How do you know what eBay business model is the right fit for you?
There are many ways to go about selling on eBay.
We will cover the most popular ones here…
eBay Business Model: Thrifting / Flipping
Choosing an eBay business model can be tricky. One popular option among eBay sellers is selling items from a thrift stores, estate sales, and garage sales. Running an online thrift store has its benefits and its disadvantages.
- All merchandise is cheaper to obtain
- You might find an antique that is worth significantly more than what you paid for it
- Becomes easy to specialize in things such as clothing or books
- You can inspect all merchandise before you ship it
- You constantly have inventory available to you
- You typically will not be able to sell more than one of that item
- Identification of unusual items may be hard to determine and require expertise
- Inspecting inventory and driving between stores can be costly and taxing
- It is hard to grow your business because of lack of replenishing inventory
- It requires immediate investment with high risk of loss
- Requires storage and organization for many individual items
Although many many eBay sellers make a living with this model, the drawbacks can also be significant. Although it may not be the best business venture to make your first million it is a good way to start building a profitable low cost business.
eBay Business Model: Drop Shipping
Drop shipping is actually frowned upon by eBay customer service representatives (ask any one of them) yet their online eBay guidelines state otherwise. It’s a bit of a grey area. People do it and they do it A LOT! To learn more about drop shipping, take a look at one of our other articles Frequently Asked Questions About Drop Shipping. If you are considering drop shipping here are some pros and cons to consider before you begin your business.
Drop Shipping Advantages
- If you are just getting started, drop shipping can help you launch without a lot of capital.
- There is significantly less hassle involved with drop shipping. There is no inventory to deal with, no packing challenges to sort out and no shipping to worry about.
- Drop shipping is a great way to test new product ideas.
Drop Shipping Disadvantages
- The logistics for drop shipping can be hard to overcome as your business expands. This becomes even more challenging if you rely on multiple warehouses, multiple sources, and multiple contacts.
- Other people will be selling the same products. This creates more competition and makes it harder to stand out as a new business.
- You don’t have the ability to add the special touches that can really make your store stand out.
- Profit margins are usually very tight. Mistakes are costly.
eBay Business Model: Wholesaling & Retailing
This is probably the most traditional way of selling. You find a wholesaler for your product and resell it at a higher price. In many instances, you can go straight to the manufacturer on sites like Alibaba.com and negotiate deals directly. This is a little more stable then drop shipping since you have control of your inventory, and the margins should be higher.
- You are selling in large quantities thus moving product quickly and bringing in large sums of money at a time
- You do not deal directly with individual customers
- You are selling a brand that is already well known so marketing for your product isn’t as necessary
- Selling a well known brand can work against you as well as for you because you aren’t the only one selling that particular item
- Setting your price may be difficult because you have more competition for selling the same item
- when you make your purchases from the manufacturer you will most likely have to purchase a minimum amount of inventory therefore you will need space to hold your inventory
- If you are carrying more than one product it may be difficult to manage all of your supply partners
eBay Business Model: Manufacturing
This is the top of the food chain. Apple became one of the biggest companies world by being able to manufacture their own high-end products. They sold them directly to the consumer and cut out all the middle men. They charged large fees for top quality products and accrued tremendous profit margins. But unless you are an inventor or hacker that can build and design such things, this model will be quite costly to hire the help to do so. You can team up with someone with such skills and form a company but the risks are very high for failure. This model will most likely not fit many peoples goals.
- You are the only one selling your product
- All revenue from all sales comes back to you directly
- You have the ability to create your brand name around your product without competition
- You are always in control of the quality of your product
- Your initial investment in your own company can be costly
- Fraud from overseas manufacturers
- The time and effort that needs to be put into the start up of your business can prolong the amount of time it takes to see any return
Summary of eBay Business Models
When contemplating an online business model, it is important to consider all the available avenues. These avenues are listed in order of lowest amount of income to highest. With hard work and the right game plan, you can make any of these avenues work for you! If you have any questions feel free to leave them in the comments below.
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