Local eBay sellers grind it out in the hope of finding Web wealth

For the ever-growing tribe of Inland Northwest eBay sellers, it’s both the best of times and the worst of times.

Let Spokane eBay seller Joe Johnson explain.

“This area has a lot of people who are getting rid of stuff. The economy, or the large number of people who’ve lost jobs, creates a lot of sale opportunities because people are getting rid of stuff, needing the cash,” said Johnson, who’s a full-time bicycle mechanic in the Spokane Valley and part-time eBay online trader.

Johnson, a 33-year-old former Agilent Technologies worker who was laid off last year, no longer finds it much harder now to hunt for used items to later resell at higher cost on eBay.

The popularity of eBay — on which 25 million items are sold every day — along with economic stress in the community, have led to hundreds of area residents signing up and trying to compete with Johnson to find those bargains and sell them online. Many are people who just sell certain types of items. Many others have decided to be eclectic sellers, dealing in any or all categories, from collectibles to T-shirts.

Johnson has found those other eBayers at garage sales, flea markets, auctions and thrift stores. Often, they’re the ones elbowing each other, lining up early and quickly scouring a yard full of items to see if they can find something worth listing online.

Before he was laid off last year from a job as a computer-design programmer, Johnson dabbled a bit with eBay. After losing his day job, he had enough free time to start spending several hours a day finding deals and turning around and selling them.

He plans to cut back this fall, when he returns to his courses at the Community Colleges of Spokane. Plus, he only sees more competition among other sellers in the area.

“Nowadays too many people are aware of selling on eBay,” he said. “The estate auctioneers all go through the sales ahead of time, taking out the good stuff and selling it on their own, before selling it at the estate sales,” said Johnson. “I stay away from estate sales because of that,” he said.

That same complaint has been voiced by area eBay sellers who’ve been trading online for more than three years. Ebay officials estimate the site has grown so fast that there are 430,000 mom-and-pop sellers in this country. Those sellers, most of whom spend less than 20 hours a week selling, are estimated to account for 95 percent of the company’s annual gross sales of $24 billion. That amount includes fees eBay collects from sellers for listing an auction, plus fees collected by eBay for each item sold online. The amount eBay gets for a sale depends on the price; the higher the sale price, the more eBay gets.

Nearly all of eBay’s transactions are done in auction format, with bidders competing to buy a given item.

Spokane-area eBay sellers closely match the typical range of traders found anywhere else. They range from the weekend seller who may generate a few hundred dollars in income for the year, to highly focused retail businesses that devote a lot of effort to selling on eBay, such as Spokane Discount. The locally owned retail business has two area retail stores, one on North Division, the other in Spokane Valley. But it also has nine full-time workers who do nothing but list and sell its items on eBay, said company owner Steve Waco.

Ebay officials declined to say how many of its members and sellers live in Spokane and North Idaho. Company spokesman Hani Durzy said eBay routinely does not disclose that data. He also declined to identify how many “power sellers” — people who generate significant incomes through online selling — are in this area.

Power sellers

Among the power-seller group is 39-year-old Mike McKinney, a Coeur d’Alene resident who says he’s generated above $100,000 a year in eBay revenue each of the past five years. He sells a large variety of items under the eBay name Lake City Collectibles. His primary area in recent years has been signed copies of LPs and album covers from popular rock acts.

One of his big eBay sales included an authentic letter written by Civil War General Thomas “Stonewall” Jackson, dated from the 1850s while the Confederate officer was still at Virginia Military Institute. McKinney said he sold the letter for $9,500.

McKinney knows first-hand that success on eBay almost always generates IRS curiosity and scrutiny. After he cleared $100,000 the first year, the IRS conducted a lengthy audit of his books and his tax return, he said.

IRS officials confirm that the federal tax agency is monitoring some online traders for under-reported income more than in the past. The IRS has not said how large the “tax gap” might be from people who sell on eBay but don’t declare their earnings as income. Generally, the IRS is concerned with high-volume eBay sellers and not those individuals selling online as a hobby.

IRS spokesperson Judy Monahan confirmed that any earnings made by selling on eBay has to be declared as income. The exceptions would be personal items that fall into the “garage-sale” category. “If you sell your own items, personal possessions that you have and no longer use, that’s not income,” Monahan explained. But any purchases someone makes just to resell on eBay fall into the category of business, she noted. That includes any items a person may acquire from a relative or an estate sale, then sell on eBay, she added.

McKinney said his audit turned out fine. “I even got some money back. I was extra careful in recording all my operations,” he said. He also was diligent in listing all his eBay-related expenses as business expenses, cutting the amount of taxable earnings. Those expenses include the auction listing fees eBay charges, the commission eBay collects for each sale, the shipping and handling costs, the online Internet service provider fees he pays, and the fees he also pays through PayPal, an online service that helps traders conclude sales with buyers.

McKinney is the exception to most Spokane-area eBay traders. He buys the bulk of his merchandise for resale from outside this area. He frequently travels to California or Nevada, two active pipelines for pop-music memorabilia, his current best-selling niche.

“I don’t go to the local sales often. It’s not worth it, with so many other people looking for collectibles to sell,” he said.

Help for novices

The eBay trend has reached the point that area companies are now targeting eBay novices who need help selling products online.

Spokane’s three area UPS Stores, locally owned by Spokane resident Paul Branham, have joined a nationwide program called AuctionDrop. People wanting to sell items bring them to the UPS Stores, where workers take care of listing the items, advertising them on eBay, then boxing and shipping them to the buyer. AuctionDrop, a private company based in California, collects a fee based on the sales price. UPS Stores collect the cost of packaging and shipping the item, said Branham.

Another Spokane business, CW Products in the Spokane Industrial Park, has launched a business by crating large items sold by area eBay sellers. CW Products, owned by Ron Johnson, makes a variety of crates, bed frames and wooden pallets. Last year Johnson learned — after selling several large items he sold on eBay — that he can add revenue to the company bottom line by selling his crating services. This week he sent off two large marble-top speakers to an eBay seller, charging $310 to send the two 150-pound crates to their California destination.

The one area business with the largest inventory on eBay continues to be Spokane Discount, which has retail stores here for 22 years but only began selling online through eBay in early 1999. Owner Steve Waco is not focused on finding overlooked specialty items that sell for huge markups. He’s based his eBay trade entirely on high-volume sales with modest price markups.

Since 1999, Spokane Discount has bought nearly all its merchandise by scouring closeout sales and odd wholesale lots of items that other retailers want to get rid of. Its eBay sales last week ran to about 600 items, including clothing, CDs, computer parts, DVDs and household items like phones.

Waco is the only area eBay trader who is ranked in the Top 500 list of all eBay sellers worldwide, based on positive ratings generated through his online sales.

Margins are down

He agrees with many others here that the golden days of hefty eBay profits are over. Three years ago, Spokane Discount generated nearly half its annual revenue online. Now it’s down to about 25 percent (out of a yearly gross of $3 million), according to Waco.

“Our (eBay) margins are way down,” he said. “There are more of the same items now being sold. And there are more people selling on eBay than before,” Waco said.

Waco buys huge wholesale and closeout lots of clothing, home appliances and other merchandise by keeping track of firms going out of business, mostly in the Western United States. Despite the decline in profits, he still sells on eBay because online sales generate a steady cash flow.

“It also helps us get ride of items we can’t sell in the store. If I get 100 pairs of pants of some unusual size, I can’t sell many of them in our stores. But on eBay, they’ll sell,” he said.