Selling on Trade Me: Business or Hobby? February 3, 2010
Posted by Michael Carney in : auctions , add a comment
Spending too much time on Trade Me? Here are ten ways to tell if your flirtation with Trade Me is turning into a serious business — and, if you are indeed in that position, ten other things you should know to help make that business soar.
BUSINESS OR HOBBY – DOES IT MATTER?
If you’re running a business, your business expenses are deductible but you have to pay tax on your income. If it’s a hobby, you can’t deduct any expenses but then you don’t have to pay tax on your sales either.
Inland Revenue’s point of view, paraphrasing its published advice on the subject: the same rules apply, whether you’re selling on Trade Me or offline. If you sell stuff you don’t want or need any more, there are usually no tax consequences. However, if you sell things on a regular basis you might be regarded as being in business and consequently should declare the sales for income-tax purposes.
THE TEN TELL-TALE SIGNS THAT YOU’RE RUNNING A BUSINESS ON TRADE ME
As a general rule you’ll be considered to be in business (and should declare and pay tax on your Trade Me sales) if:
1. You acquired your products with the purpose of onselling them
OR
2.Your intention is to make a profit from your selling activities
OR
3. If your business involves dealing in such products
Note the ‘OR’ — any one of these conditions is enough to lead to the conclusion that you’re running a business on Trade Me. A key factor that Inland Revenue will consider when evaluating your case is how often or how regularly you’re selling on Trade Me. A high feedback count in a short period of time may be good for business — but it’s also a good indicator that you’re actually running a business.
Business or hobby — it’s one of the ‘grey areas’ of tax law. Some of the other issues that Inland Revenue (and the courts) consider if they need to establish whether an operation is hobby or business are:
4. Scale of operations
If it’s relatively large-scale, it’s probably a business. If it’s small-time, it could be a hobby.
5. Volume transactions
Many sales make business work. Just a few sales suggest a hobbyist (or a really lousy businessperson).
6. Commitment of time, money and effort
If you don’t have a life any more, it’s a business. If you’re only occasionally engaged in Trade Me-selling, hobby status seems likely.
7. Frequency of sales
Regular = business; occasional = possible hobby.
8. Financial results
Large sums of money changing hands, whether profitably or not, indicate a probable business venture. Small dollar values suggest you aren’t very good at this, and if it’s not just a hobby then maybe it should be.
9. Type of activity
If you’re dependent on Trade Me for your livelihood, tick business. If it’s mostly for fun, tick obsessed.
10. Buttoned down
Do you have systems and processes set up for your Trade Me efforts? Quacks like a business to us. Or are your operations loose as a goose? Then you’re either feeding a hobby or setting yourself up for a major business quack-up.
CONGRATULATIONS, IT’S A BUSINESS!
So your operation fits one or more of the Ten criteria above? Well done! Time to get even more serious about doing business on the site. Here’s another top ten list for your collection, this time of 10 key points to improve the prospects for your Trade Me offerings:
1. There are four wholesale levels when it comes to manufactured products: manufacturer, importer, distributor and intermediary. The further up the chain you have to buy, the harder it is to make money when you sell. Try to get as close as possible to the original manufacturer of a product. How? If you see a product you think would be a profitable seller on Trade Me, check the markings on the product and/or the packaging for point of origin. Then pick up the phone, ask for sales and start talking likely volumes. At the very least they’ll point you in the direction of the nearest importer or distributor.
2. Don’t be an early adopter. Never buy new or soon-to-be-introduced products unless you’re absolutely certain they’ll sell on Trade Me (based on historical results for similar products).
3. Don’t buy fad products, unless you buy at bargain-basement prices direct from the manufacturer or importer and you’re buying right at the height of the fad (which, frankly, is unlikely).
4. All products have life cycles. First, they’re launched, full of hope and excitement. Ultra-hot new products, where demand exceeds supply, can sell on Trade Me for a premium — if you’re able to find a dependable product supply source and can get in when demand is at its peak. (Guess wrong about a product’s popularity, however, and you’re cooked. Anyone want to buy a Catwoman plastic toy — we’ve still got a few hundred left?)
5. Not all products survive the launch phase. But those that do tend to become established then turn into a steady seller at retail. During this phase you’re unlikely to match the buying power of the large retail chains, so it’s not a good time to sell this product on Trade Me (except for pre-owned versions bought for a song and resold at highly discounted prices).
6. In the next phase of the product life cycle, sales begin to dip as customers move on to the next big thing. Retailers will start clearing stock at discounted prices — but not at enough of a discount to make it worth your while buying up product. Once again, this is a poor time to buy for resale on Trade Me.
7. Finally, the products fall into the liquidation phase, flogged off for pennies in the dollar. This is when you’ll be able to make a decent profit — so long as the product still has inherent appeal for potential purchasers.
8. Don’t buy products in volumes that represent more than 10% of the total quantities available on Trade Me. You won’t corner the market; you’ll just take a bath.
9. Don’t buy a product if there are more than 10 competitors selling the exact same thing on Trade Me.
10. Never buy a liquidation or end-of-line item unless it carries a well-known brand name.
For a whole lot more about running a business on Trade Me, may we direct you to Chapter Seventeen of Trade Me Success Secrets, available through our Trade Me Store.
Charity Auctions In Tough Times February 24, 2009
Posted by Michael Carney in : auctions, charity auction, new zealand, trade me, trademe , add a commentTrade Me is usually a pretty good venue for charity auctions, and we note that there several hundred items currently available through the site whose proceeds are partly or completely designated for charitable causes.
Unfortunately — and it may not necessarily be as a result of the recession — most of the items on offer just now aren’t racking up too many high bids.
Most popular item of the current crop — so rated based on numbers of bids — is the SEGA Mega Drive Ultimate Col. Charity Auction, which comprises two “extremely rare” collectors’ items: the Sega Megadrive Ultimate Collection 12″ LP (yes, a vinyl record!), accompanied by a Limited Edition Sonic Canvas Print. The LP, one of just 3500 released wordwide is individually numbered as #2, which makes it the most desirable of collectables (except for record #1, of course).
According to GamePlanet:
Gary Russell, Brand Manager for SEGA New Zealand says he is expecting some fierce bidding for the auction. “The Vinyl Soundtrack has been stamped #0002 from a world wide production of only 3,500 which makes it unique and the Sonic the Hedgehog Canvas print has been specially created for this auction, featuring some iconic artwork from the first Sonic Videogame.
“The auction is a great way to help the kids at Starship and also give New Zealanders an opportunity to bid for some unique SEGA memorabilia,” he says.
The auction is to celebrate [the release on the 28th February, for the Xbox 360 and PS3, of] The SEGA Mega Drive Ultimate Collection, an all-in-one package of over 40 classic titles from the golden era of the SEGA Mega Drive. This is the most complete collection to date of SEGA first party games ever offered. Featured games include; Sonic the Hedgehog 1, 2 and 3, Columns, Alien Storm, Ecco the Dolphin, Space Harrier, and cult classic, Streets of Rage 1, 2 and 3.
Alas, hardly any of that information has actually made it onto the Trade Me listing. As a result, the Sega auction is currently languishing with just 686 views and a top bid of $151. From Sega’s point of view, it’s a relatively disappointing marketing result — not enough eyeballs, really, for the effort. And, while Starship will undoubtedly be grateful to receive whatever the final sum turns out to be when the auction closes on Thursday night, the whole exercise is really an opportunity lost for all concerned.
Sadly, that’s also true for most of the charity auction items being sold on Trade Me right now. So, with a view to helping those seeking to raise money via the site, here’s a little guidance on fundraising via Trade Me:
TradeMe is a great way to fundraise for your school, community group or charity, primarily because you can deal to several birds with one stone:
- Raising Funds
Doh. Naturally, Trade Me allows you to turn donated goods into cash – and to sell them to a much wider audience than would otherwise be possible through traditional fundraising methods. The more potential purchasers, the greater the likelihood you’ll achieve at least market value for the goods you’re selling. - Promoting Your Cause
488,000 visitors wander the corridors of Trade Me every day. A Trade Me auction for your worthy cause gives you the opportunity to introduce yourself to a huge audience of potential supporters, both on Trade Me itself and through the PR you’ll be able to generate by promoting your auction through traditional media (although, as we’ve seen from the current crop of auctions, you have to fan the flame of publicity yourself, through the combined efforts of every single member of your organisation — you can’t expect people to just trip over your auction on Trade Me). - Harnessing Celebrity Power
Even very ordinary items can achieve star status if aligned with a celebrity, but ownership or autograph. But celebrities are notoriously difficult to attract to one place at one time. Trade Me provides that virtual appearance opportunity, allowing you to strut your celebrities in front of large audiences. So talk turkey with absolutely every member of your extended group — who do they know who’s clocked up at least 15 minutes of fame and could they twist arms so that said celebrity will donate, sign or otherwise add value to an item. Nag as necessary. - Finding New Donors
The more you sell (and the more interesting your items are), the more people who will learn about your cause. Each buyer is a potential addition to your Donor list. BTW, the very best items to auction off are for unique experiences that can’t normally be had for love nor money (eg lunch with major celebrity, walk-on part on Outrageous Fortune, drawn as a bystander on Bro’town, etc.) - Involving Your Whole Community
Not everyone can afford to make big donations, even if they are strong supporters of the cause. But most can find at least one item of value in their garage or attic that they no longer need.
So what specifically do you have to do to set up a fundraising auction on Trade Me? These are the eleven basic steps to the process:
- Look first within your community or amongst your friends and acquaintances for someone who’s already selling successfully on Trade Me. They’ll already have a good idea of what works and what doesn’t on the site. If you don’t have any luck there, check out Trade Me’s online help pages for the essential details. Or you could always read a good book on the subject (ahem — do check out the Second Edition of Trade Me Success Secrets).
- Make contact with Trade Me through stores@trademe.co.nz and request information on setting up a charity auction.
- Create a name for the event. If you have any budding artists on your midst, this is their chance to make a real contribution, drawing up a logo for the event.
- Set up a timetable for the event (ideally allow yourself three months to organise it all and a week for the auction to run).
- Pitch for donations. Ask your community to rummage through their homes and donate any items they’re not using. Talk to anybody who knows anyone of celebrity status and shamelessly hustle them to cadge for your cause.
- Photograph the items. Take multiple photos for each item and choose the very best.
- Write colourful descriptions, as detailed as possible (you have 2048 characters to use, spend them all). You’re trying to sell these items to people who won’t have the opportunity to touch or inspect the merchandise before bidding.
- Write item headlines that identify the charity nature of your auction (as well as each item) eg “Autographed Rugby Ball, support Zonta”.
- Promote the auction to anyone who’ll listen – especially your local newspapers, radio stations, bloggers. Post fliers on noticeboards. Text, email or IM details to your community and ask them to spread the word. Tweet the auction on Twitter, promote it to your Facebook, Bebo and MySpace friends — get the word out there.
- Manage the auctions professionally. Answer any questions promptly (and with personality). Remember, you’re promoting a great cause. Take any opportunity to spread the word.
- Once each auction is over, communicate promptly with the successful bidder, take their money, send out the goods quickly. And don’t forget to invite them to join your cause!
That’s about it (apart from the other three hundred pages of advice in the Trade Me Success Secrets book, of course). Happy Fundraising!
