Profiting From eBay Consignment

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Profiting From eBay Consignment Terry Gibbs Interviews

Skip McGrath

This is a transcript of an eBay Mastermind Interview done in January 2006. Every month mastermind subscribers get a new interview on CD in their mailboxes.

EBay is like a deep river - Calm on the surface but underneath, in the depths, there's a mighty current - waiting to be harnessed. The majority of people don't know this and they'll never find out...they will always just skim the surface of eBay's possibilities.

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What is even worse, these advanced concepts aren't obvious, and you could spend a lifetime trying to intuitively pick up on them. The best way for you to make the leap is by learning from others.

Helping you learn from others is the goal of the eBay Mastermind Series.

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Skip McGrath Interview

Terry: Hi. Today, I’m here with Skip McGrath of the AuctionSellersResource.com. Skip and I are going to talk mostly about eBay consignment, but we’ll also talk about sourcing products and running your eBay business.

So even if you’re not interested in doing eBay consignment selling, you’ll be sure to get some valuable information by listening to this interview.

Skip, are you there?

Skip: Hi Terry, I’m here and I’m doing just fine. Looking forward to talking about the eBay consignment business. This is something I’ve been doing for about 5 years, in addition to my regular eBay business. And I like to call it the perfect eBay business.

When you think about it, what’s the biggest problem eBay sellers have? It’s finding merchandise to sell. EBay has gotten so much more competitive that there’s a constant search on for good wholesale sources and sources of product that you can sell to make a profit.

Well, with the eBay consignment business, you don’t have a problem sourcing products. People bring products to you to sell for them. There’s really no risk, except the little bit of money you spend on eBay fees, listing the item.

If the product sells, you’re going to earn a nice commission. I charge commissions as high as 40% for my services. If the product doesn’t sell, you simply return it to the client and you’re only out the little bit on eBay listing fees.

In fact, if you run your business right, you can even get the consigners to pay those listing fees for you. So I’m really looking forward to talking to you about the business.

One correction. The Auction Seller's Resource website, we’ve just changed the URL to www.SkipMcGrath.com. There’s a lot of free information on my website for prospective consignment sellers. I would invite them all to come over and have a look at what we have to offer.

http://www.skipmcgrath.com/


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Terry: Alright. Before we get into talking more about the consignment selling, let’s talk a little bit about you. Can you give the listeners a little more background about you, at this point?

Skip: My wife and I used to own an antique shop in upstate New York, and we decided, back around ’96 or ’97, to relocate out here to the west coast. We live up in the San Juan Islands, in Washington State, up near the Canadian border.

We closed our antique shop. We sold off a lot of our large, heavy items, but we kept all of the small things and just packed them up in little boxes, to bring with us, thinking that we’d open another shop out here.

Well, to make a long story short, we never got around to opening a shop. A couple of years later, I think it was ’98 or ’99, my son was fooling around on eBay. He was buying comic books. He showed me the site, and I had looked at it and thought it was kind of interesting. So we drug out one of these old boxes of antiques and my wife Karen and I decided, “Let’s put a couple of things up there and see how they do,” and we were astounded. We actually were selling things for more on eBay in ’99 than we’d been getting in our antique shop the previous years.

So we kind of went through all of that merchandise. That took us a little while. We became Power Sellers. I think back in those days, we were selling about $3,000 a month or more. And it was shortly after that I wrote my first book, The eBay Power Seller’s Manual, which was a book designed to teach people how to build a business on eBay. Everyone else was selling sort of CD’s back then, and I decided to carve out a niche for myself by selling actual printed books.

So even today, all of the books I sell are actual printed instruction manuals. There are a lot of good CD’s, DVD’s and e-books out there. I’m familiar with your work. You do some great work. But I just carved out that little niche for myself, as one person that still sells the printed variety, and we’ve done pretty well with it. I have about 7 titles now, and doing pretty well.


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But meanwhile, we’ve kept up our eBay business. We kind of got out of the antique area. I still do some collectibles. Personally, I collect Starbucks mugs from all over the world, and I always seem to buy a few more than I need for my collection, so we sell those on eBay.

I also go to Alaska once in a while and I buy Native American Eskimo art and artifacts. We sell those on eBay. Then we have a couple other product lines I sell. I sell the line of EZQ photo tints. This is a light tint you can put your products in, to take a quick and easy picture, to make sure you have good-looking photographs.

Terry: I was looking at those. That’s kind of interesting.

Skip: Sold those on eBay. I also sell a line of high-quality fire pits and barbecues. That’s been a nice business for us. Not too good right now, this time of year. But during the spring, summer and fall, those products do very, very well.

So we have an ongoing eBay day-to-day business. I’m usually right at about the goals of Power Seller level. Sometimes I go a little higher, sometimes I drop below it. It depends on how busy I am and what I have to put up.

But I started doing consignment sales about 4 or 5 years ago, really, when just neighbors and friends knew what I did and people started bringing me things and saying, “Could you sell that for me on eBay?”

Since then, that’s grown to where consignment sales are now probably a good 25% to 30% of my business. We still operate out of the home. We don’t have a storefront or anything like that. That’s kind of where we are now.

Terry: So you mentioned these barbeque pits. Now, those are new items, right?

Skip: Yes. It’s a fire pit. It’s an outdoor fire pit with a grill that goes on top. They’re hand-forged, like a blacksmith can forge. They’re fairly expensive and they sell in the $250 range. We do quite well with those during the season.


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But that’s something I get from a manufacturer. The manufacturer’s in California. They make them and they drop-ship them for me.

Terry: So you just buy them or pay the manufacturer, and then the manufacturer ships it when you sell them?

Skip: That’s right.

Terry: Now, how did you work out the details or find this manufacturer and decide that that would be something worth doing?

Skip: Well, I find a lot of products offline, at tradeshows. I go to the Merchandise Marts and display centers, the wholesale display gift shows and tradeshows, things like that. I’m always on the lookout for something that nobody else has. I think that’s one of the secrets to making money on eBay is not trying to sell a product that’s hyper-competitive.

Everybody today wants to sell Ipods and plasma TV’s and DVD’s and DVD players, and all the latest designer blue jeans. But you’re really competing against pretty big sellers and big companies when you’re in that area.

The trick is to find these little niches, find this sort of product that nobody else or very few other people have, and concentrate on those areas. That’s where you can get higher margins and higher average selling prices, you get higher sell-through rates. Basically, it just makes your whole life easier when you sort of specialize.

You don’t have to specialize in just one thing. I specialize in like 4 or 5 different areas. But all of that, I take the time to learn all of the relevant product knowledge and do all of the things that every seller should do; write the descriptions, take good photographs, give good customer service, and deliver the product on time and in good condition.

Terry: So with all of these different product lines that you have, are each one sold with a different eBay account?

Skip: Right now, I have 2 eBay accounts. I use one for selling and one for buying. The one I use for buying is


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kind of my backup eBay account, should anything ever happen to this one.

But we have very good feedback, knock on wood. I’m still at 100% feedback after 6 years of doing this in my main selling account. But I do have my eBay store divided up into segments. I’ve done some design work on an eBay store, and when they go to the store they can go to one section that has fire pits, a different section has my eBay books, a different section has the photo tents, and so on.

Terry: And that’s just something that you set up within the eBay store as part of eBay’s store arrangements, grouping or something?

Skip: Exactly. But I actually hired a web designer to design a store template for me. I use a company called ProImpulse.com. They’re web designers that are very familiar with the eBay format, the store regulations, the About Me page design, all the stuff you’re allowed to do, and the banner sizes that eBay allows and all of that stuff.

So I just bit the bullet. It cost me a few hundred dollars, but it gave me a nice, clean store design.

Terry: So do you get traffic into your stores from outside eBay?

Skip: Yes, I do. I use pay-per-click advertising at Google Ad Words and Yahoo, and a new program I’ve just found, called BuyRedZ.com. It’s a pay-per-click search engine that’s pretty clever. It actually gives you natural listings instead of sponsored listings in the results. When people download the RedZ toolbar, there’s an algorithm in there that sort of captures the search, and it puts in the RedZ customers first into the natural position. And the costs are as low as 5¢ per click.

I’ve been using that for the last 3 weeks and had fabulous results with it.

Terry: That’s interesting, because that’s one of the major problems that I see with my clients that are running stores, is getting the traffic into them.


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Skip: The other thing I do is use my eBay auction to drive traffic to the stores. I do things like free shipping promotions. I’ll put a statement right in my auction description. Like, for example, for a Starbucks mug, if I have several of these, I have one in auction and I have 2 in the store I’ll say, “You don’t have to wait for the auction to end. Click here to buy this from my eBay store now, with free shipping.”

Of course, the price in the eBay store is increased to pay for the free shipping. People look at the auctions, and it does work because I know the auction might end on Sunday, but during the week, Tuesday, Wednesday, Thursday, Friday, I’m getting the occasional sales that are coming through the store.

Terry: So the important part there is that the price in the store is a little higher than the price in the auction, one. And then 2, there’s actually an item for sale in the auction. Because I know from my experience, that eBay rules prohibit running signpost auctions. That’s where you’d run an auction to drive somebody to something else.

It’s not as common today as it used to be, because you can list in multiple categories now. But it used to be people would list their item in one category, then list the same thing with a note, “Don’t bid on this one, go to this auction to bid on it,” or “go buy it in my store.” That’s frowned on.

Skip: I actually have the item for sale in auction. Like a typical Seattle Starbucks mug might realize anywhere from $19 to $23 at auction, and I’ll have the price set in my store at say $27. If they buy it from the store, they get free shipping.

They all have both. The auction will end and I’ll usually have bids on the auction in that sort of $19 to $23 price range.

Terry: Are these old mugs, or they’re newer?

Skip: These are new. But they’re new, unused, but they’re from all over the world. Starbucks produces mugs with the name of cities on them. And you can only buy it in that


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city. Like if you want a Dallas Starbucks mug, you physically have to go to a store in Dallas.

So what I’ve done over the years is built up a network of family and friends and contacts and other Starbucks collectors that we trade with, and basically I can get mugs sent to me from just about anywhere in the world.

Terry: And what do they cost in the store?

Skip: They’re $9.95 in the store.

Terry: So you’re having somebody buy them and then ship you 6 of them or whatever, and then you’re basically doubling your money less whatever it costs in eBay fees and what you pay your friend for shipping?

Skip: Right. There’s that, and sometimes you do more than double. Some of the mugs are really hot. People want them. Obviously, you can imagine what a New Orleans mug would go for right now. They’re going for some pretty high prices.

I sold a Jerusalem mug last year for $77.

Terry: That’s cool.

Skip: And I think my cost to get it delivered here from Jerusalem was about $21 each.

Terry: Okay. So you mentioned earlier that you wrote the Power Seller book on how to build a Power Seller business.

Skip: Right.

Terry: What caused you to decide to write that book?

Skip: Well, about that time, if you remember back in ’99, you’d be sitting on eBay and there would be all kinds of offers for these sort of get-rich-quick schemes, CD’s. “Buy my CD, it’s loaded with all of these software and recipes and games and you can resell it and make a fortune.” People were purporting to teach you how to sell on eBay, and most of it was pure junk.

And that’s what happened. I think about the third time I bought one of these CD’s and realized what I got, I just


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got frustrated and said, “I actually know how to sell on eBay. I do it every day. Why don’t I just write down what I do in a simple, straightforward manual and see if I can sell it.”

I did that. The first version was only about 50 pages, but I put it on eBay and it was a big hit right away. We were selling about 20 or 30 copies a week.

So I kept expanding the book, making it bigger, and I raised the price. Today it’s up to probably 180, 190 pages.

A couple of years ago, I produced another book called “The Wholesale Buying System,” which was how, what and where to find products to sell on eBay, and how to source them. And I eventually combined the Power Seller with the Wholesale Buying System and created a new instruction manual called “The Complete eBay Marketing System,” that includes both of those books. And it includes access to members’ password-protected website, where I have all of my wholesale listings.

So once you buy the book, either the Wholesale manual standalone or the Complete eBay Marketing System, you get access to my website. And on the website, I list wholesale sources that will work with small eBay sellers. I haven’t just copied and pasted a list from one of these wholesale directories. I actually do the research. In some cases, I contact the manufacturers/distributors and make sure they’ll work with eBay sellers.

We have it all broken down by category and product. I have a couple of wholesale search engines on there and a lot of other resources you get. Once you purchase the book, you sort of get a lifetime free membership to the site.

Terry: That sounds fascinating. I’m sure some of the listeners might be interested in that.

Alright, we’ve been talking for a couple of minutes now and I think we’ve got a good idea of where you came from, what your skills are, and that kind of stuff

Let’s get into some of the eBay consignment specifics.


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You mentioned earlier that you started doing consignment because the neighbors were asking you to sell things and things like that.

Now, I recommend that that is the easiest way to start. It’s actually how I got started doing the consignment.

Let’s talk about some other ways that people can get started doing eBay consignment. When I started doing eBay consignment, it was mostly for my friends that belonged to the train clubs that I belong to, saying, “Hey, I hear you can get a lot of money for this stuff on eBay. Would you sell my trains for me?”

I started doing that. I started charging, and when I first started, and this was in ’98, I charged the people 10% plus eBay fees, which I thought was a lot of money. But later, I just got it up to just charging 30% and paying the fees out of that.

Is that about the same way that you got started doing it?

Skip: Pretty much, pretty much. Just like you were in a train club, you were showing an example of personal networking, I’m not in a train club but I’ve always been a big proponent of personal networking.

After people came to me and started asking me to sell, then I started spreading the word a little more and I started handing those out.

I use what’s called the 3-foot rule. Anyone that comes within 3 feet of me finds out what I do for a living.

You just want to start by networking around, letting everybody know what you do. Any clubs or associations or community groups that you’re involved with, use that to spread the word. And I would do that before I started investing any money in advertising.

But then once you’re really ready, you will reach a certain point where you’re going to go through all of your personal contacts. And if you want to keep expanding the business, the easiest, fastest way is to engage in some type of advertising. There’s a lot of venues available.


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The easiest is probably classified ads in small local or suburban newspapers. I would stay out of the big-city newspapers. They’re very expensive to advertise in. But your local suburban papers, things like the Little Nickel and the Ad Server, these throw-away papers, you can buy classified ads in there very cheaply. Just create an ad that says something very simple, like “I will sell your stuff for you on eBay. Call,” and then give a phone number. Or you can be a little more clever than that and come up with some one- and 2-line classified ads. “I get road show prices for your treasures on eBay.” That’s another example.

Terry: And that’s an important point, is that you start with the free networking, like Skip and I both did, and then later get into doing the free advertising or cheap advertising in driveway drop newspapers and the circulars you find in the grocery stores.

Driveway drops are the papers that the people throw out in bags onto the driveways. And they’re usually delivered once a week or once a month.

I’ve been advertising to buy trains in those going back into the 70’s, and they’re very productive, they’re very cheap. And also, they’re usually run, like the one company I’m dealing with now, a man and his wife run it and they do like 6 retirement communities.

So they’re really easy to deal with these people, and it’s a lot different than say running an ad in the New York Times, which I ran an ad in the New York Times once and it cost me $300.

Skip: Exactly.

Terry: And I didn’t get any results from it. Now, it was worth it as a test, but starting small.

After I had done the eBay consignment for a while, I actually put together a really involved system in order to generate leads, by running ads in the state section of the phone book, bringing the people in, and then I’d charge $300 to walk into somebody’s house for an hour and go through and identify the different items in the house,


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what’s worth selling, helping people divide up the contents of the house, and then take the stuff out and sell it on consignment form, or better, buy the stuff for cash.

And I ended up spending close to 3 months putting together all of the different stuff that I’d done. I had handouts for financial planners and estate lawyers, and the different homes, churches and all of that done. And then I got into doing it and I hated it. I walked into people’s houses and the families were all like fighting. And here I was, the outsider. So all of a sudden, I became the target.

It was an interesting deal because the first call that I got, I bought a major train collection off the woman for cash. So it was interesting in that respect.

But in terms of setting it all up, I spent so much time putting this together that when it actually launched and I found out that I didn’t like doing it – and it was a productive way to find consignment materials – I just didn’t like dealing with the families.

Skip: What I do is contact the estate attorneys. And I think by the time something has reached an estate attorney, it’s really in his purview and his possession, rather than the family’s. The family has kind of decided to settle it or he’s been tasked with settling it.

So I haven’t had any of those sort of unpleasant experiences.

Terry: With estate attorneys, at least here in Arizona, the ones that I’ve dealt with – and I have like a small list of 6 or 8 of them that call me regularly when they get trains – when they’re involved, there usually isn’t a family or the family is out-of-state or the person died without a will and somehow it ended up going into probate. And this person’s been hired to deal with it. And they can be easy to deal with. That is a good avenue, through the estate people.

So going back to when you got started, I mentioned that I started charging 10% plus fees, and that today I would just charge 30% flat rate.


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What are some of the things that you would have done differently, knowing what you know now about consignment sales versus when you were first starting?

Skip: I had the same experience. I started out charging too little for my services and realized I was doing a fair amount of work for not very much money. That was one.

The other thing was I was not being selective. People would bring me things to sell and I figured, “Hey, anything will sell on eBay,” and I’d put it up, do all of the work, and then it wouldn’t sell or it would only sell for a small amount of money.

So, one of the things I’ve learned over the years is how to say no. When someone brings me something, the first thing I do is I go into eBay’s search engine, plug it in, and see if these things have sold on eBay before. You get a lot of different, weird merchandise. And a lot of things you intuitively think may sell very well, in fact, there really isn’t a market for on eBay.

There are some things in this world that people need to pick up and touch and feel, that don’t work on an internet online kind of sale.

Terry: Is there a minimum estimated value that you’re looking at?

Skip: That’s another thing. I stopped selling anything that would sell for less than $50. Today, I’ve actually increased that to a couple hundred dollars. I get people calling me all the time with things to sell that might go for $50, $60, $75, $100, and I turn it down. I refer them to someone else. There’s another trading assistant down here.

But what I’m looking for today is people who have really high value, expensive merchandise to sell.

A couple of months ago, I sold a $13,000 Indian motorcycle for a guy. That’s the sort of thing I’m looking for. I have a collection now of train magazines and train sets and engines and things from the 1940’s and 50’s that while individually some of these things might not sell for more


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than $50, collectively, because I’m going to be selling them in lots, I hope to get $50, $75, $200 for a lot. I think there’s $10,000 or $15,000 or $20,000 worth of stuff here.

Right now, my garage is full of all of this stuff, and I’m having trouble finding time to photograph it and get it all listed.

So to summarize, charge a little more. I charge 30% for my services. Usually, I’ll pay the eBay fees for that, unless it’s a lot of items, like in this case. In this case, since there were so many items and there would be so many listings, I am charging a couple bucks on each listing for the eBay fees.

Terry: I used to charge, when I did some of the big train estates for like friends of mine who died, and then I would work a deal out with the wives or the children, I would charge a flat rate, say $10 an hour was the original thing, and then later it got up to $35 an hour, in order to sort and prep the stuff for eBay.

And then I’d charge the consignment fee on top of that. For example, in one estate that I did, I went over there every Wednesday night. I set up a television and I sat there and watched TV and sorted out all of the stuff and then took it with me and photographed it, put it on eBay, and then the following week I went over and took another batch of stuff.

It got to the point that once there was a 2-week gap from the week’s sales, I started bringing her checks every week too, in order to show what I’d done.

And that’s an important error that I made originally, too. One of the first things that I sold on consignment was a set of trains that was worth somewhere between $1,300 and $1,600 and the guy said, “Would you sell this for me on eBay,” and I said, “Sure.” And I took some pictures of it, listed it on eBay, and left it at his house. I don’t remember what it sold for, but it sold in that range. And then the buyer sent me a check and I deposited it and went over to pick up the train, and the guy said, “No, I’m not


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going to sell it for that if that’s all you got for it.” And that caused problems.

And after that, I learned to never list anything on eBay without taking actual possession of it. Or, in the case of something that’s large or, like you mentioned with the motorcycle, getting a contract that specifically states that this guy’s selling this and he’s going to take any price that goes for it.

Skip: I absolutely agree. Again, there’s some really large items you can’t physically take possession of. But if I can take possession of the item, I do. I want it right here in my possession, so I can make sure I ship it.

But I get a contract regardless. My book includes 2 types of contracts: one is a regular consignment seller, and the other is where you’re sort of an agent/consultant.

The reason for the 2 contracts is some states have regulations about consignment sellers operating and licensing. So I’ve created 2 contracts, so you’ll have one that can work in any state.

But I sign a contract with everybody. I fill out an inventory sheet and list all of the items. We take possession of the items and take them home. I do all of the photograph and everything here.

If a person says to me, “You can sell this for me on eBay, but I’m not going to let go of it,” I say, “Thank you very much. Here’s other people in town that might be able to help you, but I don’t. I have a policy of taking possession.”

The other thing you need to look out for is people bringing you stolen merchandise. One of the policies I have is that if I’m going to sell something on consignment for you, you have to give me your driver’s license and I’m going to make a photocopy of your driver’s license. And then, after I sell the item on eBay, I’m going to pay you via check, and I’m going to mail that check to the address on the driver’s license. And that’s the only way I’ll do business.


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And generally, when someone trying to sell stolen merchandise comes to you, when they see that is your policy, they usually just go away because they don’t want you getting their real contact information.

Terry: Now, has that ever happened with you?

Skip: I had a person, one time, bring me some stuff that I thought was stolen. And I just said that. I said, “I’m not sure where this is from. You don’t sound very credible of where you got this.” He just went away, and we never even got to that stage.

But it has happened to other sellers. It tends to happen more to the people who set up storefronts, I think. Although I had one of my readers, someone bought one of my books and emailed me a few months later. He was down in your area, in Arizona. And he said he was called by some guy in Ohio who had X,Y and Z to sell. I can’t remember what the product was. And it was just too hinky. He used that method. He said, “Look, you need to mail me a photocopy of your driver’s license and that’s where I’ll send the check,” and the guy backed out totally.

So he was convinced that what he was offering was really phony or stolen merchandise.

Terry: Yeah. I actually bought stolen trains, that I later found out were stolen. For all I know, I’ve bought stolen trains numerous times and never found out about it.

But in one case, I bought a set of trains from a kid who was like 20 years old, and it’s not uncommon for somebody to come here to Arizona, and I live just adjacent to a college town, they come here to Arizona, they decide to sell their train in order to buy a couch or something. So I bought the train. I think I paid the guy $200 for it. And it was brand new, in the box, which is also something that’s not unusual for somebody to give a train set as a gift to a child. The child never plays with it, and then as soon as they’re away from whoever gave it to them, to sell it.

The only deal is they have to be 18 and they have to be willing to fill out the secondhand dealer’s form, which is


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actually a form that I have to send in to the city, listing what I purchased, who I bought it from, their driver’s license number, and all of that relevant information.

I bought the train and then 2 weeks later the guy came back trying to sell me more, and I was like, “No, this doesn’t make sense.” And he ended up selling the train to another dealer here in town, who’s a friend of mine. And the second train, he sold for $400, which was like a 2-year-old set of trains worth about $1,200.

It turned out the stepson of a local collector was taking the stuff out of the collector’s closet and selling it in order to buy crack.

The police ended up calling me later that night and saying, “These trains have been stolen, do you know anything about it?” And I said, “Yeah, and they just called me from this motel room.”

So the police went and arrested him. And when I took the trains to the police department, because I hadn’t sold them yet, I had the detective list me as a victim because the guy had sold me stolen goods and misrepresented it. And that was very important, because later I was able to force the people to give me my money back. Because as a victim, I had rights. When they went in, because it was the stepson, the wife was telling the father not to press charges. Well, he can stop press charges, but because I’m a victim I had the right to press charges and I refused to lift the charges unless I got my money back. That was very helpful.

Since then, because I do a lot of buying from the public, I have a policy of if in doubt, I don’t bother with it. And that goes in 2 realms. One, I run around with cash and go into people’s homes and pay them cash for their trains. I have a fear that somebody’s going to call me, offer me some trains, and I’m going to go out and they’re going to rob me.

So if it feels weird, I don’t go.

Skip: Yeah, that’s a good policy.


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Terry: And it’s none of this stuff where if it feels weird I take a gun. It’s like, no, if I think I need to take a gun to go look at the stuff, I don’t go at all.

And then the second deal is that if I get the instinct, like just last week I had some people trying to sell me some trains from these 2 gentlemen in their 30’s, and I think these 2 gentlemen are trying to sell the father’s trains without him knowing it. They won’t let me come over and look at them. They want to meet me somewhere, and they’re being very evasive. And it’s like, “Okay, this is not something that I’m going to take on. It’s a problem. I don’t want problems. I want to make money. But there’s a constant stream of calls that I’m getting, so when something comes up that sounds hinky, I just walk away.

Now, I might be walking away from deals that I could be doing that could be fine, but at the same point, I’m not buying into the crap. And that’s an important thing is I’m willing to walk away from a deal every now and then, that probably is fine, just to avoid the potential problems. That’s something that the listeners should remember, is that it can be a major hassle dealing with the police and everything else.

I was burglarized a couple of years ago, out of the storage shed that I run my train business in. The people took my train and then sold them to an auction house up the street. And I walked in, saw my trains in there, and had the police seize them. I got my trains back, which took 8 months, almost a year of going through all of the court stuff.

But I got my trains back and the auctioneer got a court order for restitution from the crackhead that had stolen my stuff.

So in 2 years, when the crackhead gets out of jail, the auctioneers going to get these checks for $5 or $10 a month. It’s not worth it.

Skip: Good luck with that. The best way, as you say, is just to stay away from anything that at all seems strange. Believe me, there are so many people out there willing to give you something to sell, it is not a problem to say no


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to someone and just walk down the street and go to the next person.

Terry: One other thing, and this was kind of weird. This has happened with me 3 or 4 times, is I get calls, and I don’t know what the deal is because I don’t sew, but people want me to sell photocopies of patterns. And it’s like, “First of all, those McCall patterns, I don’t think they’re very expensive. I don’t buy them, but I guess they’re like $5 or $10.

There’s no way that I’m going to get involved with selling a photocopy of a copyright-protected piece.

And I know that the same thing goes for like videos and music, that kind of stuff. You want to make sure that you’re not selling something that violates trademarks and all that.

Actually, from what Skip said, which he won’t sell anything that looks like it will bring less than an estimated value of $50, my number’s $30 as an estimated value. And I think that while I’ll do $30, the most stuff goes for more and I’m really looking for groups of stuff where I’ll take this, that will sell for $30, but I’m also taking that, that sells for $200 and I’m taking that, that sells for $600. And I’m just taking the $30 item in order to make the deal for everything.

But to sell like a CD or a copy of a CD for $5, it’s not worth doing.

Skip: There’s so much work that goes into just listing an auction, photographing it, packing and shipping, communicating with the customers, you want to make more than $2 or $3 for that piece of work.

Terry: Actually, I used to start all of my auctions at 99¢. And when I started doing the consignment for stuff that I didn’t have any familiarity with, I raised it to $3.99 because on some of the items I’d get, that I’d look at, like for example a silver teaspoon set, those collectible things, I’d look at that and I’m like, “Yeah, that’s got to be worth $30.” And I’d throw it on eBay with a 99¢ opening bid and it would get one bid.


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Well, what just happened? I paid 35¢ to list the thing and got 30¢ in commission, and then I’ve got to box it and ship it and do all of that. So I actually lose money on doing that.

So I raised it to $3.99, so that even if I only got one bid on an item because I took something without understanding that it had no market, I’d always break even because then I’d get a dollar out of it. And that’s an important consideration, too.

Let’s talk about owner’s expectations. I know this is something that I run into a lot with people. They have something they want to sell and they think it’s worth a lot of money.

Skip: I run into that all the time, where owners have an overblown idea of the value of something they own.

A lot of times, the easiest way to deal with that is just get them in front of a computer, pull up the eBay search engine, type the item in, and show them what it’s actually sold for on eBay before.

Once they see that it’s actually sold for that price, they’re really more amenable.

I had a woman who wanted me to take a large collection of Elvis Presley plates, these Franklin Mint limited-edition plates, and she had paid between $19.95 and $29.95 for these, going back over the last 5 or 10 years. She went on eBay and saw that they were selling for anywhere from $3 to $9. When I showed that to her, that suddenly changed her mind. I ended up not taking them, for that reason. But that’s an example.

But that’s the easiest way to deal with the expectations.

Terry: So how would you do that if you didn’t have a computer to show her?

Skip: You can always go home and print it out. Bring up an eBay search, print it out and take it over. Or before you go over, you ask them what it is you’re looking at, and she tells you, and you can do some of the research before


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you go over and bring the 2 screenshots of the page or something. That’s basically the way I try and do it.

But if they still have a really overblown expectation, if they’re insisting, “I don’t want to sell this below a certain price,” I’ll say, “Look, I can put it up with a reserve, but you’re going to have to pay the reserve fees,” and I’ll charge them upfront the listing fees, the reserve fees, something extra for my trouble. And if the item doesn’t sell, at least I’m not out any fees.

Terry: On the reserves, I charge people a $10 flat rate for anything that they want to put a reserve on, in addition to the 30% consignment fee. And that way, I’m going to make at least $5, even if the thing doesn’t sell.

Skip: I actually run something else I do. If someone has something fairly expensive, if somebody’s going to sell something for $1,000 or more, I sell them my “promotional package,” which basically is a category-featured listing, which costs $19.95, and a bold listing, which costs $2, $3 each.

I charge $29.95 for that. I say, “This is something to help promote your auction, if you want to invest in this.” And they pay me the $29.95 upfront. I’m only making $4 or $5 on it, but that’s not the point. Because of this promotion, the auction’s going to get a lot more attention and probably sell at a higher value, which will increase my commission and their take.

But I don’t have any risk upfront, doing the promotion.

Terry: I don’t charge extra for the featured-plus auctions or the category-featured auctions, but I don’t offer that as an option. That’s something that if I think it’s worth doing, I’ll do it. It’s not even something that I offer to the consigner or the owner, just because I don’t want to confuse them.

But that sounds pretty good, to actually offer them a package and say, “Hey, you’ve got this item and it’s worth about $200, and in order to get that you really need this,” or “this will help you and might even cause you to get more.


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Skip: It gets them to invest a little money, as well.

Terry: You talked earlier about you’ve got 2 different contracts, agent versus dealer. We talked about the secondhand dealer’s license. That’s part of what’s going on with you there, as far as why you’re working as an agent instead of working as a dealer.

Skip: Exactly. There are some states that have varying regulations. I know a lot of the communities in Arizona have that regulation, where you have to fax a list of what you’re selling to the police first.

Back east, in Tennessee, there’s been some rumblings back there that they want eBay consignment sellers specifically, not any eBay seller but just eBay consignment sellers, to actually have an auctioneer’s license. And you have to go to school and learn to be an auctioneer and take the test.

The agent or consultant-type contract does away with that. Basically, that contract sets up a scenario where you’re not taking possession of the goods and selling them on consignment, you’re basically providing computer consulting services. You’re doing the computer work to list the item and so on. And for that, you’re going to charge XYZ fee.

So we provide, in my book, both types of contracts. So whatever the situation is in your particular state or county, you’ll have a contract that’s workable and that you can use.

Terry: And the agent should remove most of the liability, in the event that you do take something that’s stolen, as long as you’re doing due diligence. If the guy comes in and you say, “Where did you get this at?” and he says, “I bought it,” wink, wink, that’s not due diligence.

Skip: Right. I found that my method of using the driver’s license, the police consider that doing due diligence. If you ever do inadvertently sell something stolen and the police show up at your place one day, you show them the driver’s license and the photocopy and where you sent the check, and you say, “This is how I prevent selling stolen merchandise,” that’s usually okay with them. They won’t arrest you for selling stolen merchandise.


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But you’re right. Some kid walks in with a car stereo and wires hanging out the back and says he’d like to sell it, you’re absolutely crazy if you do that. You’re also crazy to deal with anyone who is just dealing with cash. That’s a real red flag for me.

Terry: So how do you organize your consignment sales? Do you list everything off one day a week or as you can? Is there any structure to it?

Skip: No, not really. It’s pretty much as the merchandise comes in and as I have time to do it.

There’s certain days and times for auctions to end which are better. I like things to end like on Sunday night, Thursday night, Wednesday night. So I do schedule my auctions to launch and list during certain times.

If something appeals to teenagers, I sell it during the 3:00 to 6:00 hour, when kids are home from school. If it’s older people or businesses, I actually have it end during the business day, between 9:00 and 5:00, because that’s when those people are typically on the computers.

But no special organization. I’ve started using Empire for my auction management service, because Empire has a consignment module. I’ve been with Vendio for a long time, and I’m going to be switching over to Empire. They have a consignment module that allows you to keep track of all of your consigners and your fees and commissions, built right into the system. So that’s pretty convenient.

We use QuickBooks to organize all of our payments and everything. You want to keep all of your financial records organized, so your life’s a lot easier at tax time.

Terry: I actually run my consignment business as a part of my toy train and figure any expense or any check that I write to an owner, for items I’ve sold on consignment, that’s just like a cost of buying product.

Skip: I have a separate line item set up in QuickBooks for that. It treats it just like product that’s sold.

Terry: And that makes it very easy for me. The only difference with the consignment sale is that the cost comes


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after the revenue instead of the cost coming before the revenue. That’s actually one of the advantages of doing consignment is, for me, the consignment sales have become a fall-back position. When I’m in somebody’s home and I’m looking at their trains, I can’t work a deal out with them, I’ll turn around and offer to sell them on consignment. That way, I can still make the deal.

Skip: You have a huge advantage there. Because you’ve specialized in an area, you know all about the trains, their cost and their values.

If I was brought into someone’s house looking at trains, like in the case I recently did, I had no clue. So I’m just strictly going on the consignment model.

On the other hand, if someone brought me in to look at something that I had a lot of knowledge about, then yes, I might make a cash offer for the products. But the risk is just too great when you don’t know what you’re buying, you don’t have a lot of familiarity with that product niche.

Terry: One of the things, and I’ve been burned here a couple of times as a result of this, one of the things that’s great about consignment is, for example I mentioned those teaspoons, and that’s where people drive around and they buy them in gift shops or something.

And I sold a bunch of those. They were worthless.

The same woman had been collecting teaspoons that were antique teaspoons, and I have no clue what makes one teaspoon worth $75 and the other worth $3, even after selling a couple of hundred teaspoons.

So if I walked into somebody’s house and saw a collection of teaspoons, I would look at it and say, “Great, they’re all worth $3,” and hope that there were some more expensive ones.

Some areas where I did figure out exactly what’s making the things valuable, were the little badges like the sheriff’s badges. I sold a bunch of those for one guy.

On those, I got to the point where I could look and say, “Yeah, that should sell for $20, that should sell for $40.”


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And I actually bought a bunch of them at an antique show and got them home and found out that they were all fake.

Skip: That’s another reason why it’s good to do consignments. You never have that risk.

Terry: I sold about 100 of these old sheriff’s badges, and I thought, “Hey, I know enough about these now.” I didn’t realize they were fake. But I also sold those plates. You talked about the Franklin Mint Elvis Presley plates. I sold some name with a B. I forget the name of the plate, the manufacturer. Like Bing and Grondahl, I think it was, and I sold a bunch of those. And now I know enough that I would never touch one of those.

Something that you see all the time in antique stores and antique malls are those painted plates, like the Limoges, that kind of stuff. I sold a couple hundred of those for a woman, and now I know to ignore any plate that doesn’t have the word Limoges on the back of it, or there was a Royal something or other from Bavaria. And those are the 2 names. Anything else, ignore it. If it’s chipped, ignore it.

So by doing the consignments, I was basically learning about these collectibles while I was selling them. And that’s a great advantage to me, is that now I can go out and if I see this other stuff, I can learn more.

One of the things that is very surprising and I’ve done very well with is employee pins. With those, if it’s for a company where there’s a huge collector interest, like Coca-Cola would be one, Lionel Trains is one, those pens are worth a fortune.

If it’s a company like a railroad, like Pennsylvania Railroad, they’re not worth a fortune but they’ll still bring $100, $125.

Skip: That’s interesting. I didn’t know employee pens were a collectible area. I knew old fountain pens were. I didn’t think of the advertising ones.

Terry: It’s not actually that people are collecting employee pens, it’s that people collect products from the


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manufacturer, like Stangl pottery. Stangl makes the little porcelain birds that are very collectible. Most of them are cheap. You see them on eBay for $25 to $35 for the small, 6-inch porcelain figures. And these are all from the 50’s.

But the pens are worth a couple hundred dollars because people who collect the birds say, “That’s kind of neat, I don’t have one of those,” and collectors want to have something different.

The Lionel employee pens, think about it, if you worked for Lionel for 25 years, they give you a little pen and it’s gold, and it has a stone on it. I don’t remember which stone it is. You get that pen, very few people work for 25 years for a company, so they’re very rare and they’ll bring hundreds of dollars.

I’ve actually got to the point where I’ve been in people’s homes and said, “Hey, do you have employee pins?” Right now, I have a whole box full of them that are worthless. Like I have Bayer, which is the aspirin company. And I think Squibb or something else, in pharmaceuticals. Nobody collects that kind of stuff, so they’re not worth anything.

But the ones with the names where people collect the underlying product manufacturer, they can be worth a fortune. And nobody knows that.

So when you’re out, that’s what I learned in consignment sales is that here are things that I can go into somebody’s home, buy these for $2, $3 apiece, and get $100 or $500 for them.

I never would have known that if I wasn’t doing the consignment sales.

So one of the problems that all eBay sellers have is maintaining this momentum. When I was really banging at the consignment sales, I was doing 200 to 500 auctions a week. It was a full-time job, and I just basically did nothing else.


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After about 6 months of that, I really burned out and went in different directions and pulled back on my total involvement.

What are some ways that you can recommend to the listener to maintain their momentum?

Skip: I think one thing you have to do is have a clear business plan. Decide what you’re going to do and what you’re going to go after.

After you get some basic experience selling on consignment, I think you ought to think in terms of maybe having a specialty.

One of the things I do is I look for business-to-business consignment deals. I look for companies that are downsizing, that want to sell off equipment, or hospitals and doctor’s offices that are replacing their equipment, retailers selling off large amounts of retail closeouts, that sort of thing. Because now you’re dealing with higher-value goods, higher average sales. You don’t have to do hundreds of thousands of auctions to make a lot of money.

If you can find that one situation where you can get a lot of money’s worth of goods to sell, I think if you’re making a good profit, if the money’s coming in every week and you’re doing really well, there’s no trouble keeping the momentum going. You enjoy getting up every day and going to work, if you know you’re going to make a lot of money at it.

One of my students at my seminar, who had bought my consignment book, called me a few weeks ago. He went home to Kansas, and he found a large hardware store in Kansas, it’s actually a chain of 4 or 5 stores, and they have $2-million worth of surplus inventory in their back room that they want to liquidate. And it’s expensive items, like power tools, barbeques, garden sets, lawnmowers, things like that.

He’s basically selling it for them on eBay, and they’re drop-shipping it for him. He sells it on eBay and then he gets the money, he pays them, and they drop-ship it


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directly to the customer. He’s going to be busy for the next 2 years doing this, and he’ll probably make a 6-figure income each year out of it.

I think that’s the way you stay motivated and keep momentum going is to find a way to really make some money. Don’t fall into the trap. Don’t be selling lots of little things. Don’t be bouncing from person to person. Try and create and design a business and focus your energy on what you want that business to look like, what kind of consigners you want to get.

If you’re interested in the antiques and collectibles area, that’s a great area to specialize in. But you should try and carve out some kind of market for yourself in a direction that you’re going to go in. That’s the best way to avoid burnout, I think.

Terry: I know a guy who lives in San Francisco, that he does eBay consignment and all he does is trains.

Skip: There’s another fellow in LA, who only does movie memorabilia. There’s people out there that specialize in all sorts of areas.

And, of course, the other nice thing about specializing like that is you can pull in merchandise from all over the country now. You’re not just really limited to your sole geographic area.

Terry: One thing that I want to mention, you talked about the guy with the hardware store. When I was first putting together my eBay consignment book, I talked to a friend of mine that owned a pawn shop. And he had a woman that came into the pawn shop one day and said, “Look, give me a desk that I can work at, and I’ll come in once a week and list stuff on eBay for you. You give me 20% of whatever it sells for, and we’ll leave the stuff here and I’ll come back once a week and then pack the stuff and ship it. You handle all the payments and I’ll handle all of the listings.”

He did that with her for like 2 years, and then he retired and sold his pawn shop.


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But that’s an option to get yourself tied in.

Now, with me, going out and finding one thing that you’re going to sell on consignment and then listing it, and then having to go out and find another seller for one thing, that got to be a nightmare.

So I got to the point where I only do big stuff, people that have a large collection, where I can go in once a week and get more stuff or things where I can learn about it.

And then very rarely, I’ll sell stuff for like my mom or my sister or somebody else that’s a relative or friend, just because they’re friends and I’m helping them out.

But for the most part, I’m looking for the large deals. And I even do this in my train business today, where years ago I bought every single item that was offered to me, that I could get my hands on. If I could close them, I walked out the door with them.

Today, I run my business of, yeah, if I get something and I’m there, I’m buying it. But I want the big deals. I want to walk in and I want to walk out with a barge. I want to fill the car up and have to go back for a second trip, stuff like that.

What’s happened is I haven’t lost a large percentage of my income by doing that. What I’ve done is I’ve freed up a lot of my time and I’ve really changed my cash flow because now I’m only taking things that I can turn around and sell quickly. And that’s an important consideration with the consignment. We already talked about that there’s no investment in buying the products. Well, if you’re doing the consignment, I like to do 5-day auctions, which means 10 days after the auction’s done I got the cash.

So it’s really changed the whole outlook, as far as my cash flow model.

Skip: Sure. And if I get something that I know is going to be a popular seller, I’ll sometimes even use the 3-day auction to list that.

Terry: So you mentioned, earlier, your website and your books and stuff. I’ve been on your website, Skip, and you


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have some wonderful articles on there. Why don’t you tell the listeners a little bit about your website again?

Skip: Okay, it’s the Auction Seller’s Resource. The URL is www.skipmcgrath.com. Yes, Terry, I have about 40 or more free articles on the site. I have a resource section, resources for auction sellers, resources for website sellers.

I publish the largest newsletter for eBay sellers, the eBay Seller’s News. We’re going into our sixth year of publication. Currently just put out the new issue this morning. We keep the back issues on there. That’s kind of a treasure trove of information.

I noticed whenever I’m looking at my hits on my website, my stats say the back issues of the newsletter are some of the highest accessed pages. So people really find a lot of good information there.

The newsletter is free. You can sign up right on the homepage of the website. All we need is your first name, last name and email address, to make sure it gets through the spam filters. And we don’t rent or sell your names to third parties. So feel free to come to the website, sign up for the newsletter, look at the back issues, and spend some time browsing around. I think you’ll find that we just have tons and tons of free information.

I’ve found, over the years, that giving away good information for free tells people that what you’re selling must be a pretty good product as well. And that’s worked out for me because we’ve done very well with our book sales on the website.

Terry: I know a couple of months ago, you were doing something with Seller’s Voice, like eBay radio or interview shows. Are you still doing those?

Skip: Yeah. In fact, this morning I was interviewed on eBay Radio with Griff. He has a new show and he had me on for a guest, and we were talking about the same subject, consignment book.

http://www.skipmcgrath.com/


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Chris Malta invites me on eBiz Radio with Entrepreneur magazine once in a while. I think I’ve been on there twice over the last few months.

I’ve also started to do seminars. We did our first seminar in Las Vegas back in October. That was a pretty big success. That was sort of a test seminar, to see how it goes. I’m going to be rolling out a plan next year, starting in January or February, for a series of seminars around the country. Those will all be promoted through my newsletter and from the website.

Terry: And then the newsletter also has information about the radio shows and Chris Malta. I’ve been on his show a couple of times, and that’s a good resource. You tell the people in advance when you’re going to be on these things?

Skip: Yes, I do. It depends on how often the newsletter comes out. Sometimes, I don’t know in advance. But what I do is I also post links where people who have missed the live interview can go back and listen to the recordings.

Terry:

Thanks for being on, Skip. I’m sure the listeners got a lot of good information about starting eBay consignments. They’re going to be able to avoid some common pitfalls and hopefully add to their income by doing a little consignment sales.

I know from my experience and also what you’ve said, that just doing a few consignment sales here and there is very easy to do. And then if you want to go further into it, it can be a great profit source all by itself. And it can actually be a concentrated focus for your business.

I really enjoyed the call. Thanks for being on.

Skip: Okay, thank you very much, Terry. It was a real experience, and I look forward to talking to you again soon.

Documents

Profiting From eBay Consignment