Can You Make Money on eBay?

This seems to be the million dollar question (no pun intended). Everybody thinks they can, and even more people are willing to sell them information on how to do it. But can you really make money on eBay?

The answer is (drum roll please): Yes, but not much. Yes, but the same effort would make you more money doing something else. eBay is a great way to liquidate merchandise from your business or get some money for stuff lying around your house that you no longer use, but it's VERY difficult to buy something and resell it on eBay for a profit.

Here's why:

1. You're competing with the whole world. Sure, you have millions of potential customers, but you also have millions of potential competitors. You're much better off to be the only seller of an item in your town with fewer potential customers than you are to be on the internet facing such stiff competition. And the competition on the internet can almost always sell for less than you can. Maybe they have a source of merchandise you don't because they can afford to spend $10,000 to buy it. Or maybe there are other reasons they undersell you, such as:
2. Your competitors are stupid. That's right, I see stupid sellers on eBay all the time. They buy a ton of merchandise they shouldn't have bought and just want to unload it at giveaway prices. Or they don't know they're not making any money; they forget to factor in the cost of fees, or their labor. Real life example: I have a friend who makes craft items. "I made $500 on them," she told me. "Did you factor in the cost of materials?" I asked. "Yes" she said. "How many hours did it take you to make them?" I asked. "Oh, probably a couple of hundred hours." Congratulations! You just make $2.50 an hour. (I didn't tell her that).
3. They're offering things at a low price as a loss leader. I don't agree with this strategy: Offer a low price on your auctions then get the buyer to click on your web site where he can make other purchases from you. Inevitably, I can buy the cheap item from his auction, then go back to eBay to find a cheap price on the same things he has on his web site at a higher price. So why would I buy from his web site? Still, all the eBay gurus say this is a good strategy, so it must work. Right?
4. Your competitors are addicted to eBay. Some people can't help themselves. eBay becomes a compulsion. They don't care that they're not making money.

Soon we'll take a lot at product sourcing.