15 October 2007 1150 views 3 Comments Print This Post  Email This Post

We all know that there is a lot of money to be made through online auction giant eBay as well as the stock market. Some people are earning huge returns by investing in quality individual stocks, as there are power sellers on eBay making six figures a year by selling the right products. Looking at both marketplaces, I can see that there isn’t much difference in the way they work. Both marketplaces involve doing research, taking risks and ultimately making money. However, one of the most common reasons why a lot of my friends say they don’t invest in the stock market is because they don’t understand it. They end up not investing at all because they are intimidated by the various ratios that they hear about. The S&P500 sounds like a newest model plasma offered by Sony. The last thing they would do is invest in individual stocks as a means to earn a higher ROI. I would tell them that if they don’t want to take the higher risk of buying individual stocks, they need to invest in individual products and sell them on eBay. Anyone who seeks higher returns but are afraid to invest in individual stocks should try to build side business on eBay. It’s easy to start and understand, the risks are lower than buying individual stocks, and the profit potential is similar.

Buy Low Sell High
When it comes down to it, investing is basically buying low and selling high. That is how you usually make money from stocks and it’s the same way on eBay. Except on eBay, instead of making money from stocks or a group of them, you’re selling products or services. Yes you are doing a bit more work since you have to answer emails and ship things, or at least order them after a sale if you are using a drop shipper. However, I believe that by doing the extra work, you are earning a higher return on investment without adding too much risk. In other words, the bit of extra leg work is well worth it. If you sold 20 fashion jewelry chains a month at a price of $20, and you paid $12(approx $14 with eBay expenses), you have essentially bought 20 stocks at $280 and sold them for $400 that month. Your return on investment is 43%, or 516% a year. Of course in the stock market, this would be a phenomenal return since a lot of passive investors aim to just beat the S&P 500.

The above example is what a good friend of mine does on a daily basis. He sells fashion jewelry on eBay and makes close to six figures a year. He is an eBay power seller under the user name HipHopChains. He invests in stocks as well but if you ask him if he’d rather try a new product or buy an individual stock, chances are he’ll try a new product. The main difference with selling products or services online is the fact that your return is realized after each sale you make. This minimizes risk because even if your return is a small one, you see it the moment you sell. With the stock market, you just see your unrealized returns on paper if your portfolio goes up in value, but you don’t see the money until you sell them. If you need to sell them during a dip in the market, you’re pretty much out of luck. So when it comes to buying low and selling high, eBay has a lot of potential if you put a little more time into it. I know eBay is thought of more like a business than a investment, but ROI is ROI no matter how you look at it. To me, managing an eBay business is not much different than managing an active portfolio in terms of time involved.

Do Your Homework
If you’re a serious stock market investor who wants to earn high returns, you’re constantly researching companies, looking at history, comparing P/E ratios with others in the same industry and so forth. It’s the same way with selling online. Choosing which products to sell is like choosing which company to invest in. The products are the key. You have to pick a product or range of products that are not in a saturated niche. eBay works best with specialty products that you can’t find easily in stores. The easiest way to do research on eBay is to search for the products you want to sell. Find out how many auctions are listed. Who dominates the niche? How many powersellers are selling the products? Are people bidding on the auctions? Once you find a product or category you want to focus on, the next step is to find a supplier. Dropship suppliers can be found in the World Wide Brands database, which I previously wrote about in How To Find a Dropshipper. Bulk wholesalers can be found at trade shows and sites such as alibaba.com. Your task here is to research pricing. If you can buy these products and have room for profit according to your research, you may have a winning stock.

Pull The Trigger
When you find products to sell that has room for some profit, go for it. This is like putting in your order to buy a certain stock when your research tells you it’s the time to do it. The next part is where a bit of work is involved. In stocks, you just need to make sure you monitor your holdings, keep researching and staying during and eventually determine when to execute your exit strategy. When you’re selling on eBay you need to invest some time in making the auctions, taking great pictures and starting the auctions. Once you do this, the business can be close to autopilot. Reinvest your profits and you’ll soon have a high performing eBay portfolio.

I’m not saying that selling products or services on ebay is better than investing in the stock market. However, for those who want high returns without the complexity of the stock market and risk in buying individual stocks, selling online is a viable lower risk solution with similar return potential. Chances are you won’t buy a certain product at wholesale price and they end up being worth only 60% of what you paid for it. Worse case scenario, if your research was flawed you would blow them out at cost or take a small loss and try another product. But if your research was right, you can earn very high returns year after year. So if you’ve got money to invest but were hesitant on trying out stocks, start researching and find your winning products to invest in.