Internet auction website eBay is one of the fastest growing retail phenomenons of our time. The opportunities offered by an eBay business stretch way beyond the chance to sell unwanted bric-a-brac or discarded christmas presents. eBay has allowed millions of people to go into business who previously wouldn’t have considered it, while growing numbers are making healthy second incomes by buying items and selling them online for profit. The simplicity of setting up an eBay business is a big attraction for many people.

eBay was started by Pierre Omidyar in September 1995 as a result of his wife’s desire to add to her collection of sweet dispensers. The site now has over 181 million customers worldwide, 10 million in the UK, with up to three million items from Britain on sale every day. With so many customers online, it is not surprising that many people choose to start an eBay business.

As any user will know, eBay features just about everything for sale, from the weird and wonderful to the plain and practical. With thousands of UK customers looking for an eBay bargain every day, it’s unsurprising that some entrepreneurs have decided to take advantage and use the website to generate a full-time eBay business.

In fact, more than 724,000 professional sellers in the US alone use eBay as a primary or secondary source of income.

Julie King, from Newcastle, gave up her job as an IT consultant after she found she could buy and sell designer shoes and handbags on eBay for a profit. Her eBay business, Killer Heels, now makes over £6,000 a month buying shoes and bags from wholesalers and selling them on eBay.

Amid all the wacky eBay stories that regularly invade the press, such as the housewife who put herself up for sale for £25,000, there are plenty of thriving businesses taking advantage of the eBay phenomenon.

Wilmamae Ward sold vintage clothing through her eBay business, The Gathering Goddess.

“I had been buying beautiful vintage clothes on eBay for several years and had amassed a huge collection for which I no longer had room,” she says. “I decided to sell some of my collection back on eBay. I was amazed at the prices achieved so I began to sell more and more and it just snowballed. eBay allowed me reach many customers

“I soon decided this was a business I would love doing as I was able to indulge my fashion obsession and make a great living at the same time. It also enabled me to work from home and make my own hours.  

“In addition, unlike a bricks and mortar shop which has to rely on passing trade and extensive marketing, eBay provide all of this on a global basis without the overheads.

“I'd be mad to open up my own shop. It makes complete sense to me to have my business on eBay.”

"Starting an eBay business was quite easy, I think the most important thing is to find a niche that few other people are competing in, if you can do this then this is probably the best way to start an ebay business."

eBay provides a unique opportunity for entrepreneurs. Starting an eBay business can be lucrative if done properly, this eBay guide will help you start and run a great eBay business. Whether you are looking to sell personal items on eBay or run a full ebay based business, this guide provides the information you need to get started on eBay and become an eBay success story.

Setting up an eBay business is much like setting up a normal home-based business as you don’t really need anything other than a computer and storage space. Your biggest challenge will be finding plenty of low cost products you can sell at a profit.

Getting stock

The most obvious and efficient way to accumulate products is to buy them in bulk from wholesalers. Julie King, founder of Killer Heels, makes over £72,000 a year by getting clothes and shoes from warehouses and selling them on eBay. Finding a wholesaler that will supply you with cut-price stock can be a challenge, but if you shop around you will be able to find bargains.

If you strike an agreement with a wholesaler, you should be able to get a constant supply of warehouse stock for your new business.

“Sellers don’t really like to divulge where they source their products as this is where they make their profits,” explains a spokesperson at eBay. “For the older items, people go to markets and charity shops. For newer items, they go to wholesalers, manufacturers and liquidators.”

You may have a collection of items that you wish to get rid of to start with, or there may be a bric-a-brac shop down the road that sells products at a low price. Make sure you explore each avenue to achieve the best possible profit margins.

Becoming an eBay member is relatively hassle-free – and is one of the reasons it has more than 180 million members across the globe. Simply choose a name and a password and you’re in. To start selling you follow the clear instructions giving details of the item you are selling and selecting the relevent subsection.

You can also pload a picture from a digital camera, or one off the web, to illustrate your product.

The next steps are creating a business account, and setting up an online shop. To start trading under your business name, set up a business account when you register with eBay. All you need in order to do this is a UK address, to receive a confirmation letter through the post, and bank account details to set up a direct debit.

If you enter your VAT registered number when you create this account, then you won’t pay any VAT on seller fees. (If you don’t have a VAT registered number, register with HM Revenue & Customs.)

However, be aware that as from March 1 2007, changes to eBay’s EU stucture meant that there has been a change in the prices offered to VAT-exempt sellers. The gross fee now offers VAT at the Luxembourg rate (where eBay’s new EU entity is based) of 15%. This means your fees will rise slightly.

To be able to open a shop, you need to have a PayPal, an international online transactions company, account plus a minimum score of five positive feedback reviews. Alternatively, if you don’t have a PayPal account, you need a minimum score of 10. You also need an automatic payment method on file to pay seller fees (credit card, debit card, bank account.)

Then go to http://stores.ebay.co.uk/ and click on ‘Open a Shop’ on the right-hand side of the page.

Your customers will then be able to add your shops to their ‘Favourite Shops’ list in ‘My eBay’, and you can choose to set up and receive reports that analyse your sales.

There are various options to make you stand out from the crowd, such as premium listings and titles in bold. Although these options do not cost much by themselves, it will add up if you are listing many items. Work out which items need pushing by trial and error – you can always take action in the future if an item needs to stand out more.

Your user ID on eBay contains a comments section from customers and buyers. You are rated for your reliability and honesty and comments stretching back for a year are displayed. Although you have a public right to reply to comments, a long list of negative comments could prove disastrous. New eBay users, in particular, will be cautious when parting with their money and if you’ve gained a reputation for poor service they are unlikely to turn to you.

In the formative days of your eBay business, storage space shouldn’t be a problem. Once you have a profitable business up and running, you may then want to rent out space to store your items.

“Don’t rush into buying storage space,” advises an eBay spokesperson. “If you start off in a small manner, you can use your living room, garage or loft for storage. You’ll know when sales demand that you need more storage space.”

Costs

It costs between 15p and £2 to list an item on eBay, depending on the opening value or reserve price of the item. The site takes a slice of the selling fee once an item is sold, depending on how much the item is worth. For items under £30, eBay takes a 5.25% share. For items between £30 and £599.99, the fee percentage is 3.25% for the part of the high bid above £30, and for items over £600, the percentage is £1.75%.

Setting up an online shop that displays all of your goods costs £6 a day and the first 30 days are free.

Making and receiving payments through Paypal, eBay’s online payment system of choice, also incurs a small transaction charge.

You can also pay slightly more to get extras for your shop, to help it to stand out from the crowd. You can even hire a professional to design your eBay store for you.

Another advantage of an eBay business is that you shouldn’t be too tangled up in red tape. With no extra staff necessary and the ability to run the entire business from home, you won’t be spending your days getting an ulcer over regulations.
Although eBay itself is user-friendly and a pleasingly accessible marketplace for your products, it does have several rules which you have to abide by. The most significant of these rules for small firms is what you can or can’t sell on the site.
Here is a list of what eBay considers to be unacceptable auction items:

Aeroplane tickets
Alcohol
Animals and wildlife products
Catalogue and URL sales
Counterfeit currency and stamps
Counterfeit and trademarked items
Credit cards
Drugs and drug paraphernalia
Embargoed items and prohibited countries
Firearms and ammunition
Fireworks
Franking machines
Football tickets
Government IDs, licences and uniforms
Human parts and remains
Lockpicking devices
Mailing lists and personal information
Offensive material
Prescription drugs and materials
Recalled items
Satellite, digital and cable TV decoders
Shares and securities

Obviously most UK small firms wouldn’t consider selling human remains or grenade launchers, but it’s worth going through this list as selling agreements on items such as football and aeroplane tickets are strictly controlled.

Other items such as food and batteries are in a grey area for eBay, which describes them as “questionable”. So if you have 1,500 cream cakes to sell, check with the site first before you try to auction them off.

eBay promises tough action against those breaking the rules and you could find yourself barred if you persistently flout the code of conduct. Not delivering items on time or not paying for goods is frowned upon – not only can this get you in trouble with eBay, it will impact on your image as a reputable business.

Because you are a reputable business, there are also rules from HM Revenue and Customs (HMRC) to have to follow.

If you’re trading as a business, during the first three months of trading, you have to contact your local HMRC office to register as a self-employed sole trader.

If you expect your turnover to exeed the threshold for VAT (£60,000 in 2005/6) you must also advise and register with HMRC.

You don’t, however, have to register with Companies House.

Any profit from the business will be treated as personal income, meaning you have to complete a self-assessment tax return. But don’t worry: if your turnover is below £15,000, you only need to complete three lines on the self-assessment form: your total income, your total allowable expenses, and your profit.

Make sure that you also keep proper records of all transactions

Making a profit on the items you buy and then sell is the very essence of starting an eBay business.

There is no sure-fire way to make a profit, but by sourcing goods at a low price and selling them at the going rate, with prompt delivery, you should begin building up your takings. There are certainly plenty of people out there looking to buy - eBay offers a large marketplace.

“There are 10,000 businesses in the UK selling on eBay,” explains an eBay spokesperson. “They are attracted to it because eBay is a ready-made ecommerce solution – everything is taken care of, all you need is a computer and a digital camera.”

As any financial risk to your eBay enterprise is small, you can experiment with the goods you are putting online. Vary the prices to see what the market rate is and then stick to it. Check out what your competition is doing whenever possible, as they may be undercutting you. With so many eBay businesses in the UK, the chances are that someone else is doing what you are doing.

By their very nature, auctions are unpredictable, but they are the only way to ‘test the water’ and see what kind of demand there is for your stock. When you are posting your first few products, set a low price and see how many bids you get and how much the price rises.

You can set a reserve price on items over £50. Only do this if you are extremely confident they will sell for the set price.

It’s best not to set reserve prices on the first items you sell, as you will not be able to work out the market going rate for specific items.

An eBay spokesperson says, like many businesses, there is no guaranteed way of making a profit on the site.

It’s all about the market. Buyers love the chance of getting a bargain – do your research to see what you are likely to get, look at your profit margin and go for it.

You should only used a fixed price if you are very confident about the auction