In order to run a healthy eBay Business you need to know your eBay Vitals.

In this post I’ll be covering what we refer to as an eBay Close Rate. Understanding this information, and applying it to your eBay Business will help you to achieve your optimum closing rates. Ensuring you are maximising sales whilst minimising the cost of sale (that did sound like a sales pitch, don’t be put off - it wasn’t!).

What is a Close Rate?

A close rate is the percentage of successful listings against the total volume of listings. This can be measured account wide and on an individual item basis. ie., If you successfully sell 9 out of 10 listings for an item on eBay, that equates to a 90% eBay close rate for that listing.

It’s best to have an overall account close rate AND individual item close rates. (When selling a small breadth of product, it’s very easy for 1 or 2 bad performing items to bring your overall account close rate down dramatically, resulting in higher fees and less margin. You should build a process that not only identifies these items, but also actions them to prevent/limit damage to your margin.

Is that it, is it that easy?

Each time I mention this strategy, the immediate response is normally along the lines of “Ok, so I need to have 100% close rate for all my items then?” - While this may seem great, this isn’t normally a good move. Yes, this would insure you had a good close rate, and your fees as a % of cost of sale would be healthy [providing you have common sense pricing strategy], but this also indicates you are limiting your growth, as either you are selling too cheaply, or there is more demand for your product - or both.

Logically, you would need to work out, based on your costs, is it more effective to increase your listing velocity or increase your selling price. Most clients I work with have an optimum item close rate of between 50-60%. You should be able to work out what your optimum close rate is based on the following factors:

• The cost of selling your item.
• The margin made when selling your item.
• The cost of not selling your item.

Once you have that data, you should be able to work how many times you can unsuccessfully list an item against the margin made when you successfully sell an item. Using this data, I would strongly recommend applying this close rate method to all inventory in your account. Working with historical data, you will now be able to isolate these items, and build a procedure to action them as you see fit.

A basic example:

item selling price = £29.95
Item Cost Price = £20.00

EBAY FEES
insertion fee = £0.50
gallery fee = £0.15
final value fee = £2.25

PAYPAL FEES
3.4% PayPal transaction fee = £1.02
PayPal fixed fee = £0.20

Total Fees = £4.12

If successful = £5.83
If unsuccessful = -£0.60

Based on the above assumed pricing details, we can assume that if we sell this item once, we make £5.83 profit. We can also see that if we list this item using the same strategy a total of 9 times, our fees will amount to £5.85. So, for every item we sell, we cover the fees for 9 unsuccessful listings. At this point, work out what percentage margin you would like to make on your item, and how many times you unsuccessfully list the item before eating into your margin.

This close rate ratio will give you your maximum listing volume to achieve the margin you want to achieve. This will enable you increase your listing volume to meet demand, or even decrease your listing volume to decrease your fees-to-sale percentage.

Ok, so what’s next?

Obviously what you do from that point is up to you, but I would suggest a regular ‘health check’ on each item (the frequency depends on your volume of course), and be sure to build a process that will action these items and deal with them how you see fit.

A lot of the details above are assumed, so take them with a pinch of salt. Hopefully this will help to show that there is a simple equation to calculate optimum performance.

I just want to emphasis once more that identifying this data is only the first step to improving your eBay vitals, as without a process that actions your results, this is a wasted process and nothing will change. I say this as I’ve worked with hundreds of eBay businesses and only a tiny percentage of my clients actually used this information - most of which saw results the following month.

Ok, so working in the Managed Service department at Frooition has proven to be a challenge over the last few months. Most of my clients are really trying to ramp up business early 2008 (like every other business that wants to succeed), which means more communication, new supply and more inventory. As any eBay seller knows, this creates quite a work flow for the team that actually needs to transfer all this excitement onto eBay and generate more sales.

With my work cut out, I’ve been steadily improving strategies on a daily basis for each account, and tweaking every item where necessary to improve sales. Normally the steps to improve an eBay business are relatively basic:

1. Improve Creative Branding.
2. Improve Inventory Information (item specifics, attributes and formatting all need to be clear and concise).
3. Devise / Improve listing strategies for each product group & format, based on Frooition marketplace research.
4. Streamline procedures (sales processing / status updates, etc).

However, with one account in particular, being TopUpTV (for which I actually run two separate eBay identities), the process has had to be modified due to the fact I only have 1 item to sell for each account. The process outline is much the same, but relying on eBay’s natural ability to display and expose your inventory (in the form of search results, feeds, eBay Shop pages, etc) is very difficult when you only have 1 item to sell.

Challenges:

1. Inventory breadth - Selling only a single item (with unlimited quantity).
2. Generating exposure / traffic.
3. Competing / dominating your main eBay category.

In light of the above challenges, you may be surprised to learn that this account is now the biggest seller in their category, with both TopUpTV & The_DTR_Store holding 1st and 2nd place as top sellers on eBay based on GMS (Growth Merchandise Sales) in their category. Based on my research, These two accounts are also the most healthy eBay businesses in the top 5 sellers for their category too.

In order to run a healthy eBay Business you need to know your eBay Vitals.

• What are your Close Rates (see my “Identifying and Optimising your eBay Close Rate” post)
• Low Fees
• Competitive pricing
• Good Sales Volume / GMS

In short, keeping close rates at their optimum levels, fees as a low % of selling price, have competitive pricing, and maintaining a good volume of sales, will ensure your eBay business is off to a good start.