An age old question (since the time of eBay at least) and one of the most common queries that’s sent in to me by my blog readers – how are some items for sale on eBay at such a low price? You know what types of listings I’m talking about – £0.99 with free shipping or sometimes even bulkier items for sale at £2.99, which is just barely enough to cover the Royal Mail postage fee, never mind any packaging or the item itself – so HOW do they do it?
Well this is exactly what Julie asked me in a recent email I received from her:
I’m a huge fan of your blog – you’re really doing an amazing job with it so thank you very much! As a newbie eBay seller I learn so much from every post and whenever I’ve asked a question in the comments section you’re always so quick to answer, so thank you again!
I wanted to ask you one further question if possible?
I started selling on eBay last year, just as a hobby as I have a full-time job and two young kids to look after. Recently I’ve started to look into ways to grow my business to the next level and hopefully even get it to the stage where it can replace my current job in the future.
But there’s something that really worries me whenever I look into doing this properly and that’s the fact that there seems to be so many sellers offering items at such cheap prices! I just don’t understand how they do it and how they can possibly make any money like that.
I mean, are these genuine sellers/products or is it some sort of eBay scam?
Hi Julie and thank you for your email – it’s great to hear that you find my blog valuable and that it’s helping you with your business! 🙂
In answer to your question – yes these are genuine sellers, to put it simply.
The first thing you need to understand is that sellers aren’t necessarily making any profit at those prices. In fact I would go as far as to say that the majority of the time they’re not.
There are several different scenarios in which an item would be sold at what appears to be an impossibly cheap price and I’m going to run through a few of them for you now, so that you can see exactly what I mean:
- Chinese sellers – you often get big wholesalers or even manufacturers in China selling directly to retail customers in the UK via eBay. In such cases they obviously benefit from rock bottom item costs and shipping is also very cheap (albeit very slow as well!).
- Feedback builders – a classic tactic for people just starting out is to sell some items at a very low price – after all they need to entice buyers somehow.
- Sales history boosters – another classic tactic and exactly what I teach in my guide on how to reach the no.1 spot on eBay’s search ranking – basically you start with a very low price (often BELOW what it costs you) in order to get a large number of sales in as quickly as possible.
- Loss leaders – while on the subject of selling items below their cost price, loss leaders aren’t only for new listings – they’re often used to get new customers (i.e. to build your mailing list) and to promote other, profitable, products for sale.
- Clearing out overstock – many businesses will sell end of line/out-dated stock at a loss, simply to get rid of it and clear some much needed warehouse space.
- Selling one-off clearance stock – some stock can be bought well below the usual market price, from liquidation sales or from companies that have gone bust. Of course products can’t consistently be sourced like this but it does account for a decent minority of the “unmatchable” prices on eBay.
- Multi-buy items – there are often products that seem completely unprofitable at single quantities, but when you check the sales history you’ll see that the vast majority of purchases involve customers buying 2,3 or even more of that item in one go (LED lightbulbs are a good example). Suddenly a £1.99 orders turns into a £6 one, and that’s where the profit is made.
- Shipping costs abusers – yes, there are a number of sellers who somehow abuse the shipping rates and pay less than what they should – paying large letter fees for small parcels for example. I don’t know exactly how they do this (I’m assuming it’s by fraudulently using the “mate’s rates” that some shipping companies offer employees) but they usually don’t last long anyway.
- Hobby sellers – this may sound hard to believe for those of us trying to run a business on eBay, but there are a lot of sellers who simply aren’t bothered about the profit they make. They do it as a hobby and are happy to subsidise losses here and there.
- Large sellers with huge buying power – this is a fairly obvious case, as if a seller can buy stock in huge quantities, they’re obviously going to get the best prices and lowest shipping cost per item.
- Failed sellers – I saved this one to last, as I personally think it probably contributes the most to this phenomenon. There are a lot of sellers on eBay who have no choice but to sell their stock very cheaply, simply because they couldn’t get the price they were looking for.
Let’s look at a quick example. A new seller comes along and decides that mobile phone cases are the perfect product to sell on eBay (after all, they’re cheap, small, easy to ship and very popular – so what could go wrong?). They order 1,000 cases from China but very soon realise that the market is oversaturated and they’re not going to achieve their expected selling price of £4.99.
People are inherently impatient and I’ve often seen sellers give up after just a week or so! They don’t give it time, they don’t take proper product pictures, or implement proper listing strategies – they just throw some products on eBay and when they haven’t made a huge profit after a week think “what the hell, this obviously doesn’t work” and then list their remaining stock at £0.99 just to get rid of it all and to recoup at least some of their initial investment.
You’ll see countless such listings in the job lots section on eBay:
So please always do proper Terapeak research BEFORE you buy any item to re-sell, so that you can get an actual idea of the market and normal selling price.
I hope this answers your question Julie.
Have a great weekend everyone!