May 31, 2006, 12:00 AM

Life after eBay

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Within a year, the modest investment had blossomed into a thriving business. The company upgraded the quality of its site to allow for richer graphics and opened a brick-and-mortar retail store. The diversification away from the online channel has made it possible for Denim & Daisies to extend the selling season for much of its inventory. “One thing we learned is that if an item does not sell in season online, you have to mark it down significantly to move it,” says Esposito. “In the brick-and-mortar world, the selling seasons start later than they do online, so we have a place to continue marketing the items as the online selling season comes to a close.”

The company recently moved into an 1,100-suare-foot storefront and plans to integrate the inventory between its virtual and retail stores to automatically reflect changes in the number of units per item available after each sale. That’s another retailing practice that the former eBay-er has had to learn. Currently, when an item sells in the store, inventory online is adjusted manually. Adjustments are automatically made for sales through the online store. “Occasionally we goof and forget to make the adjustment in the case of the former,” acknowledges Esposito.

Eventually, Esposito says she plans to add analytics capabilities to the site and other more sophisticated features to the shopping cart that can aid shoppers in making changes to what’s in their carts. “It’s a step-by-step process,” she adds. “We’ve only been in the new physical store a few weeks and we’re still focused on ramping up that location.”

While stories of such modest investments in infrastructure are not uncommon, most eBay graduates can get a quality storefront for $3,000 or less. Typically, these are hosted sites, which relieve the retailer of many start-up IT headaches.

“One of the things I ask retailers launching their own storefront is do they want to be a programmer or a merchant,” says Barney Stone, president of Stone Edge Technologies Inc., which offers an entry level storefront for about $1,500. “No start-up ought to be writing their own software platform.”

It is also advisable to avoid having a custom platform built. While the idea may look attractive on the surface, it can be costly down the road to add features and functionality because of incompatibility with other open-coded applications, provided the programmer that wrote the code for the storefront in the first place is still in business.

Nor should retailers be seduced by low cost do-it-yourself applications that run $50 or less, experts say. While attractive in price and made to sound user friendly, such applications are beyond the IT skill level of most eBay graduates, they say. Consequently, what looks like a bargain can end up costing the retailer more time and money than if he hired a third-party to build and host the storefront. On average, it takes about three months for a retailer to fully test a storefront prior to roll out.

“EBay graduates can’t afford to take shortcuts when building their storefront,” affirms Robert LaGarde, CEO of e-commerce platform provider LaGarde Inc. “Mistakes can slow roll out or cost sales. There is a cost to doing it right, but it is not onerous.”

Besides, eBay graduates agree that any eBay seller not willing to spend a few thousand dollars to purchase an off-the-shelf storefront package is nothing more than a casual player in retailing. “To make the transition to Internet retailing, you’ve got to pay attention to the core business, which is marketing and merchandising,” says Tool King’s Cohen. “EBay creates a lot of expectations when it comes to online retailing success.”

Diversify sales

True, eBay can be an intoxicating environment for sellers looking to open their own online stores because of its marketing muscle and the extent of its reach into today’s online economy, which is about 25% of all e-commerce sales, according to ChannelAdvisor’s Wingo. As a result, many sellers moving off eBay expect to enjoy the same level of traffic in their own stores as they did through eBay. When they don’t, the urge is to emphasize the eBay store at the expense of their own storefront.

“Most retailers moving off eBay keep a presence on the site, but we counsel them to diversify their sales and bring eBay’s contributions to sales in line with the industry average of about 25% of total sales,” says Wingo. “The transition away from eBay doesn’t happen overnight, but eBay must be viewed as an additive to the business, not the backbone of the business.”

Even after they move off eBay, many retailers continue to find it highly useful for selling overstocks, discontinued items and used items. It is not uncommon for eBay graduates-and even some large, well-established retailers-to test market such items through an eBay store before stocking them in their own store.

“We have made some very opportunistic buys from our suppliers for items we thought might never fly, but worked well on eBay and ultimately sold well through our online store,” says Cohen, who adds Tool King plans to grow its online inventory from 20,000 items to 100,000 items by year’s end. “It’s a way to test products that convey uniqueness to the marketplace.”

EBay graduates also tend to be well schooled in customer service. Consumers shopping through auction sites not only harbor skepticism about the retailers they deal with, but are extremely demanding when it comes to fulfillment and service, and rightly so, according to eBay graduates. The reason is simple: There are eBay sellers that do not deliver the goods as promised and then neglect the buyer. It is for this reason eBay created its feedback and rating system to guide shoppers when selecting sellers with whom they do business.

Keep up the refresher course

“There is a high level of trust among online shoppers in the auction environment and if a seller runs afoul of it, it kills them on eBay,” says Yen. “This insight into the consumer psyche forced us to maintain the high standards expected of us on eBay in our own store. It has been an asset.”

Last but not least, eBay grads never forget the marketing and merchandising lessons learned. “EBay taught me how to enhance product presentations, the brands shoppers look for, how sales cycles work throughout the year and why customers come back,” says Esposito.

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