eBay consignment selling is an efficient way to grow your business without having to buy inventory. eBay sellers can scale their businesses by selling for others and consignment is an effective way to make extra money leveraging eBay skills, as long as products are carefully chosen and terms and conditions of consignment are explained in detail to the consignor. However, selling for others can get messy if not thought out beforehand.
If you are an eBay seller, you have probably been asked by friends, family, or even acquaintances to sell something on eBay for them. The conversation usually goes like this:
Friend: "Oh, you sell on eBay? I have this ____________ that I've been wanting to sell" or "I have a _______ that I heard was worth a lot on eBay. Can you sell it for me?"
Consignment is big business on eBay. For example, Linda's Stuff is the largest consignment seller on eBay with over 140,00 items for sale and sells about $30,000 worth of consigned items a month. Other eBay sellers reach thousands of prospects when listed in the eBay Consignment Seller's Directory.
eBay sellers should answer this question with caution. Committing to sell for others can cause relationship problems, stress within families, and disagreements. Here is how to navigate the "Will you sell for me?" question.
Educate Yourself About Consignment Selling
The first step in setting up a consignment business is deciding what you want to do and how you want your business to run. You can always fine tune as you move along and your business evolves. But it is a good idea to have a clear picture of where you want to start. Ask yourself these questions:
- What price points do I want to deal with? What will be worth my time? Some sellers will only sell items that will sell for $50 and above. If your commission is 30% (not including eBay and Paypal fees) that is $15. Estimate at least 30 minutes per item including research, cleaning if needed, photographing, listing, and shipping. That is a rate of $30 per hour for your work - an excellent rate that compares with nurses, technical writers, and other jobs requiring a degree.
- What kinds of items will you work with? Do you want to ship large, bulky, or heavy items? Are you comfortable selling electronics? Do you like listing clothes? Think this through so you will have an idea of what kinds of items you want to work with.
- How much storage space do you have? Remember that you will have possession of the item until it sells, so you need ample storage space.
- How will you keep track of sales? These items are going on your eBay account and payment will be through your Paypal. You will need to present the client with an accounting of how the money flows, as well as be able to keep track of what sales were not yours for tax purposes.
- How will you pay your clients? Paypal transfer or check? Be sure to pay in a way that can be tracked (not cash) for tax purposes and good record keeping.
- For any questions about how taxes work with consignment, consult a local financial professional such as an accountant. Consignment is not a new concept (for example, consignment stores have been around for decades) but you may have questions about how it is different than selling items for yourself.
- There are many more details to consider before jumping into consignment.
Gather the Facts and Ask the Right Questions From the Beginning
It is a good idea to ask the right questions and nip any problems in the bud from the start. Here is a list of basic questions to ask the person who wants you to sell something for them.
- There are no guarantees on eBay as far as pricing. It's all about what the market will bear. Are you willing to let this item sell for whatever I can get for it?
- Selling on eBay can take time. Are you willing to wait as long as it takes to sell this for the best price?
- eBay has a Money Back Guarantee. The item could be returned and we have to start over. Are you willing to accept this risk?
- eBay and Paypal fees are about 15%. My fee is ____%. Are you willing to pay these fees for my service of selling this item for you?
If the answer to any of these questions is no, then this arrangement will not work. If the person has a price in mind for their item or wants the item to sell within a certain time frame, this is not a good business arrangement. Sellers can never guarantee that an item will sell for a certain price within a certain time period on eBay. This is a guarantee you absolutely cannot give a client.
Create and Sign a Consignment Agreement
Selling on eBay is business and a written contract is warranted. Both parties need to understand the commitment and responsibility of the other person. When, or if, a disagreement arises, you can point back to the contract and remind the client that they agreed to the stipulations in the agreement. The person who owns the item for sale is called the consignor and the eBay seller is called the consignee. For example, a good consignment agreement states:
- Consignee agrees to be responsible for the loss or damage and safekeeping of the items and will ensure they are packed and shipped properly to the eventual buyer.
- Consignor agrees to a fee schedule.
- The consignor may not withdraw an item after it is sold.
- All items are priced based on the market price in the eBay marketplace and at the discretion of consignee.
Don't Let Others Dictate Your Terms
Here is where things can get tricky. Once the item is listed, the consignor may become impatient and want to pull the items off eBay. Or, the consignor may disagree with pricing. Sellers must stick to their original terms and remind the consignor of their experience, knowledge, and that they know how eBay works.
If the consignor knew how to sell on eBay, they would not have had to hire the eBay seller to sell the items in the first place. This is a common scenario as the consignment relationship progresses - the consignor becomes impatient and tries to dictate how the eBay selling should be handled. And this is the exact reason eBay sellers must always have the consignor sign an agreement.