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Risk free entrepreneurship and marketing via the internet: ooh!!! It's so easy!

Many people have dreamed of running their own business, but they have been reluctant to begin such an endeavor due to the associated risks. Now, with just a little advanced planning there is a way to run a small business with very little risk and only a small amount of capital. This new opportunity is the Internet and it has changed the way the world does business. In this article you will be presented with a very simple and risk free method to start your own small business; one that has worldwide reach. In addition, you will be made aware of some of the specific techniques that you can use to make your new venture relatively risk free. But first, here is a brief overview of the nature of e-commerce on the Internet.

Background

It is estimated that over half a billion people worldwide have Internet access according to recent research (Nielsen-Netratings, 2003). Data concerning e-commerce is likewise compelling as commerce on the Internet continues to grow at a phenomenal rate, as illustrated by the following facts:

* US consumers were expected to spend 14.8 billion US dollars online in the first quarter of 2003 (A.C. Nielsen, 2003).

* Online retail spending in the US is estimated to grow by 28% in 2003 to $52 billion (Jupiter Research).

* In the fourth quarter of 2002 the US accounted for 29 percent of the global Internet universe. Europe had 23 percent and Asia-Pacific had 13 percent. Latin America accounted for only two percent (Nielsen-Netratings, 2003).

* A survey of US companies indicated consumers spent $74 billion shopping on the Internet in 2002, and projected spending of close to $100 billion for 2003 (Internetnews, 2003).

* Online retail spending is estimated to reach $105 billion by 2007 and it will account for approximately 5% of all US retail spending (Jupiter Research 2003).

* The Department of Commerce figures also indicate that e-commerce sales during the fourth quarter of 2002 were equivalent to 1.6 percent of all retail sales, up from 1.3 percent in the third quarter (US Census, 2003).

* The United States has the world's highest Internet usage, with approximately 72% of the population having been online at least once in the past three months (Cox 2003).

From a demographic standpoint, Internet users are generally young, affluent, and well educated. Measurements reported from comScore's media matrix reveal a link between Internet usage and household income, with those earning above $100,000 annually spending the most time online and viewing the most pages (Greenspan 2003). The August 2002 analysis also revealed "nearly 84 percent of Internet users with a household income of $100,000 or more visited a retail site."
 "Those households earning between
 $50,000 and $75,000 were responsible for
 more than 22 percent of the monthly traffic;
 households in the $35,000 to $50,000
 income range accounted for nearly 17
 percent; $25,000 to $35,000 accounted for
 over 10 percent; $15,000 to $25,000 just
 over 7 percent; and households below
 $15,000 comprised a little more than 6
 percent of the September 2003 Internet
 traffic" (Greenspan 2003).


More recently, research has shown that seniors have become one of the fastest growing groups of Internet users as well, with average online spending up. As can be seen from these data the Internet has become an essential method for conducting business in the world today and it is therefore becoming an even more important retail business and entrepreneurial tool.

Getting Started

What do you need to take advantage of this important and valuable tool to start your own business? The answer is really quite simple:

Required items

* Access to a computer and the ability to connect to the Internet.

* An active e-mail account, and a current credit card account.

* Time!

* A commitment to succeed.

Optional items

* A digital camera (not necessary but a very helpful tool).

* Starting an eBay Business for Dummies by Marsha Collier (This is an excellent and inexpensive guide for the first time eBay user and all those who would like to use eBay to develop a business).

Let's begin!

eBay and the Auction Houses: The Easiest of Options

Auctions are one of the easiest, fastest, and potentially least expensive and risk free marketing methods available. There are several auction sales sites from which one could choose. These include eBay.com, Yahoo.com auctions, OnSale.com, and ICollector.com, to name a few (a more complete listing of auction sites can be found at online-auctions.net). While many choices exist, this article will focus on eBay. The reason for selecting eBay is that it is one of the largest and best known. For example, "on any given day, there are more than 16 million items listed on eBay across 27,000 categories. In 2002, eBay members transacted $14.87 billion in annualized gross merchandise sales (eBay.com, 2004)." Couple this with the fact that eBay reaches over 50 countries internationally and it becomes obvious why it has the potential to become a powerful tool for the entrepreneur.

To become an eBay seller is really quite easy. After logging on to your computer simply go to the eBay.com home page and click on the help box. This will take you to the eBay help center where you can then get assistance and information on a wide range of topics: registering with eBay, buying, selling, and opening your account. Two important topics areas that you need to read very carefully are the eBay policies and the Safe Trading areas.

eBay Policies (covers the following issues):

* Overview

* The Agreement

* Frequently asked Questions

* Privacy

* Identity

* Rules for Everyone

* Rules for Buyers

* Rules for Sellers and Prohibited and Restricted Items

Safe Trading (covers the following issues):

* Overview

* Community Values

* Your Privacy

* Knowing your Seller

* Knowing your Buyer

* Reputation and Feedback

* Protected Programs

* What if Something goes Wrong

* Additional Resources for Shopping Safely Online

The Basic Process for Listing an Item for Sale

To list an item for sale after you have registered, you need only click on the "sell" block on the toolbar at the top of the page. This will take you to the worksheet for listing your item(s). On this page there are several hot buttons you may click on for additional information, such as how to sell, seller's checklist, creating a seller's account and learning about seller's fees. You will be asked to login/ register with your account name and password. Once signed in you will be asked how you want to sell your item. You may choose to sell it via online auction or elect to sell it at a fixed price (Note: eBay has other formats available such as the eBay virtual stores and the Dutch auctions that are used for selling multiple identical items. Discussions of these formats will be reserved for a future article). Choosing a format, e.g. sell item at online auction, and then clicking on "continue" will take you to the appropriate worksheet. For your online auction you will be asked to choose a listing category from the choices provided, you may even elect to select two, cross-listing the item. Next you will be asked to name your item and provide a written description. On the following page you will be asked to provide the length of time your auction will run, in days; the quantity of item (normally 1), price, minimum bid, and a reserve price if desired (note: a reserve price allows the seller to specify the minimum price for which he is willing to sell the item. If the reserve price is not met at the time the auction ends the seller is not under any obligation to sell, however if there is no reserve the seller must sell his item to the highest bidder at the close of the auction. The reserve price auction option can be used to reduce risk, and will be discussed later.) At this point you will be asked if you want to include a picture. EBay allows one picture with each listing, but you may add others for a small fee (a picture of the item being sold is an excellent idea and reduces the number of potential inquiries for additional information that you will receive). You will be asked to specify the acceptable methods of payment and method for handling shipping costs. There are other options presented which the seller may elect to use as well, such as the use of boldfaced type for the listing. In addition you may select the use of a counter (at no charge) that will track and report the number of times the item has been viewed. Continuing to the next page allows you to review/proof your listing and will tell you what the listing fee is prior to submission. The overall process is straightforward and the forms are easy to fill out. EBay has provided numerous links on each page that provide detailed explanations for the beginner. As you use the various tools the process becomes much easier to accomplish.

Services

EBay provides a wide variety of additional services to both the buyer and the seller. A complete discussion of these services can be found by clicking on the "services" block of the home page. An example of the type of services available is being able to track the bidding history, which can be done on the actual item page. The listing page also contains written information about you, the seller, and your reputation. It is important to note that one of the major mechanisms for reducing transaction risk is the reputation of the buyer and seller. A flawless reputation is critical to becoming a success on eBay. Both retailer/seller and buyer can and are encouraged to provide detailed feedback concerning the transaction using the feedback option provided as a service to eBay members. Feedback information, either positive or negative, is available to the whole eBay community to see and act upon. If the buyers or sellers are not treated ethically and properly throughout the transaction process they most certainly will leave damaging feedback and it will become part of the eBay records. Therefore accurate descriptions of the condition of the item being sold, including any damage and the terms of the sale, e.g., who is responsible for insurance and shipping costs, are essential. A seller can also view how many successful transactions the bidder has completed and what other sellers have had to say about the smoothness of those transactions.

This has been a much abbreviated description of the listing process but it does give an overview upon which interested readers can build. eBay is an excellent site and has earned a very high reputation for the manner in which its dealings are transacted, but it is still the responsibility of the buyers and sellers to become completely familiar with all the details of the process. E-mail contact information is also available so that potential buyers can ask questions of the seller concerning the listed item. This should be encouraged as it prevents misunderstandings between parties.

Some Advantages

There are many advantages to using eBay, primary ones being its size, recognition, reputation, and worldwide access. Other advantages include the large number of categories of goods handled (over 8,000); the services that are provided to sellers and buyers; reasonable fee structure, search capabilities; and a charge payment options through Pay Pal and/or escrow accounts. In addition, tracking of various items listed for sale is made easy by eBay through the use of the "My eBay" page which tracks the status of all open auctions on which the seller has an item for sale. This handy page lets the seller know at a glance what the highest current bid is, the number of bids made, and the time remaining in the auction, and it will also indicate if the auction has a reserve price. For your customers, the buyers, the "My eBay" page will let them track the status of all auctions on which they are bidding.

Strategies for Minimizing Risks

With a little advanced planning you can greatly minimize your potential risk while conducting business on eBay. First of all, knowledge of what you are selling, whether baseball cards or Barbie dolls, and current prices are extremely helpful and necessary. The Online Auction Users Association at www.auctionusers.org is a good reference source for beginning buyers and sellers alike and it contains much useful information, including a code of ethical behavior. You can also acquire the necessary knowledge by examining similar items being sold on eBay or other online auctions. As you look at the various items, make notes as to what you think the condition is and what the seller says about the condition. Look at the number of items sold by this seller; it will become easy to spot dealers due to the large number of transactions they have completed and the use of terms such as "power seller". You may note that dealers often have reserve prices on the items they sell.

Once you have become familiar with the types of items you are planning to list/sell and the eBay auction procedures, it is time to place an item for sale.

* Tip 1 Start with an item that has moderate or low value and is an item that you can afford to sell at a low price. (Don't list your unique or rare items until you build up practical experience).

* Tip 2 Require the buyer to use a certified check or a money order for payment (do not take personal checks initially). As you gain experience you may want to accept personal checks from buyers that have no adverse feedback in their dealings. You should specify that personal checks must clear, normally 1 to two weeks depending on your bank, before goods will be shipped.

* Tip 3 In listing your item, specify that the buyer pays all shipping and insurance costs, and strongly suggest insurance on all purchases over $10.00, stating that you will not be responsible for loss or damage in transit.

* Tip 4 if you are unable to determine or estimate the value of your item prior to listing it, use the reserve price auction feature and establish a high reserve price that is well above the minimally acceptable price you would take for your item. In this way you will not be required to sell the item to the highest bidder unless your reserve price has been achieved. Be careful, listing an item on eBay without a reserve price is a contract saying that you will sell your item to the highest bidder even though the highest bidder may have only bid $1.00 or less. The minimum bid price asked for on the listing form is only the starting point for the bidding; if a buyer's bid exceeds that starting point and is the highest bid at the time the auction ends you are obligated to sell the item. Only an unmet reserve price allows you the option to refuse to sell.

* Tip 5 Require all payment in US dollars. This eliminates any risk from currency exchange rate differential for overseas buyers.

* Tip 6 you will note that many people selling on eBay will not ship overseas, and sell only in the USA. This eliminates such things as customs declarations, etc. Realize that overseas shipments are costly and transfer those costs to the buyers by making them responsible for all shipping and handling costs.

* Tip 7 Use Pictures. Pictures allow the buyer to see the item and make his/her own judgment as to the condition. If you can afford it, use more than one picture to display the item from all sides and the top and bottom. This is especially true when selling high value items. If there is any damage or missing parts include these areas in photos. Note: use only sharp pictures; out of focus pictures look like you may be trying to hide the true condition of the item.

* Tip 8 Pack items securely; fragile items should be double wrapped in bubble wrap and always use packing peanuts. Double box if necessary.

* Tip 9 Keep accurate records of all sales. Remember to keep good records as you must report all income on your taxes. Carefully document all income and expenses for tax purposes (chapter 16 of Starting an eBay Business for Dummies does a very good job covering record keeping).

* Tip 10 Provide feedback for all your buyers, and ask them to provide positive feedback for you. Feedback is an important tool as it is used to gauge performance reliability of both buyers and sellers.

A final note: This article has just skimmed the surface of the potential eBay holds for entrepreneurs and those wanting an easy way to start their own business. If you are interested in seeing more articles on Internet marketing, and/or eBay, please let us know.

References

AC. Nielsen, "Yahoo! And AC Nielsen Release Seventh Quarterly Wave of Internet Confidence Index," http://www.acnielsen.com/news/corp/2003/ 20030117.htm.

Collier, Marsha, Starting an eBay Business for Dummies, Willey Publishing, Inc. 2002.

Cox, Beth, "E-Commerce as a way of life," http://www.cyberatlas.internet.com/markets/retailing/article/ 0.1323.6061_1548011.00.html, January 2003.

Department of Commerce's Census Bureau, http://www.uscensus.gov

eBay.com, "About eBay," http://www.pages.ebay.com/community/aboutebay/index.html

Greenspan, Robyn, "More Money +More Surfing," http://cyberatlas.internet.com/big/big_picture/demographics/article/ )..5901..3091091..00.html, October 2003.

Leon, Mark, "Online sales soared 48% Last Year," http://internetnews.com/stats/article.php/2207471. May 2003.

Naraine, Ryan, "B2C Goes from Rags to Riches," http://www.internetnews.com/stats/article/php/2196821, April 2003

Nielsen-NetRatings, "Global Internet Population Grows an Average of Four Percent Year-Over-Year," http://www.nielsen-netratings.com/pr/pr_030220_hk.pdf. February 3003.

NUA, Jupiter Research, "Online retail spending to soar in the US," http:// www.nua.ie/surveys/index.cgi?f=VS&art_id-905358701&rel=true, January 2003.

About the author:

Lynn Muller is an Assistant Professor of Marketing at the School of Business at The University of South Dakota in Vermillion and earned his PhD from the University of North Texas. His research interests include Marketing on the Internet, Marketing to Mature Adult Markets, Retailing, and Advertising and Promotions.
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Author:Muller, Lynn
Publication:South Dakota Business Review
Date:Dec 1, 2003
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