Top Tips To Expanding Your eBay Business - Video
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Expand your eBay Business With These Top Tips
eBay Business expansion
As you grow your eBay business, your unit costs should start to decrease. This is known in business terms as 'economies of scale'. This is an advanced topic and I explain this in further detail in the video above and explain how you can make it work for your eBay Business. If you are new to eBay, feel free to visit the beginner sections of this website for tips on starting your eBay business and come back to this topic later.
The basic principle of economies of scale is that as your business grows and expands, your cost per unit will go down. Let me break this down in terms of eBay and show you how it can help you grow your eBay business.
- Most wholesale suppliers will charge you less money per unit if you buy more stock. For instance, let's say you buy 100 T-shirts. You may have to pay your wholesale supplier as much as $300. This is the equivalent to $3 per T-shirt. On the other hand, let's say you buy 1000 units of the same T-shirt from the same supplier. Because you are buying more and giving him more money, he is likely to only charge you something like $2,400. Although Your initial cost is higher by $2,100 your unit cost per T-shirt has fallen to $2.40. In simple terms, if you were to by 100 of those T-shirts, the supplier would make you pay $3 per T-shirt. However, if you were to buy 1000 of the same T-shirt from the same supplier; because you are buying more units he is likely to give it to you for less, in this example; $2.40 per T-shirt.
- Your overall shipping cost per unit should also decrease when your eBay business begins to grow. When you started your eBay business, you were probably using your local post office to deliver your items to your customers. Expanding your eBay business will also mean expanding the way you ship your items. Let's assume that whilst your eBay business was still growing you were shipping roughly 100 items per week at an average cost of $2.80 per item. This would mean you are spending $280.00 on average per week in shipping costs. Now, let's say you finally reach a stage in your business where your sales grow to 1,000 items per week. If you kept going to your local post office to fulfil your eBay orders this would now be costing you $2800 per month. The first thing I would suggest you do at this stage would be to try and find a reliable courier who would be willing to take a fixed monthly payment from you and agree a price that is under $2800. Let's say you agree to pay your courier $2500 every month as a fixed cost. Your unit cost for shipping each item now goes down from $2.80 (when you were using your local courier) to $2.50.
Hopefully you are beginning to see how economies of scale can dramatically influence the growth of your business and how important it is to think in this way when you are trying to grow your business.
Dominating Your Niche
I want to take you back for a second to when we spoke about economies of scale in relation to decreased unit costs when purchasing items at a wholesale price. I want to take this opportunity to stress the importance of finding a niche to specialize in on eBay.
Although you may think that having a large product range that spreads across many different niches is a good thing. It can actually be quite risky and do more harm than good for your eBay business. Let me quickly take some time to explain what I mean by choosing a niche to specialize in.
If you do an eBay search for 'sports socks', you are likely to find thousands of different kinds of sports socks on eBay. Furthermore I can bet my bottom dollar that you will find hundreds of sport sock related listings that are selling really well every single day. 'Sports socks' is an example of a niche and if I choose to specialize in this niche I can expect to benefit in the following ways:
- Cheaper Unit costs - As we mentioned early, if you buy more of the same product with the majority of wholesalers your unit cost is likely to go down. Taking this a step further, it is a lot easier to find a reliable niche related supplier. Let's break this down for a second. Let's imagine again that our niche is 'sports socks', we grow our business and we are now selling 100 different types of sports socks. We only need to use 1 supplier who specializes in wholesale sports socks. So, we order 1000 units from that 1 supplier which contains our 100 product variants. Our unit cost goes down as a result because we have spent more money with that 1 supplier. Let's compare this to having our eBay business spread across different niches. If we are selling sports socks as well as golfing equipment as well as cutlery; we now have to find three different suppliers who specialize in wholesaling each of these items. We do not get as much of a benefit when it comes to economies of scale because we are paying 3 different suppliers instead of investing entirely in one.
- Recurring customers - Once you 'start your eBay shop', eBay will make it easy for you to send out newsletters to those who have bought your item in the past. If you specialize in sports socks for example and someone buys 1 pair from you; you know that that particular person is interested in sports socks and may return to eBay to buy more. By having that person on your eBay store newsletter; you can notify them when you add new sports socks to your eBay shop inventory. Having this customer base will also prove important when you decide to increase your product range. You can start stocking items that have no competition on eBay without the fear of them not selling as you can send a newsletter to your niche related newsletter promoting your new range of sports socks. This could also be a great way of finding product opportunities that none else has.
Useful Tip - Try to stick to one or two wholesalers. This will mean that you build a business report with your suppliers and when you are ready to make a big investment with them, you already trust them. They will also start to see you as a valued customer and offer you great deals down the line.
- If you are a new eBay seller and do not have a lot of upfront cash to start, I would recommend starting by listing the items that are currently in your house for sale. Do not get frustrated if these items do not sell, go through the selling tips that I have on this website and learn how to create profitable listings. Once you learn how to create profitable listings your eBay business should begin to grow naturally.
- You can use free tools such as Google analytics to help you find a popular niche for your eBay business. Try to find a niche that is not too competitive as I teach in the above video. As your eBay business grows you can always expand your reach. My business motto is to 'start small but dream big'.
- Be selling a quality product
- Be offering quality customer service
- Developing a growth strategy for your business
- Diversifying your income
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