The online auction site eBay has provided people from all walks of life with a low cost, low risk way of starting a business from home. More than 45,000 new eBay businesses have sprung up since September 2008 in the UK alone and that’s set to increase further still as people look to make some extra money during the recession. So with ever increasing competition, is starting an eBay business still a good option for would be entrepreneurs?

Why start an eBay business?

It’s easy to get started and it carries minimal risk. In theory, all you need to do is to buy some stock and then list your items for sale on eBay, but of course there’s a little more to it than that. One of the most attractive things about eBay to budding entrepreneurs is that it makes it easy to find customers, which is traditionally one of the biggest hurdles entrepreneurs face when starting a business.

You need to remember, however, that today’s eBay marketplace is highly competitive and success doesn’t always come easily. Basic business essentials such as buying your stock at the right price become even more important on eBay because buyers often expect to buy items cheaper than they would elsewhere. If you can find a good market, however, an eBay business can be very profitable and provide you with worldwide reach from your living room.

Start-up costs

Start up costs for a new eBay company are among the lowest of any business. Essentially all you need to begin trading is a computer, an eBay account, some initial stock and somewhere to store it. Ebay makes it easy for you to start small and then grow your business into something larger over time. Many eBay businesses for example started with a small job lot of items bought from a wholesaler for less than £100.

You can easily ‘test the water’ and find out what sells before investing more money into it, and the same principle applies to storage space and premises. In the early days your spare room or garage will probably suffice as your warehouse and then as your business grows you can consider investing in premises later on.

Finding your niche

Most successful eBay businesses specialise in one niche area, for example children’s clothing or mobile phone accessories. There are however examples of eBay businesses which sell a little bit of everything – so your niche could simply be something like ‘catalogue return items’ or ‘nearly-new items.’ If you’re struggling for ideas you might want to have a look at a service provided by eBay called ‘The eBay Pulse’ which can help you to identify profitable items, niches and current eBay trends.

Buying stock

You can buy your stock from wholesalers or even from eBay itself. Buying the right stock at the right price is essential, so investigate lots of different wholesalers and make sure you are getting the best possible price. This may mean contacting and building relationships with wholesalers who don’t actively advertise and buying in large quantities to get a lower unit price. It is a good idea to study completed auctions and research what price other eBay sellers are achieving for identical or similar items before you purchase them.

Key principles to success

eBay can be extremely competitive but that shouldn’t put you off because many eBay businesses are highly profitable. Aside from buying the right stock, you need to market your business in a professional way. This means having a company logo, building your brand and generally treating your eBay business as you would any other online or offline business.

Your auction listings or adverts are of critical importance and can help you to stand out from other sellers, so make sure that each listing contains all the information that a potential buyer would want to know about the item and remember to include plenty of photographs. It’s also a good idea to invest in an eBay Shop as this provides a single place from which you can showcase all of your items.

Bear in mind that eBay is a community and the eBay feedback system makes it easy for buyers to voice their opinion of what they thought about buying from your company. Negative feedback can quickly damage your reputation, so make sure that you provide timely, efficient service and that your items are always as described.

Your first step

Visit eBay and start to investigate potential niches and items that you could sell. Research completed auctions and have a look at The eBay Pulse to find out what is currently selling. Make it your business to study in detail what other existing eBay businesses are up to. You might even want to buy from one of them to get a feel for how they do things and see how you could potentially do things better in your own business.