How do you make a warehouse full of Ford Pinto parts, a truckload of Mickey Mouse clocks, or any other overstocked or discontinued items disappear? Increasingly, the answer for businesses large and small is eBay.

Once considered a gathering place for antiques traders and Beanie Baby collectors, eBay has become a top-performing e-commerce outlet, attracting companies like The Home Depot, Sears, IBM, and Palm, which unload new and refurbished inventory online to the highest bidder rather than taking a hit to their bottom lines. Auction Sites Stake Their Claim By 2006, when the online retail market reaches $195 billion, auctions will make up 25 percent of that, owning significant shares of the online travel, electronics, and toy markets. Last year, sales on the No. 1 Web auction site hit $219 million, an increase of 64 percent from the year before, beating analyst expectations by nearly $10 million. And despite the miserable economy, business is only getting better. With 42 million users, eBay auctions account for nearly 10 percent of all e-commerce sales. Whether you're looking to offload inventory or reach new customers, there's big money to be made.

The site's top sellers can prove it. About one-fifth of eBay sellers account for 80 percent of transactions. Here they reveal their best strategies, embarrassing mishaps (so you can avoid them), and keys to making online auctions pay. Think of it as a cheat sheet—your business guide to eBay.

Make the Investment

Lurk before you leap. If you spend time researching your product categories, you're already two steps ahead of the competition. Start selling on eBay without knowing the vagaries of auctions, and you'll end up with a backlog of inventory and few bidders. "Every time I rush, I get into trouble because I didn't do the research," says Sydney Johnston, who sells rare books and jewelry and has written an e-book filled with her secrets called Make Your Net Auction Sell.

Early in her eBay career, for example, Johnston found a deal on cubic zirconium earrings. She snapped up 250 pairs and quickly posted them for sale on eBay—without doing a market reality check. With no takers, Johnston gave away the earrings as bonus gifts to the high bidders in her other auctions.

Determined not to repeat the mistake, Johnston did plenty of research before starting to auction first-edition books. Her most important rule: Review the past bids in eBay's three-week history of completed auctions for any item you plan to sell. "I went back in the categories as far as I could go," she says. Johnston also started keeping track of titles that fetched more than $100. Her diligence paid off. She recently bought a first edition of Jean M. Auel's The Clan of the Cave Bear for $2 at a charity book fair and resold it on eBay for $431.

Even if you aren't peddling hard-to-find-items, researching your market is essential. Sometimes you'll find that your most cutthroat competitors aren't other eBay auctioneers at all. Take Glacier Bay Video owner Randy Smythe, who auctions genre DVDs on eBay and sells mass-market DVDs through his eBay store. Both businesses generate about 1,500 transactions a week, topping roughly $30,000 in sales.

Smythe considers stores like discount retailers Wal-Mart and Best Buy the biggest threats to his brisk business. To compete, Smythe starts most of his auctions at just a few dollars below discount-store DVD prices—but high enough to ensure profits. "If the street price is $14.99 and you start your bids at $1.99, you will get only $11," he says.

Buy a digital camera. eBay customers like to see what they're getting before they bid. Auctions that include photos attract bids 11 percent higher than those for identical items without photos, according to the Institute for Operations Research and Management Sciences.

Paying $300 for a midrange digital camera now will save you money in the long run, says Art Lazarus, co-owner of Machinery Values, an industrial machine dealer. A digital camera lets you sidestep film-processing costs, quickly reshoot photos you don't like, and post images online faster. (For the best in digital cameras, see our A-List

Lazarus posts 20 to 25 auctions per week plus 1,200 fixed-price items in his eBay store; two-thirds are machines that need four or five photos to show their features. A digital camera cut $1,200 per month in film developing costs, not to mention the hours spent waiting for film processing. "We used to go through 200 rolls of film every two months," he says.

Recycle copyright-free Web images. Auction ads for common goods like books, CDs, cooking utensils, and household tools don't always demand original photos. If you plan to auction these types of items, save time and money by downloading stock photos from the product manufacturer's corporate site. With more than 1,500 auctions going at once, there's no way Glacier Bay Video's Smythe could take original photos to go with the DVDs he auctions. With permission, he uses the packaging scans provided by the studios instead.

Lure Them In

Don't skimp on details. If you auction specialized items like industrial equipment, auto parts, or musical instruments, include as many details as possible in your descriptions—but be concise too. Make a checklist of features and mark off each item as you craft the description.

Some eBay sellers intentionally leave out details about flaws or broken parts in item descriptions—a practice that can destroy credibility and hurt sales in the long run. eBay uses a customer rating system to keep sellers honest, letting shoppers easily check a vendor's ratings as well as customer feedback before they buy.

Being up-front about, say, a missing hinge doesn't mean your item won't move. On the contrary, says Lazarus of Machinery Values. Within one year of posting auctions online the company has sold more than $500,000 worth of equipment on eBay—and 10 percent of that revenue comes from broken machines or equipment that needs repairs. "We had a Hitachi mill with a broken tool changer, and somebody bought it for $4,000," Lazarus says. Machinery Values had paid $500 for the item.

Boost your ad results with popular search words. Most eBay shoppers track down items by typing words in the site's search box. As you write a description, remember to include terms your customers use. "Put words in your descriptions that make your auctions come up," says Ron Saxton, owner of Chase to the Checkers, an online store that sells die-cast model cars. Saxton, who's auctioned online for three years, always includes the brand names of the models he sells because he knows that's how buyers search for his products.

Experiment. If you repeatedly sell similar products, experiment with headlines, price, and even ad presentation to see what works best. Eric McKenna, who auctions new and vintage guitars under the name BoogieStreet Guitars, admits his first few ads were an exercise in excess: a bright blue background with product descriptions in white letters. Worse yet, McKenna attached large photos that took more than five minutes to load. "I thought it looked great," he says, laughing.

But when slow load times discouraged customers from bidding on the guitars, McKenna says he immediately revamped the ads. Today he uses a customized template to create professional-looking auction ads. Each ad includes photos of the guitar for sale, plus a description of the instrument's condition and comments on its look and feel. McKenna sells about one guitar per day, ranging in price from $1,300 to $3,000. He attributes his success to the care he places in creating detailed yet uncluttered ads. "People are buying guitars that they haven't played," he says. "For me to sell guitars online is an anomaly."

Give your customers buying options. Some eBay customers like the thrill of an auction; others would rather just buy a product and be done. Chase to the Checkers' Saxton always gives his customers two choices: the option to bid or the option to buy it at the listed price. After he added eBay's Buy It Now feature to his auctions, Saxton's products sold faster, improving his cash flow.