My Long Journey to Successful Selling on the Internet [Part 1 of 2]

How I learned - the hard way - what happens when you forget to apply the E-Myth principles to your online business

[Paul Wenke has been an E-Myth Client since October 2005, and graduated from the Mastery Impact! Business Coaching program in December 2006.]

My wife and I own an ACE hardware store in a small town located high in the remote Sangre de Cristo Mountains of Colorado - a beautiful area with a population of only about 4,000 people in the whole county. Our business philosophy has been to stock a wide variety of products to meet as many of our customer's needs as possible.

Like all retailers, we have some products that don't sell very well, or don't sell at all. But, because of our business philosophy and remote location, it's even more difficult to get these "dead" products out of the store. We have tried different methods, such as displaying them in different places and marking them down in price and, if they still don't sell, putting them in an auction (where we are lucky if we get 25% of our original costs back).

I hate this kind of dead inventory because it represents dead money -- money that's not working for me. It's money I could use to expand, to pay debt, to put in another product line or to pay for a nice vacation. A few years ago I got the idea of selling this dead inventory on eBay. I thought that, at a minimum it would expand my potential customer base, and maybe some this dead stuff would sell. That idea led to what would turn out to be a very interesting journey.

The start of the dream - building our eBay store

I introduced my new idea to the management team, which includes my wife. Their polite enthusiasm conveyed their unspoken thoughts of: "Uh oh, here he goes again." Well, I wasn't deterred. After all, what did they know about eBay? Of course, I didn't really know much about eBay, either. Still, I was convinced it would work. So this is how I started - with a "ready, shoot, aim approach." It definitely wasn't an E-Myth approved method, but I decided to go for it anyway. v

For those of you who have never used eBay to either buy or sell something, it is truly an amazing experience. First, the entire company is being run by extremely talented, creative people who have a lot of energy. Second, over 200 million people use eBay to buy and sell an incredibly broad array of products and services. It is an enormous marketplace -- if eBay were a country it would be the fifth most populous in the world. Third, over 60% of all Internet sales are made through eBay. Fourth, Internet sales have experienced double digit increase in year over year sales for the past five years.

The first thing we did was select a name for our eBay store. We called it Hardware Overstock. Once we had the name selected, we listed an item for sale. And while we were listing our second and third items, the first item sold! I rushed to my wife's office and told her the exciting news. She said something like, "That's nice, Dear." Why didn't she understand that this would change life as we knew it?

Sales pick up

At the next manager's meeting I made the grand announcement that we had sold our first product on eBay. They all dutifully congratulated me, and then went forward with the other business of the day. "Why aren't they more excited?" I wondered to myself.

Well, I wasn't going to be deterred, and kept selling products on eBay and reporting the sales numbers to the management team every month. And every month they would nod and then move on to more "important" things. So, I decided to stop reporting the eBay sales numbers unless some one asked. But no one asked.

Finally, about 10 months later, one of the managers inquired whether we were still selling products on eBay. He must have thought I'd given up on the whole thing. I told him that sales were picking up and we were doing well, and that in the last month alone we had actually sold $1,500 of merchandise.

The room was silent. I felt quite smug as I said, "Yes, it's true. Sales are growing nicely, and the more items we list on eBay, the more we sell. In fact we are getting about 1,000 hits on our site every day." And then I told them about the most amazing thing -- that I had been putting our dead inventory on eBay at a discounted price and it all sold out! And not only that, but when I re-listed the products at full price, they still sold out! And we were getting buyers from all over the world.

The management team and my wife all started to question me about the eBay business. I was in my glory; the big idea was paying off and I could see that everyone was impressed with the notion of selling on the Internet. With our sales success fresh in our minds, we decided to go full steam ahead with listing items on eBay. We hired an employee to manage the site, a person to handle order fulfillment and people to list the items. And by June of 2006 we had over 12,500 items listed on eBay, annualized sales were on pace to reach $175,000 and 15% of our sales were coming from outside the USA.

A sudden sense of unease

I happened to be on the golf course when I realized I had made a major mistake in the development of our eBay business. I had developed this business idea without a goal in mind, in fact, without any kind of plan and with very few, if any, policies and procedures to run the operation. I realized we were on the verge of losing control of the eBay business.

There, on the golf course, I realized that my "ready, shoot, aim" approach was backward and not sustainable over the long term, and that the eBay site would have to be completely restructured and rebuilt all over again. How could I, the guy with all the great ideas about selling in cyber space, make such a colossal blunder?

It happened because I ignored the fundamentals that we had learned from E-Myth, and embarked on a business venture based on the idea that if we just threw as many things as possible onto eBay as quickly as we could, that we'd obtain the outcome we were seeking.

I went home and told my wife that we'd have to stop what we were doing in the online business and rethink everything. She took the news in stride and said, "That's all right. If you hadn't done things the way you did, then you wouldn't have learned what you did wrong."

Then she asked what I thought about taking the E-Myth principles we had learned and already applied in our bricks-and-mortar business, and applying them to our new bricks-and-clicks business.

Continue with Part 2.