Investment Budget and Pricing Strategy For Your Ebay Business

Last time we talked about how to determine what to sell from the Giftamax.com product list. Now you have to think about your pricing strategy and investment budget. Remember you should not raise a price war when you don’t have to. The reason you pay your effort in eBay is for making profit. And since your products are coming with certain uniqueness, you should position yourself well.

Let me make an example by one of my eBay accounts, selling mouse pads.

- Store inventory items posted each month: 1000

- Auction items posted every day: 20, i.e. 600 listings per month

- eBay store monthly subscription fee: $15.95

- Giftamax monthly membership fee: $19.95

After doing research, I decide to sell my mouse pads at $5.99 + $5.99 Shipping. Not the most expensive nor the cheapest, but with reasonable profit margin. Though I don’t need to pay for any shipping fee to Giftamax, I still split up the total price into a selling price + shipping price. In this way, I can save some eBay cost as eBay charges transaction fee based on the selling price when you sell an item successfully. However, the shipping cost must be reasonable, or it may violate eBay’s policy about Excessive Shipping Charges.

When posting items in eBay, remember to add a gallery picture to each of your listing. You have to realize that most customers are attracted to your items because of your pictures. When they search and look around thousands of listings in eBay, it’s quite unlikely they will go into your item page if they don’t know what you sell by a quick glance.

For the price settings for store inventory items, I set $2 more expensive than the auction items. It’s a strategy to earn more profits. If the customers want to get the items immediately, then they have to BUY IT NOW at a higher price. If they don’t mind waiting until auctions end, they may have a chance to buy at a better price.

I offer shipping discount when people buying more than 1 item at a time. In this way, hopefully I could encourage people buying more items at the same time, less profit per item, but more profit in total. You may think about and see if this strategy also suits you. By ordering from Giftamax, your work doesn’t differ much between placing order for 1 item and 100 items. Now I charge $5.99 for the 1st item and then $3.99 for each additional one.

Now after selling in eBay for a period of time, I know the sales conversion rate of my items. But as a new eBay seller, you may need to estimate at the beginning. And don’t be too optimistic in your estimation. It’s also true that certain customers may have hesitation to buy from a new seller. So the sales at the beginning will be slow for you. Be patient. Everyone needs to get through this stage before they can make real money as a Powerseller. Now as a Powerseller, my sales conversation rate is about 40%, i.e. about 8 items sold per day.

OK, with all details, we can start our budget calculation:

Fixed cost I have to pay, i.e. even without any sales, I still need to pay and that will be my risk of loss:

- Store inventory items posted each month:

1000 x 0.03 = $30

- Auction items posted every day: 20, i.e. 600 listings per month:

600 x 0.35 = $210

- eBay store monthly subscription fee: $15.95

- Giftamax monthly membership fee: $19.95

Total fixed cost: $30 + $210 + $15.95 + $19.95 = $275.90

Cost I have to pay after my items sold (8 items sold per day, and around 50% auction items sold at $5.99 + 50% store inventory items sold at $7.99):

- eBay transaction fee for store inventory items:

$7.99 x 12% x 4 x 30 = $115.06

- eBay transaction fee for auction items:

$5.99 x 8.75% x 4 x 30 = $62.90

- Paypal fee for store inventory items:

($13.98 x 3.4% + $0.3) x 4 x 30 = $93.04

- Paypal fee for auction items:

($11.98 x 3.4% + $0.3) x 4 x 30 = $84.88

- Item cost paid back to Giftamax:

$3.49 x 8 x 30 = $837.60

Total cost for items sold: $115.06 + $62.90 + $93.04 + $84.88 + $837.60 = $1193.48

Total sales payment received (120 pieces from store inventory and 120 pieces from auction): $13.98 x 120 + $11.98 x 120 = $3115.20

Net profit per month: $3115.20 – $275.90 – $1193.48 = $1685.82

Now you know how to calculate your budget. One point you have to bear in mind is that your sales volume at the beginning will be slow when you are new to the market. Also, lack of item choices may be another reason customers don’t stay in your site for too long. It does take some time before you can have thousands of items in your eBay store and encourage your customers to buy more from you. Don’t worry too much if you find you can’t reach the scale like mine. It’s understandable. But my suggestion is: just start from a small scale. Even with only 40 or 50 items ready in your list, post them up and start making little sales. You may have little loss at the beginning when the sales are not enough to cover your cost. But if you treat it as a serious business, certain investment is a must.

Once you get in track and prove your strategy profitable, you may start expanding your scale by creating more items with different designs, or creating different items with the same designs. Either way you should expect your profit may grow as you wish.

Credit Card Rate Vs Investment Rate

Over the past 18 months we have witnessed the stock market plunge over 50%. With your 401k balance in shambles you may be hesitant about investing more money in the stock market. So you decide you might as well spend the money since it just disappears in your 401k. WAIT. I have another alternative investment. Go look at you credit card statements.

What is your current rate is it 9.99%, 12.99% or 21.99%? This is the interest rate you are guaranteeing your credit card company. Think about it for minute. All of your credit cards have a guaranteed interest rate and you can actually control that rate. How? By paying the balances down or off.

Now you should still save money in your 401k especially if you receive a match. For example, if your employer will match 3% of your contribution you should definitely do the 3%. After that amount you should consider using the money over 3% on your bills.

With this type of plan you can still take advantage of your retirement savings plan at work plus work on lowering your monthly bills. The type of plan you should use is a debt stacking plan where you take all your extra money and apply in one bill. Usually the one with the lowest balance since this one would pay off the quickest. Note: you cannot use any credit card you are debt stacking because this will not work by continue to charge purchases with that card.

I have seen many people save thousands of dollars of interest by following a simple debt stacking plan. By concentrating on eliminating debt right now can help you significantly years from now. Why? Well we all want to retire someday, but debt is the main reason why we have to continue to work. Think for a minute if I came and paid off all your credit card bills. Would that give you a pay raise? Most people would say yes and quite a large one. By eliminating debt now you can actually give yourself a pay raise. I doubt your employer is going to give you an extra $200 or $300 a month. I know you can if you started a plan to eliminate your debt.

The Only 3 Ways To Increase Your Business

Would you like to increase your business? In Jay Abraham’s book, Getting Everything You Can Out of All You’ve Got, he says there are only three ways (or a combination thereof) to increase your business and make more money. They are:

1. Increase the number of your clients

2. Increase the average size of sale per client

3. Increase the number of times clients return and buy again

Before we take a closer look at each of these methods, it is important to be sure that the prices you are charging are in line with the value that you deliver. Meaning, if you are undercharging please consider increasing the investment for your products and services.

Now, let’s take a look at each of the ways to increase business and get you brainstorming about how you can apply them to your business.

INCREASE THE NUMBER OF YOUR CLIENTS

Look at your client data to see where and how the majority of clients find you. If you haven’t been tracking this start now and in the meantime just go by memory.

Add up the number of clients from each source, see which marketing strategies are working the best and start spending more time doing them. It’s all about doing more of what works. This may sound simple, and it is. It’s just a matter of doing it!

If none of your marketing strategies are working very well, take time to reevaluate and then begin with something new.

INCREASE THE AVERAGE SIZE OF THE SALE PER CLIENT

Take a look at all of the products and services you offer and do two things. First, think about new valuable products or services you could add to the existing ones to create more interesting packages for your clients.

Next, consider all of the ways you could bundle existing products and services in various combinations to create new packages. Look for logical themes or groups that will appeal to your clients. You could even sell all of your products as one giant package at a discounted price.

INCREASE THE NUMBER OF TIMES CLIENTS RETURN AND BUY AGAIN

A well known fact is that it costs around seven times the amount of money to acquire a new client as it does to sell something to an existing client. Take a look at your existing clients, as well as your previous clients, and think about what kinds of products and services they would like.

Consider creating ‘follow-up’ or ‘next step’ products and services. A great way to find out what they really want is to actually ask them what they need. You can ask via: the phone, e-mail, or a web based survey.

Are you starting to see how you can use these three ways, or a mixture of them all, to increase your business? Take the time to analyze your business, create a plan, and get into action on increasing your business.

© Stephanie Ward 2006