From it’s humble beginnings in 1995, where one of it’s first auctions was the sale of a broken printer, Ebay is one of the dot.com’s success stories.
Trading on Ebay has exploded in recent years and many people use an eBay shop as their sole online outlet.
The Advantages of Selling on eBay
- It’s easy to set up an eBay account or shop and an accompanying PayPal account (also owned by eBay)
- There is little upfront cost/investment required, as the interface and payment facilities are already set up and items show up in search engines.
- Possibility of creating a “branded” presence on eBay.
- It’s low risk particularly, if you start slowly.
- Positive feedback ratings can improve buyer confidence.
- There are payment protection policies in place for both buyers and sellers.
- Items do not have to be in perfect condition, as long as they are realistically described, it can be a great place for selling “distressed stock”.
- it’s easy to exit.
The Disadvantages of Selling on eBay
- Sellers must play by eBay’s rules (which are weighted towards buyers, to improve buyer confidence). The number of rules and regulations have increased over the years and are beyond both buyer and seller’s control.
- Feedback is a “double-edged sword” – there is a risk of “feedback extortion” (where buyers give / or threaten to give negative feedback maliciously or spitefully to sellers)
- Unless the items are unusual or rare, it can be very competitive, and many items go unsold or for pennies.
If you are serious about starting an eBay business, then it’s important to get the accounting and bookkeeping in place from the start. eBay traders generally do low value – high volume sales. This means that if you neglect your bookkeeping, the backlog can buildup quite quickly. Leaving it until “year end” will create a massive task that will be time-consuming or expensive to get into order.
Depending on your volume and competence with numbers & bookkeeping, you have the option of:
- Manual records (least recommended, due to the volume and value of eBay transactions – but better than nothing at all)
- Excel spreadsheet records (better for smaller traders, as it can quickly become unwieldy for high volumes).
- Software (best option in theory, but only if you know how to use it properly. Most packages won’t interface automatically with eBayPaypal, but many have “bolt-ons” or extra modules that will handle data imports etc… look carefully at all the options to ensure that the software does all that you need – eg, stock control, barcodes/serial numbers, PayPal or credit card transaction imports, invoicing, VAT – if registered etc… etc…)
You must decide on your trading structure – eg whether to trade as a sole-trader or a limited company (if the latter, you must make it clear to your customers that you are trading as a limited company). I’ve blogged previously on the advantages and disadvantages of trading as a limited company.
You must register for VAT once you exceed the VAT threshold (you may register voluntarily sooner than this). If you are selling to private individuals or unregistered customers, bear in mind the impact on your pricing strategy – effectively, you will be raising your prices by the VAT amount.
Remember that artificial separation of trades to avoid VAT registration is not allowed. HMRC are aware of all the tricks and if they suspect you are doing this, there will be penalties.
If you are working from home, remember that you will be able to claim some home-expenses against tax. See the earlier series of blogs on “working from home” expenses.