How eBay Sellers Can Survive The Recession

The eBay Seller's News, October 14, 2008, Volume 8, No. 16

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

In This Issue:

Musings

How eBay Sellers Can Survive The Recession
Consignment Selling on eBay Could Boom in a Recession
Listings Are Climbing on eBay, But Sell-through Rates are falling
Toys Could Prove To Be a Recession Proof Product
Could The Secret To Making Money With an Online Business Actually Be an Offline Business?
New eBay Wholesale Sources for October 2008

"Toughness is in the soul and spirit, not in muscles."
~ Alex Karras

Earlier this week, eBay confirmed the rumors and announced a layoff of 10% of their workforce. About 1000 full-time employees were laid off along with hundreds of temporary and part-time workers. eBay was not clear about the nature of these employees, but analysts expect they will cut overhead and admin functions and reduce employees in the support function (email and telephone service.) eBay's stock was trading as low as $16.00, however part of that was certainly due to the huge market selloff last week. In an eBay webcast, management said the third quarter profits may come in slightly higher than estimated but revenue will be at the low end of their estimates. That didn't help. Then news leaked out that eBay's results may be a little better and the stock recovered to the $18 to $19 range.

eBay also purchased the online payment service Bill Me Later for almost 1 billion dollars. eBay will merge Bill Me Later into PayPal to give eBay a credit service to go along with their payment service. eBay is also expanding their classified ad offerings by purchasing two Danish classified ad sites for a total of $390 million in cash.

It is no secret that we are about to enter tough economic times. Falling home values, higher cost of credit and now a looming recession, a lot of good folks are struggling with debt.

My old friend Leo Quinn is a professional debt counselor. He has recently updated his master work on the subject, How To Own Your Own Paycheck Again. This is much more than an eBook. It is a complete program that can help anyone reduce and eliminate their debts. Whether you are flat broke and way over your head -or just have a little too much debt to be comfortable, this program can help you.

Don't confuse this with some of those crazy debt schemes. Leo is a professional debt counselor in real life and he has helped hundreds of regular folks turn their financial lives around. I contacted Leo and he agreed to extend an offer he made last year to my readers to save $30 on this excellent program.

Like most of the things I recommend to my readers, How To Own Your Own Paycheck Again comes with a money-back guarantee if you are not happy with the program.

Last month I completed revising one of my best-selling training courses: How To Create and Sell Information Products on eBay...and The Internet. Several dozen of my readers ordered the book and have been sending me a stream of very positive comments.

Earlier this year when eBay banned the sale of digitally delivered information products everyone thought the info products business was dead. But they were they wrong. I was an early critic of the policy -but it turned out I was wrong too. In fact, my information product sales on eBay are actually up! It seems that getting rid of the 99-cent eBooks was a good thing. Most of the people selling the cheap eBooks were doing one of two things: They were selling junk -or they were running a feedback farm. With these items gone, buyers now have more confidence in the info products market. This seems to be working for me as the sales of my information products on eBay are actually higher than they were at this same time last year.

eBay is testing its feedback removal program on eBay Australia. I spoke with someone in PowerSeller support on October 13^th who told me the program would roll out on eBay US within a few weeks.

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

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1. How eBay Sellers Can Survive The Recession

There is no longer any question that we are heading into a recession. It's actually been a mild recession for a while and the recent financial crisis confirmed it. Credit actually started to tighten a few months ago and just recently reached crisis proportions.

So what are the effects of a recession and the credit crunch? First of all, there is plenty of money around. According to Forbes Magazine, American households have $7.4 Trillion in checking, savings accounts, CDs and money-market funds. They have another $4 Trillion in Treasury bills and bonds. Americans also hold about $10 Trillion in IRAs, 401Ks and mutual funds, but that total dipped by about $2 Trillion over the past week.

On the other side of the equation is debt. While some Americans are saving and investing, others are deeply in debt -and it is getting worse as credit card companies are raising rates. Total public debt is $5.5 Trillion -about $18,000 for every living American.

So you have the perfect storm of people, with money, not spending --and other consumers with too much debt unable to take on any more. When you combine the personal debt issue with the lack of business credit, businesses can't expand and others pull back and cut employment. When this happens consumer spending falls -and consumer spending is one of the leading drivers of our economy.

As eBay sellers, we live on consumer spending. So this will affect us all. The first thing to realize though is that a recession is a slowdown --not a stop sign. If unemployment goes as high as 8%, as most economists forecast, that is a lot of people not working -but it means that 92% of all people are still working. People still spend money during a recession, they just change their buying habits.

The first thing to fall is what is called "discretionary spending." That is a fancy term for people spending less for goods that they don't need. This would include buying the latest iPod or iPhone, putting off the purchase of a new flat screen monitor a little longer, holding off on the purchase of that slightly larger plasma TV, and maybe shopping for that new handbag at Target instead of Macys or Nordstrom's. People will still buy iPods and designer shoes and handbags -just not as many.

So if you sell products on eBay that qualify as "nice to have" versus products people need, you will not see zero sales -but you will see fewer sales. How much? I don't know.

One of the products we sell is an outdoor wood burning firepit grill. I think this qualifies as a discretionary item. We have seen our sales fall about 20% over the past couple of months. On the other side are our EZ Cube Light Tents. These are still selling well because it is an item that helps eBay and website sellers make money by taking better photos. With the slowdown in the economy more and more people seem to be starting to sell on eBay and the web -probably to supplement their income. Consequently we have seen our sales of these products increase slightly.

As a seller, if you derive a large part of your income from eBay and online sales, the first thing you have to do is not panic. Business will slow down but it will not disappear. If you sell high end luxury goods, jewelry, famous-name brands, or other expensive items, you might consider moving into more basic items that people need. One of the advantages of selling online is flexibility. I am looking for some lower priced items to add to my line of expensive firepits. Depending on your product line and business model you may be able to do the same thing.

eBay is known as a place to find bargains. In a slowing economy there will be more people looking for bargains. So give some thought to goods that are available in the liquidation and surplus market (See our wholesale search engine for liquidation and surplus dealers).

There will also be an uptick in used merchandise. This always happens in a recession. I know -used merchandise is harder to source, but it is also more profitable. Most new consumer items sold on eBay earn margins of between 10% - 30%. But on many used goods, you can double or triple your money. So they are often worth the extra time to find them and list them.

This is also a good time to experiment with alternative auction sites such as OLA.com, ePier, eBid, and newcomer Bonanzle. There is a great article on Bonanzle at Auctionbytes.com.

So bottom line: think basic, think about what people need versus what they want, and look to new product lines that address the bargain hunting that goes on during a recession. Remember: all things end. Good times will come back -they always do.

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2. Consignment Selling on eBay Could Boom in a Recession

One of the things that happens in a recession is that people become strapped for cash. Suddenly those impulse purchases they put on a credit card last year don't look so attractive. Add to that, the number of businesses cutting inventory and others even closing down. This presents a great opportunity for eBay consignment sellers.

People are often willing to take absurdly low amounts of money for valuable merchandise when they need to raise cash. Consignment sellers can take advantage of this. Remember, about 40% of what sells on eBay is not new merchandise -but used items of some type or other.

In a down economy you have sellers who need cash and buyers who are looking for bargains. This is a perfect opportunity for consignment sellers, what eBay calls Trading Assistants.

One thing to be careful with are famous-name designer products. eBay has secret rules that prevent many sellers from listing designer names such as Gucci, Prada, Coach and Tiffany. If you try and sell these items -even if you have proof they are legitimate -eBay will cancel your listings. And then they won't tell you the rules for selling them. I heard from one large consignment seller of designer goods last week who has seen his once large and profitable business disappear when eBay started arbitrarily enforcing these rules. So if someone calls you and says they have some Channel sunglasses or a Gucci handbag to sell, take a pass on it. There is plenty of merchandise out there that will sell. You just have to go out and find it.

Personally I think the best opportunity is to work with businesses that are downsizing and selling off their equipment or inventory. Besides networking in your community, you can also let local bankers know you can help their business clients raise cash by disposing of their equipment and surplus merchandise. This can earn some pretty big dollars. One of my readers from Oregon was contacted by a printing company that was downsizing and he made over $10,000 in one month helping them sell some expensive printing presses and other equipment.

In an environment like this you also see a lot of business failures. Contact local bankruptcy attorneys and let them know you can help liquidate merchandise and equipment. Restaurants are also often casualties of a recession and there is an excellent market for used restaurant equipment. When you run into items that are large and heavy, you can also sell these items on Craigslist as well as eBay.

If you don't know anything about consignment selling, I wrote a book a few years ago called How To Start and Run an eBay Consignment Business. Some of the information in the book is out of date -but the basics are still pretty much the same. The book includes a link to a webpage with sample contracts and other forms useful to the consignment seller.

I don't have any copies left to sell, but you can find copies on eBay, Amazon.com and other book selling sites. There are even plenty of used copies around for under $10.00. When you buy the book, you get a link (printed in the book) to a page on my website that updates some of the information in my book and links to the sample contracts.

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3. Listings Are Climbing on eBay, But Sell-through Rates are falling

When eBay announced their new Fixed Price fees and selling rules in mid-September it took a little while for the market to catch up -but catch up it did. eBay listings climbed from 15.4 million to 20.5 million over the past couple of weeks. Sales -what eBay calls conversions or sell-through-rate (STR) fell slightly.

Charts from Medved.net at:
http://www.medved.net/cgi-bin/cal.exe?EIND

This chart is for the month of September. The chart for the first few days of October show further gains.

Sell through rates, however are dropping slightly. If you look at the second chart, STRs fell from 43% to around 40% (Green line averages all the sales). This trend is also continuing through the first week of October.

It will be interesting to see what happens in the 4^th Quarter of this year that started a few days ago. The 4^th quarter which contains the holiday buying season is traditionally the strongest quarter for eBay sellers -and therefore for eBay.

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4. Toys Could Prove To Be a Recession Proof Product

Every year Jenni Hunt publishes her annual Holiday Toy Guide. Jennie has a long track record by making tons of money selling toys. I looked back at retail figures during past slowdowns and recessions, and although toy sales did decline slightly, they did not fall as much as other goods. It seems that no matter how bad things get, parents and grandparents will still find the money to make sure their kids have a nice Christmas.

Jenni knows this business inside and out. She shows you both how to source the toys and how to sell them. And she always knows what the hot selling toys will be.

Last year when I recommended Jenni's Holiday Toy Guide, I received several emails from readers who were thrilled. Several of them made hundreds of dollars and one lady made over $3000 during the holiday season from Jenni's system and her lists.

Whenever I recommend a product from another seller I always ask for two things: An ironclad money-back guarantee for anyone who is unhappy and a special deal for my readers. Jenni gave me both things. When you go to www.holidaytoyguide.com/skip you will get three free reports about the toy business for just looking and a free copy of her top-selling eBook, Secrets To Profitable Auctions if you decide to purchase.

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5. Could The Secret To Making Money With an Online Business Actually Be an Offline Business?

I am all about eBay and making my living from online businesses, but I want to tell my readers about something I have been working on for a while with my good friend Jim Cockrum. We work together on Jim's Silent Team Membership Site. This is a new program that Jim and internet wizard Andrew Cavanagh put together to help folks like us make some good extra money. It's called OffLineBizToday.

Do you have basic internet skills? If so a new proven program could generate up to $1500 a day? Do you sell on eBay or from a website? Can you follow simple instructions to set up a basic website? Do you have basic writing skills?

If you can answer yes to these questions, they you may want to look at this new free trial membership program.

One of the reasons I like this program is that Jim has set it up so you can look into it and try it without risking any money. And, everything is online. There are no eBooks to buy.

I know this is not for everyone, but if you have some basic skills, OffLineBizToday shows you how you can help local businesses. This program has been in design for a while and Jim actually tested it with his silent team members and it is working great.

FREE Short Audio and Free Trial Membership at http://www.offlinebiztoday.com/

Don't worry. There is no spamming involved. No cold calling. No multi-level marketing or recruiting. This is just a simple business where you can take some very basic internet skills and help local businesses like restaurants, gift shops, kitchen stores, contractors, dog groomers, interior decorators and others build their business with simple internet skills -and, you can outsource most of the work.

Best of all you don't have to buy anything to see how this works. Jim has set up a free membership site where you can see videos and join a forum to see and discuss with others how this works. It's a members-only forum -but my readers get a free trial membership with no upfront money and you don't have to give up your credit card info to get in.

I have actually done a smaller version of this in my local community and my son even did this for some local businesses when he was younger. But Jim (and his partner Andrew) have taken this to a new level and they have simplified it.

Now, I am not talking about free money. You will have to do some work. How much is up to you. If you just want to make an extra few hundred dollars a week, you can do that in a few hours. Work more and you can earn $1000 to $1500 a week. I know that isn't getting wealthy -but you can still do this even if you have a full time job.

This is NOT for total internet beginners. You will need some basic skills. But if you know how to launch auctions on eBay (write descriptions, upload photos, process payments, etc.), understand how websites work and if you have simple basic writing skills, then you can probably do this. Take a listen to the short free audios and read the message board posts at http://www.offlinebiztoday.com/. If you feel it is not your cup of tea, you will have wasted a few minutes. But if it intrigues you, dive right in.

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6. New eBay Wholesale Sources for October 2008

This week I am trying to focus on products that are recession proof. One of the categories that comes to mind are Baby Goods. I know this isn't for all of you, but if you are currently selling discretionary products, you might want to look into something like this.

Skip Hop, Inc. makes a very unique line of diaper bags and other clever baby products. Click on the Wholesale link to register and get pricing.

Mom Innovations is a distributor and dropshipper of dozens of baby products for the new mom.

Baby Emporio sells several unique baby items including a line of very nice fleece blankets.

Plush toys are always hot sellers during the holidays. Plush-In-A-Rush is a large wholesale supplier of everything plush out of Dallas, TX.

Here are some other items that should do well this season:

Uncle Milton Industries makes some of the classic educational toys that children have used for years. These include everything from art farms to night sky projectors. MSD Dropship is a company that specializes in working with small online retailers. MSD drop ships the complete line of Uncle Milton toys, games and science items.

Wholesale Case Lots sells case-sized lots (usually between one or two dozen) of Airsoft guns, remote control toys, tools and other general merchandise.

People still collect Beatles stuff. Beat Mugs is an official licensed distributor for Beatles coffee mugs. Click on the Reseller link to get wholesale info.

Atlantic Importers makes a unique collection of Vintage Collectible Tin Replicas. The main theme of the collection is transportation of one form or another. Many of these items mark an exact and unforgettable date or time in history. Some made or changed history.

1Wholesaler sells a complete line of RC toys, boats, helicopters and cars and they have a drop ship program (I haven't looked at the dropship program in detail, so you will need to check it out yourself.) Click on the tab that says wholesale to get dropship and wholesale info.

That's it for now. Look for our next issue on the Christmas selling season.

Skip McGrath
The eBay Seller's News

P.S. If you missed the last issue, click here to read it.