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Starting an eBay Store to Jumpstart Your Small Business

Person starting an eBay store by signing in to their account

eBay started as an auction site where enthusiasts bought and sold collectibles of all kinds. Later on, more traditional businesses started to use the site to sell in the more traditional way—by setting a firm price and selling the item right away. Today, eBay has an enormous user base, and it continues to be easy for both professional and casual sellers to use. This is why starting an eBay store is a great way to build your first—but not last—online store.

If you’re reading our series on finding the right place to open your first online store, you’ll know that our first (and most important) criterium is that the platform must be well known. This way, potential customers can easily remember where to find you. eBay is that. eBay also has easy-to-set-up stores and other e-commerce conveniences for business sellers.

But we don’t recommend eBay for every type of business. Because eBay originally started as an auction site, it has a unique way to charge a fee for each sale. This is fine for businesses that sell larger ticket or unique items. But it doesn’t make sense for businesses that sell the same, lower-priced product many times a day. If this is you, then you might wish to consider using another platform like Facebook Shops.

Let’s take a closer look at how eBay works. Then, you can make a more informed decision on whether starting an eBay store will work for your type of business.

What Kind of Sellers Use eBay?

Both private individuals and businesses sell on eBay. Individuals tend to sell their own used items just like a garage sale. Businesses—unless they’re in the collectibles business—tend to sell one type of item multiple times until their inventory runs out.

eBay sellers come from all over the world and sell to buyers all over the world. As such, selling on eBay can be a little complicated. You’ll have to follow different tax laws. You’ll also sometimes have to follow import/export laws. As we go into detail later in this article, eBay can help you with all this.

For now, just know that one of the greatest benefits to starting an eBay store is that your pool of possible customers is worldwide. And, one of the greatest detriments to selling on eBay is that your competition can also come from all over the world. But that’s OK. You’re not starting an eBay store to compete with them. You’re using eBay as a way to finalize a sale that you made off eBay.

How eBay Charges Its Sellers

eBay started out as an auction website. Auction businesses charge differently than most businesses, and so does eBay. To sell on eBay, you’re charged a listing fee and a selling fee.

Listing Charge

eBay charges all its sellers a fee for simply listing an item for sale. If you sell the initial item and you put up a replacement item—even when it’s the exact same item—you’re charged another listing fee. eBay calls this an insertion fee.

A listing typically lasts for 30 days. If the item doesn’t sell, then you can relist it. You’ll be charged another insertion fee for relisting.

Paying a listing fee makes sense if you’re selling a collectible or big ticket or unique item. It doesn’t make a lot of sense if you’re selling chocolate chip cookies at five cookies per bag (i.e. per listing).

For any item, the insertion fee is different depending on whether you list the item as an auction item or a fixed-fee item. We expect that most of our readers here will list items as fixed-fee items.

Any generic seller on eBay gets 250 free listings per month. Stores typically get more free listings. If you list more than your monthly free listings allotment, you’ll be charged an insertion fee for the item.

The insertion fee depends on the type of item you’re selling, whether you’re listing it for auction or for fixed price, and on your store package. Some categories have a zero insertion fee, but most categories have an insertion fee of between $0.05 -$0.30.

Payment Processing Charge

Once someone buys your product, eBay charges you another fee for processing the sale. eBay calls this a final value fee.

The final value fee is calculated based on a percentage of your total sale + $0.30 per order. The total sale includes the actual price of the item sold, the shipping and handling charges, the sales tax, and any other fees that may apply.

The percentage of the charge depends on the category of the item sold, your sales volume, and your store platform level. Usually, the charge is between 2.35%-15% but can be lower for a few specific categories.

For a more detailed breakdown of fees for each category and level of store subscription, see this eBay store selling fees page.

The Basics of Starting an eBay Store

While you don’t actually need to start an eBay store to sell on eBay, we do recommend you have one. You’ll look more like an official business (and therefore gives potential buyers confidence that you’re not a fraudster). You’ll also have a place for buyers to browse other items you sell. Having a store account also lowers your selling fees.

Here are some details on starting an eBay store.

eBay Stores Come in Different Pricing Tiers

There are several tiers of eBay stores. Each tier has a different platform fee and each comes with a different number of free listings and discounts on the final selling price.

The tiers and their pricing are:

  • Starter. $7.95/month or $4.95/month if paid yearly.
  • Basic. $27.95/month or $21.95/month if paid yearly.
  • Premium. $74.95/month or $59.95/month if paid yearly.
  • Anchor. $349.95/month or $299.95/month if paid yearly.
  • Enterprise. $2,999.95/year

You can upgrade your tier at any time, even if you’ve paid for the entire year. So, the safest approach for a new business is to buy a lower tier and upgrade if business picks up.

Each Tier Comes with Different Benefits

For a business that’s just starting, the Enterprise and Anchor tiers are too pricey. They do give the best discounts in selling fees and include additional benefits. But, a starter business is unlikely to be able to use all the benefits. So, we won’t focus on these tiers.

While the Starter tier offers the lowest pricing, it doesn’t offer too many benefits over what a casual eBay seller gets with no store at all. Specifically, the only benefit the Starter tier offers is a storefront dedicated to your business. The tier does not offer any discounts on eBay’s fees.

For most businesses, paying for the Basic or Premium tier makes the most sense. Exactly which one you pick depends how quickly you expect your products to move. The Basic store comes with 1,000 free fixed price listings per month and the Premium store comes with 10,000 free fixed price listings per month. Both tiers come with the same discount in selling fees.

The Basic store also comes with $25/month of free eBay branded shipping supplies, and the Premium store comes with $50/month of free shipping supplies. Note that if you pay for an entire year for the Basic store, you’d be paying $21.95/month. With your $25/month of free shipping supplies, you’re getting the shipping supplies for free and then some.

Additional Store Benefits

eBay stores come with additional benefits. For example, you’ll get a home page where you can display your business’s name and where you can customize your store. You’ll also be able to run promotions such as having a sale or offer coupons. You’ll have access to some analytics tools too, to understand your sales and profit margins.

For more detailed information about starting an eBay store and links to additional information on charges, see this page.

Product Photo Requirements

Once you set up your eBay store, you’ll need to upload some product photos so your potential buyers can examine your products before they buy. We know eBay already has stock photos for popular products. However, we’re assuming you make a somewhat unique product, so you’d need your own photos.

You can hire a professional photographer to shoot your product photos, but you can also get pretty close to pro quality photos by doing everything yourself. If you’re interested in taking your own photos, here’s our series on DIY product photography.

Here are some specifics for product photo requirements for eBay:

  • File can be up to 7MB
  • Maximum of 12 photos per product
  • Must be at least 500 pixels on the longest side and preferably 800-1600 pixels on the longest side.

If you use the eBay app to upload your photo, the app has a photo editing feature. It can crop, rotate, adjust brightness and contrast, and automatically remove the background. For more information about uploading photos, see this eBay page.

eBay Helps You with Sales Tax

Whether you’re an individual seller or a business, eBay will help you with sales tax calculations. And, for 47 of the US states, eBay will also collect and remit the sales tax for you. In case you sell internationally, eBay will also help you with other tax and customs fees, if applicable.

For tax information in detail, see this page.

You Can Get Discounted Shipping on eBay

eBay has pre-negotiated various discounts with a few shippers when shipping domestically in the US. But you are also free to use other shippers, if you wish.

Shippers Offering eBay’s Pre-Negotiated Rates

You can get discounted shipping if you use one of eBay’s preferred shippers. These shippers are:

  • USPS
  • UPS
  • FedEx

With any of the above shippers, you can also print shipping labels and track shipping from your eBay account.

eBay also offers international shipping, which includes sales tax (e.g. VAT) and customs clearance services.

Shipping Supplies

You can buy eBay branded envelopes, corrugated boxes, tapes, and other shipping supplies. Note that you get a monthly allowance of supplies by starting an eBay store. This way, you can look like a professional seller and save money too.

There are Items You Can’t Sell on eBay

eBay has a reputation for being a place where you can buy and sell just about anything. But there are some items you can’t sell. These include the usual suspects like illegal drugs and escort services. They also include some antiquities and endangered animals prohibited under various international laws.

Still, eBay does try hard to let anyone sell anything. This means that there are always exceptions to broad categories that are usually prohibited. To deal with the exceptions, eBay made detailed policies for many broad categories. To find out if your item is prohibited, you’d have to check the specific policy. Often, a category isn’t a firm “no,” but a “no” or “yes” only under specific conditions.

For example, you can sell wine, but eBay must approve you as a seller first. You can sell fossils and antiquities, but you have to be able to certify they’re real and follow different countries’ antiquities dealings laws. You can’t sell certain items made from animal parts—e.g. ivory. But you can sell items made from turtles or tortoise shells, as long as the turtle/tortoise isn’t a protected type.

So, if in doubt, always check eBay’s policy to see if your item is allowed. Here’s eBay’s prohibited or restricted items policy list to get you started.

eBay Stores Can be Great for Some Businesses but Not All Businesses

We think starting an eBay store can be a terrific way to open an online business. But it’s definitely not for all types of businesses. While you can sell practically anything on eBay, if your business relies on selling a lower-priced item many times a day, then, because of the pricing structure on how eBay takes its fees, eBay isn’t well suited for your business.

Aside from this, be aware that there are a lot of sellers on eBay. Competition can get fierce not only from domestic sellers but from international sellers as well. You shouldn’t depend on buyers to organically discover your store. Instead, it’s a better strategy to find customers in some other way off eBay and then tell them they can buy from you on eBay, for their convenience.

Other than this, eBay helps you with payment processing, tax calculations, and shipping. With a customizable storefront, you can display your entire line of products for cross-selling. So, for not a lot of money, you can set up your own online store and start selling very quickly. At the end of the day, being able to generate cash flow as quickly as you can is your goal.

Next up in our survey of great places to start your first online store is Etsy. If you think of eBay as the flea market of the internet, then Etsy is the arts and crafts fair.

Interested in starting and running a small business? Here’s the beginning of our step-by-step guide: What to do right after getting that great business idea.

Questions? Comments?