Question
EBay (EBAY: news, chart) has lost some big sellers in part because the auction site is too successful. Omaha Steaks International, for instance, stopped selling meat through the Web site because the auction format limited its ability to sell at a profitable price. There was just too much inventory available.
Home Depot (HD: news, chart) also halted some sales on EBay after it found its own Web site was more effective, according to the Wall Street Journal. EBay officials agree they don't have enough buyer demand to soak up tons of look-alike merchandise, the report added. Meg Whitman, chief executive, said, "If you want to move a thousand of the same computer in a day, EBay may not be one of the most effective channels."
Not sure I understand this story in the manner it is reported.
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Too many sellers, not enough buyers. I think it works for the little sellers also.
Lynn
Lynnber almost everywhere
selling books and other stuff
Lots and lots of my Ebay Auctions
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Question is where will eBay growth come from. If they are losing the large sellers and the small ones are slowly giving up, sounds like more rate hikes coming if eBay is to meet corporate projections.
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Big sellers flood eBay with like merchandise. eBay is known for being a bad place for high volume sellers offering similiar items. Only fixed prices work when there is that much merchandise to sell.
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This was an excellent article on front page of the WSJ today by Nick Wingfield. Unfortunately, it's a subscription service, so I can't link to the article, but the story will likely be picked up by another service in the next few hours. Here are some of the more interesting highlights:
The issue is basic economics. Because of limited demand for any particular item from users of the eBay auction site, merchants that offer a big supply of identical items often drive the price way down, just as a stock sinks if an investor dumps a large block on the market. On the flip side, some big sellers that trickle goods onto eBay have found they can't sell enough to make the site worth their while.
EBay officials acknowledge they often don't have enough buyer demand to soak up tons of look-alike merchandise. "If you want to move a thousand of the same computer in a day, eBay may not be one of the most effective channels," says eBay's chief executive, Meg Whitman.
Walt Shill, the former chief of ReturnBuy, puts it differently: "EBay is two inches deep and miles wide."
and this:
Some sellers in other categories have faced similar problems. Callaway Golf Pre-Owned, which has a deal with Callaway Golf Co. to sell clubs traded in by buyers of new ones, started selling on eBay several years ago. It was initially pleased, says David Schofman, president of the used-clubs retailer, a unit of Trade Up Commerce Inc. of Austin, Texas. He says about 18 months ago, eBay encouraged his firm to increase its listings.
Callaway Golf Pre-Owned hired a team of programmers to tie its inventory systems in with the eBay site. It more than tripled the number of clubs it listed. The impact was swift: The proportion of listings that found buyers fell to 50% from about 90%. Yet under the eBay system, it had to pay fees to list items even if they didn't sell. "We're not happy with their ability to move product in any kind of volume," Mr. Schofman says. "We really hit the wall with them." Callaway Golf Pre-Owned has trimmed its eBay sales and is emphasizing its own Web site.
Very interesting quotes from two enterprise sellers that eBay heavily courted to sell on their site. This article is a 'must read'.
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We moved from 80% sellthru for 500 items / week to 50% sellthru for 1500 items / week to 33% sellthru for 3000 items / week.
It is tough to ramp up to a decent sales level, on Ebay, and still manage to maintain a sellthru rate that is profitable.
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<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR> Overstocked: As eBay Grows, Site Disappoints Some Big Vendors --- Offering Many Identical Items Undercuts Price for Firms Liquidating Inventories --- 'Inches Deep and Miles Wide'
By Nick Wingfield
2,189 words
26 February 2004
The Wall Street Journal
A1
English
To fans of eBay Inc., growth opportunities for the giant online bazaar have long seemed as inexhaustible as the heaps of old cameras, clothes and other unwanted stuff in attics and storerooms.
Yet some important eBay merchants are discovering one of the first potentially significant limits of the site as it seeks to expand: It hasn't always been a good place for corporations to move big volumes of identical items.
Two years ago, ReturnBuy Inc. was busy using eBay to liquidate unsold merchandise for electronics retailers and manufacturers. For a time, ReturnBuy had one of the highest eBay sales tallies of any merchant on the site. But it hit a wall: Whenever it tried to sell more than a few dozen digital cameras, laptops, or other lookalike items, it effectively crashed the price. Last year, ReturnBuy filed for bankruptcy and sold its assets.
The issue is basic economics. Because of limited demand for any particular item from users of the eBay auction site, merchants that offer a big supply of identical items often drive the price way down, just as a stock sinks if an investor dumps a large block on the market. On the flip side, some big sellers that trickle goods onto eBay have found they can't sell enough to make the site worth their while.
EBay officials acknowledge they often don't have enough buyer demand to soak up tons of look-alike merchandise. "If you want to move a thousand of the same computer in a day, eBay may not be one of the most effective channels," says eBay's chief executive, Meg Whitman.
Walt Shill, the former chief of ReturnBuy, puts it differently: "EBay is two inches deep and miles wide."
This limit is curbing eBay's appeal for some large companies, many of which have experimented with the site as a way to shed excess inventory. Fortunately for eBay, the demand ceilings aren't a serious hitch for its legions of smaller merchants -- who sell wide selections of goods such as antiques and used CDs. EBay is still thriving, thanks to its continued appeal among that class of merchants. But at some point in the future, as it seeks to keep up its torrid growth rate, it may need to depend more on big-business sellers.
EBay says its sellers, on the whole, are doing well, a claim backed up by eBay's financial performance: Earnings last year jumped 77% to $ 442 million, on revenue that rose 79% to $2.17 billion.
The adaptability of its business -- in new markets such as cars and new regions such as Asia -- has made eBay a Wall Street favorite. Its stock-market value is more than $43 billion, nearly equaling the combined value of retailers Best Buy Co., Costco Wholesale Corp. and Sears, Roebuck & Co. EBay's stock is up 73% in 12 months and trades at a lofty 65 times this year's projected earnings, compared with 18 for the S&P 500. The stock, adjusted for splits, is higher than during the dot-com boom -- a distinction that richly valued Internet peers such as Amazon.com Inc. and Yahoo Inc. can't claim.
Starting several years ago, eBay made a push to get big retailers and manufacturers to sell on its site, hoping to tap the vast supplies of out-of-season and returned goods. It was part of a larger drive to move beyond the original base of hard-core collectors and lure more shoppers for everyday items such as computers and sporting goods. Some big retailers signed on, and some of those say they continue to sell enthusiastically on the site. Among them are Sears, Sharper Image Corp. and Hewlett-Packard Co.
Others have been disappointed. About a year ago, Home Depot Inc. says, it stopped listing tools and such for auction on eBay after it found it could sell more through its own Web site. Last spring, Omaha Steaks International Inc. halted two years of selling meat on eBay because it couldn't get high enough prices to make a profit. It decided to try a more traditional online retailer, Amazon.
Just this month, consulting firm Accenture Ltd. decided to shutter a venture that helped companies sell large volumes through eBay by handling their listing, shipment and other details. The venture, Connection to eBay, began two years ago amid hearty endorsements from eBay executives. Accenture says it couldn't find enough clients to commit to using eBay for significant amounts of merchandise.
Competition on eBay from sellers large and small has also made the site a more challenging place to do business. In recent years, sellers have poured goods into big eBay categories such as electronics and sporting goods, crimping the prices some sellers used to get. When it started selling on eBay several years ago, Allwall Technologies Co.'s Art.com would list 8,000 or so products a week for auction. It has scaled back, in part because of an explosion of smaller rivals in the eBay site's art category. "It's to the point where we can list only a few hundred products on eBay and do that profitably," says Michael Marston, Art.com's chief strategy officer, who says business on the company's own Web site is thriving.
EBay executives won't comment on specific customers but say the site isn't yet a big enough source of sales to hold the interest of some large companies. "Unless we can deliver sales of $20 million to $30 million" a year to big companies, says Ms. Whitman, "it's probably not worth their time from an investment point of view."
ReturnBuy's experience shows the problem. Founded in 1999 by two business-school friends, it had a simple goal: Help retailers and manufacturers get more for returned and overstocked merchandise than by selling it for pennies on the dollar to liquidators. The answer was to put it on eBay. The idea sparked interest at eBay, and the San Jose, Calif., company invested in ReturnBuy alongside venture-capital firms.
ReturnBuy opened a giant warehouse in Columbia, S.C., to store the computers, DVD players and other goods that flooded in. It hired dozens of workers to take photos for eBay listings and respond to bidders. ReturnBuy's sales jumped to about $25 million in 2002 as it signed up clients such as Palm Inc. and Electronic Arts Inc., according to Mr. Shill, the former ReturnBuy chief executive.
At the Consumer Electronics Show in Las Vegas in early 2002, he says, eBay executives such as Ms. Whitman joined him in wooing Alan McCollough, chief executive of Circuit City Stores Inc. The big electronics retailer agreed to let ReturnBuy market a portion of store returns on a two-month trial.
Often, ReturnBuy had hundreds of identical items from Circuit City to sell. They flooded the eBay market, depressing prices bidders were willing to pay. Though eBay limits to 10 the number of identical auctions any one seller can have going at a time, Mr. Shill says ReturnBuy easily got around the cap. It bundled some products with accessories. and it offered some goods for fixed prices, an option available on the eBay site.
With its stacks of digital cameras, laptops and such, ReturnBuy found it could get acceptable prices for just the first 20% or so of its merchandise. Mr. Shill reviewed the figures with dismay. "We said, `Holy cow, this isn't working,' " he recalls. Circuit City sharply scaled back its business with ReturnBuy, Mr. Shill says. Circuit City declined to comment.
ReturnBuy filed for Chapter 11 bankruptcy protection early in 2003. Though the company made mistakes such as spending too much on its warehouse, Mr. Shill says, its fatal miscalculation was how much it could push through eBay. "We were outstripping demand," he says.
Some sellers in other categories have faced similar problems. Callaway Golf Pre-Owned, which has a deal with Callaway Golf Co. to sell clubs traded in by buyers of new ones, started selling on eBay several years ago. It was initially pleased, says David Schofman, president of the used-clubs retailer, a unit of Trade Up Commerce Inc. of Austin, Texas. He says about 18 months ago, eBay encouraged his firm to increase its listings.
Callaway Golf Pre-Owned hired a team of programmers to tie its inventory systems in with the eBay site. It more than tripled the number of clubs it listed. The impact was swift: The proportion of listings that found buyers fell to 50% from about 90%. Yet under the eBay system, it had to pay fees to list items even if they didn't sell. "We're not happy with their ability to move product in any kind of volume," Mr. Schofman says. "We really hit the wall with them." Callaway Golf Pre-Owned has trimmed its eBay sales and is emphasizing its own Web site.
In the near term, eBay doesn't need bigger companies to sell through the site. It has plenty of smaller ones. Its core merchants remain mom-and-pop entrepreneurs who run steady eBay businesses. EBay estimates that its 95 million registered users include more than 430,000 full- and part-time sellers on the site. It figures these types of sellers accounted for 95% of the $24 billion in goods merchants sold through the site last year.
While some of these merchants have warehouses and small staffs, many face little in the way of overhead expenses, operating out of their homes and working long hours. The small merchants sell a variety of flea-market and yard-sale goods and can change the mix if competition chews away the profits in a category. There are also countless people who just use eBay to clear their closets, with minimal concern for how much they make.
Among big businesses, eBay executives say those with diverse products -- different models or categories of merchandise -- do best on the site. The company's general merchandise manager, Michael Dearing, says sellers who stumble usually have operational problems in their own businesses or don't have unique or well-priced products.
EBay says its top sellers overall are doing more business than ever: The sales total required to be one of the site's top 10,000 merchants has doubled over two years, to the low six figures. "The good news is the growers outnumber the slowers by a wide margin," Mr. Dearing says.
(MORE)
Some corporate sellers have held back merchandise to avoid flooding the eBay market. Motorola Inc. began selling cellphones, walkie-talkies and other products on eBay in April 2002. This was profitable for Motorola, says Chip Yager, its director of channel development. But Motorola pulled the plug on auctions of individual goods when it decided it couldn't increase its eBay sales without hurting prices. "There was no way it was ever going to scale to be anything meaningful for us," Mr. Yager says.
Motorola tried a different tack on eBay. With the help of ChannelAdvisor Corp., a firm that assists large eBay sellers, Motorola shifted its activities to an area called eBay Wholesale, where merchants auction items in bulk.
That didn't work out, either. Last year, Motorola began moving the majority of its bulk auctions to a private auction site operated for it by ChannelAdvisor. The reason: It wanted to avoid the hassle of eBay bidders who don't pay for auctions they win. These aren't a problem on a private auction, where bidders come by invitation only.
Mr. Yager also disliked the widespread eBay phenomenon of "sniping," in which shoppers submit last-second bids and give others no time to counter before the auction closes. In Motorola's private auctions, bidding is extended if someone submits an offer in the last few minutes of an auction. Mr. Yager considers Motorola a graduate, of sorts, from eBay. The site "was the right place for us to start" in online auctions, he says.
Some executives close to eBay, such as ChannelAdvisor CEO Scot Wingo, say the site could do more to spur demand when a seller has hundreds or thousands of an item to unload. Mr. Wingo says eBay could promote the sales on its home page, as do some Internet retailers that specialize in liquidation merchandise such as Overstock.com Inc. EBay allows sellers to advertise auction listings on the home page, but Mr. Wingo says his clients don't want to pay extra for this.
EBay's longstanding "level playing field" policy prohibits giving big sellers special perks or fee discounts. Mr. Wingo, in whose company eBay invests, suggests eBay might need to rethink its policy if it wants to encourage large businesses to use the site. "There could come a day when it has to change for eBay to keep growing at the rate it's growing at," he says. EBay says it has no intention of modifying the policy.
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Melinda
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My husband posted this to the message board he participates in:
? What happened to eBay Seller PriceItWholesale?
Does anyone know what happened to Price It Wholesale, the big dealer of high-end electronics? The April 2003 Forbes special listed PriceItWholesale as the second-largest monthly dollar volume seller on eBay (behind Motorola, who have left eBay).
They have no auctions running at this time, and their store has been emptied as well. What's up?
Read these for background:
http://www.forbes.com/2003/04/16/cx_pp_0416ebay.html
and
http://www.house.gov/smbiz/hearings/...7/glazier.html
Marie
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Wow, this thread is fascinating, in part because it agrees with what I've been saying all along. eBay will never succeed as a retail marketplace. And apparently not as a retail closeout marketplace either.
For big companies, eBay is a huge amount of work for what amounts to essentially taking out their trash. Listing, packing, shipping, customer support. And they're lucky if they get wholesale prices. And then there's the "stranger factor." Many consumers won't spend $500 on an big ticket item unless they can take it back to the store the next day for a refund. There's a cap on how much eBay buyers are willing to spend, especially when those big retailers tend to rack up negative feedback pretty quick.
There are eBay sellers who move a lot of product, making just a bit off each one. And there are sellers lucky enough to be making good money off a few items. But there's no way big companies will consistently get retail prices for mass-produced stuff on eBay. That's not what eBay is about.
eBay buyers want to see interesting items, not stuff from the K-Mart clearance bin. They want good prices, and they want the fun of trading with other just plain folks. The sheer overhead of trading on eBay will kill off most big companies.
Those big companies may be dumping their returns and refurbs on eBay now, but pretty quick they'll realize they should stop marketing cheap crap which people are returning in droves. It's not cost-effective to have to pay eBay commissions, plus all that work, just to take out the trash.
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<BLOCKQUOTE class="ip-ubbcode-quote"><font size="-1">quote:</font><HR> But there's no way big companies will consistently get retail prices for mass-produced stuff on eBay. That's not what eBay is about.
<HR></BLOCKQUOTE>
so much for meg's push to attract traditional businesses