Net a healthy profit from the global cyber marketplace

The rise of auction websites has taken spare bedroom businesses out of the home and on to the world wide web, says Iain S Bruce

Less than a decade after the San Francisco enthusiast, Pierre Omidyar, responded to his wife's desire to collect Pez candy dispensers and interact with other collectors over the internet by building the first online auction site eBay, the sector now connects an estimated 150 million consumers worldwide. Hosting an entrepreneurial orgy enjoyed by people ranging from hobbyists to high street players, it has become an £18.8bn marketplace where more than 2,000 small businesses and kitchen sink enterprises now turn over in excess of £750 a month.

Less than a decade after the San Francisco enthusiast, Pierre Omidyar, responded to his wife's desire to collect Pez candy dispensers and interact with other collectors over the internet by building the first online auction site eBay, the sector now connects an estimated 150 million consumers worldwide. Hosting an entrepreneurial orgy enjoyed by people ranging from hobbyists to high street players, it has become an £18.8bn marketplace where more than 2,000 small businesses and kitchen sink enterprises now turn over in excess of £750 a month.

"Whether you're looking to make a little extra money on evenings and weekends or planning to launch a full-time company, online auctions have made setting up a business very accessible," said eBay UK's Elspeth Knight.

"We give you access to a huge marketplace and all the facilities you need for free, so you don't need any working capital or even a lot of stock to get started."

It was on a cold winter's day in Stoke-on-Trent that Lee Kasilof discovered the box of old toy cars that would change his life forever. They were bashed, scratched and broken, but the diecast remains of his childhood were about to launch him on an unexpected career path, transporting him from bleak Midlands mundanity to a fairy-tale existence basking in the French sunshine.

"I'd always thought there must be a way of making money on the web, but not being a master at computer skills I could never see a way to do this until a friend told me about internet auctions," he recalls with a grin.

"A root around in the loft produced a box of old childhood toys I'd nearly thrown out many times in the past and although they had been heavily played with and damaged I thought that even if I could only sell them for a pound it would be fun trying.

"I got out the digital camera and put up my first listings on eBay on 7 February 2001, which also happened to be my birthday, and within a couple of weeks I'd turned those old toy cars into £500. I was amazed, but right away I realised that a brilliant opportunity was there for the taking."

Inspired, Mr Kasilof began searching local car boot sales for models to auction online and the die was cast. Just three years have passed since he launched his fledgling operation, but now the dinky entrepreneur routinely manages up to 100 auctions at a time, scouring the globe for wholesale lots of anything from consumer electronics to tents.

A poster boy for the digital dream, the business he started for no money down, now has two warehouses in Stoke, a small staff and a monthly turnover in excess of £6,000 that last year enabled him to move into a picturesque French property, from where he continues to run his empire via the unholy 21st century triumvirate of e-mail, telephone and internet.

With sites such as eBay, QXL, eBid and Amazon offering the facilities required to market, administrate and complete transactions for goods or services gratis, a whirlwind of commercial activity is emerging from Britain's living rooms. While some regard the phenomenon as a virtual car boot sale where unwanted possessions can be converted into cash, others see it as an opportunity that, in addition to generating regular extra income, might also provide a stepping stone to greater things.

"I'd wanted to start my own antiques business for years, but knew that even if I could raise the capital, the chances of success were pretty slim. Then a friend told me about web auctions and put I up an old mirror I'd bought at a flea market for £5," said John Black, a Glaswegian who was unemployed for eight years before he began trading online via QXL. "It sold for £40 and I've never looked back since.

"I might not make my fortune, but at least I'm earning a living wage."

Such modest success stories are legion. When Warwickshire dental nurse Anne Selley fell ill in 2003 but wasn't entitled to paid sick leave, she began selling household items on eBay and was duly impressed. A self-described "larger lady" frustrated by a lack of suitably sized alluring underwear; she sensed an opportunity and began auctioning lingerie and nightwear up to a size 40 with considerable success. Her health restored and back at work, she now earns an extra £180 a week online.

Similarly, sporting memorabilia enthusiast Matthew Wilkinson of Leeds spied an opportunity after shopping for collectibles on eBay and noticing a gap in the market for limited edition signed prints. Setting up shop in 2001 in his spare time, his self-produced autographed photos of celebrities such as Wayne Rooney have enabled him to turn an initial £500 monthly turnover into £6,000 a month and he has since gone full time.

While spare bedroom businesses are hardly new, what's different about the online opportunity is its scale. Whereas homespun tycoons once struggled to reach potential customers, speculators on websites such as eBay are afforded instant access to 50,000 ready-made product categories and more than 114 million consumers, a gargantuan marketplace where users world- wide trade goods worth £560 every second.

"Tracking down a client base was always the single biggest challenge facing small-scale enterprises but no longer; now they come to you," said Ms Knight.

"That's why eBay is now the world's largest small business aggregator, with people raising extra funds by doing anything from selling their own artworks to raising plants for sale in the gardening section."

Success is never guaranteed, but for the online auctioneers it has at least become less risky. Requiring only a second-hand computer to access services and a budget digital camera with which to display the goods, wannabe merchants can conceivably start operating for less than £400, although some have been known to operate using public terminals in libraries and cyber-cafes.

Signing up to an auction site is invariably free, as are additional services from companies like PayPal that enable traders to accept credit card payments from punters worldwide. No money changes hands until the first sale is made, and then costs vary depending upon which service you choose. On eBay these entail a listing fee of between 15p and £2 per item followed by a levy of 1.75 per cent to 5.25 per cent on the final price, on QXL the equivalents are 5p to 40p and 1.5 per cent to 5.25 per cent. eBid charges no fees, but has a much smaller customer base.

Similarly, many of the perceived risks entailed in e-commerce are negated when using auction sites as intermediaries. While PayPal offers protection against fraud, most services employ a ratings system requiring both parties to record their impressions after every sale, providing users with an instant snapshot of each trader's reputation.

"If every time you went into a shop you could ask the merchant's last 10 customers for a frank assessment of the service on offer, bad experiences would be extremely rare because by looking at each person's rating you can tell instantly whether they're trustworthy or not," said the artist, James Elliot, who uses eBay as a virtual gallery to sell his paintings and sculptures. "Trading is easy when you're provided with secure e-commerce facilities. Because you don't send the goods until payment is through, the worst that can happen is that you have to put an item back up for sale."

Making a success of an auction house enterprise is not without challenges however. As in the real world, success depends upon customer perceptions, the received wisdom being that lots accompanied by detailed, comprehensive descriptions and photographs tend to attract a greater volume of interested customers.

An effective pricing strategy is similarly crucial. Digital auctioneers have the option to sell goods at a fixed cost, to start bidding at the price of their choosing or to place a reserve on any item, and getting this right can prove the difference between success and failure. Many old hands believe that high starting prices can deter potential customers and prefer to entice participants with a low kick-off point, counselling that best practice is to let the market determine the final fee. Indeed, bicycle retailers Parkers of Bolton, established in 1924, now sells the first of each new range via eBay to determine store prices, reasoning that a system already earning them £15,000 a month must be regarded as a proven indicator of what the street market will bear.

While anxiety over the safety of e-commerce might still plague many who have yet to venture into online trading, the overwhelming evidence is that internet auctions are fast becoming a mainstay of global enterprise.

Encouraged by the plethora of hobbyists, part-time operators and small scale capitalists already reaping digital rewards, many major players are now entering the field. Vodafone and Hewlett Packard have both established sales operations on eBay, while the UK site lays claim to having several participants regularly recording a weekly turnover of £23,750 and above.

Just as it is in the real world, fame, fortune and prosperity are not guaranteed just because you start trading online. Starting up is a much simpler endeavour, say the experts, but making an internet success of yourself takes the same level of effort and commitment as that required in the traditional business world.

"How did I succeed on eBay? It's down to patience and honesty. Describe every item exactly as it is, try to answer every question accurately and take care of your customers," said Mr Kasilof. "It's a simple system and it works well. I earn a living online now, my business is growing and the equation is simple: Just be attentive, be honest, be patient and the rewards will come."

'Fashion is my passion - and my business too'

If any one person could hope to shatter the enduring popular notion that the internet remains solely the preserve of geeks, freaks and the chronically un-chic, then that individual is Wilmamae Ward.

Undeniably elegant, the former marketing executive is hell-bent on sashaying her way through the internet age as a one-woman retailer of vintage and designer clothing. She may have wholeheartedly embraced the digital lifestyle, but bears all the hallmarks of someone who's never worn an anorak in her entire life.

"I've been fascinated by clothes as long as I remember and spent most of my life as a confirmed shopaholic," she said. "Fashion has always been my passion, but the internet auction boom has allowed me to make it my business too."

Quitting her job as director of a major PR agency in the wake of her divorce three years ago, the American-born Ward, 37, has spent the past 18 months growing into her new role as an online purveyor of glamour and style. She has developed her own Gathering Goddess brand from a base in central London, and building an eBay-based business successful enough to generate a £1,500 monthly income, has convinced her that the sky's the limit.

"Over the years I'd amassed an enormous clothing collection and never thought I could part with any of it, but after moving into a smaller flat I simply didn't have the room," she said. "I started selling clothes on eBay and after quickly building a monthly turnover of £3,000 realised that this was a business with enormous potential."

Convinced by the successful sale of a Donna Karan shearling coat for £1,500, Ward invested £500 in a mannequin and professional steam press to enhance presentation. She is now applying her marketing skills to develop an online store (http://stores.ebay.co.uk/ The-Gathering-Goddess), which she intends to build into a recognisable fashion brand.

"I'm branching into selling new items now and am negotiating to become the exclusive distributor for several designers. Even with a 150 per cent mark-up, I will be undercutting the traditional retailers," she said. "Attention to detail, quality goods, prompt customer care and slick marketing have the same impact online as they do on the high street, and with eBay providing access to millions of potential customers there's no reason why this shouldn't turn into a very profitable long-term operation."

GOING, GOING, GONE: FOUR OF THE BEST ON EBAY

* WOLSELEY 6/99

Cars old and new are popular on internet auction sites. This classic has been lovingly cared for by its current owners, pictured here as they appear on the eBay site. Built in 1960, the car has 28,222 miles on the clock, has never been restored and is in original, concours condition. The reserve is set at £6,000, but at the time of going to press, no bids had been made. (Item 2486983657).

* AUTOGRAPHED ILLUSTRATION OF THE CAST OF 'SHREK'

Some film memorabilia has good investment potential and if the 'Shrek' series sustains itself, items such as this might be worth a punt for the long term. According to the vendor, "autographprincess", this is a genuine item signed by Eddie Murphy, Mike Myers, Cameron Diaz and John Lithgow. Bidding is up to £11.50. (Item 2263868543.)

* NEW APPLE IPOD + DOCK + CASE + REMOTE 20 GB

Not everything on eBay is up for auction. Item number 5715116396, a trendy ipod with accessories, has a fixed price of £168.70 and is being offered, according to seller "ac011", with no VAT or customs duty to pay, although check to see this ipod is the actual version you want and, as always on eBay, check the feedback on the vendor to see others' reported experiences.

* ARMADILLO TAXIDERMY HANDBAG

Not to all tastes, this item is luggage fashioned from a deceased armadillo. It was sold with the following billing: "This cute little chap is 8 inches long by 5 inches high. It has a red silk lining and cover. The handle is formed by the tail curling into the creature's mouth".

It fetched £68 from a reserve of 99p. After 28 bids, it went to "chiffchaff".

Was item 5513066375.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

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