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OutsideTheCode.com >> The Importance of Having Your Own Web Store - Part I
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The Importance of Having Your Own Web Store - Part I
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Rob Taylor, Owner, TConsult, Inc. www.enginesforwebsites.com
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January 31, 2008
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Like many other people, I have my own Web aspirations. Being a programmer you could say they fall outside the code. I love writing programs and
working with clients but I have my other things going on as well. They have changed quite a bit over the years as I have started and stopped
various projects but I am finally at a point where I realize that you must apply your trade to the things you have true passion for. I am going
to cover passion in another article coming soon but for now lets just say I have some irons in the fire of things that I have passion for.
I love hunting and fishing. That is where my true passion in life exists. Recently, I decided that I wanted to start my own store for ice
fishing products named IceSkimmer.com. At this time, it is just a shell of what I
envision it being. The reasoning is two fold. I want multiple revenue streams for my company and doing something like this keeps me in tune
with what I do for many other people - helping them run a Web store.
I Know! I will sell on eBay!
Of course, the first thing that comes to mind when selling online is eBay. It has many advantages. Obviously it already has tons of traffic
making it a good place to start a name. At least it used to be. I had not been to eBay in a long time. Somewhere in the cobwebs of my mind
I remember that eBay were raising their listing fees. But it was not relevant at the time. I have spent a lot of time in the last six weeks
on eBay and I certainly do not look at it like I have in the past. WOW is it expensive to sell there these days among
a few other things that are not economic friendly to Web merchants.
How expensive? Well, lets break down the numbers and look at the cost of listing and selling a $40.00 item on eBay.
- $1.20 listing fee (mandatory)
- $1.00 if a reserved price is desired (optional)
- $0.20 if you want to use Buy It Now (optional)
- $0.35 if you want a picture next to your item in the search results (optional)
- 5.25% of the initial $25.00 value of the item ($1.31) + 3.25% of the final selling price minus the initial $25.00 (mandatory)
You will spend $3.29 to sell a $40.00 item and that is if you use the bare minimum of eBay listing features - $1.20 for the listing fee and $2.09
if the item sells ($1.31 + $0.78). But the bare minimum of features make the listing less attractive and offer no protection for the buyer should
bidding end at a value far below what the seller would sell it for. So you almost have to use the nickel/dime features. It does not take long to
get in the neighborhood of $2.75 just to list the item and $5.00+ if the item sells. That is bad news if you are trying to sell retail items with
only a $10.00 profit margin.
And by the way, eBay stores do not make it cheaper to list items on eBay because store items do not appear in the auction search results. Stores are cheaper to
list items but they only appear in your store and can only be listed for a fixed price (no bidding). If you want your items to appear in the auction search
results then you have to list them under the traditional auction format and pay the same fees as everyone else. Thus, if you want eBay
users to see your store then you must list a few items for auction so a link to your store will appear in those auctions. Otherwise, you have to rely
on people to search for items under the eBay Stores section or use off site marketing to get people to your eBay store.
Effective February 20, 2008 eBay listing fees are going down but be careful
Amongst many complaints about high listing fees, eBay is lowering listing fees on February 20th 2008. You want to be careful here. While eBay has
reduced the listing fee by roughly 16% and made it cheaper to add pictures to your listing, they have jacked up the selling fee. It will now be 8.75%
of the initial $25.00 value if the item + 3.50% of the final selling price minus the initial $25.00. So it will be a little cheaper to list items
on eBay but those costs will come right back to you if the item sells. The only thing eBay has done is reduced the expense of listing an item in
the event that item does not sell.
eBay was built for used items and deals - not retailers
I could go off on an entire diatribe about my opinions on eBay's selling model these days but that would divert in to uncharted territory. I will
just keep it short. eBay was a Website built for selling used items. It was never meant to be a place for retailers. Yet, eBay kept listing fees
low enough for retailers to do well. Then they raised their prices, which you would think was an attempt by eBay to cast aside retailers and
keep the auction house for what it was intended to be. Instead, they raised their prices creating very small margins for retailers
and then turned around and started offering more elaborate merchant services. It is amazing stuff and the company has taken a lot
of flack for it in recent months as their stock has planed and rivals like Amazon.com have come up behind them.
eBay's rising listing fees have caused many to jump ship to other services such as Amazon.com but they are not any cheaper or better. In fact, they are more expensive
than eBay and this will likely catch up with them as well. While Amazon.com holds advantages over eBay such as an actual place to sell items where traditional
buying occurs, no listing fee, and standard credit card processing
that eliminates PayPal fraud, their selling commission is more than eBay - up to 15% in some categories. It is hard for most to make any money selling retail
items with those numbers. You would need to get your items at double next to nothing to be able to make any substantial profits on Amazon.com.
The Never Ending Line
Yet, people keep doing it. Have you ever seen the movie The Wall where during the song Another Brick in the Wall Part II a never-ending line of students
are marching down the walkway in the factory only to fall in to the machine and under the hammer? As soon as one falls in another one gets in line.
It's an age-old incentive. If you tell people they can make more money then they will get in line. As one finally figures out that it is way too expensive,
another soul gets in line. Historically, eBay was able to make many people prosperous by selling off the Internet. Amazon fell in to eBay's shoes when eBay
alienated everyone by raising their prices. But whether it is eBay
or Amazon, retailers do not have enough of a bottom line to survive by using these services as their sole selling vehicle. If at all.
Lots and Lots of things but where did all the consumers go?
eBay's high fees along with its back-asswards push towards a retail selling vehicle has made eBay a business-to-business environment. The only way to beat the
fees is by selling multiple items in one auction, which is called a "lot". It is difficult to find many retail items by themselves. This
has basically pushed the typical buyer, who typically only buys one thing, away. You can't find "IT" anymore. It is more like "ITS". If
you are a brick & mortar store looking to stock your shelves with items then you can find good deals on eBay. In fact, one could argue that
eBay is tailored to you these days permitting you can find legitimate items. But the traditional marketplace that
sells individual items to individual consumers is gone when it comes to brand spankin new items. There is simply little room for profit
and too much to lose if your item does not sell.
Certainly this has pushed the consumers away. I can't speak for all categories on eBay but the customer base in sporting goods is way down.
There are nowhere near the items listed that there used to be and many items not taking bids.
Can you "legitimately" compete?
Now lets look at the competition factor on these sites. As I wandered through sporting goods looking over merchandise I realized that one vendor
in particular made up for a large percentage of goods being sold there. The user even had two different accounts for selling. For the most part, this
vendor listed the exact same product in different combinations several times per day and far below what they retail for at legitimate outlets like
Cabelas and Bass Pro Shops.
Most of what this user was selling was in lots but some of the listings were for single items. When you look at eBay's listing fees in conjunction with how
many listings this user had per day that did not sell, you do not exactly have to be a rocket scientist to figure out that something fishy was going on.
It would be virtually impossible to list those items time and again at such outrageous listing fees without them being stolen, factory blunders, or flat
out fakes. There is no way that distributors are selling those items at such low rates that you could spend literally one hundred dollars or more per day
in listing fees and still come out on top. That is what you are competing with on eBay folks.
A New Generation of Online Shoppers
Number one above leads me to my next point. eBay, I believe, made it easy for people to shop online without using a credit card
because of the popularity of PayPal.
It took many years for people to finally gain confidence in using their credit cards online and the younger generation grew up
with the Internet and shopping online as being nothing foreign to them. The times have caught up.
In this day and age, everyone is shopping online. Five years ago I would tell you that I still do not know many people who have ever
bought something online. Now I can't think of anyone other than my grandmother (91 and still driving god bless her soul) and my
Dad (who asks Mom to buy it online for him). People are not as freaked out about it as they used to be and buying on eBay is not so
cool anymore as evidenced by the drop in items and buyers. People will simply buy their items anywhere in these days. The credit card
companies have also helped with their fraud protection policies that have gone through major changes in recent years.
HOLY SMOKES - I can't believe I just complimented the credit card industry.
So what is the real attractive power of these companies? The same thing it always is when it comes to the Internet - traffic. It is
the whole nine yards. If you use these services you basically get free traffic. It is the easiest and cheapest way to get your items
in front of buyer's eyes but at the expense of very high fees, risk of not selling items at very high fees, and potentially fraudulent
competition that kills your profits.
Wrapping it up
I tried to keep this section as brief as I could but it was a challenge to try and focus on an article that helps Web entrepreneurs
and not divert in to the economics and poor decision making of eBay. But like I said, eBay is a place to sell next to nothing items
be them used or obtained at next to nothing. If eBay does not realize this themselves then that is their problem. But what about you?
Lets talk about that is Part 2.
Part 2 - Can the Canned and Get Serious
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