eBay 101: Beginners Guide to Learning eBay
Author : Paul G.    -   Subject : Internet

Chapter 1: Overview of eBay

Part 1: How eBay Works.

It started in 1995, when Pierre Omidyar and his wife decided to trade Pez candy dispensers using the Internet. Pierre founded a web site, eBay (with a lower-case “e”) where traders could meet to sell their goods to other collectors, all within an environment of professional trust.

Within 9 years, eBay.com has grown into the largest and most successful online business model in history. Today, tens of millions of people converge daily at eBay.com to trade millions of dollars in new and used merchandise. From simple products like old Monopoly games and used Elvis records, to wholesale electronics and digital cameras, all the way up to exotic sports cars and real estate, eBay has become the global trading platform for the everyperson.

The eBay business model is magnificently simple: provide a safe and motivating online marketplace where anyone can gather to trade products with confidence.

At its base level, eBay works exactly like an electronic “flea market”:
1) eBay sellers pay a small flat fee plus a 1.5% percentage fee to eBay in order to market their wares;
2) eBay buyers visit and use the marketplace without any surcharges;
3) Any parties that abuse the system or each other will be disciplined or ejected.

At a higher level, eBay is different from a regular flea market for ten reasons:

1) The eBay marketplace is international, and crosses language and national boundaries;
2) The massive choice of goods is awe-inspiring;
3) Sales can either be auction format (competitions between bidders), or traditional fixed price format. The sellers choose whichever format they prefer;
4) The buyers and sellers will likely never meet in person;
5) The buyers do not get to see the product in person before purchase, but are given various post-purchase guarantees to ensure satisfaction;
6) Very sophisticated computer measures are implemented to minimize electronic dishonesty on all sides;
7) Fulltime staff are employed to enforce safety and fairness across the system;
8) An honesty incentive model called “positive feedback” is used to motivate buyers and sellers to trade with integrity;
9) Professional third parties payment services, like Paypal, Bidpay, and Escrow.com, are brought in to ensure safe and trusted payment between eBayers;
10) eBay is easier to use than a flea market.

Part 2: A Sample Transaction at eBay.com.

Note: this scenario is simplified for learning purposes.

Scenario: Seller Shauna is a registered eBay member who has been buying and selling for eleven months. Because Shauna has successfully bought and sold 14 times, she has earned an eBay “positive feedback rating” of 14. Shauna’s name will appear onscreen as follows:

ShaunaFromSausalito (14)

She is very motivated to continue earning positive feedback and the customer trust that goes with it. Shauna hopes to one day achieve a positive feedback rating of 1000.

STEP 1: The Listing Stage:

Shauna decides she wants to sell her used Swiss Army Watch at eBay.

Originally a $750 item, the watch is 7 years old and in good condition. She hopes to get $500USD for it, but will settle for $400.

She takes some digital photos of the watch, and she takes an hour to carefully author a web page ad that describes the watch to potential buyers. She then lists the web page advertisement and photos at eBay at 3:04pm on a Saturday afternoon. She pays a small initial listing fee of a couple dollars.

Shauna’s starting bid for the watch is $100USD, and the auction is slated to run for 7 days. Shauna has also added a “Buy It Now” option set at $450, to motivate buyers to end the auction early, and she promises to charge $15 shipping and handling for any USA customers.

STEP 2: The Selling (Auction Bidding) Stage:

By the fifth day of the auction, Shauna has two bids on the Swiss Army watch: Buyer Brad (feedback rating of 42) has bid $100, and Buyer Ben (feedback rating of 29) has bid $101.

On the sixth day of the auction, three new eBay buyers, Billy (rating of 3), Bjorn (rating of 4), and Bernice (rating of 1), also discover the watch, and they make “nickel-and-dime bids” of $120, $121, and $122 respectively. Although Shauna would like to see higher bids, she is pleased to see a small bidding frenzy happening on her watch. The Swiss Army watch high bid is now $122.

Day 7 of the auction comes, and a small bidding frenzy ensues over the Swiss Army watch. Bernice, the novice buyer, ambitiously bids an ambitious $175 five hours before the auction end. Bernice’s $175 is called her secret “bid ceiling”. Bjorn, also wanting the watch, counterbids $150 and $160, but is automatically outbid by Bernice’s $175 secret “bid ceiling”. The auction high bid is now $161. Billy jumps in 11:15am and bids $325. Billy does beat Bernice’s bid ceiling, so he is now the high bidder at $162, with a new secret bid ceiling of $325.

Buyer Brad, who is carefully watching this auction, decides to make another bid of his at own at 12:30pm on Saturday: $395. Brad immediately becomes the high bidder, and the auction is now set at $326, with Brad’s new secret bid ceiling of $395.

Billy tries counterbidding with $350, which raises the auction to $351, but is insufficient to beat Brad’s $395 bid ceiling. Brad wins the Swiss Army watch for $351, 44 dollars less than his secret bid ceiling.

STEP 3: The Payment and Feedback Stage:

Shauna doesn’t get the $500 price she hoped for, but she is happy to have a successful sale. She sends an email to Brad with payment and shipping expectations. Brad replies, and he promises to send Shauna her $351 + $15 S & H. They agree to use the most popular form of eBay payment: Paypal.com.

Brad logs into his Paypal.com account that night, wires $366USD from his Visa card to Shauna’s email. Shauna transfers the $366 to her bank account via encrypted Internet connection, minus a small fee to Paypal. Shauna then owes 1.5% of the Swiss Army Watch selling price to eBay.com, who will bill her$5.27 next month for her seller’s fee. Shauna nets about $357 out of $366, after all her fees to eBay and Paypal.

Shauna files “positive feedback” for Brad, documenting that he promptly paid her within 24 hours. She then ships the watch to Brad with careful packaging and short thank you note. Shauna pays for the shipping out of the $15 S& H charge she billed Brad for.

Brad, now with an increased 43 positive feedback rating, receives the Swiss Army Watch by post office mail 11 calendar days later. The watch is exactly what Shaun described it to be, so Brad is pleased. Brad logs onto eBay, and files “positive feedback” for Shauna, bring Shauna’s positive feedback rating up to 15.

Shauna’s onscreen now appears as

ShaunaFromSausalito (15)

Which indicates Shauna has transacted at least 15 honest and positive sales on eBay.

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