February 1, 2005, 12:00 AM

AuctionDrop drops its auction stores

AuctionDrop, which a year ago said it expected to operate 500 to 1,000 owned or franchised stores, has closed 4 of its 5 stores and shifted its business model to focus on its contract to provide eBay drop-off services in 3,700 UPS Stores.

With tens of thousands of independent online stores on eBay, more than 35 million active users and over $20 billion in annual gross merchandise sales, the goldmine of eBay is only partly tapped by sellers willing to post their products for sale on the famous web site. There`s a whole new market to be had among sellers who`d rather just drop their products off at a physical store to be listed on eBay by someone else.

At least that`s the basic idea behind the thousands of eBay drop-off stores that have appeared over the past year. But the model of the eBay drop-off store continues to undergo adjustment.

In recent months, AuctionDrop Inc. and Circuit City Stores Inc. have closed their own eBay drop-off locations. Circuit City said its eBay drop-off locations within several Circuit City stores weren`t producing the expected return. It shut them down last year. AuctionDrop, which a year ago said it expected to operate 500 to 1,000 owned or franchised stores, has closed 4 of its 5 stores and shifted its business model. Instead of running its own chain, it`s focusing on its contract with UPS to provide eBay drop-off services in 3,700 UPS Stores.

"Our sales are steadily increasing and the traffic through the UPS system is increasing exponentially," says CEO Randy Adams.

AuctionDrop, which has a 3-year renewable contract with UPS, also provides eBay services through five Best Buy stores in California. Adams declines to say how well AuctionDrop`s services are selling in Best Buy. "We`re still evaluating this arrangement," he says.

Like other eBay drop-off stores, AuctionDrop lets customers drop off items to be photographed, listed and sold on consignment through eBay. UPS ships items accepted at its stores to a 105,000-square-foot processing center AuctionDrop recently opened in California, then also handles the final shipment to eBay buyers. Once a sale is completed, AuctionDrop sends the seller a check for the final selling price minus a commission and eBay listing fees.

With eBay`s critical mass of buyers and sellers, combined with UPS`s strong brand recognition and broadly based network of stores, Adams figures he`s developed a golden on-ramp into eBay`s wealth of e- commerce. "Financially, we are in the best shape since our inception," Adams says.

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