|
We received quite a few emails about David's article, "eBay by the Numbers" in which we discussed the profitability of selling items with low sell-through rates and low selling prices on eBay. http://www.auctionbytes.com/cab/abu/y202/m09/abu0078/s02 In the article, David crunched some numbers based on an actual eBay seller, whom he called Mr. X.
The first letter was from Debbie, who brought up an ethical question about selling certain kinds of products. "Most of those trendy, hyped products are bogus, unproven, worthless products that don't deliver on their promises. The diet pills and weight loss products are especially worthless. I would not want to sell a product that was similar no matter how much it made me."
Debbie explained that she had considered selling Epil stop and NADs hair removal products. "I would have made a good profit on either, but upon further research, found mostly disgruntled buyers, bad press and customers who reported negative results. I could still have sold it, but wouldn't. eBay is rife with overhyped and questionable products, especially informational products boasting of making you an eBay Powerseller, etc."
Debbie raises an excellent point. David and I don't make judgements about what people buy or sell. But we advocate standing behind your products as a good long-term business decision. Researching items that you are considering selling is an excellent practice.
John, another reader, raised a question about the tools the seller used to help him list and fulfill such a large quantity of orders. "What software can support this volume? In a 14-hour workday I have a tough time listing and processing even 10 orders. Mr. X must have a system that is very fast, and very easy. He's probably got an employee or two as well. Or does he?"
Our seller, "Mr. X," is actually a husband and wife team with no employees. Mr. X uses custom software for listing, sending out End-of-Auction messages and other email responses, as well as creating shipping labels. His item is very easy to ship - it's dropped into a mailer. David figures that Mr. X processes between 90-100 auctions daily.
Finally, Scott wrote in asking for more information about the seller's costs. The seller in David's example listed 11,000 items for auction, and actually sold 1,870. If each item cost $1, as David cited, wouldn't the cost be $11,0000, not $1,870? This is an excellent question.
David calculated the Cost of Goods Sold for the month, monthly revenue, and some other factors. Assuming this is an ongoing concern, the inventory represents an expense, but it also represents an asset. That seller expects to sell his inventory in the future. (The inventory would show up on the balance sheet as an asset.)
We don't know if Mr. X actually had 11,000 items on hand when he listed his auctions. If he knows he has a sell-through rate of less than 20%, he may not want to buy and stock 11,000 items. However, this gets into a sticky area; according to eBay's User Agreeement, "You must be legally able to sell the item(s) you list for sale on our site."
For the purposes of the article, David was trying to get a rough idea of the expenses and revenue on a per-transaction basis. It may have been a bit of a leap to say the seller makes $75,000, since there are overhead and other expenses that weren't addressed, but the idea was to figure out roughly the potential of these kinds of sales.
You can use the numbers in the article to figure out the variable costs of selling these kinds of items, and then factor in your own overhead and other expenses.
While there are a lot of assumptions in a case study like this one, David's mission was accomplished: it got readers thinking!
|
