October 2, 2001, 12:00 AM

Online Auctions

(Page 2 of 3)

Retailers who want to maintain some sort of price consistency among channels and still list on eBay can do so with two options that are essentially fixed-price offerings. EBay stores, which rolled out this summer, offers retailers storefronts on eBay, where sellers can offer items for fixed prices alongside their auctions. And scattered through a merchant’s other auction listings is the “buy it now” icon, an offering that lets buyers skip the bidding process and “win” the listed product immediately if they’re willing to plunk down their cash at a higher fixed price set by the seller.

EBay charges sellers from 30 cents to $3.30 per item to list on eBay auctions, depending on the amount of the opening bid or the seller’s reserve price on the item. For fixed price listings in eBay stores, sellers pay 5 cents on each listing, whether it’s a single item or a lot of 1,000 items. For both auction and e-store listings, eBay charges a “final value fee” of 1.25% to 5% of every sale. EBay charges the same listing and transaction fees to major retailers and manufacturers that it does to individual sellers. And though eBay says 20,000 sellers now have stores on the site, the company doesn’t break out how many of them are individuals vs. major retailers and manufacturers, although a company spokesman confirms growing use of the site by commercial sellers.

ChannelAdvisor powers both storefronts and other auctions on eBay for several retailers and manufacturers including IBM Corp., which sells approximately $1 million in equipment on eBay every month, says Wingo. ChannelAdvisor’s work with IBM illustrates the growing role tech vendors are playing in connecting commercial sellers with the major online auction sites. “We do the branding for IBM on eBay,” says Wingo. “It looks a lot cleaner and more professional than individual sellers’ listings on eBay, and we use words like ‘authorized’ and ‘certified’ to make it clear this is not a power seller with a bunch of stuff off a truck. We also set up their storefront. If IBM had done this manually, they would have had to hire five or 10 people.”

The auction solutions vendors are selling more than just technology to retailers eager to tap into online auction sites. “You develop a lot of knowledge with experience in the auction space,” says Jordan. “It seems like it would be easy to put an item up for auction online, but there are questions - How many items should I list? What should the starting price be? What’s the best way to market it? The answers aren’t clear to someone who’s new to the auction space.”

Back-end interface

But they are to AuctionWatch, which claims the sellers it powers online now account for about 10% of eBay’s total domestic sales. And they’re not just offering help on the front end at the consumer interface. Solutions providers that link retailers with auction sites can help automate payment and fulfillment functions at the auctions by integrating buyers’ information directly back into the enterprise systems of larger clients.

If retailers are finding new customers at major auction sites, the solutions vendors that get them there are finding new business in the retailer market. Typically, solutions vendors get a percentage of each successful sale. Services such as photography, support and consulting are extra.

“The focus is now on bigger retailers,” says Alec Peters, founder and CEO of Auctionworks, of the shifting auction marketplace. And if the recent growth at tech vendors already targeting this market is any indication, that’s a trend that is just gathering steam, and one that could be a big win for retailers ready to get on board.

It’s easy to see why. “We charge sellers 2% of each successful sale. EBay charges 2% to 5% on each sale, the payment system charges another 2%. Big retailers are used to paying 40% overhead,” Peters says, “so if they can sell something at 8% overhead, the cost savings are huge.”


Who will start the bidding?

When you want to sell something at auction, you post it to an auction site and let people start bidding, right?

Wrong, say the auction experts who are building businesses on advising retailers how to sell at auction. Pricing strategy, in fact, is critical to moving goods at classic auctions.

The power of bidding to drive up prices, well-known in the offline world, applies online as well. Items listed at close to retail on an auction site will gather dust with no takers. But frequently, the same items initially listed at far below retail price will eventually be bid up to retail or near-retail price, thanks to what Larry Jordan, vice president of marketing at AuctionWatch calls “the winning mentality.”

“When sellers list items at a lower value, for instance starting at a dollar, they often see the price rise to market value because buyers perceive it as a bargain, “ he says. “They’re competing with other people and they want to win, even if it costs them a few extra dollars. But if an item is listed at retail price at the beginning, sometimes it doesn’t sell at auction all because shoppers don’t see it as a bargain. “

For that reason, Scott Wingo, CEO of ChannelAdvisor Corp., routinely advises his clients to include at least one very low priced item in their auctions, just to generate that kind of interest and spark momentum.

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