Setting Up Shopand Setting Prices

Create a Consignment Contract

All legitimate consignment resellers should create a contract for their clients to sign. This contract spells out exactly what it is you are and are not responsible for, and clarifies your legal position in terms of ownership of the product.

Your contract should include the following items:

Obviously, both you and your client need to sign this contract before you can begin the selling process.

Set Your Fee Schedule

As a consignment reseller, you make your money from the fees you charge for your services. There are no set guidelines for these fees; you can charge pretty much whatever you want, or whatever the market will bear.

First, consider establishing a flat fee of $5 or $10 for every transaction, in addition to a selling commission. This fee, typically paid up front, ensures that you get paid something whether the item sells or not. It also helps to weed out the riff-raff; if clients have to pay a little up front to get in the game, they might think twice about the salability of what they bring to the table.

If you don't use a flat fee, consider only selling higher-priced itemssay, items with a minimum bid of $10 or higher. Again, the goal here is to avoid selling lower-priced items, in favor of more-profitable higher-priced merchandise.

As to the selling commission, you'll find sellers charging anywhere from 10% to 50% of the final selling price. For example, if you charge a 25% commission, your fee is $25 if the item sells for $100.

Then you have all the various eBay and PayPal fees to consider. Most consignment sellers pass on these fees to the client, in the form of additional charges. This means that you'll charge back the client for eBay's listing and final value fees, plus the PayPal or merchant credit card fees (if any)in addition to your regular commission on the final sales price.

Consider Opening a Drop-Off Location

Many consignment resellers work out of their home. If you go this route, you'll either have to pick up items from your clients' homes or have your clients drop off items at your home. While some clients might like this homey touch, others might be a little nervous about dealing with a business that doesn't look like a business.

A more professional (and more expensive) option is to rent your own retail storefront for merchandise drop-offs. Chances are you'll attract more clients with a drop-off location, and not only because your signage will provide added visibility; many people will be more comfortable leaving their merchandise at a retail location than at some stranger's house or apartment. You also get lots of added space to store the consigned merchandise and conduct your business.

The downside of this, of course, is you have additional coststhe rent and utilities for your store, plus signage and the like. And you'll pay those bills every month, no matter how much auction business you do. But you don't need a big store, and it doesn't have to be in a high-rent location. Any type of storefront or office space will do.

Go the Franchise Route

Another option for the consignment reseller, one not available for any other type of eBay business, is to buy into one of the several auction drop-off franchise operations that are starting to bloom. With a franchise you get lots of help getting started; the main office will help you choose a retail site and negotiate your lease, plan your store layout, and market your operation. You'll also get training and ongoing operations support, plus the value of the franchise name. For all this, you pay a large upfront fee and a percentage of your monthly revenues.

Is a franchise a good idea? Maybe, especially if you're new to this or generally inexperienced in running a business. Maybe not, if you're an experienced seller, know how to run a business, and prefer to work for yourself (and keep all the profits yourself). If you're interested in doing the franchise thing, definitely check out several different franchises, visit a few of the stores, and talk to some of the franchise owners. Know what you're getting into before you sign that first check.

Some of the more popular eBay drop-off franchises include