Key Concept
Focus on a market to increase profits
50% of power sellers specialize in at least one market. Most markets are defined by a brand name and an item type. Examples: Nikon Digital Camera and Sony Playstation. However, some markets do not have brands. Examples: goth dress, wedding garland and lampwork beads.
Specializing in a market is more profitable. A specialized seller optimizes their business by knowing how to sell their product and where to source inventory. They also benefit from a repeat customer base.
Tutorial
Evaluate a new market and optimize inventory
|
The goal of evaluating a new market is to determine if you can make a profit selling an item. By using market research before you buy inventory, you learn the profit potential without the bearing the cost of inventory and eBay fees when using trial and error. Take a look at this example.
Let's research the Nine West shoes market to see if there is an opportunity to make a profit. To do this, I used the following search parameters (and adding a size keyword like "11" each time):
I recorded the summary for each search. The date range for these results are Sept. 11, 2006 to Oct. 10, 2006.
| Size | Total Sales | Average end price | Average success rate |
|---|---|---|---|
| All sizes | $51,000 | $19.24 | 42% |
| 6 | $6,500 | $17.13 | 34% |
| 7 | $12,700 | $19.93 | 45% |
| 8 | $14,770 | $20.11 | 44% |
| 9 | $8,900 | $19.65 | 48% |
| 10 | $4,000 | $19.84 | 43% |
| 11 | $900 | $30.02 | 79% |
The average end price for a Nine West shoe is $19.24. This market has a 42% success rate so a seller should plan on listing the shoes twice on average before making a sale.
Researching further, I see size 11 shoes are much more valuable and successful than the other sizes. Size 6 should be avoided. The reason for the price difference between sizes is due to market scarcity. There are less size 11 shoes available per buyer than in the overall Nine West Shoes market. This drives the price up because more buyers are competing for fewer items. The opposite is true for the size 6 market. More size 6 shoes are available per buyer than in the overall market. This means less bids per size 6 shoe listing.
Now estimate the maximum inventory price for a profitable sale. You want to minimize your inventory cost to make sure you earn at least $5 to $10 per item.
Average sale price - insertion and final value fees = maximum price you should pay for inventory
Size 8 Nine West Shoes is $20.11 - ~$2 = $18
Size 11 Nine West Shoes is $30.02 - ~$2.5 = $27.50
We have a good understanding of the Nine West shoe market. Now evaluate how attractive it is compared to an average eBay market. When evaluating eBay markets, you may wish to consider the average end price on eBay in 2006 is $23 according to a Scot Wingo, CEO of ChannelAdvisor, report.
A good eBay market meets all of these criteria:
- >$1000 in monthly sales and >100 items sold per month
- average sold price >$10
- success rate >35%
- a large variation in end prices (greater than +/- 30% of average end price) - shows buyers do not consider the item a commodity
A great eBay market meets all of these criteria:
- >$10000 in monthly sales and >500 items sold per month
- average sold price >$30
- success rate >60%
- a large variation in end prices (greater than +/- 30% of average end price) - shows buyers do not consider the item a commodity
A bad eBay market will meet any one of these criteria:
- average sold price <$10
- success rate <35%
- low price variation in individual sold prices - shows buyers think item is a commodity and sellers compete against each other on price
The Nine West Shoes market meets the "good" market criteria. It is not "great" because the 42% success rate is below the 60% criteria. It is also not "bad" because the end price is >$10 and the success rate is >35%. I looked through the listings on the search results and confirmed that quite a few of the end prices were more than +/- 30% of the average end price ($20 +/- $6 in this case).
I recommend cautiously entering this market. Observe the maximum inventory price rules when optimizing inventory selection. Re-run the size research every three months to stay abreast of the market.
