January 11, 2006

It’s all about eBay

eBay, founded in 1995 offers a global trading platform where anyone can trade practically anything. It’s scale and reach is remarkable, with a presence in 33 different global markets, a membership base of 168 million, and an average of $1829 worth of goods traded on the site every second.

In Australia, eBay commenced trade in October 1999 and according to Nielson/NetRatings Netview is Australia’s leading online marketplace with approximately 3.7 million unique visitors in August 2005 and according to Hitwise, was Australia’s second most popular website in September 2005.

One in every five adult Australians (you need to be over 18 to join) is a member of eBay, while 2500 Australians use eBay as their primary source of income. In 2004 $600 million was traded on eBay, an increase of 110% over the previous year. The most expensive item to sell on ebay.com.au was a celebrity race at the F1 in 2005 that sold for $100,000. The most expensive item ever sold on eBay is a private business jet for US $4.9 million.

The principles behind eBay are simple – and are best described as a ‘perfect market’ – where the person that bids the highest price for an item enters into a binding agreement with the seller. Unlike a traditional retail arrangement where the retailer dictates the selling price, eBay allows the buyers to dictate the price they are willing to pay for an item.

The reason for eBay’s global success is their implementation of a user feedback system that gives a potential buyer the confidence to buy from a seller, whom they can’t physically see or speak to. The way it works is simple. Every time you make a successful transaction through eBay you get one feedback point. For example, if I successfully sell an iPod, the buyer will leave me a positive feedback rating (after they receive the item by post), I will then leave the buyer a positive feedback score and we both have a rating of one. Now, the next time I go to sell something potential buyers can review my previous sales history to assess whether I am to be trusted. This feedback system works well, as anyone who doesn’t trade ‘well’ will receive negative feedback (ie. ‘Don’t buy from this seller as he takes the money and doesn’t send the item) and therefore will find it hard to make the next sale. It also means that traders with a large feedback rating (eBay calls these traders ‘Powersellers’) often get higher prices due to potential buyers having extra confidence to make the transaction.

The other remarkable thing about eBay is the amount of fantastic stuff you can find either by browsing through various categories or using the search tool. Whether you are interested in a rare Pez dispenser or a brand new iPod chances are you’ll find it on eBay and if it’s a new item you are after you’ll probably find it at a discount to retail as well.

How To eBay

The first thing you’ll need to do to use eBay is register. Simply enter your Personal Information, choose a user ID and password, and then verify this by checking your designated email address. If you choose to register with a free email address (like Hotmail, Yahoo or Gmail) you will be required to verify your registration by entering Credit Card details – don’t worry, eBay won’t charge you anything, they just need it to confirm your identity. Once registered you’ll be able to buy and sell with eBay.

Now that you are registered it time to learn about the eBay system. The two main ways of finding things through eBay are by browsing or searching. To browse, simply click on a category of interest on the left hand side of the screen, or click on ‘Lots more’ to see a complete listing. Once you click on the main category you can then choose from a sub-category. eBay now displays a listing of all items in that category that are available to buy, sorted by auction time remaining. To search eBay simply use the ‘search’ box in the top right corner of the screen.

Buying on eBay
eBay sales generally take place in an auction format – that means a seller lists their products for sale and buyers have anywhere from one day to ten days to bid on an item. When you click on to an item eBay tells you the current bid and how much longer the auction has to run. If you’d like to bid on an item simply click the ‘Place Bid’ button. The Place a Bid screen is simple – just enter the maximum amount you are prepared to pay for an item (and remember, shipping is extra so try to get an idea of shipping costs before bidding) and eBay will bid up to that maximum amount. Lets say you are happy to pay $100 for an item, the maximum bid you would enter is $100. If somebody else bids $90 then you will be the winning bidder at $91. eBay only bids up to the maximum amount necessary for you to win the auction, and often doesn’t go as high as required. If you do bid on something and then get outbid, eBay will automatically send you an email notifying you that you should increase your bid.

If you see a product you are interested in you can also track the items progress via the ‘watching’ system. Once you find the item you are interested in watching just click ‘Watch this item’. When you next log in to ‘My eBay’ (at the top of the screen, next to the Sell button) information about this item will appear in your list. The ‘watching’ system also notifies you when the auction is close to ending, as a reminder that you may want to bid.

Selling on eBay
Selling on eBay is more involved then buying. The first thing you’ll need to do is take digital photos of your item so that you can add them to your listing. Make sure these are clear and taken in good light otherwise viewing may be difficult for potential buyers. Next, Click on ‘Sell’ at the top of the eBay screen. From here follow the step-by-step guide to adding information. You’ll need to select the appropriate category to list your item under, come up with a catchy Auction Title, decide on a listing price and postage price, come up with a description of your item and then decide on the length of your item.

Once your item is listed be sure to check your email regualrily. In my experience you’ll generally receive between 5 and 10 email questions per auction. These need to be answered in good time so the potential buyers have a chance to place their bids.

Once your item sells you’ll need to invoice the winning bidder (and calculate appropriate postage charges) and wait for payment to clear. Once payment clears take your item down to Australia post, wrap it up and post it to the winning buyer. Once the winning buyer receives your item they should leave you feedback, and then you should reciprocate by leaving them feedback.

To optimize the amount you get for your item make sure you take high quality photos of the item and make the description as detailed as possible – so that potential buyers can be confident bidding. Also, make sure when potential buyers make contact you respond quickly. With a lot of competition on eBay buyers will find another similar item and bid on that if your description and photos are no good.

If you’d like to take selling on eBay to the next level you can download a program called Turbo Lister that makes listing your things easier.

Security on eBay
On eBay the main security mechanism is Feedback Rating. All eBay users accumulate feedback ratings, you’ll get one point for a good feedback and lose one point for negative feedback. It’s up to you to get to know your seller – check out previous sales history, ask questions and try to get a sense of the quality of merchandise they sell. After you are satisfied place your bid. If you’ve done all of your investigations and the transaction does turn sour eBay and PayPal (eBay’s online payment system) has a buyer protection program that covers each transaction up to $1500.

If the transaction is valued at over $1500 eBay recommend the use of a reputable escrow service where the escrow service holds a buyer’s money in trust until the buyer has had the opportunity to receive, inspect and approve the goods. Another option is to use Australia Posts COD (cash on delivery) option where the seller receives the money after the item has been collected.

Paying for an item on eBay is easy and most sellers offer a variety of different payment options. The easiest and best integrated with eBay is PayPal – an online payment system where you can simply and safely use your credit card to pay for purchases. To use PayPal you’ll need to register (a straightforward process) for an account. Payments made with PayPal are instant meaning the seller can dispatch the item as soon as he receives notification.

Other payment options are Direct Deposit (where the seller provides you with their bank details), just remember to leave a reference like the eBay transaction number so the seller knows who the payment is from or COD.