IN THIS CHAPTER

Organizing your consignment business

Competing with other consignment stores

Considering the Valet service on eBay

Promoting your consignment business

Writing an effective consignment contract

Consignment sales are a popular way for you to help non-techie types by selling their items on eBay. These people consign their merchandise to you and once it sells, you take a percentage of the profits. Lots of sellers do it, and a few retail locations base their business on it. This chapter gives you a close-up look at consignment selling. In this line of work, you’re responsible for taking photos and marketing someone else’s items on eBay — for a fee. In addition to the money you earn selling on consignment, you also get excellent experience for future sales of your own merchandise.

Getting Organized to Sell for Others

To set up your business for consignment sales, you should follow a few guidelines:

1. Design a consignment agreement (a binding contract) and send it to the owners of the merchandise before they send you their items. Doing so ensures that all policies are set up in advance — and that no questions need arise after the transaction has begun. See the end of this chapter for what you should include.
2. Have the owners sign and give the agreement to you (the consignor) along with the item.
3. Research the item based on historic sales so you can give the owners an estimated range of what the item might sell for on eBay.
4. Photograph the item carefully (see Book 5 for some hints) and write a thoughtful, thorough description.
5. Handle all inquiries as though the item were your own; after all, your fee is based on a percentage of the final sale and the feedback you receive is your own. Traditional auction houses handle consignment sales in a similar fashion.

Competing with the Drop-Off Stores

Many stores have opened up across the country with brick-and-mortar locations accepting merchandise from the general public to sell on eBay. By developing your own consignment business, you can compete with the big boys in your own area.

The best part is that if you’re running your eBay business out of your home, from a garage, or from a low-rent industrial office, you’re a step ahead of the brick-and-mortars who have to pay rent in fancy neighborhoods to get their drop-in business. They also have to hire people who are familiar with running sales on eBay — and aren’t you already set up for that?

Don’t worry about the competition! You may hear about the many eBay consignment stores that are opening up. As a matter of fact, some are selling franchises for this business for up to $21,000, not including training. You already know how to sell on eBay. (Franchise? You don’t need a stinkin’ franchise!) Use your good sense (and positive feedback) to build your own eBay consignment store.

Retail locations have a much higher cost of business than you do. They need to be open for set hours per day and have several employees on duty at all times. Many of these stores won’t accept an item worth less than $75. There’s still a lot of profit left for you in the realm of under-$75 items.

Consider all your expenses — remember to take eBay, PayPal, and shipping fees into account. Keep an eye out in your own area should a store open, so you can keep up with the competition.

What do you charge for all your work? I can’t give you a stock answer for that one. Many sellers charge a flat fee for photographing, listing, and shipping that ranges from $5 to $10 per item, plus as much as a 40-percent commission on the final total (to absorb fees). Other sellers base their charges solely on the final sale amount and charge on a sliding scale, beginning at 50 percent of the total sale, less eBay and payment service fees. You must decide how much you think you can make on an item.

Table 3-1 gives you some ideas based on the input I’ve received from some successful eBay consignment sellers. (These percentages may be in addition to the eBay fees.)

Remember that you can always choose to charge a flat commission, if that works best in your area. Check out the eBay consignment sellers in your area to see what they charge.

Understanding the “eBay Valet” Program

What is eBay Valet? Simply, the eBay Valet program is an automated system for people who want to sell merchandise on eBay without bothering to learn the ropes. I guess it would be (as you would be as a consignment seller) a way for those who are not familiar with eBay to get their items sold.

You’ll find the Valet home page (see Figure 3-1) on the eBay site at

www.ebay.com/s/valet

You may remember that eBay used to have a Trading Assistant program where they promoted consignment sellers; but that’s no more.

I have read reviews on the web and found not much to recommend it for sellers. If you want to try it, you can read more about its procedures directly from eBay here:

www.ebay.com/s/valet/faq

If you’re still interested, the requirements to become an “eBay Valet” are listed below. eBay stresses that you must go through a rigorous screening — and the points below are not the only requirements:

1. Ability to list 100,000 listings each month
2. Storage capacity sufficient to hold and manage items received for at least 21 calendar days
3. Ability to list items across all eBay categories
4. Physical presence in all major metropolitan hubs in the U.S.
5. Demonstrated ability to consistently deliver the highest standards of buyer experience to eBay shoppers

If you can fulfill all of those requirements — especially number 3 — well, frankly, you should be making a bundle on your own.

Promoting Your Consignment Business

When I was working in the newspaper advertising business, we had a saying about someone who opened a new store: If all the advertising they do is their Grand Opening ad and nothing after, it won’t be long before you’ll be seeing the Going Out of Business sale ad. The same is true with your consignment business.

Get creative! Why not design a flyer that you print on your own printer. Put it up at the supermarket, the car wash, the cleaner — anywhere and everywhere flyers are allowed.

Even if you don’t see flyers in a retail location, ask the owner of the business if you can put one up — maybe even offer a discount to the business owner for selling his or her items on eBay in exchange.

You might want to make a flyer that includes small tear-off strips where you can place your contact information. When people see your promotion, they can just snip off your phone number (or email address) and contact you when they get home.

Handling Your Business Professionally

How you conduct your business can demonstrate to your customers that you’re a responsible person. You need to present a professional appearance when you meet your client, and you should have a professional attitude in your dealings.

Being professional also means anticipating possible problems. In addition to being very clear about financial issues with your clients (especially fees and the realistic selling value of your clients’ merchandise), you may want to consider getting additional insurance to cover the merchandise you’re holding in your home.

You may also want to consider designing a few forms to reinforce your clients’ awareness that this is your business and that you know it well. For example:

• Inventory form: This form lists the entire inventory you receive from the client and should include as detailed a description of the item as your client can supply. Also, include the minimum amount (if any) the client will accept for the item — this will be your reserve price if necessary.
• Sales agreement: Professional consignment sellers who expect to remain in business have their clients sign a sales contract. Read on for some good suggestions about what to put in your contract. It’s also a potentially wise investment to have a lawyer look at your contract before you use it.

The below includes quotes from several contracts I’ve found over the years. They cover many things that you might overlook when you put together your own contract. This, of course, is not a full agreement, but it provides some of the salient points not to forget. Be sure to include an explanation of the consignment process:

• The Consignor will bring item(s) to the Seller, who, upon both parties signing this contract, will take possession of the items for the duration of the sales.
• Acceptance of any item consigned will be at the Seller’s sole discretion.
• The Seller will inspect the item(s) for quality and clean if necessary (a fee may apply).
• The Seller will take quality photographs and write an accurate description of item(s).
• The Seller will research eBay for similar items to ensure proper pricing.
• The Seller will start the listing(s) and handle all aspects of the sale including correspondence with bidders.
• The Seller will collect payment from the winning bidder (“Buyer”) at the end of the auction and will ship the item(s) in a timely manner, once funds have cleared.
• The Seller will follow up the sale by contacting the Buyer to make sure the Buyer is satisfied with the transaction.
• Once the Seller and Buyer are satisfied with the transaction, payment will be made to the Consignor.
• The Seller will keep the Consignor aware of the sales progress by telephone or email and by supplying the Consignor the listing number(s) to track the item(s) themselves.
• The Seller will return unsold item(s) to the Consignor upon payment of outstanding fees.

It’s also a good idea to provide the consignor with a statement of items sold, summarizing the total purchase price, all fees, and the amount the consignor receives.

• Outline your fees: “The Consignor will be billed the actual rates and fees as incurred for all services, to include the Seller’s 00% Commission. Any services or upgrades requested by the Consignor will carry the exact fee and will be deducted from payment, or after three (3) failed auction listings, will be due to the Seller payable in cash. If the auction sells, these fees will be subtracted from the winning bid before the Consignor receives payment.”

  In addition to specifying your nonzero commission, be sure to include a copy of current eBay fees: listing, options, reserves, PayPal, and final value fees.

• Outline the terms of your commission: “The Seller’s commission for this service is a percentage based on the final selling price. If an auction does not sell, the Consignor is only responsible to pay the applicable insertion and reserve-price auction fees. An Unsold Reserve fee of $0.00 [fill in your amount] will be due to the Seller for a reserve-price auction that does not sell.”
• Be sure you don’t guarantee the item will sell: “If an item does not sell, the Seller will re-list it two additional times. The Seller may contact the Consignor to discuss combining individual items into lots to attract buyers. The Consignor’s verbal consent, or email consent, will be documented in the Consignor’s file and will serve as a revision to this contract. After a third unsuccessful listing, the Consignor will be billed for the fees associated with all three listings, plus a $5.00 surcharge. Items will be returned to the Consignor upon payment of those fees. Items not claimed within 14 days from the end of the final listing will become the property of the Seller.”

• Protect yourself and your eBay reputation: “The Consignor of said item(s) consents to the sale of said item(s) based on the terms described in this agreement. The Consignor also attests that said item(s) are fully owned by the Consignor and are not stolen, borrowed, misrepresented, counterfeit, etc.”

  You might also mention that you will only sell the item if eBay policies allow the item to be sold.

  “The Seller will do everything possible to secure the safety of the Consignor’s item(s); however, the Seller is not responsible for any damage to the item, including fire, theft, flood, accidental damage or breakage, and acts of God. The Consignor releases the Seller of any such responsibility for any unforeseen or accidental damage.”

  I choose to protect myself additionally, because reputation on eBay is paramount. I have a small-business rider on my homeowner’s insurance that covers merchandise in my home up to $5,000 in value. It’s an inexpensive addition to your policy — definitely worth looking into.

• Ending a sale prematurely: “If such an instance arises that the Consignor demands the item(s) to be pulled, the Consignor will pay a cancellation fee of $75. Items will not be surrendered to the Consignor until this fee is paid in cash.”
• Protect yourself from possible shill bidding: An important line you should add protects you from possible shill bidding. How about something like this: “The Consignor also agrees not to place a bid on an auction that the Seller has listed for the Consignor (hereafter ‘Shill Bid’) on eBay, nor to arrange for a Shill Bid to be made on the behalf of the Consignor by a third party. If the Consignor or an agent of the Consignor submits a Shill Bid on an auction listed by the Seller, the Consignor agrees to pay all fees, commissions, and penalties associated with that auction, plus a $75 fine, and the Seller may refuse to grant consignment services to the Consignor in the future.”

Again, I strongly suggest that you get professional advice before, during, and/or after putting together your own contract or agreement. Protect yourself and your business.