January 3, 2005, 12:00 AM

Out of the Skunkworks

(Page 2 of 3)

Overstock Auctions also uses what MacDonald-Korth calls a “soft close,” designed to offset “sniping.” It’s a practice-often executed by software programs designed for the purpose-in which a buyer enters the last seconds of an auction to scoop up the item with a higher bid, leaving other bidders who’ve participated in the auction since its outset no time to respond. It’s a topic that has some eBay buyers grumbling, including MacDonald-Korth, who was once sniped out of a chandelier in the final 3 seconds of an auction after diligently watching and bidding for days. So it’s different at Overstock: if any bids are entered within the final 10 minutes of an auction, other bidders are e-mailed with the information and the auction is extended by another 10 minutes to give them an opportunity to place a new bid.

Social networking

Overstock auctions also incorporate a twist on social networking, with the idea that establishing a degree of personal connection between buyer and seller-even if one step removed-can increase confidence in the buying decision. The auction page offers users the opportunity to build personal networks from the site. Registered users can invite friends online to join their network. When viewing an auction listing, users who have established a personal network through the site can click a link to see whether the seller of the item is connected in any way to their personal network. Every auction transaction at Overstock also builds a business network, separate from the individual personal networks, that is visible to any auction user. Users can check the business network connections of any seller to see which auction users the seller has done business with, and how they rated the seller.

Industry observers say there are enough issues attached to eBay affecting both buyers and sellers to create an opportunity for auction platforms that offer an alternative. Scot Wingo, CEO of ChannelAdvisor Corp., which develops software that facilitates selling on eBay, sees one of the most powerful differentiators for Overstock Auctions as its decision to extend auctions in response to last-minute bids.

“As a buyer on eBay, your best strategy is to snipe; otherwise, you’re just competing with yourself. So the behavior of the eBay buyer has moved more toward sniping,” he says. But beyond creating a universe of disgruntled buyers aced out of a prize at the last moment, sniping also is bad for sellers, Wingo believes. “When bidders can no longer snipe, they are not gaming the system by waiting for the auction clock to run out. All the bids are out there, and the item clears at its real market value,” he says.

Wingo is less sure about the potential ability of social networking to drive auctions at Overstock, though if buying from a known entity and not from a stranger helps to reduce fraud, he says it could be a plus.

New kind of customer

In addition, Overstock faces a challenge in managing the economics of auctions, which differ from those that drive success in e-commerce, he contends. “For every item at an auction, you soak up a number of buyers. In e-commerce you typically have one buyer per item, so it’s different from a customer acquisition perspective. We’ll have to see how they navigate through that,” he says.

Perhaps more significant than any other measure, MacDonald-Korth says Overstock Auctions attempts to distinguish itself in terms of its culture, encouraging informal communication between the buying and selling community and the company as it builds itself. She’s regularly on the message boards, as is Byrne, to both receive and respond to community input on the auctions. Some user feedback already has resulted in changes, for instance, in how some categories are sorted. MacDonald-Korth says Overstock Auctions also has worked directly with sellers of one-of-a-kind items to promote them to the buyer audience, the recent auction for the 700th home run ball hit by San Francisco Giants player Barry Bonds being one example. “We want to keep that kind of flexibility alive,” says MacDonald-Korth, who contends the competition has gotten too big for many such personal interactions with users.

In fact, with a target goal of about 100,000 items on offer at any given time, Overstock Auctions is currently dwarfed by what’s available on eBay. But if it’s an organization’s size that helps shape its culture, that raises the obvious question: what happens to Overstock Auction’s’ desire for a flexible, more transparent exchange with its users as it gains traction and gets bigger?

That’s one of the challenges that promises to keep MacDonald-Korth, who’s demonstrated a willingness to switch jobs, departments and states for an interesting opportunity, firmly planted at the head of Overstock’s auction business for the foreseeable future. “I have no other plans than to grow Overstock Auctions into all that it can be,” she says. “I have at least another year’s worth of ideas for the Auctions to get off the ground.”



How eBay is evolving its selling model

By Paul Demery

Just when some thought eBay-with more than 100 million registered users and over $30 billion in gross merchandise sales this year-may have reached a saturation point, it comes out with bold new ways to expand. It now offers a print catalog and lets buyers post listings of what they want.

Just in time for the start of the holiday shopping season, eBay launched its first catalog, Holiday 2004, on Nov. 15. With 116 products listed in 32 pages, the catalog was sent to millions of registered eBay users. The rationale for the catalog is that instead of relying on shoppers to initiate shopping by logging on and searching its site, eBay present them with ideas. The full-color catalog, co-produced with Sausalito, Calif.-based Haggin Marketing, showcases products that category managers have determined to be the hottest gift items-ranging from digital cameras to fashion apparel to Toyota Prius hybrid gas-electric cars. “These are the products we’ve projected to be in the highest demand this holiday season,” a spokesman says.

But there’s a catch: The products listed in the catalog aren’t necessarily available. “EBay doesn’t actually sell anything, so we can’t guarantee that catalog products will be on our site,” the spokesman says. “But we’re not worried about disgruntled customers, because with the breadth of items on eBay, we believe shoppers will find what they’re looking for.”

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