Five Ways to Lower Seller Risk

Easy things you can do to ensure you don't get burned

As your selling business grows on eBay, it's easy to be overcome by unwarranted optimism that is only too easily shattered the first time you have a bad experience. Once that happens, it's also too easy to immediately become cynical about eBay as a business model, and to assume that there's little that you can do about the problems that sellers face on eBay. As a matter of fact, however, there are ways that sellers can reduce risk on eBay in order to ensure happy trading days ahead. Here are five of the most important.

1. Don't carry too much inventory. New sellers in particular seem to be tempted to source in volume using financial leverage without considering the consequences. Value on eBay fluctuates rapidly, sometimes even from auction to auction, and every market has a saturation point. Acquiring too much inventory too quickly or uncritically might leave you in a predicament—you need to move volume in order to cover your obligations so you list more items, but if the market isn't there, listing more items just means that each item will sell for less, chewing through inventory while not keeping up with your financial needs. Instead, start small and grow smart—don't try to bite of more risk than you can sustain, no matter how big a killing you stand to make.
   
   
2. Stay away from oversaturated market areas. Sometimes the sheer number of listings in a certain category can give the impression that the type of item in question is "hot," selling in huge numbers and making a killing for sellers. Don't let yourself be taken in—most of the time, a seemingly infinite mass of similar listings is a sign of market oversaturation or a market entirely based on volume. Before you try to enter that segment, ask yourself: "Can I sell at a significantly lower price point than the existing sellers while listing in high enough quantities not to get lost amongst their listings, and all while still making a profit once overhead and risk are considered?" If the answer is no, it's not a hot market segment but a dead end.
   
   
3. Don't accept checks or money orders. This point is sure to upset some buyers who still rely on these tried-and-true ways of paying, but the fact is that checks and money orders are both risky and overhead-intensive. They require labor to process, paperwork to track, and a mailbox in order to be received—and after all of that, they can still come back bad. Credit cards and PayPal can be fully automated and you always know immediately whether or not the funds are available.
   
   
4. Sell AS-IS for all used or refurbished items. If you deal in used or refurbished items and yet are not incorporating the risk of defective returns into your cost structure, you're asking to lose money. If you're not being backed by a manufacturer, it's often easier to simply sell all items AS-IS or exchange-only (no refunds). Despite what you might think, many eBay buyers will buy AS-IS or exchange-only auctions if the seller's feedback indicates that they have a track record of doing their best to deliver quality, working goods. Listing this way, you can decide on a case-by-case basis about whether to refund or exchange, rather than having to calculate for and eat the cost yourself.
   
   
5. Maintain meticulous records. Too many small business eBayers simply buy and sell aggressively without ever maintaining statistics on what sells and when, how listing variables result in ultimate profits, or even whether certain types of items are good investments at all. Learn to use a spreadsheet program like Microsoft Excel or OpenOffice Calc and then track the basics, including average rates of return according to item type, listing format, listing duration, season, and number of concurrent listings. Then, act accordingly when listing future auctions.

Have an important tip for sellers gleaned from your own eBay selling experience? Drop me a line and tell me about it and it may appear in future articles on this topic.