Investment Budget and Pricing Strategy for Your eBay Business

Last time we talked about how to determine what to sell from the Giftamax 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 thru 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.