IN THIS CHAPTER

Using demographics to market your business

Knowing your market — right now

Catching trends

Knowing what’s hot on eBay

Evaluating your six-month merchandise plan

I’ll bet it’s no surprise to you that most eBay sellers lack a solid retail background or education. Most of us come from different walks of life, and just about all that most of us know about retailing is shopping — that’s probably how we first found eBay. Now that game is about to change. The more we choose to sell, the more our businesses grow, and the more we need to know about the business of retail.

eBay sellers use many types of business models. Some sellers are continually on the prowl for new products, and stock their merchandise as soon as they find a deal. Others follow the trends and try to get stock of the latest and greatest gadget that they hope will take the country (and eBay) by storm. And sellers who run their businesses by selling for others are constantly beating the pavement for new customers to serve. Then there’s the new eBay entrepreneur. Just like brick-and-mortar retailers, today’s online sellers have to keep up on the trends so they can stock up on the most popular items for the coming seasons.

Be sure you understand how you want to run your own business. Ask yourself the following questions and give some thought to your answers:

1. Who is your customer? Know their demographics and where you can find them. (Book 6 gives you solid insights on how to use social media to your best advantage.)
2. Do you want to theme your sales with specific items? For that matter, are there some products you just wouldn’t carry — no matter how profitable they might be?
3. What is your price-point policy? Do you have a specific profit margin in mind?
4. How important is customer service to your business? How far will you go to please buyers?

After you’ve faced these issues and given your business an identity, you’re ready for the next steps. In this chapter, I help you see how to organize and run your business like a pro.

Marketing to Your Customers

When you’re in business, you can’t just consider yourself a retailer; you have to be a marketer too. The Internet enables sellers in the United States to market across the globe. I’m sure you know how large the area is, but what about the people you sell to? You’ve heard of advertising being targeted to the lucrative 18-to-49 age demographic, but what about all the other age groups? Who are they? If you learn about your customers, you’ll know how to sell to them. It’s all about targeting.

Decide who buys what you want to sell — or, better yet, decide with whom you want to deal. If you don’t want to deal with emails from teenage gamers, for example, perhaps you shouldn’t be selling items that Gen Y (defined in a moment) is going to want.

Marketers often provide blanket definitions about the population based on their stages in life, what they’re expected to buy, and in which activities they participate. Generational cohorts are formed less by biological dates than by life experiences and influences. We all know that outside influences make a big difference in how we look at things; they also affect how and why we buy things.

My personal marketing theory is based on psychographics versus demographics. Psychographics means that you forget about the calendar age, and concern yourself more with the activities and interests of a group. For example, I know many highly technical Boomers who are the perfect market for gadgets, but a demographic profile wouldn’t agree.

Since such generational marketing is all the rage, names have been applied to each cohort. The birthdates vary widely (depending on the source), but the approximate accepted dates are as follows:

• Gen Z  1996 and later
• Gen Y (Millennials)  1982-1995
• Gen X  1965-1981
• Baby Boomers  1946-1964
• Greatest Generation  1924-1945
• Silents  1901-1924

Table 1-1 gives you the current U.S. population grouped by age, showing how much of the total each group represents. With the knowledge from this table, you can better decide just how many people are potential shoppers for your products in the future.

Knowing the Current Market

Just as successful stockbrokers know about individual companies, they also need to know about the marketplace as a whole. Sure, I know about the newly reissued Furbies out there, and so does nearly everyone else. To get a leg up on your competition, you need to know the big picture as well. Here are some questions you should ask yourself as you contemplate making buckets of money by selling items on eBay:

• What items attract the buzz? If you see everyone around you rushing to the store to buy a particular item, chances are good that the item will become more valuable as stocks of it diminish. The simple rule of supply and demand says that whoever has something everyone else wants stands to gain major profits.
• Do I see a growing interest in a specific item that might make it a big seller? If you’re starting to hear talk about a particular item, or even an era (’70s nostalgia? ’60s aluminum Christmas trees? Who knew?), listen carefully and think of what you own — or can get your hands on — that can help you catch a piece of the trend’s action.

• Should I hold on to this item and wait for its value to increase, or should I sell now? Knowing when to sell an item that you think people may want is a tricky business. Sometimes you catch the trend too early — and find out later that you left money on the table by selling too early. You might have commanded a better price if you’d waited.

  Other times you may catch a fad that’s already passé. It’s best to test the market with a small quantity of your hoard, dribbling items individually into the market (and watching the sold prices) until you’ve made back the money you spent to acquire them. When you have your cash back, the rest will be gravy.

• Is a company discontinuing an item I should stockpile now and sell later? Pay attention to discontinued items, especially toys and collectibles. If you find an item that a manufacturer has a limited supply of, you could make a tidy profit. If the manufacturer ends up reissuing the item, don’t forget that the original run is still the most coveted and valuable.
• Was there a recall (due to non-safety issues), an error, or a legal proceeding associated with my item? If so, how will it affect the value of the item? For example, a toy recalled for reasons other than safety may no longer be appropriate, but it could be rare and collectible if sealed and intact.

Some people like to go with their gut feeling about when and what to buy for resale at eBay. By all means, if instinct has worked for you in the past, factor instinct in here, too. If your research looks optimistic but your gut says, “I’m not sure,” listen to it; don’t assume you’re just hearing that lunchtime taco talking. Test the waters by purchasing a couple of the prospective items for resale. If that sale doesn’t work out, you won’t have a lot of money invested, and you can credit your gut with saving you some bucks.

Catching Trends in the Media

Catching trends is all about listening and looking. You can find all kinds of inside information from magazines, television, and of course, the Internet. Believe it or not, you can even find out what people are interested in these days by asking a kid to provide you with a wish list. Keep your eyes and ears open.

Finding eBay’s Soon-to-Be-Hot Sellers

Everyone wants to know what the hot ticket is on the eBay site. They want to know what’s selling best so that they can run out, buy it, and make big money on eBay. Whoa, there, big fella.

As you may know, I’m not a believer in the notion that eBay is a get-rich-quick program. Nobody has, or can give you, secret information that magically transforms you from a garage seller to a warehouse tycoon overnight. You get there by studying the market and finding out what works and what doesn’t. There are no shortcuts. That said, you can find up-to-the-minute information by typing the link below to view eBay’s Trending searches. Each of the “Top 10” items listed will show you a bar graph to indicate if the item is on the way up — or on the way down (see Figure 1-1).

www.ebay.com/trending

Now wouldn’t I be the smart one if I were to list items that coincided with the top-selling items on the site? You bet! It’s a great place to start. Just remember to review those top items from time to time. And stay tuned for tips on how to keep your business healthy in the midst of the dynamic eBay environment.

Taking Aim with a Six-Month Merchandise Plan

The eBay seller buys merchandise to sell on eBay and perhaps also on other marketplaces. These online sellers are always looking for new sources and wholesalers. But many of the folks who sell on eBay specialize in particular types of item, such as dolls, sports cards, lighting fixtures, or apparel. Their eBay business is organized; they sell their merchandise and then buy more to replenish their stock. Is this the best way to handle things? It definitely works for most, but those who study retailing know that there’s a far more organized way.

One of the first things you learn when studying retail buying is the use of a six-month merchandise plan. It’s the ultimate tool in the arsenal of a successful retail buyer. Although it was originally designed for brick-and-mortar retailers, I’ve adapted it here for online sellers.

Here's what establishing a six-month merchandising plan gives you:

• A clear, concise look at your business activity: After you fill out the plan, you’ll be able to combine it with the reports generated by your bookkeeping program to get a clear, concise picture of your online business. (I explain bookkeeping best practices in Book 9.) This is a business and not a guessing game, and handling your business in a professional manner will save you a great deal of time and money.

  I admit that running by the seat of your pants is fun and exciting (and perfect if eBay selling is your side gig), but it’s not a solid long-term business practice. One of the reasons I started my own business is that an unorganized business format appealed to me. (Ah, innocence.) To my dismay, I soon learned that organization and planning really did make a difference in my bottom line.

• A basis for growth plans: Anyone who has participated in management in a corporation knows about the annual plan. Every year in many organizations, management gets together (apparently with Ouija and dart boards) to project sales, expenses, and profits for the coming year. From this annual exercise, the budget for the coming year arises. These are the magic numbers that form the basis for everyone’s annual raises — along with the company’s plans for growth.
• A set of attainable and repeatable goals: So, assuming that eBay sellers are online retailers, retail evaluation could help eBay sellers make sound business decisions. Making a merchandise plan is a good step in that direction. A merchandise plan covers six months at a time and sets sales goals. It also helps you estimate how much money must be spent on merchandise (and when) so that a particular season’s success can be replicated and magnified.

Pulling Together Your Inventory Data

When you reach a point where your online sales are your main business, it’s time to get serious. You need a few numbers to get your merchandising plan on paper. If you aren’t using bookkeeping software yet, you still need to put together a report that reflects the dollar value of your existing inventory. (Book 9, Chapters 2 and 3 give you more insights into that process.) If you are using bookkeeping software, you can get these numbers easily from the program’s Inventory Valuation report:

• BOM: The value, in dollars, of your beginning-of-month inventory

• EOM: The value, in dollars, of your end-of-month inventory

  The EOM figure for a specific month is the same as the BOM figure for the following month. For example, the end-of-month figure for April is the same as the beginning-of-month figure for May.

• Gross sales: Total revenue from sales (not including shipping and handling)
• Markdowns: Total revenue of merchandise you have sold on eBay below your target price

To put together your six-month plan, you need to have sales history for a six-month period. To get a good historical picture of your sales, however, it’s preferable to have at least an entire year’s worth of figures.

Your six-month plan can be based on your total online sales or only one segment of your business. For example, if you sell musical instruments along with many other sundry items, but you want to evaluate your musical-instrument sales, you can use just those figures for a six-month plan for your music department.

What you’re going to establish is your inventory turnover — that is, the measure of how much inventory sells out in a specified period of time. The faster you turn over merchandise, the sooner you can bring in new merchandise and increase your bottom line. You can also evaluate whether you need to lower your starting price to move out stale inventory to get cash to buy new inventory.

When you prepare your six-month plan, set out the months not by the regular calendar but by a retail calendar, which divides the year into the seasons of fall/winter (August 1 through January 31) and spring/summer (February 1 through July 31). This way, if you want to refer to top national performance figures in trade publications or on the Internet, you can base your figures on the same standardized retail seasons.

Using Formulas to Calculate Business Data

Okay, I can admit that bigger minds than mine came up with standard formulas for calculating business success. These formulas are used by retailers around the world. If you’re not pulling the figures from a bookkeeping program, you can do the calculations yourself, as follows:

• EOM stock = BOM stock + Purchases – Sales
• BOM stock = EOM stock from the previous month
• Sales + EOM – BOM = monthly planned purchases

You can make your calculations in dollar amounts or in the number of units of the item. To figure out how much of an item to buy, you must know how much you have left in stock.

Prepare a chart for your own business, similar to the one shown in Table 1-2. Study your results and find out which months are your strongest. Let the table tell you when you might have to boost your merchandise selection in lagging months. It will help you bring your planning from Ouija board to reality.