eBay

How do you Use eBay?

The online marketplace of eBay is made up of both buyers and sellers, and sometimes people just looking to pass the time. When you visit eBay’s site, you are likely in one of these three categories. Each uses the website differently.

The first way you can use eBay is to sell your unwanted or forgotten items. You start this process on eBay by first creating a sellers account. This can be done by creating a username, verify your identity, tell eBay how you will pay your user fees, and set up the methods of payments that you will be willing to accept from the buyers.

 

Once the account is created, the seller can create a unique site to display their items. From adding photos to creating catchy themes and phrases, the sky is the limit. EBay allows the user to create their own storefront, set their own price, and have complete control over what they can put on their individual site. It is the perfect place for any entrepreneur to start up their business with virtually no overhead. Once your site is up and running, you can set your prices. You can either make an open auction with no minimum price; A reserve auction (to make sure the item sells for a specific minimum price); Or you can set a ‘Buy It Now’ price, which allows the potential buyer to immediately buy the item for a price you have predetermined. Once the transaction is complete, the seller accepts the payment that the buyer has provided, and ships the item in the time that has been agreed on beforehand.

 

The second way you can use eBay is to be a general buyer. This is someone who is looking for something in particular to purchase, as well as someone who is just waiting to find the perfect, quirky item to catch their impulsive eye. You can become a buyer on eBay by setting up a ‘My eBay’ account, which allows the buyer to create a username, which allows him or her to begin bidding. While setting up your account, you can either enter your payment information at that moment, or set one up when you decide to finally break down and purchase an item. Now that the buyer has set up an account, he or she can now begin to get down to business. The majority of people use the search bar at the very top of the eBay homepage. This search bar can be found on every page of eBay’s website. The site will look for keywords, and spit out results that are the most relevant to the potential buyer’s search terms. The buyer can sort through the results from a variety of criteria. From the current price of the item, time remaining in the auction, to how much shipping will be. The buyer can then click on the item being offered and look at the description of what is exactly being offered.  If the buyer has any questions, he or she can email the buyer immediately about a product inquiry. When the buyer decides on an item, they can either bid on the item in different amounts, depending on how high the price of the item is at the time. They can also have the computer watch the item just in case the buyer gets outbid buy another person, and have the computer place a higher bid (up to a certain amount the buyer has specified).

 

Once the buyer has won the auction, the winner must send the payment to the seller. This is more often than not done automatically through PayPal withdrawing the amount from the winner’s bank account. Once payment is received, the seller must deliver the package within the time specified in the sale. Once the item is received, it is recommended that each party leave feedback for the other person, so that other potential buyers and sellers can get a better idea of how past transactions have gone with the person.

The third way you can use eBay is to just pass the time. Going on eBay is an experience, and some of the things that you can find on there are outrageous to say the least. You can find some of these items by clicking on links on the homepage to see what interesting things are on there. EBay seems to take pride in their diverse array of products, because they will bring them to your attention on the homepage. Those looking to kill a couple of hours on eBay should have no problem doing it. For those using eBay in this way, it is a cheap time killer, and surprisingly rewarding.

Who uses eBay?

Not surprisingly, there is a very diverse following of eBay. From housewives at home looking to spend their husband’s money, to the bored person at work looking to kill a little bit of time. According to eBay’s website, the site is visited by one-third of all internet users in the U.S. every month. This is a staggering number, and one that will no doubt convince many people looking to sell their stuff to look towards eBay. They also claim that eBay reaches more people in the U.S. than any other pure e-commerce property.

 

As seen from the above chart, there are numerous reasons why people visit the site. From toys for the kids, business supplies for the office, or for that new guitar, eBay has provided a safe haven for those who do not have a lot of time to go to the store and fight long lines at the counter, or for those who don’t want people to necessarily know what they are buying.

EBay also provides a very good example of their demographic layout through charts in their information page. It seems as though that no matter what your sex, age, or income level, eBay has a niche for you.

 

EBay also divides their consumers into one of two categories. These categories are Broad Category Buyers, and Narrow Category Buyers. Each brings their own benefit to the eBay community. Broad category buyers are defined by eBay as, “People who search for 11+ categories. These are usually women and are more experiential in their approach to eBay, deriving both practical and emotional benefits from their usage.” Narrow category buyers are defined by eBay as, “buyers (1-4 categories), in contrast, are typically male, valuing eBay for its ease of use and selection of unique or hard-to-find items.”

 

As for the sellers on eBay, they are also a diverse bunch. Most people think of eBay as a great way to get rid of old junk that you don’t need anymore, and make any amount of money that can be extra income for the seller. The truth is, many people use eBay as their primary source of distribution and income for their small business. The main thing that sets eBay apart from the competition is it is a perfect blend of entrepreneurship and people just looking to get rid of junk. If you need to sell something, chances are there is someone looking on eBay right now for that exact thing. If you are looking to buy a specific thing on eBay that reminds you of your childhood, chances are you are only a couple of clicks away.

What it costs?

EBay is a relatively inexpensive way for the small business owner to buy/sell products online.  As a seller you are responsible for an insertion fee, final value fee, and a listing upgrade fee.  These fees vary depending on the eBay companion site in which you choose to list your item.

  • Insertion Fee– The insertion fee is basically a fee that is paid for the right to list your item for sale.  Whenever you list an item with a reserve, or the minimum that you will take for the item, the insertion fee is based on a percentage of that price.  This fee is paid regardless of whether or not your item sells and is nonrefundable.
  • Final Value Fee- The seller is charged this fee based on a percentage of the final price that the item sells.  This depends on the category of the item, and it does not include shipping costs.  For example, the final value fee for auction style listings is calculated as 8.75% of the initial $25, and then as a percentage of the amount of the sale that is over $25 depending on the product category.  In an auction it is based on the final selling price, however if your reserve price is not met there will be no final value fee.  Shipping costs are not included in the final value fee.
  • Listing Upgrade Fee- The listing upgrade fee is used when you add things to your item such as a subtitle, extra images, highlighting, etc.  Each time that you add something to your listing you will be charged accordingly.

As stated earlier the fees vary depending on the method that you choose to use to sell your items.  They are different for auction style listings, “buy it now,” and fixed price listings.  The fees are also contingent on the upgrades that you use.  There are literally thousands of combinations that can be used to determine the amount of your seller fees, however each of the fees listed above, excluding the final value fee, stays within the $0.05 to $4.00 range.  This restates that fact that eBay is an inexpensive way to do business via the internet.  Below is an example of the combinations of fees that are possible when listing an item in the “Books/Music/DVD” section as an auction style listing.  These are just an example of what it could cost to sell an item in this category.  Keep in mind that there are several other factors that could contribute to the total seller fees, and that prices vary in different categories.

Insertion Fees Final Value Fee Listing Upgrade Fee for Pictures
Lowest Possible Fee $0.10 8.75% of closing value $0.75 for 1-6 pictures.
Highest Possible Fee $4.00 8.75% of initial $25 plus 3.5% of remaining closing value. $1.00 for 7-12 pictures.

How do you pay?

There are several different ways to pay the fees as a seller on eBay.  They include PayPal, automatic credit card payments, direct pay from a checking account, checks, or simply just using a one time payment.

 

  • PayPal- PayPal essentially acts as a middleman between the consumer and the seller on eBay, and several other ecommerce websites. There are no monthly fees for using PayPal; however, they do take a percentage of each transaction.  Typical they receive 3% and then $0.30 on top of that.
  • Automatic Credit Card Payments- EBay will automatically charge any major credit card accordingly to pay your seller fees.  Charges will be added to your card typically about a week after you receive the invoice regarding your seller fees.
  • Direct Pay from Checking– To sign up for direct pay you simply need to provide your account number and the routing number for your bank.  Seller fees will be charged on the same day every month.  EBay will automatically deduct seller fees from your checking account each month. 
  • Checks– eBay only accepts checks from businesses.  Typically it is necessary to allow ten business days between the time you send your check in to pay your seller fees and the day that the fees are due.    
  • One Time Payment- any of the above methods may be used to make a one-time payment.

Small Business Uses

There are many uses for a small business when it comes to doing business via eBay.  Small business owners find using eBay easier because essentially all of the equipment, supplies, and resources that they need can be purchased on the website.  The CEO of eBay is quoted as saying that, “small business owners can discover amazing business buying opportunities that can help them achieve success.”   Also, eBay offers small business owners a unique way to sell their products over the internet.  EBay has also added services in the recent past that help small business improve cash flow, hiring, and shipping.  These services have been met by eBay through partnerships with other companies.  Small business owners can pursue equipment leasing/financing with Direct Capital, they can access employment services through Monster.com, and enhanced integrated shipping solutions through the United States Postal Service.  Discussed below are several potential uses for small business owners on eBay.

Uses as a seller

  • Increased Turnover- As a seller eBay can help you increase the amount of products that you sell.  Inventory will be turned over at a quicker rate allowing an increase in profits.  One use that comes to mind is to liquidate unwanted inventory.  When inventory goes “out of style,” or is for another season, small business owners can list the items on eBay to a wide assortment of buyers.  EBay is simply a great source to create extra sales for your business.
  • Sell Obsolete/Out of Date Equipment-Many small business owners use eBay as an avenue to get rid of unwanted equipment because it is a “cost effective sales channel.”  When equipment become obsolete owners can list it online.  EBay is a huge market for the resale of used equipment which draws numerous businesses to the website.
  • Reach Larger Market- EBay allows small businesses to reach further out into the market, past the traditional “brick and mortar” store front.  An estimated two million buyers visit eBay each day.  It is well known that many small businesses do not have large amounts of money to dedicate to advertising.  EBay helps with this problem because they offer an inexpensive way to reach a larger target market.  The more people that a small business can reach on a limited budget, the better off the business will be.  With eBay, they can literally reach customers on the other side of the world for practically nothing.
  • Advertise Via EBay- Small business owners can advertise on eBay with a text box or a banner ad.  It is not necessary to pay for the advertisements until somebody actually clicks on the ad.  This guarantees that you are only paying for advertising to potential customers.  Ad reports can be accessed and owners can determine which way of advertising on eBay is the most effective.
  • Sales Reports Overview- Sales reports for your business are free of charge from eBay. These features allows you to measure your performance against your sales goals, understand what drives online sales for your business, determine areas for improvement, and gives you information to accurately update your business strategy.  The reports include things such as sales, ended listings, successful listing %, average sale price, and any fees that you may have to pay.
  • Marketplace Research- This feature of eBay allows small business owners to access information, and to do research about their competition.  Small business owners can find the average selling price of similar products that are sold on eBay.  They can also find out the words that get the most hits for the type of product that they are trying to sell.  Also, products can be gauged by market demand based on seasonality, and small businesses can decide which way is the best to list their product.  Overall, the marketplace research function offers you a way to easily monitor your competition and the customers to whom you are selling.
  • Accounting Assist- This is a program for small businesses that is offered for free by eBay.  Essentially it allows a small business owner to view eBay and PayPal transactions in a QuickBooks accounting software format.  There is no data entry because the information is directly transferred to QuickBooks after the transactions are made.  This program could be very useful to a small business owner who is not necessarily an expert in the field of accounting.
  • Growth- Small businesses that sell on eBay are expected to increase in size at a quicker rate than similar businesses that are not using eBay.  Growth can mean an expansion in the number of offices or simply an increase in the number of full-time employees. Statistically, 70% of eBay users’ businesses are expected to grow, whereas only 58% of non-users are expected to grow.

Uses as a buyer

  • Purchase Equipment, Inventory, Supplies, Etc. – As a buyer for a small business on eBay you have access to millions of listings that could be essential to your success.  EBay gives you the opportunity to browse the listings and find whatever products are important to your business.  Huge savings are to found on eBay for small business owners.  For example, an eBay success story article refers to a woman who bought $30,000 worth of equipment from eBay.  This seems like a lot of money for a small business to spend, however, it was estimated that her savings were around $90,000. Savings such as these can be used to do many things in a small business.  In this example, company cars were actually purchased for several of the full-time employees.

Problems and Risks

Like with almost everything else, there are problems and risks associated with eBay. The problems with eBay stem from two places, angry buyers and angry sellers, which can be looked at as angry customers. There have been a multitude of problems over the past twelve years from identity theft, to unhelpful customer service, to lots of counterfeit merchandise, to being expensive and many more that we will take into more depth.

The first problem we are going to look at is the pricing problems the website is experiencing. According to the article “The Depth of eBay’s Problems 2: Angry Sellers,” eBay “sellers increasingly find eBay’s fees to be too expensive and are becoming successful at finding buyers on Amazon.com or on their own sites.”  Over the years eBay has increased there fee’s for posting an idea as well as the percentage they take from each sell. But luckily eBay is taking steps to fix this problem.

One major risk with eBay is the chance that by using eBay, your identity could be stolen. According to Ina Steiner, the editor of Auction Bytes, a news service for eBay sellers, the fall off in traffic is due to eBay’s “identity crisis.” Consumers are always weary about identity theft, especially when using the internet, and this “crisis isn’t helping eBay’s cause.

Another huge problem with eBay is the “ghastly approach to customer service” they are currently taking. According to Ann Cummins, a former middle manager at eBay, “eBay should rename their customer support something more appropriate like, [an] endless obstacle course of red tape and runaround where you rarely if ever get to talk to a human.” Another form of poor customer service in eBay is the online payment system, Pay Pal. Consumers have found Amazon.com’ system to be much more user friendly, which has hurt eBay this year. We have all experienced terrible customer service at one time or another, but when it comes to conducting business, I would not want my business processes to be associated with poor customer service.

With all of these problems in the company, the new chief executive Jon Donahoe, has been steadily working to fix where the company has been going wrong. One tactic being used to increase growth is focusing on the “secondary market,” or what Donahoe views as “the out of season products sold by small and medium-sized sellers or large companies looking to offload excess inventory.” This is a great point to focus on, as a lot of large companies have extra inventory and this would help with turnover. Another tactic being experimented with is the addition of new technologies to the website that will make the site more user friendly. One example of integrating technologies into the company is moving Pay Pal into websites like Facebook and even applications for mobile phones.

Overall there are quite a few problems and risks associated with eBay, but the company has been pursuing ways to solve the issues. The company has definitely taking a few hits this year and needs the changes they are making to be successful to help the company grow.

References

1)         http://bits.blogs.nytimes.com/2007/12/17/the-depth-of-ebays-problems-2-angry-sellers/

 

2)         http://bits.blogs.nytimes.com/2009/07/10/ebays-traffic-drops-amid-identity-crisis/

 

3)         http://bits.blogs.nytimes.com/2008/01/29/sellers-give-negative-feedback-on-ebay-changes/

 

4)         http://bits.blogs.nytimes.com/2007/12/17/the-depth-of-ebays-problems-1-disappointed-buyers/

 

5)         http://bits.blogs.nytimes.com/2009/03/11/chief-promises-a-new-ebay-and-talks-up-paypal/

 

6)         http://pages.ebay.com/help/sell/fees

 

7)         https://www.paypal.com

 

8)         http://en.wikipedia.org/wiki/Paypal

 

9)         http://news.moneycentral.msn.com

 

10)       http://investor.ebay.com

 

11)       http://pages.ebay.com/accountingassistant

 

Definitions

PayPal– an ecommerce business allowing payments and money transfers to be made through the Internet. PayPal serves as an electronic alternative to traditional paper methods such as checks and money orders.

Insertion Fee- a one time fee charged for initially listing your item on eBay.

Final Value Fee- a one time fee charged as a percentage of the final value of the product and category of the product that is sold.  Shipping costs are not included in this calculation.

Listing Upgrade Fee- If you add upgrades to your listing, such as a subtitle, extra picture, or highlighting, there will be an additional charge for each listing upgrade.

 

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