How to Start and Run an eBay Consignment Business By Harish Amilineni
Review by Steve Weber for How to Start and Run an eBay Consignment Business
This is a great idea for a book, and I was glad to see it was written by a longtime, successful Powerseller with experience running his own eBay consignment business. This is a how-to book from a real entrepreneur, who is giving some real-world advice. He tells you exactly what works, what doesn’t work, and why.
It’s clear that eBay has some momentum with its “Trading Assistant” program. Since its launch last year, 80,000 sellers have signed up, and eBay drop-off sites are popping up everywhere. People with stuff to sell are becoming aware that this is a real alternative to yard sales and newspaper classifieds. Once you sign up with eBay to become a Trading Assistant, you’re listed in their Web site directory, where potential customers can find you by Zip Code.
How big is the opportunity? The author estimates that just one company, AuctionDrop, is closing about $50,000 worth of auctions a week on eBay. With a commision rate of 40 percent, that comes to a gross margin of $20,000 a week. Ramping up to a scale this big would certainly require some employees, rent payments, and advertising. But once you’ve proven your business at a smaller scale, you can expand at your own pace. Any one-person eBayer relatively skilled at selling could generate $1,000 to $5,000 in weekly profits, the author says. That sounds pretty darned good.
So this book solves the main problem for someone starting a new online business — finding enough merchandise to sell at prices low enough to bring a profit. With the consignment model, people bring the merchandise to you, and after you sell it, you pocket a commission less your expenses. If it doesn’t sell, you return the item to its owner.
Of course this book will have limited appeal to casual hobby sellers who aren’t interested in devoting much time to selling. Only those ambitious enough to try — and disciplined enough to follow the advice in this book — will be able to carry it off. But by the same token, there are real opportunities here for people willing to do the work. Think of the millions of people interested in getting cash for their old possessions, but aren’t interested in learning how to sell to sell on eBay themselves. Many of these folks probably realize they could get a much higher price for their items by letting someone else sell it for them online, where a worldwide pool of buyers can bid up the price.
But there are pitfalls to a consignment business. To do it right, you need to set up a real bookkeeping system for consignments. You’ll need good insurance coverage if you store merchandise that belongs to someone else, in the event of fire, flood, or some other disaster. There’s also the problem of managing the expectations of the folks you’re accepting merchandise from. Popular shows such as “Antiques Roadshow” have convinced too many people that treasures are lurking in their attic or basement. Lots of the stuff isn’t valuable, it’s just old.
Fortunately the author provides sound advice on this and many more issues that the average seller probably hasn’t thought through yet. For example, how can you represent yourself as a bonded auctioneer? How do you protect yourself from illegal activity such as stolen goods? The author provides bulletproof answers to these issues, so the peace of mind you’ll have from reading this book will be worth its cover price many, many times over.
Lots more ideas you’ve probably never thought of are here in this book. For example, an online consignment business could target the lucrative business of estate sales. Online sellers could probably do a better job of selling more of the items, and at higher prices. And they could do this at a lower commission rate than traditional estate-sale operators, who conduct weekend-long walk-in sales require staffing and expensive newspaper advertisements.
There are lots more topics covered in this book, too numerous to mention them all here. In addition to the helpful tutorials on eBay selling skills, I thought the most essential sections included:
How Much Should I Charge?
Find Consignment Customers
Sell Retail Store Closeouts
Raise Money for Nonprofit Organiations
Conducting Estate Auctions
Conducting Bankruptcy and Repossession Sales
Corporate Consignment Sales
Set Up a Consignment Storefront
Organization and Record Keeping
Write Your Business Plan
The book also includes sample agreements, forms and letters and provides access to a Web site with these types of materials.
I think anyone contemplating an online consignment business — or looking for ways to expand their current online business — should pick up a copy of this book and read it cover to cover. It’s a thoroughly researched book with up-to-date advice and resources that can be tremendously helpful to anyone selling merchandise online.