eBay is good for customers but awful for business owners

I agree it's very tough to make a decent mark up with the ebay, paypal and in most cases delivery costs. It appears there are more costs than profit.

As a customer, I think ebay is very cool as I've picked up some good bargains.

Does anyone think it makes sense to put a 'Be aware of eBay copycat products' badge on your site in a prominent position?

There are two ways to look at this. On the one hand you are warning people of those fake products but on the other, people might leave your site to research more on Ebay for that product (which they might not have been previously aware of) and try to work out for themselves whether its genuine or not.

Well, I don't think I ever said eBay is a junk marketplace but I have noted in multiple posts that I stopped selling there almost five years ago. This was actually BEFORE I had fully transitioned into drop shipping.

Let me share my story to help clear things up -

I graduated from college in 2006 with a BA in marketing & management.

While I was in college I met a lot of people who already owned their own businesses, or who planned on opening their own businesses (some online, some offline)

One of the friends I made had started a very successful eBay store while he was in high school (he has something like 8,000+ positive feedback in 2006). He was already netting about $80k/year selling a inexpensive product. He directly imported this product from China. I remember thinking "he's doing OK, but I want much more".

Immediately after college I got a job to cover expenses but I would meet a local library every night with one of my other friends from college and research different online businesses to start.

This is when we first turned to eBay, we would use them for market research and to identify which products were selling well, and at what prices. We looked for EXPENSIVE products that sold well because we knew wanted to make a lot of money off each sale. Our mutual friend was making around $15 off each sale, we tried to find a niche to make a couple hundred or more off each sale while doing the same amount of work.

I speak about this in my Mike From Maine interview which can be seen here:


After a few weeks of researching we found a niche and chose about 20 products that we wanted to sell.

We then went on alibaba and found a reputable supplier in China and got their wholesale pricing (for the same exact product being sold on eBay).

We then contacted customs brokers and freight brokers to calculate our total costs (Cost of Goods Sold + Importing + Ocean Freight + Domestic Shipping) and we learned that we could VERY competitive in the market place (eBay). We learned we could sell for less then our competition and still make 40%+ markups on each sale. Our average sale price was over $1k so these numbers added up very quickly.

Here's the thing; we knew from the very beginning that we did not want to start an eBay business. We didn't want to build a business around a platform where customers go to to find deals and bargains.

Even though we knew our Buy It Now prices would be lowest we had no idea how long that would last for. We didn't want to build up hundreds of sales and positive feedbacks only to have a competitor realize all of their sales disappeared then lower there price, which would lead to us lower our price (and margin), which would lead to them lowering their price (and margin) until no one was making money and we were both out of business.

Here is how we avoided that - we set up an eCommerce store for $29 (the first store we ever set up was a Yahoo Store but I now use Shopify) and we uploaded all of our products to it for about ~40% markups.

We then created an eBay store and listed all of our products for a little less then competition, but not as low as our website. On our listing pages we would indirectly tell customers that if they go to our website they can get a better deal. So we basically redirected all of our eBay traffic to our eCommerce store and brought in the sales there. This way our competition couldn't track out sales (as they would be able to do via eBay), and we never got into a pricing war.
*** I should note this is against eBays TOS so I don't recommend doing it***

So this was back six or seven years ago and it worked great for a year so BUT then other eBay retailers had the same idea we had (find what sells well, get a supplier in China, sell for less) except they were selling for less on eBay. Our pages started getting almost no views and eBay almost disappeared as a traffic source for us.

We were also no longer able to use eBay to identify hot niches via eBay because every time we would find a niche that sold well, get a wholesale price list from China, calculate shipping costs and figure out profit it was coming to 20% and less, sometimes much less! eBay had become full of retailers who were bringing in TONS of inventory from China and selling at small profit margins (20% isn't' a small margin if you're drop shipping BUT if is for that workload (importing, warehousing, shipping).

Luckily, at this point we already had been contacted by numerous other advertising channels and we had traffic coming in from PPC ads, free shopping networks and blog ads so we no longer needed eBay to survive.

This is the same time that we had a couple of drop ship suppliers contact us (via our website) who wanted us to list their products for sale. They said all we would have to do is email them with the order details and pay a discounted costs and then they would ship the items directly to our customers. This was the first I had every heard of drop shipping and I LOVED the idea.

Waiting on 40' containers to come in from China was getting old really fast and I learned I would still earn ~20% margins for simply sending an email! Sure, it's less of a % as profit then I would make from importing BUT my workload decreased to almost nothing! We uploaded all of these suppliers products to our store, got sales and then we COMPLETELY transformed our business.

We started contacting EVERY drop ship supplier in our niche that we could find, we uploaded ALL of their products and eventually built up a HUGE product catalog and stopped importing all together. Our sales and profits were higher then they ever had been and we were doing MUCH less work.

We used our free time to find other niches were drop ship suppliers were also readily available and we began entering those niches as well and found success in every niche we entered. Sure, some stores make more money then others, but they still were ALL making money and my only investment was the cost to set up the stores. No inventory, no warehouse, no employees.

We quickly learned that we had to work with drop ship suppliers who enforce MAP to protect our profit margins so we did have to "drop" some suppliers product lines but at the end of the day we were left with a HUGE network of highly profitable, drop ship only stores.

So what happened to my friend who was making ~$80k net in college? When he saw the success of our eCommerce store he started doing the same thing. Since then, competitors have drove down the price in his niche on eBay and he put all of his focus is into his eCommerce store which currently has an Alexa ranking inside 15k in the US. He is absolutely KILLING it. Would he still be if he stuck with eBay? I doubt it, there are too many "bargain" retailers.

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Sorry for the long post guys... I just wanted to clear things and give my opinion on eBay and drop shipping. I'm sure other people have other experiences and opinions, but these are my findings after the past seven years of selling online.

- Anton

Thanks for the detailed post. Your insights into the dropshipping industry is of great value to many people here.

By the way, I am not accrediting the line, 'eBay is a junk marketplace' to your name, that's just my opinion.

What's your opinion on this? I found a dropship supplier who sells his products on his store ranging from $150 to $350 but when I look on eBay, what appears to be the same products to the naked eye with very similar product descriptions, are selling for 1/4 or even 1/5 for what he is charging. And I can tell you has a good yearly turnover. Are these 'same' eBay products genuine? If so, how do shops get away selling for such a huge markup. I have read a lot about how products on eBay that appear genuine and look incredibly similar on the outside are actually not always real, or are very cheap imitations.

Oh man,

I could go on forever about this thread - but the gist of it would be

eBay IS legitimate, and you are NOT losing money because the 'FEES are too high!'

That is almost like saying, (If you were an Olive Garden) My 'rent is too high in this strip mall! I'm not going to open in this AWESOME location!

Why does eBay have those fees? Well, it's because eBay has a 'GREAT location'. They have years of marketing, LOADS of traffic, and are giving YOU that foot traffic to sell your items!

So, in THAT regard, the fee is NOTHING!

If you are losing money on your item, it is because the APPROACH to your item was wrong.

BEFORE you sell your item you need to do a number of things:

1 - you need to know EXACTLY how much the item sells for. You cannot take a 'stick-your-finger-in-the-wind' approach. This is NOT an 'average price' as many people want to do, but it is a HIGH average. (You copy off the smartest kid in class... not the 'C' students!)

2. You then figure out your DEDUCTION (including the fees!)

3. You determine your ACTUAL estimated profit. If this is in the negative? You DON'T list the item! Simple as that! If you sell the item, knowing FULL WELL that the item would have given you a loss, that was not the smartest business decision.

(sometimes people justify this for 'experience, turnover, or feedback-- but if you take losses on items for these three reasons? You'll shut your doors very soon-- ONLY sell items for a profit)

This is a strategy I've taught for years, and it is the ONLY way I sell on eBay.

Then, once you find your pricing, you need to LIST a certain way (I call them my 3-rules of eBay) so that you can rank higher and sell 100% of your items.

That way you NEVER EVER lose money!

eBay a buyers market? Yes, you are absolutely right about that. And because of that, it is EQUALLY a sellers market.. so leverage that!

Additionally,

And this is MORE to the point - eBay does NOT allow knock off products at all.

It is against their policy.

They shut them down when they are found -- even IF they advertise them as 'knock-offs'.

This violates parallel trade law and is illegal.

Even if there are listings 'right now' on eBay, they aren't there for long.

Knock offs: Answer Center: eBay Answer Center

To each their own, some people like eBay, others don't.