In a highly competitive eBay niche, such as consumer electronics, you generally can’t affect prices very much. But where ever there is reduced supply, you can receive what economists call monopolist profit: That is, restricting supply can drive up the price and increase profit.

In my last example I used watches, so I’ll stick with it. I bought 100 watches from Hong Kong for around $2.50 a piece. As they were unique (nobody else was selling them) I guessed my margin would be anywhere from 300-1000%) I immediately put 10 up for sale at $1 reserve. After the week was up they ended up selling for between $10 and $15.

Which was ok, but I thought I could do better. The next week I put just one up, with all the bells and whistles, highlighted, featured etc. Guess what, it sold for $50. My first week selling 10 watches I made around $70 - when I only sold one I made $40.

The moral of the story, when you have a unique product you determine the price by fixing the output. Try it, it obviously doesn’t work all the time but when it does it can be very lucrative.

The Zippo is a perfect example of perceived value. There are hundreds of suppliers that could produce just as quality lighters, yet most retailers will only stock the high priced Zippo. Why, because consumers perceive Zippo Lighters are better than their non branded counterparts, and as a result retailers are able to bank a higher margin. This argument is equally true in industries like cosmetics and brand name clothing.

The highest margin I’ve ever made on a product was on non branded, expensive looking watches. Though their quality was not bad they looked very expensive and they were vaguely associated with a name brand watch. On top of this their size made shipping cheap.

Some general tips for creating perceived value

1. High quality/contrast photo - you might even consider hireing a professional if its worth it, or if you don’t have a good quality camera, borrow one from a friend. Remember about good lighting and Mise en scène (basically means all the other stuff in the picture).

2. Price example - Put a high RRP in the title or body text .

3. Auction Extras - Bolding, featuring or highlighting your auctions means your serious about them and the product your promoting is somehow superior than its rivals.

4. Hype - Don’t over do it, or you risk devaluing your opinion and hence your product, but well written enthusiasm  is a must. Read up on copywrighting if your not inherently skilled, check out Copy Blogger. Writing good copy is a must for all online sellers.

If your like me and would rather not take the risk of dealing with them, there is still a lot of general fraud information to get out of the article.

When dealing with people in any country, consider…

1. Is the country a known producer/exporter of the product, it’s pretty safe to assume Nigeria is not the iPod export capital of the world.

2. Research with official sources of information. Look on Government sites, banks etc, especially for discrepancies in their story.

3. Never send any money via Western Union. Ever! I would also add to not conduct transactions in eGold, for the same reason as chargebacks are difficult/impossible.

What does this mean for the small auction seller? It is very hard to compete.

But not all auction sites are this competitive. I have personally had great success selling on the top New Zealand auction site Trademe.

The advantages of a smaller auction site are lower fees and less competition. The disadvantages are obviously less demand and the logistical difficulties.

Lets look into the difficulties:

Less demand: It’s easy to think that the reduced demand and reduced supply (competition) will offset each other, meaning a smaller auction site will not be more attractive than eBay. But auction theory states that you only need a couple of interested buyers to sell something for a  fairly high price.

Logistical difficulties: These can be hard to get around. If the auction site is based in your country then you will be fine. But for other country’s you will have to partner with someone who lives there. Basically once you have found a partner, arrange payment and shipping for the goods to your partner, and write up the auction. Your partner will keep on top of listing, payments and shipping the individual goods and if all goes well, will give you your cut on a regular basis.

“The 21st Century Business Herald reported that Hong Kong-listed Tom Group would announce its takeover of eBay’s China division and its PayPal service within a few days, citing a well-informed source. An agreement between the two companies had already been signed, it said.” Source

eBay China’s office (photo: crienglish.com)

It seems eBay is struggling to compete against Taobao, the leading Chinese auction site, which has no fees. Taobao’s market share in Shanghai, Beijing and Guangzhou was 67.3% last year compared with eBays dwindling 29.1%.

eBay declined to comment, but if the rumors are true expect to see an announcement within a week.

“Luckily [the dealer] saw the funny side and said he would re-advertize” Neal’s mother said.

There are a few online research tools to help make your job of finding a niche easier.

The Market Research Wizard: This will cut your search time down significantly. You also get pretty stats like this:

Overture: You can use Yahoo’s data of monthly search terms to find out what people really want to buy online.

Above all, I recommend finding a product or industry you are familiar with. This will allow you to understand your customers better so you can tailor your auctions to their needs.

Fee’s ranked highest among respondents concerns, followed by fraud, non paying buyers, payment services, then inventory and product sourcing issues.

The survey polled 1225 respondents between September 3 and September 13. Check it out here, and have a look at Chart 1.

Forget it. Big brand consumer electronics suppliers and wholesalers operate on very small margins (usually between 1 and 10%). Dell, the king of cost cutting has a profit margin of 6.3%.

If you can find brand name consumer electronics that will let you have them for a decent margin and a low order you can bet their doing something similar to the iPOD scam.

Your only hope is to find generic brand usually Chinese manufactured consumer electronics, which may allow you a decent margin.

You may:

* Provide a contact email on your listing page, this can only be used to discuss the listing and cannot be used as a way to circumvent the auction process. Smart buyers will realize that there’s probably a website of yours attached to that email so this can generate traffic.

* Link to a page which further describes the product. The primary purpose of this link must be further describe it, meaning you cannot give the user the option to buy it on that page, but eBay says

“That page may contain links to pages which do contain items not listed on eBay.”

Remember, the primary purpose of the further description page must be to further describe the product, so keep the links to other pages discreet.

* Use your further description page to highlight your other eBay auctions.

* If you own your images, watermark them with your website address.