How to Make Money on eBay

Whether you're looking to clean out your closets and make a few bucks, turn a hobby of collecting into a profitable venture for extra income or establish a small business as a primary source of income, eBay offers an excellent way to make money by selling stuff.

Originally called AuctionWeb, eBay made its debut online in 1995, when founder Pierre Omidyar offered a broken laser pointer for sale and found a collector to purchase it. Today, eBay is the world's largest online marketplace with more than 97 million active users around the globe. The total value of goods sold on ebay in 2010 was $62 billion, or more than $2,000 in sales every second. With more than a million people worldwide depending on eBay as their primary or a secondary source of income, it's no wonder the Web site is such an attractive marketplace for those looking for some extra cash, as well as for entrepreneurs, and seasoned business owners [source: eBay, Inc].

The potential for making money on eBay looks promising, as the overall volume for online retail sales increased 13 percent in 2010 and is expected to keep growing. Consumers are attracted to online shopping because of the wide selection of products, round-the-clock access, the convenience of shopping from home, and the competitive pricing. And as eBay offers more online marketing and customized offers to attract both buyers and sellers, its reputation as a marketplace where consumers can find exceptional value and unique merchandise should continue to grow [source: Standard & Poor's].

Getting started on eBay is easy. Many eBay sellers have started small by selling a few items they weren't using, then discovered the fun and profitability of running a business online. Some have turned to eBay to fulfill a dream of owning a business or setting up a retail empire, while others are use eBay to expand an existing brick-and-mortar business online. The benefits of starting a business on eBay are many: There's no need to raise start-up capital, build up inventory or rent the right location.

Finding something to sell is as easy as deciding to declutter your basement or part ways with your doll or baseball card collection. Some eBay sellers offer items they've made, such as paintings, crafts, or even patented items or machinery, while others source unique items from overseas or from wholesalers. You can start small, with one or two clay pots or holiday ornaments, or on a larger scale with dozens of silk scarves or an inventory of hand tools.

Read on to learn more about making money on eBay.

Getting Started

Before you start selling on eBay, spend a few hours getting to know your way around the site. You'll find almost any item you can imagine available for sale, from iPhones and camera equipment to new and used books, as well as recipes, coupons, or cars. Get to know the items that eBay prohibits selling as well, such as firearms, military weapons, identification documents, human organs or parts, pets, or any items that infringe on an existing copyright or trademark.

Then, do a little research on the item you want to sell. Go right to the source; type in "antique Roman coins" or "cowboy hats," and get a feel for the market for your product. See how other sellers describe and price their products, and track the results of a few auctions to learn how to position your own items for sale.

Making money on eBay is just like running any successful business. You'll need to consider all the administrative and upfront costs, monitor your product quality and positioning, market and promote your items, establish pricing, process and fulfill orders, and provide excellent customer service.

Here are some fundamentals new sellers should know:

Learn about eBay selling fees. EBay charges four types of fees to sellers: an insertion fee charged when you list your item, upgrades for enhancing your listings, a final value fee based on the selling price of your item, and fees for collecting payment through PayPal. Consider these fees when determining your listing price.
Choose the right format. EBay offers two ways to sell. In the popular auction style, your item will go to the highest bidder, so this format works best if there's a high demand for the item you want to sell. You can also set a "Buy it now" price so that a buyer who really wants the item can buy it immediately at the price you've set. A fixed price format makes your item available for immediate purchase; this works well if you know what your item is worth.
Market your item wisely. Start with an informative title that includes keywords a buyer might enter into eBay's search engine. Then write a a few lines that describe your product accurately and include clear, close-up photographs to illustrate your product from different angles. Include size, color, information about the item's conditions or defects, as well as terms and conditions.
Ship promptly and follow up with your customer. Build a good reputation as a seller by following up with your buyer as soon as the auction ends or item is purchased. Once you receive payment, package the item carefully and ship it out promptly. Let your buyer know you appreciate their business by inviting them to leave positive feedback to encourage repeat sales.

Read on to learn how you can earn special designations with added benefits as your eBay business grows.

Becoming a Power Seller

Once you've become a successful eBay seller, you can set your sights on becoming a PowerSeller, a special designation that's based on your record of selling high-quality products, providing good customer service, and achieving a certain quantity of completed sales. Higher sales volume results in higher PowerSeller tiers, while good customer feedback leads to Top-rated seller status.

To become a PowerSeller, you must achieve at least $3,000 in sales and 100 transactions over a twelve month period. Additional minimum requirements must also be met, including an account in good standing and 90 days on the site.

Sellers must also maintain excellent feedback and detailed seller ratings (DSRs). PowerSellers must receive 98 percent positive feedback over the past twelve months as well as high detailed seller ratings in four key areas: item as described, communication, shipping time, and shipping and handling charges.

Five tiers of PowerSellers are offered based on sales volume.

Bronze: $3,000 in annual sales or 100 transactions
Silver: $36,000 in annual sales or 3,600 transactions
Gold: $120,000 in annual sales or 12,000 transactions
Platinum: $300,000 in annual sales or 30,000 transactions
Titanium: $1,800,000 in annual sales or 180,000 transactions

As a PowerSeller, you can use your earned designation to promote your business, helping to establish confidence and a positive reputation. In addition, eBay offers higher levels of customer support and account servicing as your tier ranking climbs, including UPS rate discounts, health insurance options, discussion boards, and marketing templates. PowerSellers must comply with all eBay policies, including rules against shill bidding (a tactic that artificially inflates an article's value), feedback manipulation, or counterfeit policies; the number of allowed violations increases with the tier level.

Top-rated seller designations are reviewed every month, and require a minimum of 100 transactions and high ratings on DSRs. In addition to Power Seller benefits, Top-rated sellers receive 20 percent discounts on final value fees, promotion in best match search results for fixed priced listings, and a top rated seller badge on item pages.

Ready to get started and sell your first item? Visit eBay's Seller Information Center to learn everything you need to know about setting up your business and making the most of this online marketplace.

Lots More Information

Related Articles

10 Budget Basics Every Parent Should Know
10 Green Living Ideas for Frugal Families
10 Tips for Staying on Budget
10 Tops for a Debt Free Life
Can you penny pinch and still have fun? Frugal Living Quiz
How Personal Budgets Work
How to Know When to Spend and When to Save
Why does having too many options make it harder to choose?

Sources

Collier, Marsha. eBay for Dummies. Wiley Publishing, Inc. 2009.
eBay.com. "Guide for New Sellers." http://pics.ebaystatic.com/aw/pics/pdf/us/sellercentral/pdf/New_Selling_Guide_20110930.pdf.
eBay.com. "Top-rated & PowerSeller Program." http://pages.ebay.com/sellerinformation/sellingresources/powerseller.html
Entrepreneur. "19 eBay Success Secrets." September 7, 2005. http://www.entrepreneur.com/article/79796.
Knox, Tim. "The Secret to eBay Success. Entrepreneur. June 1, 2004. http://www.entrepreneur.com/article/71112
Standard & Poor's. "eBay, Inc." Standard & Poor's Stock Report. October 29, 2011.
Turner, Marcia Layton. "eBay Made Easy." Entrepreneur. November 1, 2006. http://www.entrepreneur.com/article/169204.