eBay has proven to be a key channel for small businesses to sell goods online without the cost and effort of creating and running their own shopping site. Yet making the jump to selling products through eBay can seem daunting and downright risky for a newcomer -- unless you're armed with the right intelligence.

In part because of the low hurdles to entry, eBay has proven to be a successful channel for thousands of entrepreneurs who are making their first forays onto the Web. Many find it a suitable proving grounds for making sales before investing time and money in a formal e-commerce site, which requires designing, setting up and hosting their own online presence.

Plus, an online auction may be an effective way to test-market products. In the end, some businesses may use the experience to price and market products on formal e-commerce sites of their own, while others may discover a permanent new product channel.

Benefits of the Online Sales Channel
Compared to brick-and-mortar retail stores, eBay (as well as other e-commerce sites) offers online stores that are open 24x7 and have few geographic limitations -- they're generally only limited by where you can ship. And Web-based sales, whether through an online auction or e-commerce site, can be cheaper than sales made through retail stores because there's less overhead -- you don't have to lease storefront space, hire salespeople or publish and mail paper catalogs.

Compared to building and hosting full-fledged e-commerce sites, getting started on eBay is easier and less involved. All you need are a computer with Internet access, preferably with a fast connection such as DSL or cable; a printer and a digital camera.

With an e-commerce site, you have to attract customers, either through advertising, links or search rankings. With eBay, there are already thousands of potential customers who visit the site daily and you don't need a merchant account to accept credit cards. You can rely on eBay's PayPal -- a popular payment method.

An online auction offers a low-cost way to test a product's market before building an e-commerce site. To do this, you can list products at different times on different auctions and compare or average prices to derive a retail price. And an online auction is a great place to move excess inventory that may include outdated styles and earlier product models and versions.

On the other hand, running an eBay business takes as much work as managing any retail business. While there's no physical building or e-commerce site to manage, you still have to deal with business basics such as inventory management, product purchasing, order processing, shipping and customer service.

Know Your Costs

Insertion Fees
Starting/Reserve Price	Fee
$0.01 - $0.99	$0.30
$1.00 - $9.99	$0.35
$10.00 - $24.99	$0.60
$25.00 - $49.99	$1.20
$50.00 - $199.99	$2.40
$200.00 - $499.99	$3.60
$500.00 or more	$4.80

eBay has its own overhead to consider. To start, eBay charges a listing fee that's based on the price of the item, and this is charged regardless of whether the item sells. Additionally, when you successfully sell an item, eBay takes a percentage of the final price, which starts at just over five percent. If your customer uses a credit card, there's an additional fee. A good rule of thumb is to allot ten percent of an item's price as the cost of selling on eBay.

Final Value Fees
Closing Price	Final Value Fee
Item not sold	No Fee
$0.01 - $25.00	5.25%
$25.01 - $1,000.00	5.25% of the initial $25.00, plus 2.75% of the remainder
Over $1,000	5.25% of the initial $25.00, plus 2.75% of the initial $25.00 - $1,000.00, plus 1.50% of the remainder

eBay offers different types of auctions. Reserve price auctions let you set the lowest price that you will accept for a product. Customers may submit bids below this price, which isn't revealed to them, and are told when they meet your price. In a fixed-price format, there is no auction. Bidders simply purchase your product at the price that you set.

In Dutch auctions, you may sell multiple items at a fixed price or allow bidders to declare an amount and price that they are willing to pay. A "Buy It Now" designation lets bidders purchase your item at an established price without having to wait for an auction to close. You may also set the duration of your auctions, typically for one, three, five, seven or ten days.

Some businesses have opted to leverage the eBay platform further, creating eBay Stores -- places where they may display their wares and offer additional information on customized pages. Stores have the advantage over standard auctions by enabling you to list products for a longer time at a lower cost and to organize products in categories.

Also, eBay can give a Store its own URL that may be promoted to customers. Depending on the complexity, eBay stores start at a reasonable $9.95 per month.

Test the Market
Before diving in, it's a good idea to go online and see what's offered and at what price. If you have a common product, you may find that there are lots of others selling similar goods. If an item is offered by many vendors, it could be that there are simply too many of them in the market. You may also discover that you can't price your products as low as the competition.

On the other hand, you can test the market by listing an item -- effectively performing market research on the fly. You may have to list several times before an item sells and adjust reserve prices accordingly. This is all useful information that you may apply to future auctions or an e-commerce store.

For additional help, eBay offers good tutorials. Also, the eBay Start-Up Center provides useful information on starting an eBay business. As you gain experience, you may eventually consider auction software that helps to automate the process by managing inventory, tracking buyers and sending end-of-auction e-mails.

Selling the Sizzle
Just as you want to present a favorable product description in a paper or e-commerce catalog, you'll want to do the same when listing on eBay. And you'll find that you have to work within the confines of the auction listing.

eBay lets you create a title that forms the basis of eBay searches. In the title, it's best to include all the relevant phrases or keywords that may include manufacturer, model number, version, color and more. It's also a good idea to forgo superlatives as customers rarely use these when they search for items. As an example, when is the last time you searched for a sweater by using a keyword like "Attractive" or "Wow!"?

The description lets you add details such as features and condition, as well as define the shipping and payment. To enhance your listings, you should consider paying more for bold type, highlighting and more.

Just as you want a good picture of a product in a catalog to show it at its best, you'll want to post a professional-looking picture. Those many images on eBay listings that show items hanging on living room walls or laid out on old shag carpets do little to promote interest in serious buyers' minds. For ideas, visit the "Completed Items" section to see what other sellers are doing.

Once you've made a sale, you'll have to provide customer service to deal with problems or unmet expectations. If you don't service customers and they have a bad experience, you can bet that they won't buy from you again. Customers will undoubtedly have questions that will arrive via e-mail, which should be quickly answered.

And once an item is sold, you'll want to ship it as soon as possible. Over time, you'll get a feel for the questions that customers are likely to ask and can address these on "About Me" pages that provide additional information.

Keep in mind that eBay maintains Feedback ratings that allow customers to rate sellers. A good rating will give you a good reputation and help you make sales in the future. It's a fact that some buyers won't purchase from sellers with no or low ratings.

Bottom line, you can think of eBay as another full-fledged sales channel, or a way to get your feet wet in the online market. Either way, it's a valuable option or stepping stone for small businesses that want to move sales across the Web.