Booming on eBay

Jul 01, 2003 9:30 PM  By

Multititle mailer Brylane wasn’t satisfied with the recovery rate it was getting on overstocks and discontinued items that it sold to discount stores and “jobbers,” or liquidation specialists. But the company has no such complaints anymore. In November it opened the Chadwick’s Factory Direct store, a Web outlet named after its best-known brand, women’s apparel catalog Chadwick’s of Boston.

Selling dresses, sportswear, coats, and leather items, Chadwick’s Factory Direct is generating 40%-50% more in recovery rates than would be gained through sales to jobbers, says Brylane’s director of liquidation, Lauren Hyman. The company is so pleased with the results, in May it opened a second store, Chadwick’s Wholesale, which sells items in quantity to other businesses.

What’s more, New York-based Brylane, whose other apparel titles include Lane Bryant, Roaman’s, Lerner’s, and King-Size, doesn’t have to worry about staffing the store or investing in print advertising to drive traffic: Chadwick’s Factory Direct and Chadwick’s Wholesale are located on auction site eBay.

Indeed, with 60 million registered users and counting, eBay can cost-effectively bring a brand to the masses. Or as eBay spokesperson Kevin Pursglove says, catalogers and online marketers “have ready access to new customers without having to market a separate Website.”

But if eBay were a panacea for all of a catalogers’ liquidation ills, surely more would be on the site, right? In fact, issues of branding, merchandising, and control have led many catalogers to steer clear of eBay as a liquidation option, despite the potentially greater return on overstocks.

Getting more for less

San Francisco-based The Sharper Image has offered auctions on its own Website since 1999. Nonetheless, last year the cataloger/retailer of high-tech gifts launched an eBay store.

“We thought this would be just another way to broaden our customer audience,” says spokesperson Mollee Madrigal. “We’re able to reach a different customer who may never have shopped at The Sharper Image before.” Whereas the typical Sharper Image customer is between the ages of 35 and 55 with a combined household income of at least $100,000, rural, lower-income consumers make up a significant portion of eBay’s audience.

San Jose, CA-based eBay has also introduced slipcover manufacturer/marketer Sure Fit to more rural, midwestern customers, says David Spain, director of sales and marketing for New York-based Sure Fit. Spain says that Sure Fit targets its midwestern prospecting to urban areas such as Chicago and Milwaukee. EBay, on the other hand, attracts many consumers living in rural areas without enough retail opportunities. “It provides an outlet for our distressed inventory without cannibalizing our online business,” Spain says.

SureFit, which saw weekly sales of $3,000 from its eBay store in its first week in February 2003, now reaps more than $50,000 a week from eBay, Spain says.

A higher return on liquidated goods is perhaps the most significant advantage to using an eBay store. According to Hyman, a $99 leather coat that Brylane would sell to a jobber for $9-$10 sells for up to $40 on eBay. She estimates that more than 80% of the products Brylane places on the auction site sell within three days. If merchandise is unsold after the auction has expired, it is rerun until it is sold.

Monthly fees for an eBay store range from $9.99 to $499.95. All eBay stores are given access to the site’s “store’s merchandising manager.” This software function enables merchants to cross-promote complementary items on each auction page.

For instance, if an eBay store showcases a camera up for auction, the merchant could also choose on the same page to present the tripod, the lens, and the bag that go with that camera. Visitors to the page could then select the links to those auction pages.

EBay also provides each store merchant with a “storefront,” a home page of sorts, to showcase all of the company’s eBay listings, as well as monthly reports on all eBay sales.

A midlevel option of $49.99 a month enables merchants to promote and cross-sell merchandise on the appropriate Ebay category directing pages (“consumer electronics,” for instance, or “gifts”). Merchants paying for the premium $499.95 a month store can have their logo appear up to 1 million times per month throughout the ebay site — on the eBay home page, for instance, and next to related product links on the site’s search and browse pages.

Branding concerns

So for a company like Sure Fit, even the costliest eBay store option pays for itself a hundred times over. But money isn’t everything, especially when branding is concerned.

Last summer, Charlottesville, VA-based electronics cataloger Crutchfield tested an eBay store, selling car stereo equipment, televisions, computers, and similar items in three states: new, returned/open box, and scratched and dented. Vice president of marketing Alan Rimm-Kaufman says that some vendors feared that their brand name would suffer if consumers saw their product sold through eBay instead of through a traditional retailer or cataloger — especially if the products were getting auctioned off in a damaged or used condition.

Frederick’s of Hollywood, a cataloger/retailer of women’s apparel and lingerie, has another brand-related concern. If the Hollywood, CA-based marketer were to open an eBay store, a consumer searching “Frederick’s of Hollywood” on the site could be led to the Frederick’s eBay — or to an auction of Frederick’s merchandise from sellers unaffiliated with the company, says online merchandising manager Michelle Hornsby. To avoid the potential confusion, Frederick’s shies away from eBay altogether.

An eBay store “may end up confusing the customer,” agrees Andrea Syverson, marketing strategist with Black Forest, CO-based consultancy IER Partners. Customers may wonder whether the items they are bidding on are seconds or used.

Worse, they may grow accustomed to paying bottom dollar on eBay. Sites like eBay teach consumers that a cataloger’s price is negotiable, says Robin Lebo, president of Charlottesville, VA-based consultancy Lebo Direct. These shoppers may therefore be less likely to spend full price for the company’s merchandise in the future. “When you continually offer discounts, you train your customer to wait for deals,” she says.

“Controlling all aspects of the shopping experience is one of the ways we protect the integrity of our brand,” says Margery Myers, vice president, corporate communications/public relations for apparel cataloger/retailer The Talbots. “This includes providing our customers with consistent pricing and a high level of personal service.” For that reason, the Hingham, MA-based company has no interest in opening an eBay store.

Lebo suggests that catalogers interested in opening an online auction site store tag for auction only high-end merchandise, or products that most consumers might be unwilling to pay for at the full price. Merchandise available in limited supply may also be a good choice for an online auction if you don’t have enough of those particular items to sell on your main Website.

Lebo says she would stay away from offering discounted or returned items. While offering high-end or limited merchandise is similar to an estate auction, selling already discounted or returned items may bring to mind images of a tacky garage sale.

Technical difficulties

Branding issues weren’t the only difficulties Crutchfield experienced before closing its eBay store in September. While the experience of shopping at its eBay store was seamless for customers, it required more extra work in the order-processing department than Crutchfield’s executives had anticipated.

The main technical problem, Rimm-Kaufman explains, was that the company’s order processing software system was not designed to handle sales of the same product to two people at the same time at two prices. Employees in the order processing department had to manually override the set price of products bought through eBay and enter the price the item was auctioned off for.

They also had to override the system when eBay customers made returns. The company’s software would not automatically process the return of products purchased at prices differing from the set price in its database. This too required a time-consuming override.

Crutchfield also had to adjust its system to hold inventory for the duration of an auction. So Crutchfield’s order processors had to again override the software to tell it to reserve certain products so they would be available as soon as the auctions were won.

Rimm-Kaufman says it would have helped to have the technical questions worked out before opening the eBay Store. “In the start-up phase sometimes you hit bumps in the road, but with eBay you need to start with perfection because one negative rating could be disasterous,” he says, referring to the customer feedback survey available to every eBay shopper following a sale.

Despite its initial problems Crutchfield remains a believer in eBay. (The cataloger is in fact an eBay customer itself and has purchased auction lots of IT equipment.) Rimm-Kaufman says the company plans to reopen its eBay store, though he can’t specify when. Due to the still-unresolved branding issues, when Crutchfield does reopen its eBay store, certain vendors will not be represented, at their request.

Alternatives to EBay

EBay is the largest and best-known auction site, but it isn’t the only one. Competitors include:

Bidz, based in Culver City, CA, buys closeout lots and offers them in no-reserve auctions

OnSale, a wholly owned subsidiary of Torrance, CA-based cataloger/retailer PC Mall, boasts that introduced online auction engines and e-mail order status

uBid, based in Chicago, was founded in April 1997 as a division of cataloger/retailer Creative Computers

EBay Tip Box

Considering launching an eBay store? Here are a few tips to keep in mind:

  • When putting an item up for sale, don’t skimp on information. The more details on a product you provide, the more likely you are to make a sale. EBay spokesperson Kevin Pursglove suggests including the history of the item if it has been used, an accurate description of the item, particulars on the return/refund policy, details on the shipping terms, and a photo of the item.

  • Decide whether you want to start with a minimum bid. Pursglove suggests that stores start an auction at a price they are willing to accept. To reach the maximum number of bidders, however, New York-based furniture slipcover cataloger Sure Fit doesn’t put a minimum bid or reserve price on its merchandise. “You get the highest selling price when you have the greatest number of potential buyers out there,” reasons director of marketing and sales David Spain. It does offer a “buy it now” option, however, which enables shoppers to purchase the product for the price that SureFit has set. Conversely, New York-based multititle mailer Brylane sets a minimum price on all its auction items. Products on its Chadwick’s Wholesale site have been given a minimum selling price of $1 to generate interest in the still-new store, and items on Chadwick’s Factory Direct have minimum price points of $2.99 for dresses and sportswear, and $5.99-$10.99 for the more expensive merchandise such as its leather clothing. Brylane keeps prices as low as it can to make its products as attractive to eBay customers as possible, but it always sets minimum price points, says director of liquidation Lauren Hyman.

  • Test the lengths of the auctions. EBay allows merchants to run their auctions for three, five, or seven days. Besides these standard auction times available to all sellers, companies with eBay stores can list their merchandise in “Store Inventory,” an additional format providing longer durations (30, 60, 90, and 120 days, and “Good ‘Til Cancelled,” ending whenever the store chooses to end it). After testing five-day and seven-day auctions, Brylane found three days to be the ideal auction length for its Chadwick’s Factory Direct store, as Chadwick’s customers get tired of seeing the same products displayed for more than a few days, says Hyman.

  • Determine who will handle checkout and fulfillment. Spain says one of the biggest challenges was figuring out a way to integrate the eBay purchase platform with Sure Fit’s own checkout platform. The difficulty, Spain says, is that eBay’s check-out system is designed with transactions between independent individuals in mind, not sales between a company and customer. Sure Fit’s IT department worked with a Web consulting firm to convert eBay’s data fields, containing information on the piece of merchandise sold and the price it was sold at, into a format that Sure Fit’s fulfillment software would recognize as an order. The order information is then processed by Sure Fit and sent back to the customer on eBay as a checkout link. The Sharper Image, on the other hand, bypasses the eBay checkout system altogether by redirecting customers checking out of its eBay store to the checkout page of The Sharper Image Website, says spokesperson Mollee Madrigal.
    MW

On the Auction Block

A sampling of catalogers’ eBay auctions, as of June 15:

Disney Deals Direct from Disney: Disney Princess Ballerina Quilt Set, Full; reserve price, $175.00

Martha Stewart Yardsale: Spoke Garden Dining Table; highest of 18 bids five hours before auction close, $86.00

Northern Tool and Equipment Co.: NorTrac 25 HP 4×4 Demo Tractor; reserve price, $4,750.00

The Sharper Image: Leather-Covered “Human Touch” Robotic Massage Recliner with Curve Track and Calf & Foot Massage; retail price, $1,799.95; reserve price, $1,250.00

West Marine: GPSMap 2010C Large Screen Chartplotter (refurbished); starting bid, $1,439.98; highest of five bids five hours before auction close, $1,550.00.