Is selling other people's junk on eBay a good idea?
May 8, 2010 11:29 AM   Subscribe

I want to start an "I will sell your stuff on Ebay" service in my town. What should I know about this before proceeding?

I've been helping a few people in my neighborhood put together auctions on eBay or listings on Craigslist. An opportunity has presented itself now to take this further and actually market this service to my entire town.

I am entirely confident that such a venture could be profitable (to the tune of $500/week) given my preliminary business model and the large number of potential customers who have expressed interest in this.

My preliminary business model would be to charge a preliminary $5 fee (for listing fees, handling fees, et cetera) and then a small percentage of the final sales price. I am Web-savvy enough to know which items will sell better on eBay and which will sell better on Craigslist, so I've been utilizing both.

I do have some reservations about this stuff, though: I have read through some concerning reports about sellers' experiences with Paypal and eBay, and though I've never been ripped off before, I've never sold anything for more than 60 or 70 bones. I'm not sure what I would do if someone gave me an expensive watch to sell and the buyer ended up scamming me out of it.

The other concern I have is whether it's legal and/or possible to "legitimize the business as I go." I.E, I'd like to learn about incorporation, tax returns and the like, but only once I'm making some money. Do I really need a business license off the bat for something like this?

Have any of you done something like this in the past? Do you have any suggestions about the most effective way to handle a venture like this, or any holes to poke through in this plan? I realize that this is a completely unoriginal service, but I live in a fairly backwater town and there's demand for it, so I'm more than willing to forgo a traditional summer job and experiment with this.
posted by Wanderboy to Work & Money (9 answers total) 4 users marked this as a favorite
You shouldn't need a license, or incorporation, if you're running this as a service from home. I would use a simple agreement with sellers that specifies that they are the sellers, not you — you're just providing the service. I would make that clear in your listings as well the way that established Ebay stores like this one do. (See their listings.) You might look at the setup and policies of established operators like that, and also check the Ebay message boards about preventing scams (which is probably a risk you run and have to accept, but if you're careful, getting ripped off would be rare). I'd skip the $5 listing fee and use a commission structure based on a sale price. Isolditgulfcoast charges 38% of first $500, 30% of next $1000, 25% above that, plus eBay and Paypal fees. In general, if you're going to make a business of this, is those high-ticket items that will provide the profits.
posted by beagle at 12:25 PM on May 8, 2010

I would think your biggest risk (assuming you stay legal on taxes and so on) is that less scrupulous people will start trying to use to as a conduit for disposing of stolen goods.

In my neck of the woods people deemed second-hand dealers, auction houses, and the like need to follow rules around tracking where they got things from and a no-sale period while they retain the products; you may wish to look into whether similar rules could apply to you.
posted by rodgerd at 1:29 PM on May 8, 2010

I worked in one of these stores for several summers.

You will spend a lot of time doing customer service, explaining what your business is and what your fees are, answering lots of questions and generally having your time wasted by people who think they have something worth a lot more than they do. We once had a woman come in who thought that because peach baskets were used as the first basketball hoops, her's was worth a ton of money. No joke. Be prepared to get calls on the phone for "the E-Bay", be prepared for people to say they don't trust you with their stuff.

I would also rethink the fee and just be firm with people about not taking crap. Estimate for yourself what your time is worth taking pictures, writing descriptions, doing customer service, e-mailing people bugging them for payment and shipping, and that's the base price of every single auction you have. Don't take anything you think won't sell for that much.

If you don't have one already, educate yourself fully on antiques and collectibles, particularly how they do on E-Bay. In some markets, the presence of a hairline crack or chip on an otherwise four figure item is enough to make it worthless. You'll intake a lot of Precious Moments (which are generally worthless), collectibles you've most likely never heard of (which can be worth something) and old toys (which are often gems). You will make the most money if you can identify on sight what's worth taking in and what isn't.

You will need to incorporate and pay taxes on your income. You'll also need to consider hourly wages and employer's insurance if you go that route. Hopefully, you're also factoring in some of the less notable costs of doing business: you will need to buy boxes, a postage meter and some packing peanuts at the very least. You will inevitably have to refund a buyer because you broke something. Though PayPal is good about holding the money from big-ticket transactions until both parties are satisfied, you will probably get ripped off at one point or another.
posted by l33tpolicywonk at 2:16 PM on May 8, 2010 [1 favorite]

A friend of mine has been doing something like this for the past three years, ever since she was laid off from her medical transcription job. She's been able to make an OK living with it, but it is a source of endless frustration and she's looking to get out of it at the moment. Her main problems are with the sellers - the folks providing the auction items. (She has three main clients who regularly scour flea markets and antique malls and then give her the items they find to sell on eBay.) Sometimes they set impossible reserve prices, sometimes they blame her because a certain item didn't fetch the price they thought it would, and then they start to dicker about giving her the full pre-agreed-upon percentage of the sale price. They'll also sometimes dispute a particular shipping cost (if some item was oddly sized and she had to use an oversized box and pay extra postage as a result). Sometimes they'll come ringing her doorbell at night or on the weekends (after her established business hours) with some treasure that must be photographed and put up on eBay immediately! They'll give her twice her usual percentage if she'll do them this small favor!

In addition to listing the stuff on eBay, Friend also has to store the items and then package and ship them once they sell. Her basement and garage are full of items awaiting sale. She has to both keep track of everything and also make sure that nothing gets damaged while in storage.

All of the above is strictly anecdotal, but hopefully it is also some helpful information.
posted by Oriole Adams at 2:27 PM on May 8, 2010 [1 favorite]

Assuming you are in the US, You do need to pay taxes on your income but you do not need to incorporate - you just report business income and expenses on Schedule C.

You need to check with the local planning commission about rules for running any kind of business from your home. Many years ago, when I was a self-employed consultant with no employees, I had to pay $10 a year to get a business license from the city.

If you are a reseller, and not an agent, I think you probably have to pay sales tax as well. I'm not an expert but I believe that individuals can resell items that they personally used with sales tax, but I don't think that includes someone who buys and sells used stuff. So that means you need to be careful about sales contract to make sure you are establishing the correct relationship.

If you add any employees, it gets much more complicated but that can wait until you actually need one.
posted by metahawk at 3:01 PM on May 8, 2010

You have to be extremely organized to do this well and handle a lot of auctions at one time, otherwise the inventory will over-run your house and you'll have a hard time finding things. Come up with assembly line systems for doing the photos, listings, shipping. Be very careful about telling people what you think their widget/trinket will sell for on the ebay. The market fluctuates at various times of the year and final bid prices can wildly fluctuate wildly. If you've got a client who thinks their doohickey will sell for $100 and it only sells for $15, they are going to be pissed.

For the tax paperwork: save your receipts for everything you have to buy related to your home-business. Stuff like packing materials, office supplies, storage shelves, photo studio lights can be used as tax write offs. If you end up having to drive to deliver or pick up items, start logging your mileage because you can write that off too.

Do as much of your shipping stuff online as possible. Waiting in line at the Post Office with 2 dozen packages sucks and you have better things to do with your time. Get a postage scale, a good printer and print the postage yourself at home. Then you can drop your stuff off at the Post office or arrange for a pick up.

If you aren't already, be prepared to be very frank with people about what will sell and what won't. Friends and family can be the worst and will show up on your doorstep with bags of baby clothes, Avon perfume bottles, old broken costume jewelry and water damaged books (all these are real examples from my life) that they will want you to magically sell for big $$$.
posted by pluckysparrow at 3:33 PM on May 8, 2010

Oh one more thing: you will probably end up getting scammed at some point. You can minimize this risk by using delivery confirmation on every single item you ship. That way if your customer files a claim with Paypal for a refund, you have that delivery confirmation number to prove it was delivered. Be cautious about shipping to some foreign countries. I ship regularly to Australia, France, UK and Japan with no problem at all. I have had stuff shipped to Russia and Italy go missing.
posted by pluckysparrow at 3:41 PM on May 8, 2010

For the heck of it once, I signed up once as an eBay Trading Assistant. Through this program, expect to receive very little contact since eBay doesn't seem to market it at all. However, a woman in her 40s called me out the blue from finding me on the list of Trading Assistants and told me (insisted) that she had tons of amazing, boutique clothing from a store that two of her friends had to close down. She drove very far to give them to me. And out of about 300 pieces, I would say that less than half were saleable. For even decent clothing items, I'd warn that used clothes are glutting the market on eBay and do no sell the way they used to, even designer brands. There's an eBay newsletter put out by Skip McGrath that had an article on this point. So be very picky about what items you take. If an item won't sell for much, maybe increase your fee to 50+%. Owners won't like it, though, and be think you're scamming them.

I think focusing on niche products and maybe some type of product you really *know* will make your business experience more focused, less headache-y, and just better. E.g. if you loved Louis Vuitton handbags, only sell those on consignment. Or Star Wars collectibles, etc. If you end up taking every piece of crap that ehhh might sell, expect frustration.

You should read several books on starting eBay businesses. Most cities do require you to get a business license if you run a business out of your home. But it may also depend on whether you meet customers there. All of the eBay business how-to books state you have to pay income tax and charge sales tax on items you sell to people within your own state. Of course, you could probably fly under the radar when you're just starting up out of your house and income is negligible.
posted by KimikoPi at 7:29 AM on May 9, 2010

I will 2nd that people think that their stuff is worth a lot more than it really s.
posted by k8t at 3:29 PM on May 9, 2010 [1 favorite]

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