Margin Killers - The Scourge of Ebay
Have you ever wondered why some fellow sellers on ebay sell their products for next to zero margins ?
Here is how it goes. You find a great product, and are excited about the profit potential marketing it on ebay only to find out that some knucklehead is selling it for 25 cents over cost rather than the $10 profit they could be getting.
Although frustrating, it certainly is not a new phenomenon in the retail market place. Grocery stores have been doing this to themselves for years with milk, bread and seasonal items such as turkeys and hams. They price them so low that they in many cases are losing money in an effort to attract customers of which they hope they will earn more money from in the future.
But what about the ebay seller who takes a digital information product or software title and starts selling it for 99 cents rather than the 29.99 suggested retail.
The first and most important rule of the free market system is that competition will drive prices down. That is why the oil and gas industry formed an association ( OPEC ) to control the prices which in the long term ensured maximum profitability from the product and prevented any one country from selling gas too cheaply.
Understanding this principle about the market system and subsequently ebay goes a long way to maximizing your profit from your auctions. Obviously if you are going to compete in a market of slashed margins, you need to have your house in order.
Start by analyzing the sellers auction including his sales history and what types of products they are selling. Is there a catch to what they are selling such as a cheap website but a hosting contract is required ?
Some sites sell products for very low simply to obtain a qualified email address which they know can result in many more sales in the future.
Others are able to buy the product for a lot less than you can either through contacts or access to liquidation auctions.
And then there is the type of ebay seller that simply sells for next to nothing because their perspective on profit is a lot different than yours. If they make a $100 a month from ebay they are happy, where you might look at that and say it’s not worth the effort for that type of money.
So How Can You Counter this Type of Low Cost Strategy ?
First: Before you get into selling a tight margin product, give it careful consideration whether the earning potential is worth your efforts. If you are going to have to spend a ton of time shipping and dealing with customers, will you in the end only make a few dollars an hour for your efforts ?
Second: If you are going to compete, don’t bring a knife to a gun fight. Compete hard and demand your share of the marketplace. Constantly strive to offer more than your competitors do and relentlessly peck away at their already slim profit margin. Offer added bonus items to the auction for the winning buyer. This only works though if your primary competition has a higher earning expectation.
Third: Optimize your site. Just because one guy is selling the same product lower doesn’t mean the buyer will even find their site. Be sure to use keywords in the title and study their meta tags and keyword usage. A product like the se tool box is great for this.
Forth: Design a great sales auction site. Use html and graphics to add more value to your auction. Remember, your auction is your packaging.
Slim margins mean you will have to be as tenacious as a junk yard dog. If you love a good scrap, then go for it, otherwise move on to a more profitable product line.