your items. When you start increasing the number of products you have listed it’s even more essential that you stay on top of your pricing otherwise you’ll find yourself like the woman on the forum. Kicking yourself because you’ve gone to a lot of trouble to give an item away.

Pricing your products on EBay

Correct pricing is important if you are going to succeed on Ebay. It’s crucial whatever business you are running but on Ebay you need to be aware of exactly how much it costs to sell your product. You have to pay to list your item, then you have the Final Value Fee that EBay will charge when you sell your item. If you list an item for an auction and it doesn’t sell you could end up relisting it a number of times. Each time you do it costs you and these costs can soon add up eating into any profit you may make.

This is why it’s essential to keep a close eye on every item you have for sale on Ebay. The whole point of selling on EBay is to make money. When all is said and done EBay is just a market, a large twenty-four hour seven day a week market but a market nonthe less. And your objective in taking part in the market is to make a profit.

The first thing you need to do before jumping into EBay is work out your pricing policy in a businesslike manner. Don’t treat EBay like a car-boot sale treat it like a business. You’re not there to give things away. What kjnd of pricing policy should you use? There’s many ways you can price your items but what you need to ensure is that you are aware of the costs EBay charges, if you lose sight of these costs they can easily erode your profit.

My method of pricing is simple but ensures I achieve my desired profit. I take the cost of the item I am selling then add to that the profit I desire. So for example, if I’m looking for a 35% mark-up. I add 35% to the cost. I then add 10% for the Ebay final value fee. I then add the EBay listing fee to this figure. Finally I add the cost of paypal to the figure and I am left with my sale price. This is how I price the products I sell on Ebay.

You may argue that this method puts the price excessively high. So what? I’m not on EBay to give things away and if the buyers think the price is too high they won’t buy it. My experience is that my products are still competitively priced and still sell. Running a business requires a large investment of your time. You have to source the products you sell, lay out money for them, taking a chance that you will be able to sell them. You then have to list them, write the copy, deal with questions and when the item sells package and post it.

I don’t know about you but I want paying for doing all that. After all the buyer at the other end of the computer wouldn’t work for free and neither should you. I’d prefer not to sell a product than sell it too cheaply. If the customer wants the item you are selling he will buy it. If he doesn’t he won’t. Leave the choice to him. What you need to ensure is if he does buy something you make a profit that covers all your costs including you time costs.