Finding Profitable Products to Sell on eBay

The eBay Seller's News, August 2007, Volume 7, No. 8

Learn How To Sell More on eBay with The Newsletter for Professional
eBay Sellers by: Skip McGrath

In This Issue:

Musings

Finding Profitable Products to Sell on eBay
Update on my eBay Boot Camp
Manage Your Inventory for Profits
New Wholesale Sources for August 2007

"Before you build a better mousetrap, it helps to know if there are any mice out there." ~ Yogi Berra

It is August --the largest vacation month of the year and that includes me. So if you are wondering why this issue is much shorter than usual there are two reasons. My wife and I will be taking some time off this month and I am saving the really good stuff for September when more people will be online and reading.

The back-to-school selling season on eBay starts in a couple of weeks (Last two weeks of August). This traditionally marks the end of the summer slump on eBay, so now is the time to review your business plans, give your auctions a tune up and start ordering merchandise for the fall season.

Our quote this month refers to research. Our first article is about finding the right product and determining if there is a market for the product before you invest a lot of time, money and effort in it. As Yogi says, you want to make sure there are some mice around before building the trap. "Build it and they will come" may be a great strategy for baseball but it doesn't really work on eBay. In my experience eBay is more about finding a need and filling it instead of telling people they have a need and hoping they buy it.

Lynn Dralle, AKA, The Queen of Auctions, who is one of the trainers at our eBay Boot Camp in September, has just released her latest book Ka..Ching. Lynn Dralle is a single mom who will sell over six figures this year on eBay. Good Housekeeping magazine describes her work as a dream job. She shares her tips, tricks and secrets with you in her new book, eBay...Ka-Ching! so that you too can have your dream job.

Lynn has created a special offer for my readers that expires at Midnight on Wednesday, August 8th. If you miss that and still want her book, it is available on Amazon and on eBay from several sellers.

I mentioned last month that I would be addressing the Dallas eBay Users Group, eBabes and eMales. They are reportedly the largest eBay user group in the US. When I got to the event they had over 100 people present for the dinner and the training class then another 40 or 50 showed up for my talk at 8:00.

This was a really great group and gave me a fantastic Texas welcome. Joining --or starting, an eBay user group is a great way to learn and network with other sellers and to share your knowledge with others. If you are interested in starting a group, Stephanie Inge who runs the Dallas group has volunteered to share her experience. You can connect with Stephanie at: http://ebaysell.meetup.com/119.

If you would like to find an eBay user group in your community, you can start with the regional groups page on eBay at this link.

Let's get started with this month's issue:

[top]

1. Finding Profitable Products to Sell on eBay

Finding the right (profitable) product to sell on eBay is one of a seller's biggest challenges. I received an email from a lady last week who was upset because my wholesale sources didn't list the original source for laptop computers and other expensive electronic products. It's not that I don't know the source. Probably the best one is Ingram Micro at www.ingrammicro.com who represents large electronic manufacturers such as Apple Computer, Motorola, Minolta, Epson, Fuji Photo, Samsung, SanDisk, Sony, Samantec, HP, Hitachi, Intel and about 100 other high-tech companies.

The reason I don't list them is that these markets are highly saturated, extremely competitive and most electronic products sell at such small margins that only large sellers with deep pockets can make any money.

I am not saying you can't make money in these areas --just that it is difficult. My market has always been the small to medium sized seller. It is true that I wrote a book called Titanium eBay that was aimed at people who wanted to build a big eBay business, but in reality most people do not have the resources, or even the desire to create a million dollar a year business. It is not that hard to do it if you have the time and financial resources, but I am past the point of wanting that. If I wanted to deal with employees, bankers, leasing an office, complying with government regulations and all that stuff I would have stayed in the corporate world.

Most of my readers are people who want to make some extra money part time or build a small business where they can earn $5000 a month or so. So how do these sellers find the right products?

When I am looking for a new product I have a checklist of questions I go through to help me determine if this is a product I can make money with.

Competition - how many other sellers are selling this or a very similar product?
Margin - What is the average selling price on eBay and can I make money at that price?
Upselling - Does this product lend itself to upselling or cross selling?
Seasonality - Is this a seasonal or year-round product?
Fad Product - Does the product have "legs" or is it just a short-term fad?
Related Products - Is the product in a category with similar products I can sell to the same buyers?
Niche - Does this product fit into an established niche or will I have to create a niche for it?

There is no right or correct answer to every question --the idea is to use the questions to help you understand the market dynamics of the product you are considering.

So what are some of the things I look for? You will most likely not find any items with zero competition, so what I look for are two things. I avoid items with an excess of competition --especially where competitors are cutting the prices. I also look at the quality of competitors. If I see sellers with poor selling skills I mark this as a positive.

When it comes to margins I try and calculate what a profitable margin would be at the price point I am selling. For example if an item sells for under $25 then I need a pretty good margin to make a profit. I would be looking for something in the 50% or greater range. But if an item were to sell for $200 or more, I could get by with a much smaller margin --perhaps as low as 20%. The key to determining an acceptable margin is to really know your costs.

The relationship of the new product with other products I am selling is critical. I always look for products that relate to my other products so I can up sell and cross sell to my same customers. For example, when someone buys one of my barbecue grills, I offer the related items such as barbecue tools, chef knives, cook books and so on. If I were selling barbecues and flash memory cards there isn't a lot of opportunity to cross sell.

The most important point I am trying to make here is that finding and sourcing a product involves much more that just finding a product at a good price. If you really want to make consistent profits you want to take a larger view and consider all of the angles.

Finally if you are going to do this successfully you need a good research tool. I use HammerTap. If you use this link you can get a discount on HammerTap that they offer to my readers.

[top]

2. Update on my eBay Boot Camp

We have come pretty close to finalizing the content and outline of my eBay Boot Camp scheduled for September 28-29, 2007, here in my home town. Here is a link to more information about the boot camp where you will find a box to sign up to receive more information. The camp will be limited to 15 attendees (an attendee is an individual or a couple).

We are going to open the registration on August 10th. Everyone who has signed up for the Boot Camp email list will get an email on the 10th with a link to make a deposit.

[top]

3. Manage Your Inventory for Profits

If you sell physical products, inventory is the life blood of your business and one of your biggest costs. Yet I see people all of the time who don't understand that inventory sitting on a shelf is costing you money every day.

If you even bought something hoping to sell it at a profit on eBay and learned too late that it wouldn't sell, don't despair. I have been doing this for 8 years and I still make mistakes no matter how careful I am. The real key to being successful is recognizing and fixing your mistakes and then learning from them.

There are two costs associated with inventory. The first one is your product cost and the second one is your opportunity cost. Product cost is simply what you invested in the merchandise including the cost to ship it to you. Opportunity cost is the money you are not making while your cash is tied up in that inventory. If you bought 200 widgets for $6.00 each that you hoped to sell for $12 each, your product cost is $1200 and your opportunity cost is $1200 (the money you will make if they sell at $12. Obviously you only incur the opportunity cost if the items don't sell. Once an item sells the opportunity cost on that item goes to zero and basically becomes gross profit.

There are two basic rules to follow if you want to maximize the return on your inventory purchases:

Turn your inventory over as often and as fast as possible (within reason). Let's use our $6.00 widgets as an example. If you price them to sell at $12 and you sell 10 widgets a week, at the end of 6 weeks you will have sold 60 widgets and made $6.00 on each one for a total of $360. Now let's say you find that by pricing the widgets lower --at $10 each your sales increase and you sell 20 widgets a week. You are making $2.00 less on each widget, but at the end of the same 6 week period you will have sold widgets for a total gross profit of $480.

Obviously if you reduced the price further you could sell even more, but at some point you will not be making a profit. So the trick is to find that sweet spot where you maximize your return.
If you buy a product that won't sell, keep reducing the price until it will --even if you are losing money on it. What you are trying to do here is get rid of non-performing inventory. When you have inventory that doesn't sell you are tying up cash that could be spent on product that will sell. Remember your opportunity cost. When you are not making money you are actually losing money.

I know it can be painful to cut the price on an item to your cost or even below, but it really is a good business decision to do so. And remember, you also learned something valuable that will help you make money in the future.

[top]

4. New Wholesale Sources for August 2007

Liquidation products, also known as surplus goods offer excellent profit opportunities for eBay and other online sellers. The king of liquidation selling is an eBay PowerSeller Chad Maslek. Chad publishes a guide called The Ultimate Insider Surplus Liquidation Guide. More than just a list of liquidation sources, Chad is the real deal --someone who does this every day for a living. He not only shows you where to buy goods, he teaches you how to buy, what to buy, what not to buy, scams to avoid, and much much more. I spoke to Chad and he has put up a special offer just for my readers. If you have any interest in working in this potentially profitable area, check out The Ultimate Insider Surplus Liquidation Guide. I rarely send out testimonials to other products, but you will see one from me on Chad's sales page.

CNI Design Products sells a beautiful line of hand painted decorative accessories, accent furniture and wall decor. They have a minimum Opening Order: $300. Most of their products are fairly small and easily shippable.

Mpressions Inc. sells beautiful handcrafted, framed prints they decorate with hand painting, embossing, calligraphy and/or personalization.

The Gift of Art. Tom Findlay creates beautiful charcoal drawings from photographs. When you get an order, you send the photo to Tom and he will deliver a beautiful 21" x 30" charcoal drawing within two to three weeks.

Kraft Klub carries a complete line of enamelware, glitter collection, rusty, weathered look, antique white-washed and galvanized tin products. Their products include primitive country, Americana, garden, vintage, home decor, star and a hand painted baby collection.

Go-Natural ® The All-In-One Cosmetic ® AS SEEN ON TV. You can watch their 1 minute commercial www.gonatural.tv! One shade for all, and 8 cosmetics - ALL-IN-ONE! No technique - just brush on and go. It's that easy. High end, salon quality - "MAGIC POWDER". Email: info@go-natural.net Tel: 702-449 2097. You have to call or email them for the wholesale pricing information.

Perfect Symetry sells a line of Christmas tree skirts, Christmas stockings, Mantel covers, table runners and coordinating place mats, decorative pillows, duvet cover, bedding ensembles / collections, throws. If you plan to sell Christmas goods, don't wait. Now is the time to place your orders with wholesalers. Another good suppliers of unique Christmas goods is TinyBayBeeze.

With the back to school season starting, teens will be buying fashion jewelry. Fresco’s is a large supplier of fashion and costume jewelry.

Drop Shipping

I continually get emails from readers wondering if this or that dropshipping company is reliable. I currently do not recommend any of the general drop shipping companies. If you want to drop ship goods on eBay profitably, you should work direct with a manufacturer or a master stocking distributor.

The various middleman-type drop ship companies rarely have products that you can sell on eBay at a profit. The worst are the ones that sell you a pre-made web site loaded with thousands of products. In my opinion this is a complete waste of time and money. Why would you want a web site that is identical to the thousands of other web sites they have sold to everyone else? How would someone doing a Google search ever find one of these sites?

When you buy my Complete eBay Marketing System or The Wholesale Buying System, I include access to a wholesale members site where I list real drop shippers as well as many other sources. My site is pretty good, but the best site with the most complete information is WorldWide Brands OneSource. WorldWide Brands and Chad Maslak's Liquidation information are currently the only wholesale source companies I endorse and recommend. Currently WorldWide Brands is still offering a $20 discount for my readers if you use this link.

That's it for this month.

Skip McGrath