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EcommerceBytes-Update, Number 125 - August 22, 2004 - ISSN 1528-6703     3 of 7

Seven Tips for Running an eBay Consignment Business

By Lu Paletta

August 22, 2004

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A growing segment of eBay and other online auction sites is consignment auctions. Whether you are an eBay Trading Assistant, a Brick & Mortar storefront or just an online seller, this market is a good way to build your business.

On the surface, consignment auctions are quite simple. A consignor brings merchandise for you to sell online. You research, photograph, write a description, list, sell, and collect money. A check, less your commission and any applicable fees, is cut to the consignor. However, if you don't do your homework and prepare, you may end up losing money and customer goodwill.

My company, Bid-N-Pack, conducts many consignment auctions. Based on our experiences, here are a few tested guidelines.

1) Sign a Contract
Before accepting any item, draw up a consignment contract. This contract protects not only you but your consignor in case of dispute. This document should outline the particulars of the consignor, the item(s) and your auction terms. The B-N-P contract has four main sections and a section for internal accounting and bookkeeping information.

A) Consignor Information:
List the name, address, phone number(s), email address, driver's license number of consignor.

B) Item Information:
Title of item(s), age, model number, serial number
Condition (new, used, antique, reviewers sample)
Defects or deficiencies
Cost, new (if known)

C) Auction Specifics:
Format (auction, fixed price, store)
Number of days to list
Which online site (eBay, Amazon, Yahoo Auctions, Abidon, Austin Auctions, Froogle, etc.) to list
Starting price, reserve price, buy-it-now price
Enhancements to listing (bold, gallery shot, highlights, more)

D) Auction Terms:
Consignment Terms
B-N-P charges a sliding commission rate based on final value realized.
Auction fees (enhancements, listing, final value, etc)
Disposition of item if it doesn't sell (return to consignor, relist, and try a different online site).

2) Know Identity of Consignor
For your own protection, both personally and financially, know the identity of the consignor. Record the driver's license number on your consignment contract. This little extra step may deter someone from using you to sell stolen goods.

3) Parts Is Parts
Ensure you have all the correct parts when taking consigned goods. Check before you list. Obtain all user documentation including owner's manuals. These documents will tell you which accessories such as power cords, cables, adapters, discs, and parts are needed. If the consignor can not find them, go online and research the items. Offer to purchase, at consignor's cost, the replacement manuals or parts. If the consignor declines, make sure to inform them this will decrease the final value realized and list it in the item description

For example, at B-N-P, we recently consigned 25 old Lego kits, dating back to the early 1980s. Not only did we have to count all the pieces that were called for on the box, but we had some kids make the kits as well. This ensured the right "parts is parts" for the Lego models.

A little extra work upfront will result in customer satisfaction, help keep your feedback positive and hopefully, maximize selling price.

4) Make Sure the Item Works
If the item is electronic or mechanical, try it out to see that it performs as specified. We have plugged in vacuums, printed test pages, recorded VCR tapes, charged up phones, changed monitors. Don't take the word of your consignor. It is you who the customer deals with; it is you who takes their money; it is you who will receive the negative feedback.

Also, the merchandise should be clean and smell clean. When taking clothing or linen items, ask the consignor to have the item dry-cleaned or offer to have it done for them, at their expense. Clean means no spots, stains, frays or tears. All hooks, buttons, zippers should work. Collectibles, jewelry, furniture, books, craft items should be clean and free from dust, lint, pet hair before accepting.

5) Research and Authenticate
If applicable, get a history of the item. It could be as simple as "I bought this camera, used it for a family vacation and then decided I wanted to go digital." If this is not available, research like items such as year of manufacture, any problems with the units, number sold, etc. These will all help in writing your description and help with bidder questions.

Appraisals on jewelry and antiques are very helpful. You could show these in your listing. Coins should be graded. Certificates of Authenticity (COA) do not carry much weight when it comes to autographed items. Reputable members of UACC (Universal Autograph Collectors Club), TMS (The Manuscript Society) and PADA (Professional Autograph Dealers Association) will not issue a COA. Instead, they will issue an appraisal or note stating that in their experience the item is authentic and is valued at a certain price range.

At B-N-P, we try to provide every option for our consignors in selling their goods. Our research is designed to help maximize their selling price. We provide pros and cons for every item, even which venue is the best to list on.

6) Set Consignor Expectations
The most important thing you must do in a consignment auction is to set consignor expectations. Be objective so you may work through the obstacles of what they paid for an item, what they think it is worth, what someone told them they could get for it and whatever sentimental value is attached to an item.

Grandma's crystal vase is probably worth more sentimentally than financially. "Collector" Barbie Dolls and Beanie Babies are very common and you will be lucky to get face value. Explain it isn't what they paid for an item that determines the sales price, it's what is someone willing to pay for it.

Research current and closed auctions to see what similar items have sold for. What was the final selling price? Was it in a similar condition? Were all the parts there? Provide, in written form, to your consignor so they may see themselves. This allows them the opportunity to change their mind before listing the item. The last thing you need is an unhappy consignor who "...was told by my friend I could get $800 for that doll."

Also, when someone says, "I want $100 for this item," what does that mean? Do they want to net $100 before or after fees and commissions? Make sure you supply final sales information to the consignor. At B-N-P, we provide final sales price, number of bidders, actual fees charged and our commissions with all checks to consignors. Pay promptly after auction closes. Likewise, if it doesn't sell, discuss the various options with the consignor.

7) No Less than $50
Set a minimum threshold for consigned goods. At B-N-P, our guideline is, accept no individual item with less than a $50 value. We often combine items to reach this threshold but do not want to be in the "bargain basement" business.

Think about the time and effort required to list items and run an auction. Think about the research you need to do the photography, the item descriptions, the time required answering bidders' questions, and to package and ship. Then, think about your commission rate. Is it worth it for $5 or $10 items?

Finally, set your own guidelines as to type of items you will accept. You are not obligated to accept any item a consignor brings. B-N-P has frequently turned down or returned merchandise to consignors after our research shows they will not sell at an acceptable price.

These are just a few suggestions and they should help build your business and reputation as an online seller. Your goal should be for the consignor to be happy with your professionalism and service. You want them to bring you additional items and to spread the word to their friends and acquaintances. You want "positive feedback" from your consignor as well as the buyer.

If you have other suggestions or have a method that has worked for you, please drop me a line at lu1 at bid-n-pack dot com.

About the author:

Lu Paletta is a partner in Bid-N-Pack, LLC, a full-service online ecommerce business http://www.bid-n-pack.com. In addition to consignment auctions, B-N-P reps consumer electronic items, sells business overstock and closeout inventories. BNP also conducts fundraising for non-profit organizations via online fundraisers. Lu has over 20 years in the consumer electronics industry. An autograph collector and history buff, she is the author of three books on the American presidency and political process. She is a regular contributor to political newsletters, has conducted radio commentary on elections and is a frequent guest speaker to civic groups and schools on American history.

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