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Retailers, manufacturers, even traditional liquidators are turning to eBay to sell surplus inventory. But sellers need sharp pencils in figuring out if it makes sense to sell certain categories at auction, Auction Works says.
Auction Works, a provider of online auction management software, says its revenues grew 150% between the fourth quarter of 2001 and the fourth quarter of last year, as more retailers, manufacturers and even traditional liquidators joined smaller business operators and power sellers on eBay.com to sell surplus inventory. Though the privately-held Auction Works doesn’t disclose sales, chief marketing officer Paul Lundy says the three-and-a-half-year-old company is profitable.
While many of the larger companies now selling on eBay are relative newcomers to online auctions, the experience of just the past three years already has provided the key learning that auctions make more sense for some categories than others, says Lundy.
Retailers looking at switching from traditional liquidation channels to an online auction solution for surplus may face some investment in making the switch, he says. It may mean some retooling of facilities, if they will provide for pick, pack and ship, shooting listing images if they don’t already have product images, and making changes around inventory creation, staffing and more. Retailers with large numbers of geographically dispersed stores face the additional challenge of aggregating far-flung inventory in a central location for fulfillment, he adds.
“It depends on the kind of product. If you have high-value product and you will get a higher recovery online, it makes sense,” says Lundy. “If you are in a more commodity product category, given the associated costs, unless you built it out yourself and can run streamlined operation, you are giving away a lot of margin. It may be more attractive for you to continue with your traditional liquidation channels.”
That’s why there may be more margin for retailers in online auctions in categories such as consumer electronics, cameras and sporting gear than in other categories. “They have good high average selling prices, and they have a rapid life cycle and new products coming out quickly behind them. So you can get products for decent price in many cases, and get good margin for them on eBay,” says Lundy. “Get into pallets of T-shirts, though, and it’s a real challenge.”