Are you in control?

Over the past 12 years, I have sold all kinds of items.  I have sold all kinds of conditions as well.  New, Used, Refurbished etc.  But there are some I had never tried.  Not because I wasn't curious, but because I really didn't feel comfortable giving up control of my business.  That's a good way to ruin a good thing!

Unfortunately, new sellers will often fall into some of the traps.  They hear stories of other sellers, or see the hype form websites and think they have hit pay dirt.  In one sense, they have, only it's not their dirt!  I have talked about margins in some of my other posts, but some people really do not understand what that means.  Margins also play a factor in this little joy ride we call reselling.

The first trap a lot of new sellers fall into is the drop shipping one.  There are a ton of sites out there who claim they can get you set up to drop ship on ebay.  Usually they charge a fee, and then the information is generally available with a little searching on google.  Then there are others who are an outright scam, or hook you up with less than reputable companies.  The problem is you have no control over any aspect of your business with the exception of your pricing.  They control when/if the item ships which can affect your status on ebay.  They can change their prices at any time, and you may or may not be notified of the change which can cause you to owe money on an item you sell.

The second trap is a fairly new one.  People will find items in the store or online and list them for sale on ebay.  When the item sells, they go buy it and ship it.  They only have to spend cash when an item sells and do not have to store inventory.  The problem there is you are not guaranteed the item will be there when it sells.  I have seen people find items on Amazon, list it on ebay, and when it sells they have Amazon ship the item to the buyer.  Again, you have no control over that inventory or the price changes.  It's a quick way of killing your ebay business before you really get started.

Margins are the next problem.  I know there are deals out there buying new, clearanced items for cheap.  However, it usually requires a lot of cash to be able to purchase the quantity needed to make a decent profit.  This is referred to as retail arbitrage.  While it is easier to sell new items, you don't make as much per item.  Let's say you buy a widget for $10 on clearance, and it sells for $25 new.  You also find the same widget at a yard sale for .50 cents, and used it sells for $18.  Now which was the better deal?  Of course the used one.  You are getting a much better margin on the used one than the new one.  Sure, $25 looks better than $18, but you are not making as much profit.

I'll keep this simple using round numbers.  Widget sold has a 10% fee from ebay, plus 2.75% + 30 cents paypal and the original cost.  So the math looks like this:

NEW WIDGET
$25 x 10% = $2.50
$25 x 2.75% = $.69 + $.30 = $.99
$2.50 + $.99 = $3.49
$25.00 - $3.49 = $21.51
$21.51 - $10 = $11.51 profit

USED WIDGET
$18 x 10% = $1.80
$18 x 2.75% = $.50 + $.30 = $.80
$1.80 + $.80 = $2.60
$18 - $2.60 = $15.40
$15.40 - $.50 = $14.90 profit

Clearly the used was the better deal.  The profit was nearly 50% more than the new one.  Knowing your margins is imperative is you want to be successful selling on ebay.  Knowing you have the inventory on hand that you are selling is also imperative.  You need to be able to ship as soon as the item sells.  I have ordered from sellers before who drop ship and it has taken several weeks to get my item.  Needless to say they no longer get my business.  Control your inventory and prices and you control your destiny.  Failing with either one of these can be disastrous.

Remember, you want to be in control of every aspect of your business.  Don't get sucked in to these great sounding plans without knowing up front what the pitfalls and potential problem areas are.  And certainly don't let yourself get caught in a situation where prices have changed and you are paying out more than what an item sold for.  That's a good way to cut your reselling career short.