In its second-largest acquisition, Amazon buys the company for $970 million.
It was inevitable that retailers in search of new customers would start to sniff around the Internet’s largest ready-built marketplace: auction sites.
With eBay sitting on one of the single largest gathering points on the web-34 million visitors a month and growing-it was inevitable that retailers in search of new customers would start to sniff around the Internet’s largest ready-built marketplace. And it wasn’t long before eBay, a person-to-person auction site that needs new revenue streams to keep share value growing, recognized in retailers a whole new market.
It was a perfect match in theory, but the execution was something else. EBay-and other online marketplaces such as auctions at Yahoo, Amazon and consumer electronics marketplace Ubid.com-were designed for individuals to sell to individuals. In fact, eBay got its start as a site where collectors could swap PEZ dispensers. “Sellers fill out a web form that’s nine pages long,” says Scott Wingo, CEO of Morrisville, N.C.-based ChannelAdvisor Corp., a provider of online auction solutions. “That’s okay if you’re just going to sell some Beanie Babies, but if you’re going to sell millions of dollars worth of stuff, it doesn’t work so well.”
Other technology developers had their ear on the marketplace also, as retailers already moving limited amounts of merchandise on eBay began to articulate their frustrations. “In the first half of 2000, sellers were saying that they loved eBay but using it was taking too much time. They couldn’t do more than 100 items a week,” says Larry Jordan, vice president of marketing at AuctionWatch, a San Bruno, Calif.-based provider of online auction solutions. “They needed more tools and functionality than eBay was providing.”
They got it, but not from eBay. By the end of last year, several software and services vendors had spied the opportunity and were in the marketplace with tools and solutions that make it easier for high-volume retailers to plug into eBay and other major online auction marketplaces. Some technology vendors who had been focused on software solutions to power auctions on companies’ own web sites, or that hosted auctions for retailers and others within a closed network, rethought their game plans and began to offer services as pathways to the bigger auction sites.
The shift broadcasts the changing role of auctions in retail: they’re not just for sellers of Hummel figurines or used CDs any more. They’re a cost-effective outlet that retail merchants are using to move clearance or end-of-model items, introduce new products, acquire customers and even test pricing. What’s new for retailers is that the b2c auction action is expanding beyond their own sites and into the much larger marketplace initially created by c2c auctions. San Francisco-based Sharper Image, for example, this summer added fixed price offerings as well as its own e-store in eBay. While still holding auctions on its own site, Sharper Image also wanted access to eBay’s much larger traffic. Launched as an experiment, Sharper Image’s store and auctions on eBay are performing very well, says a spokeswoman.
The solutions vendors who have sprung up to help retailers make the move to major auction sites offer soup to nuts services. At the core, they start by automating the listing process with tools and templates that let retailers list multiple items, trimming 50% or more off the time it would take them to post the products individually on the auction sites. Auctionworks.com Inc., for example, an Atlanta-based online auction solutions provider, is equipped to set up a general template for all of a retailer’s auctions based on the retailer’s preferences.
Marketers use the template to list the products they want to sell at auction and then launch the auction to the various auction sites with the touch of a button. Without the template and software interface, different auction sites would require listers to know different applications. Since sellers can relaunch the same auction multiple times, they can build that into their marketing strategy and still save time; for instance, breaking up multiple-item lots into single-item auctions that close at different times during the week to drive up pricing.
When auction prices rise as more bidders compete, retailers recoup more of the merchandise’s value than if they tried to sell it at a clearance price. In the fast-developing world of photography equipment, for instance, new models are very quickly replaced by newer ones. That leaves Ritz Camera Centers Inc.’s Ritzcamera.com with sale merchandise to move. Ritzcamera.com has held auctions on eBay since January on the Auctionworks platform, and used FairMarket before that. “It’s been more profitable for us than any other channel,” says Ritzcamera.com auction manager Mike Harper. In fact, auctions’ ability to
drive sale merchandise exceeds even that of Ritz Camera’s 20 outlet stores.
Harper won’t say what his margins are at auction, but the experience of Watsonville, Calif.-based West Marine shows what auctions can do. A specialty retailer of boating gear and apparel, West Marine sells through its stores, catalog and web site.
Working with ChannelAdvisor, the retailer initially tested the waters, so to speak, by offering a few items on eBay, gradually adding more as response proved positive. Refurbished GPS navigational devices, for example, had been languishing on West Marine’s store shelves, even at 80% off the original retail price. At West Marine’s auctions on eBay, however, the devices attracted enough shopper interest to generate several bids per item, driving sale prices up. “They found that they sold for 30% higher in the auction format on eBay than any other liquidation method they’d tried,” says ChannelAdvisor’s Wingo. “Now that they’ve added auctions on eBay, it’s effectively their outlet.”
‘Buy it now’
Feeding retailers’ interest in using sites like eBay is the fact that sellers have access to the auction sites’ huge customer base but they also now have more price control than they’d have in a classic auction format. That’s important when retailers are juggling products and pricing among several channels. These newer twists are carving out additional roles for online auctions in the retailer’s world. “One of the trends in online auctions is that they are starting to blur the distinction between auctions and fixed prices on the exchanges,” says Jordan.