How Will The Economy Affect eBay and Online Sellers in 2008?

The eBay Seller's News, January 2008, Volume 8, No. 1

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

In This Issue:

Musings

1. How Will The Economy Affect eBay and Online Sellers in 2008?
2. A Look Back At Prosper.com and a $25 Bonus for My Readers
3. Niche(s) Of The Month: Time Life Book Sets and 8-Track Players
4. Make Money Selling Warranties to your eBay Customers
5. FREE Webinar on Wholesale Sourcing
6. New eBay Wholesale Sources for January 2008

"Small opportunities are often the beginning of great enterprises." ~ Demosthenes

Musings

I have great news for my readers. Many of you have written me that you really like the newsletter and want to see it more often. So my New Year's Resolution is that I will now do two issues a month. The first issue will come out the first week of every month and the second issue will come out during the third week. January will be a little off because of the holidays (I actually took some time off this year).

eBay usually announces new fees in January. I am hoping they make the announcement in time for the next newsletter. You don't want to miss that issue because eBay has already warned members that the fee changes are going to be substantial this year. You can expect some fees to go up, some to go down and possibly some fees may disappear altogether. eBay has changed their fee structure before, but this year promises to be quite extensive.

Remember --If you have just subscribed, be sure and look for the confirmation message. Clicking on the confirmation link is the only way to be added to the list. I cannot add people manually.

Plans are coming together for our Wholesale Sourcing Seminar in Las Vegas. The dates are February 29th and March 1st. I have partnered with Magniphy and WorldWideBrands to put on this year's seminar.

There will be a total of 4 instructors over the two days and at the end of the seminar we will all be attending the giant AMD/ASD Wholesale Trade Show.

This is one of the largest wholesale trade shows in the world. Products include fashions, jewelry, gifts, surplus merchandise, electronics, housewares, tools, home & garden and toys and games. There are over 1000 companies exhibiting.

Click Here to read more about the seminar or to sign up for the special email list to get advanced information and up to $1000 in discounts.

Speaking of seminars, I have just received the master edited copies of the two-day eBay Boot Camp I held in the Fall. We are in the process of package design and reproduction and hope to have the product ready to ship by the end of January.

The 2-day event was filmed by professional videographer, John Mortensen. The edited version fills up 5-DVDs and covers 15 hours of content. Unlike large seminars, the boot camp was a very small event. This allowed us to cover a lot of detail, answer copious questions and really get into how a person can sell successfully and actually make a living on eBay.

I will have more details in the mid-January newsletter. As with all of my new products, I will offer a limited-time discount offer for my subscribers.

Are you looking for auction templates, branded About Me Page templates, automatic logo insertion and image hosting cheaper than eBay and most auction management services?

I found a new service this month called The Seller SourceBook. They offer over 1600 different templates and are compatible with most listing tools, the eBay Sell Your Item form and even Turbo Lister. About the only drawback is that all of their templates place the item photo at the top of the listing. I always prefer locating my photos down the side of the text so people can see them while they are reading about the product I am selling. But, it isn't that big a deal, and most eBay users put their photos at the top or bottom of the listing anyway. So if you are looking for an inexpensive solution to your eBay and About Me page design, check out The Seller SourceBook.

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

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1. How Will The Economy Affect eBay and Online Sellers in 2008?

I am sorry this article is so long, but I think it is important for my readers to understand the economic environment in 2008 so you can plan for it.

I was talking with a stock analyst a few days ago who follows eBay and other online firms for Wall Street investors. She was of the opinion that we were headed into a slowdown and possibly even a recession. Right at the end of the year I was watching several of the financial shows on TV, and although some disagreed, the consensus opinion was about the same: A definite slowdown in overall growth and about 25% of the talking heads thought there would be a mild recession lasting perhaps two quarters.

One thing to keep in mind when reading this, is that consensus opinions tend to be wrong, but for the purposes of this article let's assume that at the very least we will see a slowdown. So what will this mean to eBay and small online sellers?

First of all, despite the polls that show that 57% of Americans believe we are already in a recession, this is clearly not true. Growth in our economy has been excellent. In just the last quarter our gross domestic product grew 4.9%, the largest gain in four years and the 4th quarter numbers are expected to come in around 3% which is also excellent growth.

Unemployment is lower than during the Reagan and Clinton administrations which were considered great economies. Job growth has slowed slightly but is still considered excellent. But there are three negative pulls on the economy:

• The slowdown in home sales and building caused by the credit crunch
• The fall of the dollar
• The high price of oil.

All of these could affect eBay and online sales –but in different ways.

Believe it or not, high oil prices could benefit online sellers, as people will see it is cheaper to shop from home rather than driving to the mall. Also online sellers are starting to match many of the big sales by stores. Since eBay and small online sellers have lower selling costs (no employees, store rents, etc.) they can operate on smaller margins and actually make more profit than most large stores and large online retailers. The slight downside is that as people spend more for gas they have less to spend on merchandise.

Currently worldwide oil production exceeds demand by only 2%, but worldwide demand is growing by 5% a year, so we can count on high --and in fact much higher oil prices for the foreseeable future. $150 a barrel and $5.00 gasoline is in our very near future --perhaps by mid to late 2009.

Tight credit and the slowdown in housing is another story and will pull the economy in the opposite direction. Unfortunately a lot of Americans have a very bad habit of piling up too much debt and then using the equity in their home to borrow money to pay off the debt.

If you do this once and stick to it and never go into debt again, this is a smart strategy. But most people do it a number of times and they never build up equity in their homes.

Now with home prices falling in most markets, people will have either less equity or their equity will grow more slowly. They won't be able to borrow as much money and the credit crunch means that rates for borrowing money will increase. This will reduce the amount of money people can borrow to make purchases. The Federal Reserve is and will keep cutting interest rates. This will increase the availability of credit for businesses, but consumer credit will continue to be more expensive.

The falling dollar is another major factor that will affect eBay sellers and some online sellers. When the dollar falls relative to other currencies such as the British Pound, the Japanese Yen and the Euro, it means that our goods become cheaper for them to buy. Two years ago, one British Pound could buy $1.75 worth of goods from a US seller. Today that same pound will purchase around $2.10 worth of goods. The Euro has acted in a similar fashion. And the Canadian dollar has increased almost 40% over the past couple of years.

This is good news for eBay sellers who sell internationally. It means the price you charge in dollars is now cheaper for people in Europe and other countries. Although the dollar is expected to rebound slightly it will probably not go back to the high strength it had a few years ago.

OK – Now you understand the forces at play, so what do you do? Here are three strategies that I am following to position my eBay and online business for this economy.

Strategy #1 – Control costs : People will still be shopping, but they will be looking for bargains. If you cut your costs you can sell for less money and still make a profit. The simplest way to control eBay costs is to achieve a higher sell through rate. Every time a listing doesn't sell you still pay listing fees. The higher percentage of listing that sell increase your incremental (selling cost) but reduce your fixed costs as a percentage of your business.

Besides listing fees, be careful when using all those optional fees like bold, highlight, subtitle and so on. Test, Test, Test. For example, run an auction both with and without a bold title ($1.00). If the bold item doesn't bring at least a $2.oo return then drop it. (Hint: Despite eBay's advice to the contrary, an ALL CAPS title does almost as well as bold and it's free. But again --you want to test it. What works for me, may not work for you).

Watch your other costs like telephone, cable or DSL service, insurance, etc. These services are becoming more and more competitive. Shop around and look for deals. For example Discount Shipping Insurance sells postal and UPS insurance at rates 40% to 60% lower that buying it direct.

Strategy #2 –Sell Internationally : Overseas shipping rates increased last year and we saw our international sales fall. So we pulled back from selling internationally quite a bit. But with the weak dollar, both the cost of shipping and the cost of the actual product is now less for overseas customers, so we will be increasing the number of listings where we agree to ship overseas.

Many overseas sellers list on eBay US and check the box for your listing to show up in overseas locations, but did you know that you can also list directly on the various overseas eBay sites? Unless you have the language skills, I would stick with eBay Ireland, eBay UK and eBay Australia, although most Germans read English and we have had some sales from Germany even though our listings were in English.

Strategy #3 –Control Your Inventory: Inventory sitting on the shelf that doesn't sell, sells slowly or sells at a low margin costs you money. This is called Non-performing Inventory(NPI). Get rid of it even if you have to do so at a loss. Money tied up in NPI is money that is not making you any money.

If you have a pile of goods that you bought for $500 and can't make any money with them, sell them at a low price even if you take a loss. For example, if you lowered the price and sold the whole lot for $400, you would incur a $100 loss, but now you have $400 to put into merchandise that will sell.

Finally, no matter what the economy does or will do, one of the best strategies you can follow is to constantly review and update your auction listings. Follow best practices such as branding your business, being friendly, consistent and thorough with your listings, test new ideas, watch your costs, treat everybody fairly and deliver great customer service. You will make mistakes. Not everything you try will work out, but just keep working at it and the profits will follow.

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2. A Look Back At Prosper.com and a $25 Bonus for My Readers

Early last year I wrote an article about a new Person-to-Person (P2P) lending site that was financed by eBay's founder, Pierre Omidyar, called Prosper.com. P2P lending is like eBay for borrowing and lending money.

Borrowers put up a loan request and lenders bid on it. You can bid on the whole loan (I don't recommend this) or you can bid on a small piece of the loan –as little as $50. Most bidders bid between $50 - $200, so their risk is spread over dozens of loans. When the loan is fully funded, Prosper takes the money you bid from your account, adds it with all the other bidders and sends the borrower a check. The borrower pays the money back to Prosper who collects the payments and divvies them up to the lenders each month.

Benefits for Borrowers

Prosper can be a great deal for borrowers. If you have no credit rating or a very poor credit rating, you can borrow money when no one else may lend to you. Of course you will pay a high rate, but if you really need the money –for example to rebuild your credit rating, or to pay for something critical like a medical procedure, then this is one place where you can borrow for much less than those payday loan places.

If you have good credit, you can often borrow money for things that a bank will not lend –like money to start a business, or you can borrow money to pay off high rate credit card debt. For example, one loan I recently funded was from a lady with AA credit who owed several credit card debts that were running between 16% and 22% interest rates. Her Prosper loan was bid down to 9%. She was able to pay off all three of her credit cards and now has a 9% loan.

Benefits for Lenders

I haven't needed to borrow any money from Prosper, but I have been a lender since March of last year. My original investment was $2,000 but in April I increased that to $5,100 and was fully funded by early May. Since that time my original investment has grown to an account value of $6342.67 –an increase of 24.36% in just 8 months. How is that possible?

What's going on here I wondered? I know compound interest is powerful –but it doesn't grow that fast.

That's when I discovered the secret that bankers and moneylenders have known for thousands of years.

If you compound both your interest and the principal amounts paid back to you, your money grows almost three times as fast.

My original $5100 funded about 75 loans. Now I am up to 94 loans.

And here is the really neat part. I actually had two loans default. That's right, two of the loans I made went south and I will never see that money again, but I still made over 24% on my money. At this rate, once a year is up, I will make over 30% return –even if I have a few more defaults.

When you lend your money to a bank, they pay you interest each month, but they keep all of your money until you take it out. You can keep re-investing the interest and earning interest on that (this is called compound interest), and will eventually make you a lot of money. But when your bank loans out the money you deposit with them, they get paid back not only the interest but they also get a portion of the principal each month. Then they turn around and lend out both the principal and the interest again to someone else as fast as it comes in.

Think about your car payments. You borrow $24,000 at 9% interest to buy a car and pay it back over 4 years. Every time you make a payment, you are sending the lender, part of the $24,000 plus interest. By the time you have been paying on the loan for two years, you have paid the bank ½ of the original loan amount ($12,000). And, the bank has already lent the $12,000 that you paid back to someone else and is earning money on it. Actually every time you make a payment, the bank adds your money to all the other payments it gets and lends it our again as fast as they can. Is there any wonder that people go into banking? This is probably the best business on earth next to a owning a casino. With Prosper you can do the same thing bankers do !!!

Now for some really good news. Prosper has an affiliate program. If you join Prosper through my affiliate link, they will pay both you and me $25 just to join. And if you refer a borrower you get $35. You do have to either lend a minimum of $50 or borrow to get your $25 payment. You won't get this payment unless you join through an affiliate link, but once you join you can sign up for the affiliate program and make $25 every time someone you recommend joins. You can post your links in your eBay About Me Page, your blog or on any of the social networking pages like Face Book or My Space.

Here is the link to join: http://www.prosper.com/join/SkipMcGrath

One word of caution. Until you get some experience, stay away from the high risk loans. Loans with poor credit grades earn very high interest rates, but also have very high default rates. Personally I have only funded a couple of these loans. Most of my loans are rated AA, A and B and I have a very low default rate compared to the averages yet still earn a huge return on income.

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3. Niche(s) Of The Month: Time Life Book Sets and 8-Track Players

I decided to show you two niches this month because the first one, Time Life Book Sets are very heavy and a chore to ship. So I also included 8-track tape players which are a bit easier to handle.

The first niche is from Scott Foster's great FREE eBook, 91 Common Everyday Items that Bring Huge Profits on eBay. If you click on that title you can download this fantastic little book for free. Better hurry though, as this offer will disappear soon. I have known about the 8-Track player market for several years. It's not something I go looking for, but I always keep my eyes open and I have found four of them over the past couple of years. All of them sold for over $100 on eBay. I think the most I ever paid for one was $35 but got most of them for under $10 or $20.

Time-Life has been publishing book sets for about 40 years. Individually these books are often dogs on the market. But complete sets sell for really good money. The screen shot below is from just before Christmas so the numbers are a little low. If you performed a search later this month, I am sure you would see some books with higher values.

For example, the first one on the list, the civil war set, normally sells for much more than this. You should get over $150 for a good set.

You can find these sets in several ways. They often show up at garage sales, estate sales and thrift shops. The other way is to advertise. Just take out a small classified ad that says: I buy Time Life Book Sets for Cash and give your phone number. Only buy complete sets with no missing volumes and make sure they are in good condition. Don't bother with sets that are stained, have torn pages or badly dented corners. If you get a set with one bad book, check with Abe Books, half.com or on eBay to see if someone is selling a single book. You can often buy them for a couple of dollars.

The other item this month is 8-Track tape players. If you are under 30 years old you may never have even heard of these. But they were the forerunners of the cassette tape player that preceded the CD. Most of them were made for cars, but there were some home units to be found. These are bought by both audio collectors and people who own or restore older cars and want the real thing. Once again, these prices are a little low because of the time of year. In general collectibles don't do as well in price around Christmas as they do other times of year.

The sell through rate on these is very high. Once again you can find them by advertising, at garage sales and estate sales. The other place they turn up is flea markets and automotive swap meets. Be very honest in describing them. You can test the car models to see if they work by hooking them up to a 12 volt battery. If they don't work, they are still saleable because collectors can either fix them of use them for parts. The other thing to look for are the 8-track tapes themselves. Again make sure they are in good condition.

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4. Make Money Selling Warranties to your eBay Customers

Do you sell any kind of electronic item on eBay or from your website? If so, there is a very nice profit opportunity available from SquareTrade. SquareTrade is the company that provides the safe trading seal to eBay sellers and dispute resolution for feedback. Now SquareTrade offers one of the best and cheapest warranties available on electronic merchandise --both new and used.

If you sell any electronic item on eBay (digital camera, cell phone, stereo, etc.) you can offer your buyers a warranty that costs less than the ones they sell in stores and you will earn a commission between 15% and 30% on the sale. SquareTrade warranties are the highest rated in the market by customer surveys and you can even sell them to people who buy used equipment. You can market them via an email to your buyer at the end of the sale or you can print out a little flyer from the SquareTrade website that you insert in the box with your item. If the customer calls the number and purchases a warranty you earn a commission. The more warranties you sell each month, the higher your commission schedule goes. One small eBay electronics seller makes over $1000 extra per month selling these warranties.

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5. FREE Webinar on Wholesale Sourcing

All of my readers are invited to join me and Jen Cano from Magniphy.com for a free one-hour webinar on unique wholesale sourcing methods. The webinar will be on line and you dial in on a phone line to hear the audio. The date and time are:

Tuesday, January 15th at 5:00 PM pacific Time / 8PM Eastern Time

The webinar will go for 45 minutes and then we will allow 15 minutes for questions. I will show you some of the products I drop ship on eBay every day and how to find wholesale sources for them as well as other sourcing tips, tricks and techniques.

At the end of the webinar we will also have some additional information on our upcoming Wholesale Sourcing Seminar in Las Vegas, so if you are thinking of registering for that or would just like to hear more about the seminar --or if you just want to learn more about wholesale sourcing for eBay, then be sure and join us.

Click Here to Register for the FREE Webinar.

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6. New eBay Wholesale Sources for January 2008

ASD/AMD Wholesale Auctions. Did you know that the same people who run the ASD/AMD Trade Show also run daily auctions for small to medium wholesale lots. They contract with eBay for the online auction technology. You can look at the current auctions here.

If you are looking for a truly unique product line...check out Farm House Creations. They manufacture Soy body butter, soy linen/room sprays, lip balms, owie and gardeners' salves, and Foaming Sugar Scrubs! check out the products on the website, but call them for wholesale pricing.

Famous Home Fashions - is a premier North American manufacturer of high quality shower curtains and coordinated bathroom accessories. They supply large department stores as well as small online retailers.

Ma's Bobbin Works, Inc. has been a wholesaler, specializing in refurbishing bobbins and other mill relics into decorative accessories, for over thirty years. Located on the coast of Maine.

Belle Pearl sells a beautiful line of pearl jewelry. The website is informational only, but if you click on the link that says Wholesale Enquiries, it will take you to a page where you can request wholesale information.

Check out Art As Antiques. When you enter it will take you to a registration page. You will need to fill out the registration form and fax a copy of your sales tax information to get access to the wholesale pricing catalog.

Sage Creek Organics sells a line of natural organic baby clothing. Click on the Contact Us link to email them for pricing or to see a list of the sales reps located closest to you. I don't know if it is still current, but they used to have a drop ship program.

Eden Organics is one of the largest suppliers of organic canned food sold in specialty shops.

That's it for a while. See you about January 20th

Skip McGrath
The eBay Seller's News