Three eBay Business Models To Choose From

Merchant business model, e bay business model, auction business model

As numerous as there are sellers on eBay, so also are the various merchandise and methods to sell on the predominant auction portal. This article present three such models for you to choose from.

Are you mulling over the possibility of starting your own eBay business? You’d probably have seen several ads such as the Winning eBay Business Model™ or the Secret Proven Method™ that claim that it is the one and only eBay business model that will bring you the dough by the thousands if not the tens of thousands.

Don’t get fooled. If a so many dollar book, a CD, a DVD or a kit were to bring in the money on eBay, many an individual would have become millionaires by now. The bottom line is that it is not possible for everyone to be a success on eBay. To make money on eBay you’ll have to face a stiff competition and you should be a seller who is flooded with buyers. In the real world, selling is a cutthroat business, and selling online is even more so.
In spite of the above , it is a fact that there are a extremely successful sellers on eBay and many of them have attained that status by using different business models. This leads to the conclusion that there is no one successful business model but that as a potential seller on eBay, you must have flexibility in your business. What you require is unbiased data.

Choosing That Business Model That Will Work for You

As many sellers are there on the eBay bandwagon, so are numerous business models, but few of them are seen repeatedly. To be successful as a seller on eBay you have to use abilities and your advantages to your benefit. Some of these advantages are sometimes “what” you know, at times “who” you know, every so often the “resources” that are available to you and occasionally the place “where you live”.

The following offer three well known eBay business models. Their features are first summarized, rated (low to high) and subsequently broken down into details.

 Starting Up Feasibility: This determines the degree of special knowledge, money, special contacts etc. that a person must have before attempting to start a business.
 Operating Costs: The operating costs (overheads) involved.
 Sourcing difficulty: The difficulty that you’ll encounter while trying to obtain the merchandise that you intend to sell.
 Competitive Advantage: The advantage that you’ll have over other sellers by using this kind of model.
 Potential For Success: The overall success for a seller who adopts this model and the chances of successfully running it into a long-term enterprise.
Just keep in mind that there are exceptions to any rule and as such base the hints given in the following models as guidance and apply your creativeness, your ability to satisfy eBay customers and your intuition to make your business an ongoing one.

Business Model : Drop Shipping

Starting Up Feasibility : High
Operating Costs : Low
Sourcing Difficulty : Low
Competitive Advantage : Low
Risks : Low

Working Methodology: Drop Shipping is the one most advertised business model on eBay. You’d have heard of advertisements promising great riches selling stuff that “you’ve seen or have to buy”. The idea behind the method s fairly simple. You act as a representative salesperson, on eBay, for a product that is either manufactures or stocked by another company. In fact this company that you represent actually fulfills the orders.

You post a list of items, collect the money, don’t keep any inventory or stock, don’t worry about packaging and transport and handle customer service. When a buyer wins any of the items auctioned on your listings and pays you for it, you place an order to your supplier at a lower cost. The item is delivered directly to the buyer. Your profit is the difference between what the buyer pays you and the amount you pay your supplier.

Probable Problems: The difficulties and the probable problems that can be encountered with this type of mode are too numerous to be enumerated here. The biggest problem is that you have no control over the whole transaction. You’re buying exactly what your buyer is purchasing so the profit margin is very less. Meanwhile you are meeting all of eBay’s fees and shipping costs. Even worse, your buyer can buy directly from your supplier the next time he needs the same item. But it’s your feedback that’s at stake on eBay while at the same time you’re legally responsible for the transaction. Lastly, it is so easy to start with this model that when any item sells with a sound margin, every other drop shipping seller glues on to the item and starts of a chain reaction in competition and also threatening demand and supply.

Potential For Success: It is very low. Most of those who start off with this kind of model usually drop off since the sales usually taper away. Additionally, the competition is intense and the hassles are high. On the positive side, there’s little risk involved in comparison with other models and there are no liabilities when you close business.

Business Model : Wholesale – Retail

Starting Up Feasibility : Medium
Operating Costs : Medium
Sourcing Difficulty : Medium
Competitive Advantage : Medium
Risks : High

Working Methodology : The classic business model in retailing with eBay. You decide on the kind of merchandise you intend to sell, form a relationship or relationships with a supplier or suppliers, buy and stock your inventory in wholesale quantities (with discounts) and sell these merchandise on eBay.

Probable Problems : We have two fundamental problems. First of all this is not a business that you start off the cuff. You have to find space to store your inventory, get zoning permission, search for and build a business relationship(s) with supplier(s) and invest some money in building up your inventory. Then come the operating cost that you have to manage including licensing, bookkeeping and labor (either yours or those employed by you). Your investment, the whole lot, is at risk. Your inventory may not sell or may be destroyed by some natural cause like being eaten by mice or getting flooded away. Profit or loss, it is totally yours.

Potential For Success : Medium. If you are born with a knack for retailing, eBay is the online business place for you. The advantage is that eBay comes with a built in massive audience. The disadvantage is that the competition is just as stiff. If you have experience in retailing this might just work out for you and it is not for people looking for easy business and money on eBay.

Business Model : Liquidation/Thrift Lots/Surplus

Starting Up Feasibility : Medium
Operating Costs : Low
Sourcing Difficulty : Low
Competitive Advantage : Medium
Risks : High

Working Methodology: There is not much difference between this model and that of the traditional retail model. You purchase merchandise at wholesale prices and quantities and stock them as your inventory and then make an attempt to sell them on eBay at a higher price. Your profit is the difference between purchase and sale price. The difference in this model is that you stock up on items that are unusual in some way – discontinued items that nobody wants; surplus merchandise in large lots obtained in an “As Is, Where Is” condition for very little money and so on. This means that there is an improvement on either your sourcing costs or your competitive edge.

Probable Problems : All the difficulties that you could probably encounter in a traditional retail setup could also be encountered in this model and the additional problem of sourcing. You’ll have to do a lot of spadework here. You are either sourcing opportunities, building relationships with the firms for whom you are acting as a liquidator or you are shifting through the merchandise that you have acquired, separating them into “saleable” and un-saleable” items. You will also have to photograph and describe them. This kind of sourcing could prove to be extremely unstable and hard to maintain. But it seems that some individuals just have an instinct for this.

Potential For Success : Arguable the potential is high and this is the model that made eBay. The knack is in your ability to combine your body of knowledge and business skills with finding the unique source such goods. It involves the finding of items that have been discontinued, liquidated, lot-packaged or items from government surplus auctions. This is far tougher than running the previous two models but if you can maintain your source, your merchandise is going to be unique. Your sourcing costs will also be much lower.

All said and done, success on eBay is just like success on any other type of business. It requires good ideas, suitable temperament, skills, hard work and a substantial amount of luck also.