Q&A: Is selling books on consignment a good idea?

QUESTION: I've had success selling cookbooks. In your book you discourage consignment selling, but I ran into a situation where it's appropriate for me -- I'm just starting out, and I don't want to borrow money for inventory. At a garage sale yesterday I picked up a few cookbooks, and was pleasantly surprised when they listed for considerable money -- I paid 50 cents for the books, and listed them on Amazon for $12.99 and up. The dear, sweet little old lady holding the sale noticed my interest in cookbooks, and mentioned that she was a collector. She's moving into a retirement village soon, and needs to downsize. She asked me if I'd help her sell her cookbooks, and took my card.

What is the normal percentage I should take for selling her books on consignment?

ANSWER: Since I wrote "The Home-Based Bookstore" consignment selling has gotten a lot more popular, especially with eBay sellers. And there's a new book about it, "How to Start and Run an eBay Consignment Business" by McGrath. The book is targeted at eBay sellers, but I think anyone thinking about a consignment business -- on eBay, Amazon, or even offline -- would benefit tremendously from reading it.

Here's a "customer review" I wrote about McGrath's book on Amazon.

So maybe I was too hasty in dismissing consignment selling. Perhaps when I revise "The Home Based Bookstore" in a year or two, I'll give some more attention to it. I'm still not sure it would work for me personally. But, if a bookseller can make it work, and they can get access to lots more inventory that way, then by all means it's a good idea for them.

As for the percentage of commission that's appropriate -- I think McGrath suggests a commission of around 20 percent. The thing about books, though, is if you put a lot of effort into selling a collection of lower-priced books, a commission of 20 percent might not be enough compensation for the time. To account for this, you might consider a sliding scale of fees. Say, if total sales for a collection were over $500, you'd charge 20 percent, and if they were under that, you'd charge 25 percent.

Once you developed a track record of successfully selling on consignment, it would probably be much easier to "sell" your service, based on this: You could show people that they'd get a much better price for their books by letting you sell them, rather than trading them in at a used bookshop, etc. They can probably double the amount they get for their books even after paying your commission, plus everything's taken care of -- no effort on their part.

Q&A: What does 'spiral bound' mean on Amazon Marketplace?

QUESTION: I've been listing some hardcover nonfiction books on Amazon and have noticed some other sellers descriptions mentioning "spiral-bound issue," "different cover" or "later edition." Is this against Amazon's policy? These are high-volume sellers with lots of feedback.

ANSWER: The listings you see with different bindings are usually from booksellers who have purchased rights to reprint certain books as "print-on-demand" softcovers or Xeroxed reprints. For purposes of this discussion, we'll assume that these sellers aren't offering pirated materials. (If you do see a listing that does not look kosher, you should report it to Amazon at reports@amazon.com.)

Assuming there's no copyright violation, the problem occurs when the buyer receives something different than expected. The first sentence in Amazon's listing rules is "Do not deviate from the product format represented on a retail page." In other words, you not supposed to sell a softcover if the book's "Product Details" section indicates "hardcover."

For certain scarce nonfiction titles, where the buyer is primarily seeking the information in the book, they are unlikely to be upset with a softcover that has been clearly described by the seller. Some buyers would rather have a crisp, new printing rather than a musty, 50-year-old book.

But in many cases, customers (especially collectors) will feel cheated if they do not receive a copy of the book as it was originally printed.

When you see a lot of variation like this in seller descriptions, it's a good idea to provide a detailed description of your hardcover, even if you're repeating the information in the "Product Details" section.

Conflicts like this will be a growing problem on Amazon, as print-on-demand technology becomes more commonplace.

Marketplace sales at all-time high on Amazon

Amazon Marketplace sellers shipped more books, music and videos during the first three months of 2006 than in any other quarterly period so far. Third-party sales rose to 29 percent of Amazon's overall unit sales, compared to 22 percent in 2003.

Amazon chief executive Jeff Bezos said the rise in third-party sales proves that consumers have embraced Marketplace as a mecca for used and new books. "We've stretched the corners of how customers perceive us," Bezos said. "We've had success with two very, very different kinds of business models -- the retail business model, and the third-party business, which now is a significant percentage of our units."

Asked if he was concerned that eBay's new Express fixed-price marketplace would cut into Amazon's sales, Bezos said: "We do not, as a matter of practice, talk about other companies. But more generally, ... there are thousands of competitors in this space. These are very big markets, and there can be lots of winners."

Bezos said Amazon is still gaining market share in media sales of new and used books, DVDs and CDs, with first-quarter sales in this category up 15 percent, to $1.58 billion. But he admitted that free shipping offers have cut into profitability. Net income dropped 35 percent even though sales for the first quarter were up 20 percent.

Despite early bugs, I'm sold on eBay Express

eBay has rolled out its Express fixed-priced selling platform. Despite some early glitches, it's clear that Express will be a hot bookselling venue.

I listed this book Sunday, and it took about 36 hours to show up on Express. It's a regular fixed-price eBay 10-day listing. Since the condition is new and my feedback score exceeds 98 percent, it automatically appears on Express and eBay.

There were several problems, though. Although I paid extra for a "gallery picture," the gallery thumbnail doesn't appear in search results. At times, the cover image completely disappears. Searching for this book on Express using its ISBN doesn't work, either. Buyers must search for the title to find it.

I reported these bugs to eBay early Monday, but apparently its technical staff is buried. Today eBay launched an Express discussion board and it was deluged with sellers complaining about more glitches:

-- In search results, only a listing's highest-priced shipping option displays. So if a seller offers standard shipping at $2 and priority for $5, only the $5 shipping fee is displayed. Sellers who offer both options are losing sales, since buyers scan for cheap shipping.

-- When sellers offer free shipping on Express, the shipping field in search results shows blank, instead of "Free." So sellers who offer free shipping to lure buyers aren't getting attention.

I'm sure eBay will fix these glitches as soon as it can. And I think Express will be a strong sales venue, especially for non-collectible books. Browsing and buying is similar to Half.com -- fast and convenient. And Express will have lots more traffic than Half.com. Buyers can pay with a credit card without opening a PayPal account, and this will attract new buyers and impulse purchases.

I've already sold a few books on Express this week, and based on those early results I'm opening an eBay Store. That way, my listings won't expire after 10 days.

Here's several resources if you're considering opening an eBay Stores.

The Express launch is just the tonic to shake us out of our springtime doldrums. When I started selling books online five years ago, Half.com was a very strong alternative to Amazon. But then eBay bought Half.com and it's been downhill ever since.

Express will give Amazon some real competition, and that should benefit sellers and buyers. It remains to be seen whether Express sales will justify the $15.95 monthly fee for small sellers to maintain eBay Stores. Within six months, we'll know the answer.

I'm interested in hearing your thoughts on eBay Express.

Preview of eBay Express book section

eBay is previewing its Express fixed-priced marketplace. Here is the book section, which features 1.6 million book listings.

Express is scheduled to launch next week. eBay is hoping it will take a chunk of Amazon's used bookselling business. Here's how to sell on Express.

eBay sellers will star in new TV reality show

eBay has partnered with ABC for a reality show called "Make it Happen." Families with big dreams but little cash will sell off their old books, toys, and memorabilia to raise the cash to fulfill their dreams.

The show will air twice weekly starting this summer. A Monday show will introduce the families and their dreams, as well as the merchandise they plan to sell. Friday's show will feature live action of the end of bidding.

Casting has already begun, and you can sign up here.

The joint venture between eBay and ABC will serve as a marketing vehicle for eBay. It's part of a trend where a commercial firm helps product the entertainment as a way to promote its brand. The show will also feature product tie-ins from manufacturers. The venture was reported first in MediaDailyNews.

eBay releases new TurboLister

eBay has upgraded its free bulk listing tool, TurboLister.

The new version features an easier listing process, enhanced editing capabilities, and faster performance.

Louisiana may require licenses for eBay sellers

Louisiana might become the first state to require eBay sellers to obtain licenses. The state's Auctioneers Licensing Board has begun requiring some sellers to fill out paperwork and cough up $300 to become a "certified auctioneer."

eBayers caught in this regulatory Web might may also be forced to purchase $10,000 surety bonds to protect buyers from unsatisfactory transactions.

This story on MSNBC pokes a number of holes in the state initiative. For example, isn't eBay itself actually the auctioneer for items sold on its site? And a growing number of eBay transactions are Buy-It-Now fixed price listings, not auctions.

eBay is fighting Louisiana hard on this, because the company knows it would be a terrible precedent. One of the big advantages of selling online is the relative freedom from the excessive regulation and burdensome red tape that plagues brick-and-mortar businesses.

Cool reception for 'Fulfillment by Amazon'

Amazon is testing a program enabling sellers to outsource their book storage and shipping tasks to Amazon. Under the "Fulfillment by Amazon" program, sellers would send their books to Amazon after listing and, when sold, Amazon would ship the book and handle customer service.

The program's plus for sellers is their listings would be more attractive, since buyers would have more shipping options on certain orders:

-- Amazon Prime 2-day shipping

-- Free Super Saver shipping

-- Amazon Gift Wrap option

Also, listings would feature a "Fulfillment by Amazon" logo, which could carry weight among shoppers distrustful of third-party sellers.

But active sellers are nearly unanimous in their opposition to the idea, according to a survey of online bookseller message boards and discussion lists. Many critics say:

-- Amazon will charge additional fees for handling the orders, but hasn't said how much. Presumably the new fees would be added to Amazon's 15-percent Marketplace commission.

-- Sellers don't want to lose control over their high-value books.

-- Books stored at Amazon couldn't be listed for sale at venues such as eBay, Half.com, Abe.com, Alibris and others. This could crimp the bookseller's sales velocity and profit margins.

-- Amazon will charge an annual storage fee for each book, but hasn't said how much. It's unclear whether sellers would be able to retrieve books they want to delete from their inventory.

Amazon is testing the program with a limited number of volunteers, more information is in Amazon's FAQ.

Despite the reservations of active sellers, the program might be attractive to non-Pro Merchants and non-sellers. 'Fulfillment by Amazon' might draw students and others interested in trading in books without the hassle of dealing with customers. It's likely that 'Fulfillment by Amazon' participants would receive much better prices for their books compared to other online buyback programs operated by Barnes & Noble and others.

If the program succeeds in drawing more sellers, it will certainly mean more competition for sales. I'm interested in hearing your comments about this program.

Q&A: Is my misbound book a valuable collectible?

QUESTION: I have a misbound book I'd like to sell: "The Shaker Experience in America" by Stein, ISBN 0300059337. Lots of copies of this 1992 paperback are available from $6 to $28. But none of the descriptions mention that pages 405 to 420 are bound upside down, like mine.

With coins and stamps, printing and engraving errors can make a collector's item -- is this true with books?

ANSWER: Printing and production errors can add value to a book, but only when the book was a collectible to begin with.

It's not uncommon for a book to be misbound -- I'd estimate that one every 1,000 books has some noticeable binding mistake. I hear from a few customers every month who have found an upside-down or missing page in a book I've sold. Most book buyers regard these irregularities as defects that mandate a refund or replacment, not as curiosities to be treasured.

Your paperback isn't one collectors would be searching for, so the production error adds no value. There's not much demand for the original hardcover edition of this book either.

It might be worth e-mailing some of the other sellers to see if their copies have the defect. Depending on the situation, you might might need to discount your copy to sell it with the defect. Let's just hope the buyer reads your description.

Nevertheless, many sellers handle oddities. Here's an auction for a First Edition of "Cold Mountain" where the books is supposedly more valuable because it has a single typo on page 25. This First Edition regularly goes for under $10, so before paying $200 for the misprint, I'd want to know how rare it is.

And here's an eBay listing for a incorrectly bound children's Golden Book. The listing has a buy-it-now price of $1.

To be sure, a misprint or binding mistake can bump up the value of a rare book by as much as 50 percent. When book collectors are looking for "one of each" of their favorite author or genre, some will pay premiums for misbound or misprinted rarities.

Last year, some young readers of the fantasy novel "Eldest" noticed that 32 pages were accidentally replaced with text from the upcoming novel "Inkspell." Random House offered free replacements for the misprints, which made up about 2 percent of the 1.3 million-copy first print run. Whether the misprinted copies become valuable depends on future demand for the First Edition.

The first printing of Bill Clinton's "My Life" has a famous typo at the end of the acknowledgement ("failure of my life" should be "failures of my life"). Signed copies go for more than $1,200.

Used bibles are hardly ever worth any money, since so many have been printed. But there are some rarities from the 16th and 17th centuries -- such as the "Breeches" Bible, the "Vinegar" Bible, and the "Wicked" Bible -- that are highly collectible because of misprinting or odd word usage.

Collectors love to find misprints in all sorts of things, including baseball cards, record albums, and money. Usually, the more glaring the error, the more highly prized it is among collectors. In January, collectors went nuts over a $20 bill that somehow was printed with a Del Monte banana sticker next to Andrew Jackson's portrait. The note sold for $25,300.

Q&A: Is my inventory deductible on my tax return?

QUESTION: When reporting net income for online book sales on Amazon, do I need to subtract the cost of the book, or only the miscellaneous expenses like postage, mailing containers, etc.? If the cost of books is deductible, how would I figure their current fair market value? For example, say I bought a book for $10 two years ago, and now I'm selling it. Do I deduct $10?

ANSWER: It's a real challenge for online used booksellers to calculate their "costs of goods sold," which is deductible from your income. I'll give you my thinking, but remember I'm not a tax advisor. It's a little late for this year, and for next year I'd recommend having a professional examine your situation.

The IRS has lots of complicated rules about this for retail businesses. If you're a retail bookstore and you're selling new books, you don't deduct the cost of all the books you bought for inventory, unless you also sold those books during the year. In other words, if you bought 100 books during the year for $1 each, and sold 50, you'd only be able to deduct $50 (plus the other expenses like postage). You'd have to deduct your other $50 in book-buying expenses in future years as that portion of your inventory sold.

Used bookselling doesn't really fit into this mold of retailing. We pay all sorts of odd values for our books, and their value is dynamic -- the market prices change every minute of the day. And at any given time, we might decide that half our stuff is worthless, and toss it in a dumpster.

My impression is that the vast majority of online booksellers account for their business simply as a cash business. In other words, they deduct all their business expenses (buying books, postage, storage, etc.) in the year they pay those bills. All of those annual expenses are considered the "cost of goods" and deducted from the gross profit for that year, even though this isn't permitted with a regular retail business.

I suppose you could argue that online bookselling isn't a retail business, it's a service.

I'd recommend you have a professional look at your situation and recommend a bookkeeping and income-reporting routine that you'll be able to stick with year in and year out.

Q&A: How do I report my bookselling income on my tax return?

QUESTION: This is my first year filing taxes since I started selling books online. On my tax return, how do I account for inventory, returns, and income?

ANSWER: I've always reported my business as a "sole proprietorship" on a Schedule C. This is the simplest, best option for most small businesses and part-time sellers.

A time-saving way to do this is to use TurboTax or TaxCut, which will ask you in plain English for your income, a figure on "returns," and you can set up other categories of expenses (like "books") that become your "cost of goods sold."

For your first time filing taxes, I'd recommend you do what I did the first year: find an accountant through the Yellow Pages. The man came to my place one evening, asked me questions about my business, reviewed my bookkeeping, then figured my taxes within minutes on his laptop. It was pretty inexpensive, about $200, and it was well worth it to me, because it gave me the peace of mind of knowing I'd fulfilled my tax obligation with the advice of a professional.

And that tax return provided me a guide for doing my own taxes since then (using TurboTax and TaxCut for simplicity's sake.) Another great thing about hiring the accountant the first time is they can educate you on how to put some of your bookselling income aside tax-free into a SEP-IRA retirement account.

Also, be sure to see my previous post about the tax-preparation workshop scheduled for April 11 on eBay.

eBay hosts tax-preparation workshop Tuesday

eBay will host an online workshop for sellers with questions about filing their 2005 income tax returns.

The discussion, scheduled for 11 a.m. Eastern time April 11, will be lead by Cliff Ennico, host of the PBS television series "MoneyHunt" and author of the nationally syndicated newspaper column "Succeeding in Your Business."

Since March 30, Ennico has been answering some early questions at the workshop board. For example, he recently posted this exchange:

How do I calculate the "cost of goods sold" for my business?

Basically, this is whatever you paid to your vendors for stuff you sold on eBay during 2005, plus (1) all eBay and PayPal fees, (2) all shipping and postage costs, (3) the cost of packaging and shipping materials, and (3) any sales taxes you PAID for your inventory. If you collect a “shipping and handling fee” from your buyers to cover some of these expenses, see below for a discussion of how to treat that on your tax return. If your “cost of goods sold” is too difficult to track and you don’t have a lot of inventory left over at year end, you probably won’t get into too much hot water with the IRS if you deduct your selling costs outright. As you get bigger, however, you should learn to do it the right way.

eBay Stores revisited

A recent article here on selling contemporary versus collectible books drew some interesting responses.

As readers of this blog know, I prefer selling on Amazon. But I also believe it's a good idea to avoid putting all your eggs in one basket. So that's why I think it's prudent for online booksellers to be active on eBay, as well as the The River.

Elaine's eBay Bookseller Blog ran a great follow-up that pointed out many of the eBay advantages I'd glossed over.

What it boils down to is, sellers have a lot more flexibility with an eBay store. So I agree, eBay today is probably best for rare and collectible books.

I'm glad to see the recent improvements at eBay -- with enhancements to their Stores program, and the upcoming launch of its Express fixed-price platform.

As always, one of the huge advantages of eBay compared to other bookselling sites is that eBay actually listens to its sellers. For example, when eBay made an unpopular policy change regarding store search results last week, eBay got an earful from irate PowerSellers. eBay has been pretty frank about that, and is keeping its members in the loop.

By contrast, Amazon can't be bothered to give the time of day to its Pro-Merchants, the biggest cash cows the company has.

Competition is good. If eBay can give Amazon a run for its money in 2006, my hunch is that sellers will benefit.

Barnes & Noble launches used-book buyback program

Barnes & Noble has launched an online used book buyback program.

Type an ISBN into the site, and B&N will say how much they're willing to pay for the book. If you accept the offer, you can print a postage-paid mailing label, and get paid in about three weeks with a check.

The program might be worth investigating for certain recent books. For example, B&N will pay $2 for a paperback copy of "Reading Lolita in Tehran" even though copies are selling on Amazon Marketplace for only $1.70.

To take another example, however, B&N won't pay a cent for paperback copies of "The Da Vinci Code." But this book is selling for double the price ($4.78) on Amazon. One more example: the current blockbuster "A Million Little Pieces" is selling for $2 on Amazon Marketplace; B&N will pay $1 for it.

B&N says it quotes its prices based on "future demand for the book and current stock availability." The company won't buy out-of-print books, book club editions, or books that have new editions each year, such as travel guides.

A number of similar textbook buyback services have popped up in recent months for students who want cash for their used books but don't want to bother with selling them individually.

eBay bans cash payments

eBay has officially outlawed cash payments among its 100 million members. The auction site has begun deleting listings from sellers who offer to accept cash through postal mail, saying that these sellers tend to be involved in scams.

"The U.S. Postal Service tells us it's unsafe, and now eBay is telling everyone that it is unsafe," said Matt Halprin, eBay's global policy VP. "So if a seller solicits or encourages offers to accept cash, [they are] encouraging unsafe payment methods and we do remove that seller's listing."

eBay managers approved the policy in October, but the change wasn't widely publicized or enforced until this week. Recently, several longstanding PowerSellers who have traditionally accepted cash complained that eBay is trying to force them to accept PayPal. eBay purchased the payments company in 2002, and is aggressively promoting its use.

After a rash of fraud last year, eBay and other sites such as Amazon.com warned buyers against paying for expensive items with non-reversible bank wire transfers. In many cases the fraudulent sellers posed as U.S. residents, but were actually outside the U.S. and never shipped merchandise after collecting the payments.

Some eBay sellers offering heavy or bulky merchandise don't offer shipping, and require buyers to pick up their goods. Some eBayers note that cash payments for in-person transactions can work fine in some cases, yet can present other types of risks. For example, sometimes buyers discover later that merchandise is defective. In these cases, disputes can arise over the demand for a cash refund.

"You've got to wonder though," said one eBayer who asked not to be identified. "Is eBay going to outlaw checks and money orders next?"

Q&A: How can I protect my seller feedback average?

QUESTION: How can I protect my feedback score? It seems giving great service isn't enough. I just got a negative rating from an old lady who blasted me for sending a book instead of a tape. She ordered a book! She won't respond to e-mails, and I'm at my wit's end.

ANSWER: I get negative feedback from clueless buyers too. But since Amazon began allowing buyers to delete feedback comments they've left in error, I've been pretty successful at getting bad ones removed. (At the bottom of this post I've provided a link for buyers to delete their feedback.)

As you know, preventing bad feedback is essential to a successful Amazon or eBay business. When I began selling in 2001, I decided to do everything possible to avoid bad feedback, within reason. So when I can't find a book that I've sold, I'll order the customer a copy myself. When the Postal Service screws up, I'll often refund the shipping fee. And while I'm packing a book, if I notice a flaw that wasn't in my description, I'll enclose a note and issue a partial refund. I jump through these hoops not because I'm a saint, but to compete with other sellers. As a result, I get lots of sales where the customer shopped for the seller with the best feedback.

But even when you correct the mistakes you know about, you'll still get negative feedback from more than 1 percent of customers. A brief, firm e-mail requesting removal of the feedback (and making the customer whole if they've been shortchanged) is successful about 75 percent of the time.

A good percentage of folks who leave bad ratings, like the old lady who zapped you, have some basic misunderstanding about their order. They've ordered the wrong item, or were expecting it to arrive in two days even though they paid for standard shipping. Your challenge is to figure what part of the process they didn't understand, then explain it to them without insulting them.

These days about half of the negative feedback I see was intended for a different seller and transaction altogether. These buyers are fairly cooperative about removing feedback, and I'm always happy to see the red marks erased. But I'll never understand how buyers can be so careless -- if I were going to accuse someone of fraud in a public forum, I'd want to be darned sure I was right.

The most trouble I ever went to in getting bad feedback removed was about three months ago, when a buyer left a bizarre rating, then didn't respond to e-mails. After sending the buyer two letters using snail mail, I discovered she couldn't receive e-mail from my Internet provider. In this case the snail-mail approach was time-consuming but effective.

Here's an easy link for Amazon buyers to delete feedback they've left. Remember to insert their order number after the equal sign:
https://www.amazon.com/gp/css/summary/edit.html?orderID=ORDER_NUMBER_HERE
Tell the buyer they'll need to scroll down the page, and they'll see the feedback comment they left, and a hyperlink labeled "Remove."

eBay has a similar process called "mutual feedback withdrawal."

eBay adding 'Report This Item' link to all listings

eBay is making it easier for users to report listing violations. During the next few days, a "Report this Item" link will be added to the bottom of each listing, allowing whistleblowers to bypass the regular customer-support e-mail staff.