How ebay can kill you pt.2

In a former life, I used to sell on eBay. Yep, that’s how I got started in online sales, selling off-price clothing on eBay. It’s one of the reasons that Kathleen’s article resonates with me because I see things from both sides of the fence. While I don’t necessarily agree with the eBay retailer, I understand where they come from since I have friends who still sell on eBay and I actually advise a lot of eBay sellers.

When I first started my ecommerce website, it wasn’t easy to get accounts with established brands. Most were very leery of selling to online retailers and for good reason. Even online retail website owners can be pretty shady. Many want drop shipping and get upset about $200 minimums. And as most of you know, by the time you buy 1 style in 1 colorway and all sizes (or just the ones you want to sell) a $200 minimum becomes pretty easy to meet. When I went to my first market, I had a printed mock up of my website’s layout and I had already pre-arranged to get some larger brands to sell to me. As a result, it was easier to get Brand Y once they saw I would be selling Brand X. Competing and complementary brands always want to be sold with established brands.

But even then, there was one brand that was a huge hold out, didn’t want to sell to me as an unestablished online retailer, which was understandable. The rep wouldn’t even show me the line. A year and a half later, I was able to get that line after I went to the rep again, and the company viewed my website. By then, I had more brands, had been at it a while, and had gotten a little bit of press, I could show that it was a legitimate business, I wasn’t fly by night, and most importantly, I was upholding the retail price points on all current merchandise. Also, I could point out other (what we call) pure-play etailers who were selling the brand. Today, the only brands I can’t carry are those that require an online website to have a brick and mortar presence, or the ones that are locked into semi-exclusives with large online retailers. Everybody else is fair game.

As a result, I don’t take on a brand that doesn’t enforce a retail price point. Meaning if the brand doesn’t protect the retail price, I don’t want it. The reason is, eBay or website, many online retail businesses are established by people who think that the only way to compete is to compete on price and this is exactly what they do. A price war only keeps lowering prices and no one wins (except the consumer). It’s a race to the bottom.


Having said that, I’ll tell you a little story. Two Christmas seasons ago, I had placed a sizable (for me) order of items with a retailer who experienced an upsurge in business when a very long standing established manufacturer in the industry shut down their brand and licensed to Target. Don’t want to name names, so I’ll leave it at that. Well, sales were sluggish and I could not figure out why. I ended up just doing some normal stuff and discovered that all of their fall/holiday styles (with the exception of maybe 2 or 3) were selling on Bluefly at a deep discount. Needless to say this wasn’t a normal off-price deal. I was irate and contacted the company and my rep. My rep tried to give me a line that the company didn’t know about the Bluefly thing and no other retailers were complaining. I spent maybe 3 or 4 years selling off-price, I know jobbers, I know how the industry works, when you see something like that (current styles for the season for sale by a large retailer), the company was in on it (could have been a canceled order from a very large retailer, but whatever, deals like that don’t go unnoticed). Needless to say I returned most of the order and really pulled back in carrying that line. I still carry it, because it’s a small industry and it’s a brand that is well recognized, but I’m still salty about the situation.

I say all of this to say is that legitimate retailers want everyone to uphold the retail price, with discounting being used as a promotional tool or a way to get rid of excess stock. Legitimate retailers do not go into business to sell for the lowest possible price, we look to maximize our profit margin as inventory is our biggest expense. Even when you look at a discount retailer like Wal-Mart, they are lowering their price by squeezing the manufacturer, or using a combination of loss leaders and high profit margin items.

Having told that side of the story, I will shed some light on online and eBay sellers and this is the bottom line:

Some eBay sellers don’t care about profit margin, a dollar profit is a dollar profit. They aren’t looking at percentages, a dollar profit is a dollar profit.

I get this all the time, especially with off price merchandise. If someone sees an ebay seller selling (for example) a $300 coat for $30, they insist there has to be a jobber selling that coat for $15 or $20 so that the seller can make a decent profit selling it for $30 (remember all eBayers are not doubling their money, keystone is a foreign concept to many). What I always tell people is don’t make that assumption. Sometimes eBay sellers are recouping a loss, sometimes they have already made their money back on a bulk purchase of items, and sometimes they are gambling that bidding will go higher, and lastly, sometimes a dollar profit is a dollar profit.

Maybe the dollar is an exaggeration, but I have honestly had people get excited that they purchased something for $25 and sold it for $35, even with the eBay fees. Honestly.

The standard and traditional retail concepts by which traditional retailers evaluate a business are often not used by eBay sellers. If they were, most wouldn’t be there. Especially in the clothing and related categories.

With that, I do want to clear up some issues:

  1. You don’t usually need “credentials” to get into shows. For LA Market week, all you need is a seller’s permit, business card, or business license. No proof of storefront, no photos, no print out of websites. Trust me, I know.
  2. I will also go on to say that most shows have lax credential requirements. How do I know? Because I’ve been a registered buyer for everything from the Fancy Food Show to the Home & Garden Show. What can I say? I love trade shows.
  3. I will say, though, that MAGIC is one of the more difficult shows to get into (because of their credential requirements), however, usually a buyer badge to another show usually gets you through the doors at all of them.
  4. Buyers register friends. I have done it for friends that were starting up and didn’t yet have the credentials to get into a show. No problem, I’ll register you for the show, even if it’s one that I don’t attend. I’m sure I’m not the only one who does that. Also, buyers bring friends to shows as employees (as opposed to trade guests), I do it all the time because I don’t like to travel alone.

It’s common, there are many ways that non-buyers get into shows, don’t believe for a minute that it’s the show’s job to police the registrants.

Also, one thing that most of you don’t know is that eBay participates in, or sponsors displays or seminars at, most industry trade shows (eBay had a booth at MAGIC). They solicit manufacturers and retailers to sell on eBay. They run seminars every hour or two on getting started selling on eBay. They sponsor large ads in the show guides and inserts into the buyer’s bags.

Along with that, I want to respond to a few comments from the first entry:

Essentially in the USA is it illegal to “price fix”. MSRP is a “suggested” retail price..and retail pricing cannot be determined by the manufacturer…When a buyer buys your product, they are free to sell it whenever they please- at whatever price they please. If you find the buyer is price cutting your other buyers, and you are not happy with that..then you can stop selling to that buyer at any time.. but you cannot tell that buyer what to do. Once they buy the goods- they can do whatever they want to with them.

This is true. As a manufacturer, about all you can do is refuse to sell to someone after they have not adhered to your terms and conditions. However, eBay has an interesting loophole that manufacturers can use to their advantage: the DMCA and eBay’s VERO program. This has been used time and time again by established brands to pull their products off of eBay, I know, I know people to whom it has happened.

The basic concept is that if your brand is trademarked, someone selling on eBay is using your trademark to sell, without permission. Also, many eBay sellers tend to lift pictures from the manufacturer and other websites and this also includes copyright infringement (as they often use photos without permission), which is enough to get the auctions closed. Many brands have done this time and time again, they swoop through eBay and you see ALL the auctions for their product closed. Disappeared.

Also, asking for a sales tax ID will weed out some of the trunk show people as well as some etailers.

Not in most states. In California, people who have more than a few garage sales per year, who sell at the flea market, etc., are required to have a seller’s permit (which is what most people refer to as a Sales Tax ID). You can apply via mail or walk into a Board of Equalization office to get one, you don’t need a business license, my mother has one. I think most states are like that because one time I had to apply for one in Massachusetts and it was just as easy. Typically requiring a sales tax ID (or whatever it’s called in your state) doesn’t weed out anyone. A business license usually will weed out some, because most who aren’t serious won’t bother to go through the trouble of applying (and paying for) a business license and publishing a fictitious name statement. Business imprinted checks usually weed out more people, because even I don’t have those (I don’t write business checks, I do all the check writing online), but anyone can print up a business card.

One of the best ways to weed out sellers, honestly, is to find out what else they carry. A fly by night or eBay seller usually will not have a well rounded selection of brands typical for a legitimate business in that category, because they usually are trying to get their hands on a few hot sellers. I’ve been asked that all the time and honestly, it’s a question most buyers will answer. If a potential buyer is evasive about the product lines they’re carrying or they’re not carrying product lines similar to yours already, watch out.

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22 comments

  1. Kathleen says:

    Paradoxically, Aesthetics+Economics writes today about how insiders bought up all of the smallest sizes of Proenza Schouler’s line for Target and are selling them on ebay at twice the price -which is my other beef; there aren’t enough smaller sizes, those go fast.

  2. Karen C says:

    Kathleen,

    Interesting about the smaller sizes. I had no idea. Since I’m between 12-14, it seems like there’s never enough of those. You think I should include smaller sizes in my mature woman’s collection?

  3. Irene says:

    VERY informative!!! Thank you, Miracle! I’m sorry for my ignorance, could anyone please explain me what “buy during the market” means? Is market a tradeshow? Thanks a lot

  4. Kathleen says:

    Interesting about the smaller sizes. I had no idea. Since I’m between 12-14, it seems like there’s never enough of those. You think I should include smaller sizes in my mature woman’s collection?

    My response could be an entire post. Should I write one? I don’t know if there’s enough interest.

    could anyone please explain me what “buy during the market” means? Is market a tradeshow?

    Markets (in this context) are wholesale apparel tradeshows. Retail buyers, often store owners or employees (“buyers” in this entry) go to market to pre-order clothing for their stores several months in advance of when the items will be delivered.This way, a manufacturer knows how many they need to produce (or *if* they should produce). In advance ordering is called “buying”.

  5. Irene says:

    Thank you Kathleen! That’s exactly what I thought but in that case I’ve always been wondering why do you have to go to the markets, pay money couple of month ahead and than wait for delivery if you can place the order once the items become immediates? Or you just sign the contract at the market and pay when items are delivered? Thanks a lot
    P.S. I think post regarding sizing might be of interest to many. That’s the problem we’re trying to resolve as well.

  6. Miracle says:

    in that case I’ve always been wondering why do you have to go to the markets, pay money couple of month ahead and than wait for delivery if you can place the order once the items become immediates?

    Because waiting for immediates often limits the availability of sizes and colors as the best stuff often sells out.

    Also, buyers don’t pay in advance, they pay when the goods are ready to ship (or afterwards).

  7. Kathleen says:

    I’ve always been wondering why do you have to go to the markets, pay money couple of month ahead and than wait for delivery if you can place the order once the items become immediates? Or you just sign the contract at the market and pay when items are delivered?

    As I already said to you in a private email, I suggest you purchase a copy of The Entrepreneur’s Guide to Sewn Product Manufacturing for the answers to these questions. The blog, however helpful, does NOT replace the book. It would not be fair for you to ask me to rewrite my entire book on site. If I rewrote my book on the blog, no one would need to buy it. If nobody bought it, the site wouldn’t exist. I apologize for being terse but it is so incredibly frustrating for me to see someone who obviously could not need the book more, trying to siphon information out of me in fits and starts. It makes me feel used because this is not fair. I have feelings too.

  8. Irene says:

    I am sorry if I offended your feelings. But first of all it was in no way addressed to YOU personally and I just was under impression that you can share your thoughts here and ask about other people’s opinions. Apparently I was wrong and this blog is only for you to “convince” everybody in a very rude and offensive way to buy your book. Which by the way I was going to order for me and my partner but not after this. I am sorry but I’ll better give my money to someone who is not so “generous” as you are. Once again I do apologize for thinking there are still people who can just share opinions and not harass everybody to buy anything!

  9. Alison Cummins says:

    Irene,
    Please don’t punish yourself by denying yourself a valuable resource. Get the book, or at least check it out of the library. It will answer the question you asked and many others.

    Ok, so you weren’t expecting Kathleen’s answer. She put a lot of effort into assembling and presenting the information that DEs need to get started in sewn products. It’s possible that sometimes she forgets that not everyone knows what information is in the book and what is extra (free). She is in fact extremely generous, something that will become more obvious over time and as you develop experience in the industry.

    Anyway, you can deprive Kathleen of money if you want to by borrowing the book from the library, that’s fine and it’s what libraries are for. But you would be shooting yourself in the foot if you deprived yourself of a valuable resource.

  10. Susan says:

    You are the rude one. You DID address it to her personally , read your comment again. I thought she was very patient considering the n00b questions you asked. I wouldn’t have answered it. It’s not my job to teach you your abcs, I bought the book after wasting my money on other ones.

  11. Lillian says:

    Irene, I completely understand how you are feeling. Personally. Kathleen can be a little crusty, she doesn’t express herself well. She has asperger’s syndrome and sometimes she only opens her mouth to switch feet. I have known her for years, she has worked hard and improved alot. Give her another chance, believe me, I know!!!. You will not find another person who will care more intensely about you or your business. She speaks a little too harshly sometimes but she has a heart of gold. I harbored a grudge against her for years but time after time, I’ve seen her pour her heart and soul and I know she really cares. Last year, when I had problems collecting money from a new account, she CALLED the store. They said she was rude too but I got my $6,000! Who’s ruder? In my book, that’s someone who doesn’t pay.

    Irene, buying her book isn’t doing her a favor. It’s doing yourself one.

  12. Karen C says:

    Irene,

    I so agree. Buy the book, because you will refer to it again and again. In fact, I think I will buy one (again) soon to donate to my public library because they don’t have one (and we’re the state capitol, for crying out loud).

    And please think about how much time Kathleen puts in each day just to type the day’s topic, let alone managing the blog. If you were doing this, you would want to be compensated too, right?

  13. Georgina says:

    Irene,

    You are a bit ungrateful for the information you have obtained thus far.
    Your response to Kathleen was very rude.

  14. carissa says:

    I’ll never understand it.

    Why do people who are making a living get offended when other people try to make a living?

    It’s not like Kathleen’s trying to sell bogus insurance policies to 90 yr old widows. She’s working for a living, right?

    Why is it an insult to pay someone for good work?!
    Support others. Respect others.

  15. Yahzi Rose says:

    Thanks Kathleen & Miracle. very informative and just on time. I’m writing my policies soon and will be sure to include certain restrictions in order to protect the company.

  16. Miracle says:

    Apparently I was wrong and this blog is only for you to “convince” everybody in a very rude and offensive way to buy your book.

    I wrote and sell an eBook, so Kathleen and I share a lot of the same experiences. In all fairness, it is likely there is correspondence between Kathleen and the member that we aren’t privy to because it is unlike her to become that frustrated over a couple of blog questions. I think that people who are reading and don’t know Kathleen probably won’t understand and will think it was a bit harsh.

    One of the experiences that Kathleen and I share is that people want answers without buying the book. Books are one of the few products that you can get full usage from, without paying for. I think that in a culture where you can sit in a Borders and read a book at your discretion, people have an increased tendency to want information for free. The fact of the matter is that the cost of Kathleen’s book is a pittance compared to what someone would pay for comparable consulting. You could barely cover a half hour for the price of the book.

    What becomes frustrating is when people ask questions that are covered in the book and give a clear indication that they don’t know much about the industry. We all want to help, but when we get involved in those types of questions (repeatedly) we don’t get to the meaty stuff that people come to this blog for. Most readers want something above the entry level discussion so that they can address issues that just don’t get addressed in basic business or apparel books or even classes.

    Not only does purchasing the book support the website, but it also enables us all to have a basic level of understanding that facilitates a higher level of discussion. Kathleen doesn’t want to convince you to buy the book (because neither she nor I believe in sales pitches for this type of product), but the reality is that if you don’t want to purchase the book, don’t expect the advice for free. And you won’t be taken seriously in business if you don’t want to pay for quality information (especially when it can save you money, effort, frustration and prevent tons of mistakes).

  17. Lisa NYC says:

    Kathleen…I’m thinking it might be time to restrict access to this blog to those who have purchased the book or give 30-day free access to those interested prior to purchasing the book.

    Often discussions here refer back to the book, so in order to stay up to speed, wouldn’t one want to own the book? I think those serious about this business would be foolish not to purchase the book.

    For me, it has paid for itself tenfold!

    With friendship,
    Lisa
    downtown joey

  18. kirstie says:

    Irene~

    As with the legions above, I also encourage you to purchase the book. Coming into this industry with absolutley no idea of how it works, I found (and continue to find) the book as “the bible”. I refer to it constantly. And, quite honestly, the price of the book is a minute expense when it comes to the overall costs of starting a business.

    I would also like to note that despite the fact that I have never met Kathleen face to face, she has responded to a number of questions and problems I have faced. In fact, she has dedicated time on weekends to take my phone calls and help me through some weighty issues. She has helped me make very important contacts that have helped me move through each step of the process. Now- did I mention I have never met her? Oh- and never once has she charged me a dime. I find that far from greedy.

    As I mentioned, I have entered this industry with no knowledge and training. As I would be the last person to feel the need to give advice, but- I guess I am doing it! Buy the book, make it your mantra. Kathleen is a great resource-

  19. TamLewis says:

    This is my first time here and the eBay article was most informative. I’m not even in this industry. I was taken aback by the little feud. I commend Kathleen and it is clear that she responded such that any reasonable person would have understood where she ‘drew the line’ in terms of revealing her intellectual property (pick Kathleen’s brain) with this statement:

    As I already said to you in a private email, I suggest you purchase a copy of The Entrepreneur’s Guide to Sewn Product Manufacturing for the answers to these questions.

    For any business industry one enters into, there will be ‘dues to pay’. Learning is a ‘due’ to pay. Sounds like Kathleen has provided a valuable resource for the industry.

    I commend you Kathleen. Not restricting access to this post has benefited me. Please consider not restricting access – the content permits individuals a ‘taste’ of your expertise, and if more is desired you have demonstrated that you properly direct them to your valuable resource. People picking your brain is natural and you deal with it well. Having Asperger’s makes you a very impressive role model for many, including my child who is deafblind. She likes to sew.

  20. Sylvia says:

    Interesting about the smaller sizes. I had no idea. Since I’m between 12-14, it seems like there’s never enough of those. You think I should include smaller sizes in my mature woman’s collection?

    My response could be an entire post. Should I write one? I don’t know if there’s enough interest.

    Yes, please answer the query about small sizes in middle age+ collections. Eager to hear your view.
    Thanks!

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