eBay is something of an internet veteran. Founded in 1995 by Pierre Omidyar, the site is now a staple for bargain seeking consumers and independent retailers. But do opportunities still exist for eBay start-ups now that the market is so crowded?
There’s no doubting eBay’s popularity. The site recently topped a list of Australians’ most frequently visited websites, with a Nielsen Online report revealing the online auction site attracted 5.58 million unique visitors in January alone.
Forrester Research analyst Steven Noble says eBay’s standout performance shows it has become a staple not only for consumers but for businesses.
“eBay is a significant component for the economy. There are many businesses that do use eBay as a shop front, some of which have their own offsite shop fronts as well,” he says.
The stereotypical image of a stay-at-home mum is fading fast, with eBay entrepreneurs coming to the market from many different backgrounds in the hope of selling a vast array of items.
Changing face of eBay start-ups
Small retailers were initially attracted by the low cost of entry and ready-made access to millions of potential customers provided by eBay, happy to give up a slice of sales for the privilege of a few extra sales.
But many eBay shop fronts are now highly professional, regimented operations selling to a global marketplace. The bar has been raised for start-ups hoping to enter the space, either as a standalone store or as an additional sales outlet.
Online retail veteran Nathan Huppatz has used eBay to sell a vast array of items – from fishing gear and Indian rugs to musical instruments and fancy dress costumes.
Huppatz started selling fishing gear on eBay in 2004 after identifying a gap in the market.
“We did some research to see which categories there were opportunities in. We looked at eBay in the US and the UK, and saw that there weren’t many sellers of non-branded fishing gear,” he says.
“A lot of Australian buyers were also not finding what they wanted on Australian websites and were buying from overseas.”
Huppatz says the advantage of eBay is that it makes it easy to get your picture and your brand in front of a huge number of people relatively cheaply.
He believes the market has changed a lot since 2004, with a big shift towards business-based sellers selling at a fixed price.
“When we started, the majority of sales were auctions. These days, over 70% are fixed price sales, so the marketplace has become a bit more competitive and saturated,” he says.
“The quality of sellers has improved over time and so has the education of buyers. So newcomers need to think about how they’re going to differentiate themselves on price, customer service and so on.”
Barriers to entry
Huppatz says eBay is also a very transparent marketplace, which means customers can see what you sell and how much you sell, leaving you more exposed to copycats.
“I would advise businesses to build up their own website and try to build up a customer base to give the business some protection,” he says.
According to Deborah Sharkey, eBay managing director for Australia and New Zealand, eBay businesses are reaping the rewards of an increasingly competitive online retail sector.
“We are at an inflection point in Australian retail where millions of Australians are increasingly choosing to shop online instead of going into a store,” Sharkey says.
“Smart local operators acknowledge that consumer behaviour shifts and are adopting multi-channel strategies to succeed in eCommerce, as well as using the strong Australian dollar to import more and pass those savings on to their customers.”
Sharkey says domestic eBay sellers grew 10 times that of retail in 2010, indicating there are still plenty of opportunities in the market.
She adds that in 2010, the top 2,000 sellers on eBay.com.au had an annual turnover starting at over $120,000, with the top seller reaching more than $12.6 million.
Sharkey says 2011 will witness similar growth thanks to faster internet services and increased mobile usage, in addition to the rise of online shopping.
According to business support network Work From Home in Australia, not everyone encounters success with the eBay business model.
Common mistakes include failing to include photos of the items, opting for lengthy auction times, starting the bidding too high, and sloppy or complicated listings.
But once you have conquered these, WFHIA says you are near-guaranteed to get traffic as your items will be displayed in a professional and concise format.
“This definitely beats setting up your own store and then doing all the legwork needed to draw traffic to your site and keep people coming back,” it says.
WFHIA identifies other advantages of operating an eBay business:
Working from home
Not only do you get to be your own boss, all the work can be done from the comfort of your lounge room. Keep in mind you will need an area in which to store your stock.
eBay guides you
eBay will help you through the process of setting up an online store in a simple, step-by-step format. You don’t need any experience in web design and can have your site up and running in a matter of minutes.
Less pricing pressure
With regard to auction items, eBay only asks you to set a minimum price, prompting customers to place higher bids. If the items are in high demand, you could end up making a huge profit.
All communication is done via eBay’s internal communication system, creating a buffer between your home-based business and your customers.