NEW YORK (MarketWatch) -- Over the years Diane Hogan of Ocala, Fla., had shelled out a lot of money for cosmetics and other bath and beauty products. Without a way to try them first, she ended up with a lot she just didn't like. A closet's worth, actually.
Then, earlier this year, Hogan started browsing online auction sites while at home recovering from surgery. People were selling the latest beauty products, but there was still no way to try the stuff.
"I noticed a niche wasn't being met," says Hogan, who now works from home as an eBay seller. "The average person wants to look good, but doesn't want to spend a lot of money on products they won't use."
On her eBay store, Miss D's Samples, Hogan offers generous sample sizes of bath and beauty products -- enough for her customers to decide if they like the product enough to invest in a full-size one. The closet of products has become a home office.
An estimated 430,000 Americans make a full- or part-time living from running a business on eBay, says spokesman Hani Durzy. "It offers a level playing field to businesses of all sizes," Durzy says.
Ninety percent of eBay's
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volume is small businesses and individual sellers -- it's one place where big businesses fear to tread. Many sellers use eBay as an extension for their retail business, while others have found niches that allow them to make a living solely on eBay.
Without the Internet, the Melrose Stamp Company of Albany, N.Y., wouldn't exist. So says owner Jeffrey Stannard, who started the business in 2000. Stannard's family owns a printing business that manufactures labels typically used in stores to mark sale items. When the company transitioned from hand-set printing to computer printing, he saw a way to expand into rubber stamps.
So Stannard left his job at a small-business development agency to sell stamps on eBay, earning $4,500 in his first year. This year, he expects to bring in close to $90,000. "And I'm a one-man band," Stannard says.
Running an eBay business isn't limited to a particular age group or type of merchandise, says Marsha Collier, author of several books about eBay, including the new "Starting an eBay Business for Dummies." Her acquaintances range from a 73-year-old man who maintains a high sales volume each month to a 14-year-old boy in a suit who dragged his parents to one of her eBay seminars.
Collier says she's found that sellers don't usually have any business training or experience. Most are people who found a great idea and ran with it. "People just take the step from collector to business," she says.
Jonathan Perry, president of JSP Cards and Collectibles in New York, got the idea for his business from his childhood love of collecting baseball cards and coins. After years of working in finance, he started up a full-time eBay business five years ago. "I sell anything of pop culture significance," says Perry, who gets his wares primarily from estate sales and flea markets.
Other people run an eBay business as a way to save more for retirement, says David Bach, author of the new book, "Start Late, Finish Rich." Bach first noticed eBay as a wealth strategy when his father started bidding on classic cars to refurbish and sell at a profit.
"The reality is that there are a lot of people in America today who need to catch up," Bach says. Running an eBay business is a great approach, he notes, because it's something you can take up full time or part time without having much experience with the Internet.
While retail stores have a limited, local audience, an eBay business can sell worldwide. "You can turn anything into cash," says Perry. "All of a sudden, a couple boxes you paid a few hundred dollars for generate a couple thousand dollars."
Suzanne Hallam, vice president of Pugster in Pasadena, Calif., started selling Italian bracelet charms with two friends after their former employer downsized. The charms were leftover samples from one woman's wholesale business.
Now Pugster -- named for their pug mascot -- is one of eBay's fastest growing companies. From the three original partners, "now we've got 20 people working here around the clock," says Hallam.
The business keeps growing as they license new characters. Most recently, Hallam says, they licensed Jim Benton's "It's Happy Bunny," a cute rabbit figure who says not-so-nice things.
But running a business on eBay has all the problems of a retail business, plus another set of difficulties unique to the Internet forum.
With so many sellers, competition remains the No. 1 problem. Copycats spring up quickly to steal away customers, and even individual sellers can list enough items to saturate a market. "Competition can come in so easily," Stannard says. "You are vulnerable so much more quickly than traditional businesses."
Other issues stem from the lack of face-to-face communication between buyers and sellers. "People flake out of a sale," Perry says. "Sometimes you don't get paid." These so-called deadbeat bidders don't last long on eBay, but that's cold comfort to a seller who thought he or she had just secured a big sale.
The Internet itself can also cause chaos. Sellers need to be able to add, update and check listings frequently, as well as answer any bidder questions. Without Internet access for weeks after hurricanes Frances and Jean last summer, Hogan thought her business would be a goner.
"I was just honest with people," Hogan says. She made up for the delay by sending extras with her orders, and got good feedback from her buyers.
On the business side, eBay is just like any other form of taxable income. "If you're making a profit, you need to show that profit on your income taxes," Collier says. But keep records -- many of your expenses can be deducted, especially if you're running the business from your home. You may be able to deduct gas (to and from the post office), printer ink, stickers and labels and shipping costs.
Interested in starting your own eBay business? "Sell something you're familiar with," says Collier -- it will help you price the item fairly, and provide the kind of details that will attract buyers.
