eBay: It's Not Just Beanie Babies

By Tedra Meyer On Aug 20 2001 - 6:00am




It is no longer just the place your mother-in-law goes to auction off her prized Beanie Babies.

With more than 34 million registered users, eBay has become the place where people go to buy and sell everything from cellphones to memory for their PCs. And now it seems many CE manufacturers and retailers are adding it to their list of distribution options.

Instead of viewing eBay as the enemy, more and more CE retailers are jumping on the e-auction bandwagon, using the site as another channel to sell their products, often overstocks and out-of-box returns. Likewise, CE manufacturers are turning to eBay as a way to get rid of older models, as well as introduce new ones. IBM, Sun Microsystems, Handspring, Ritz Camera and Abt Electronics are just a handful of the industry players now on eBay.

Indeed, consumer electronics is one of eBay's fastest growing categories, said Jordan Glazier, the company's director of business development. Based on fourth-quarter projections, eBay estimates that $836 million worth of electronics and photographic equipment and $682 million in computers were sold on the site last year. A computer or electronics product is purchased every two seconds on the site, he said.

What's more, better than 50 percent of those products are brand new — a fact many don't realize about the six-year-old Web site, Glazier said.

Traffic — of the Internet surfing variety — is the No. 1 reason why CE companies are turning to eBay, which is adding 40 to 50 new members a day, he said. "They look at eBay as a complement to their channel."

"There's one really clear reason that we hear over and over again from our sellers … and it's the eBay marketplace. We have close to 35 million registered users, and when they see a marketplace that can move $25 million in inventory a day, it's just too tempting to pass up," a company spokesman said.

Still, retailers may run the risk of violating their distribution agreements with vendors by reselling factory-fresh merchandise through a third party. eBay's answer is that it thinks of itself as "an open marketplace," the spokesman said, and the relationships between distributors, vendors and retailers "are the responsibility of those respective parties." However, the company has heard of very few problems with retailer-vendor relationships, and matters have always been resolved without eBay's involvement. "They tend to work that out between themselves," he said, adding that he has never heard of an instance of a retailer being forced to pull product from the site.

There are other incentives for retailers to use eBay. In some cases, such as when demand for a product is greater than the supply, auctioning leads to a larger profit, Glazier said. For example, in the fourth quarter of 2000, when there was a dearth of PlayStation IIs, $33 million worth of the gaming system sold over eBay, often at two or three times the product's suggested retail price.

Manufacturers have even used the site as a way to gauge how much the general public is willing to pay for a product before it reaches store shelves, he said. Handspring sold its first Visor on eBay — partially to measure consumer interest — and it sold more than $4,500 after 65 bids.

One misconception about the shopping site is that every item goes to the highest bidder. On the contrary, the site's "Buy Now" feature allows sellers to set a price at which a customer can buy the item immediately without it ever going to auction.

While much of the confidence surrounding Internet-related businesses has waned, eBay remains optimistic, probably because it can claim a profit.

The company recently reported second-quarter net income of $24.6 million, up from $7.5 million in the year-ago period, while revenues rose to $180.9 million from $98.2 million in the year-ago quarter. It projects total 2001 revenue of $700 million.

The Internet auction site makes money by charging sellers a listing fee, plus a percentage of the item's final selling price. This year, eBay added a "Stores" feature that, for an additional fee, enables volume sellers, including Sun, Microsoft, IBM and Ingram-Micro, to post their own pages on the site, which are promoted from the eBay home page.

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