The eBay market may be increasingly crowded, but industry figures argue that it is much like any other sector – find a niche, offer a great service in an attractive way and you can prosper.

Internet entrepreneur Michael Fox says you should treat eBay no differently to other online channels – test it, measure the results, and review and adjust your strategy.

“eBay is a great place for a new online retailer to test their products, and if it’s working for you then you should stick with it, even if you end up opening your own store,” Fox, founder of online retailer Shoes of Prey, says.

“If you’re not getting the return on investment you’re looking for, then you either need to change your strategy on eBay or look to other platforms.”

“eBay has built a network of buyers and sellers. For a competitor to come in, they need to build up that same network of buyers and sellers.”

“Too many buyers and no sellers won’t work [and] neither will too many sellers and not enough buyers. Building this network is hard to do.”

“For us at Shoes of Prey, we can’t use eBay because we can’t integrate our online shoe designer with it,” says Fox.

“This lack of control can also be challenging for brands wanting to pitch at the high end of the market because their products are mixed in search result listings, with eBay stores selling at the bottom end of the market.”

The trust factor

Building trust is key for an eBay business. Former Bunnings manager Shaun O’Brien found this out when he started selling home theatre accessories in 2003 after researching eBay for six months.

He says one of the hardest parts of the process was building up trust with customers, many of whom assumed eBay operators had a tendency to be dishonest.

“From day one, I told myself I would have nothing but 100% positive feedback, and it was over a year before I got negative feedback,” he says.

O’Brien’s retail background certainly helped him focus on customer service, but he says he was also careful to choose a category in which there weren’t a lot of other competitors.

He also juggled his eBay business with a full-time job, which meant working before and after work and on weekends. He estimates he spent around 40 hours a week working on his eBay business.

“After 18 months, I had enough income that I could replace my full-time job with eBay. Six months later, I hired my first employee and six months after that, my wife took on a full-time position,” O’Brien says.

The business, which was forced to move its increasing stock into a warehouse, now hosts its own website and two offline stores in addition to its eBay channel.

O’Brien, who has only ever spent $100 of his own money on the business, says his company raked in over $5 million last year and is looking to increase that figure this year.

“It’s not a free ride though – you can set up a business for nothing but it’s very time consuming,” he says.

Linking to the offline world

O’Brien says consumers also tend to have tunnel vision when they shop online, in that they search for a specific item and are less inclined to buy other products in the process, so having offline stores enables the business to cross merchandise.

Phil Leahy, founder of the Professional eBay Sellers Alliance, says sales growth and data suggest that growth is stronger than ever with people starting up on eBay.

“Australia is about four to five years behind the US in terms of eCommerce. Australia is now playing catch-up, with 2011 a signpost year” Leahy says.

According to Leahy, eBay is the best place to learn about transacting online.

“It is the best place to get your feet wet and has fostered some of Australia’s best examples of standalone online retailers like DealsDirect and Daily Deals,” he says.

“By starting on eBay you can acquire a customer profitability, learn the nuances of customer service, the importance of page design, tools required for scaling your business, branding and cross-promotion, trust and safety, etc.”

“The drawbacks are that it can be expensive, especially when starting out. Typically the cost of sales, excluding postage and handling, ranges between 9% and 15%, and can be as high as 25% when you start out.”

“My advice is to start with eBay, then open your own website and look towards Google, comparison sites, SEO, affiliates, social media, Amazon, etc and find your market.”

Leahy says in addition to the above, eBay newcomers must ensure they set up an ‘About Me’ page providing essential information about the business.

Is eBay really for you?

Paul Greenberg is the co-founder of online retailer DealsDirect, which began as an eBay business back in 2000 under the name Auctionbrokers Australia.

“My business partner Michael Rosenbaum and I started a full-time eBay business selling items on behalf of big businesses – Michael handled the IT aspect and I went out and talked to suppliers,” Greenberg says.

Their first client was Acer Computer Australia, so the business initially made its money selling computers and computing equipment before branching out into all key consumer categories.

But according to Greenberg, the novelty of bidding eventually wore off for customers, which prompted the business to leave eBay in 2004.

“We made the right commercial decision – we wanted to be in a fixed price model so that we could build on the brand equity,” he says.

However, DealsDirect has recently returned to eBay as it seeks to spread itself across as many channels as possible.

“Last year, I was speaking about multichannel retail and how retailers need to find as many good channels as they can,” Greenberg says.

“Customers want more choice, more variety and quicker delivery times. Online retail is just warming up – it kind of feels a bit like day one.”