Big corporations also becoming devotees of eBay auctions

Online service expects companies to lead growth

October 28, 2002|By Jan Norman | Jan Norman,ORANGE COUNTY REGISTER

The common perception of eBay, the extensive online auction site, is of Aunt Tillie selling her collection of 1950s-era Avon bottles and Cousin Jose browsing for a bargain on a laptop computer.

More than 5,000 such folks attended eBay Inc.'s convention in June in Anaheim, Calif.

But in the past year, major companies such as International Business Machines Corp. and Sears, Roebuck and Co. have become eBay devotees, too.

eBay now expects its growth to be propelled not by individual users, but rather by big corporations.

Entrepreneurs aren't the losers in this trend.

The experience of Dealtree Inc. in Laguna Hills, Calif., illustrates how entrepreneurs learn from failure and capitalize on gaps in the market that big business wouldn't bother with even if it could spot them.

It's a classic case of finding a need and filling it.

In February last year, Paul Fletcher and Garry Heath were laid off from Internet retailer Buy.com Inc.

Like the mice in Who Moved My Cheese, they didn't spend much time mourning their loss. They scurried after the next opportunity.

With experience in the computer industry, electronic commerce and supply-chain management, they had noticed large manufacturers' problems with unloading returned merchandise and with obsolete inventory, Fletcher said.

Most manufacturers don't have big enough staff to test returned products for defects, then repackage and resell them, he said. And Americans don't want 2- to 3-year-old computers and software. The companies often sell such products for 10 cents on the dollar in South America.

That's where eBay comes in.

"E-commerce success is about driving traffic to your site," Fletcher said. "eBay has 50 million registered users."

Dealtree, the business they formed, isn't the only such eBay auction manager. Fletcher estimates that he has 10 competitors.

eBay has 50,000 PowerSellers, registered users with at least $1,000 in monthly sales, spokesman Kevin Pursglove said. But most are tiny operations.

Big companies began moving onto the auction site last year, Pursglove said.

"eBay is too big a marketplace to ignore." he said. "It's easier to use an existing site than start from scratch. It's a great way to reach a large audience at minimal cost, and it's just an additional outlet for large retailers and manufacturers."

That can be easier said than done.

Fletcher estimated that it takes about 30 minutes to check out one product, take and post a digital photograph, write a compelling description and post the item for sale on eBay.

The only way to be profitable is to automate the process for large volumes of merchandise, he said.

Fletcher and Heath narrowed their focus to technology manufacturers that would have more than 800 units to unload every month or so.

"We're not interested in a one-time sale of 50 units," Fletcher said.

They started with off-the-shelf software that could handle 200 auctions while they developed the technology to handle thousands of auctions and shipments simultaneously.

Instead of 10 cents on the dollar, Dealtree clients might get as much as 70 cents. Dealtree takes a 20 percent to 35 percent commission and pays the eBay and credit card processing fees and shipping.

One happy manufacturer of networking products said: "I'm selling things I didn't think I'd be able to sell in the United States at all at prices I didn't think I'd get."

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