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AuctionBytes Blog
Covering auctions, collectibles and marketplace selling.

AuctionBytes Blog The AuctionBytes Blog has been giving a voice to online merchants since its launch in 2005. Named one of the world's top 30 blogs in 2008 by "Blogging Heroes." Weigh in with your thoughts on the joys and pitfalls of selling online.
Sun Mar 28 2010 09:49:31

Where Have all the eBay Drop-Off Stores Gone?

By: David Steiner
Sponsored Link
I was doing a little Spring cleaning on the site this weekend, and one of the chores was going through the charts on AuctionBytes to bring them up-to-date. Invariably, I get sidetracked because I find such interesting data tucked away on the site. One of the first updates I tackled was the chart for Consignment services.  I believe we created this chart in 2004-2005, around the height of the eBay Drop-Off service "land grab." Venture Capital firms were backing companies (AuctionDrop, for example, received around $3 million in funding) in the belief that if people who didn't have the time to sell online themselves would be able to drop their goods at a local drop-off store, and "Voila!" - instant money.

We were one of the first publications to write about the drop-off concept, starting with a Boston-Area service called, "MyEZSale." Things didn't pan out for that company, and ya-da, ya-da, I now own the domain name. (I thought it was a cool name, the concept just stunk)  We caught quite a bit of flak from franchise owners for the "tone" of our coverage. Interestingly, most of those services are no longer in business.

So where do eBay drop-off stores stand in 2010? Here's what I found in updating the Consignment Services chart: There are 221 services listed on this chart. That's 221 drop-off services that were either originally included by us, or requested inclusion. This number also includes companies that sell franchises. Of the 221 services listed, only 69 now link to an operational consignment service. That means that just thirty-one percent of the businesses that we listed in this area are still functioning.

I've heard that restaurants have a high rate of failure - in looking at this 2005 Cornell study (pdf) it appears that the rate is between 50%-61% after three years. I'm not claiming that the data in our charts adds up to a scientific study, but it certainly is an interesting data set. If a 61% failure rate for restaurants is held up as being an example of how difficult it is to sustain that type of business, the consignment services in our charts had an uninspiring 69% rate of failure.

What piques my curiosity isn't what made so many of these services fail? I think that's been well documented by us. I'm curious about what has made the services that are still operating succeed. What do they know that the others didn't, what types of adjustments have they had to make, and are there some pearls of wisdom that they can impart to sellers on protecting their margins? I'd love to know.

Back to updating the siteā€¦



Comments (41) | Permalink
Readers Comments

Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: bsanut
       
Sun Mar 28 12:04:30 2010
Anybody who's been at this long enough knows that back in the day Ebay was so novel you could peddle a bucket with a hole in it.  Those days have passed.

Selling on Ebay is now very complex, competitive and expensive so the bottom line is you just have to know what you're doing and buy your inventory right or you'll get eaten alive.  Niche is also very important.  Selling OTHER people's stuff has never been very successful for me, and I rarely do it anymore.

Joe
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Gary Overton
       Web Site
Sun Mar 28 12:26:58 2010
I started to go into this business when folks first started doing it. Even bought forms, etc.
After doing the math I could see where it would be almost impossible to make a go of it unless I could find enough people that just wanted to dump their stuff for any amount of money.
Most people have a very unrealistic idea of what their "stuff" is worth in the 1st place. When you add the commissions you have to charge to cover all expenses on top of the seller's unrealistic expectations you have a formula for failure.
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Kal
       
Sun Mar 28 12:41:17 2010
People don't like handing over 25-40% of the sale to someone else. Also, as someone else just said, people think their ''stuff'' is worth more than it actually is. I was selling other people's stuff for a while at 25%, and I had a terrible time with the owners of the items. I was constantly fighting statements like ''can you start it at $100?'' for something that probably wouldn't sell at all. I can well understand how business would fail at this. My cut went only to me, and it was just enough to make it worth it, I didn't have to pay a rent for a storefront as well. That was a formula for failure.
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Ron
       
Sun Mar 28 12:45:00 2010
David,

Personally, as a user of eBay, pretty much from almost the beginning of its existence, it occurred to me at one point to perhaps offer a drop-off service.  I decided against the idea simply because, as a business model, it had too many problems.  And it was also obvious that as eBay matured, prices and sell through rates would come down, especially for a site that offered fixed price items.  Using Porter's competitive model, there are no barriers to entry or exit for suppliers, or barriers to entry of competitors in the form of competitive fixed price websites.

In addition, fixed costs in terms of photo and description, follow up e-mail, invoicing, packaging and then net cost accounting for client payment by the Drop-off center would only support commissions on price points above a certain sales amount result. And getting paid for something that doesn't sell is difficult and sure to lead to a dissatisfied customer.
So, I'm not surprised that a lot of these drop-off centers have stopped doing business.  I run my own auctions and over the last two years, my sell-through and revenue rates have dropped to half of what they had been. And I'm someone who knows antiques and collectibles very well.
As to why some of these centers have survived, it's difficult to say exactly how or why.  Their experience probably would not be different from any other seller of second-hand goods like myself.  So I can only assume that either they are a non-profit organization or, if they are for profit, they have to be very knowledgeable and particular about what goods that they accept for consignment and have to either charge a high percentage fee or have the client cover processing fees.
I will say that eBay did have a very effective and efficient second-hand marketplace at one point, due to being "first-in" and having built critical mass.  Critical mass is needed for a well functioning auction marketplace in that it requires high volumes of both buyers and sellers - had they stuck to this formula, they would have been less vulnerable to competitive forces from fixed price websites.  Unfortunately, they opened the door to competition by diluting their own value proposition and allowing and then encouraging fixed price sales, especially of commodity goods and liquidation items available elsewhere.  This was a bad mistake, and will prove to be their downfall.
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: USE eBay
       
Sun Mar 28 13:55:15 2010
It's for sure the glory days are gone.  I was a latecomer to eBay in 2006, but even then there were mostly auctions and fewer Buy it Nows as options on auctions.  

Some of the best bargains I bid for and won were from consignment shops that didn't know what they were selling.  The three week free(at that time) completed listing didn't show them enough and they weren't paying for the full version to see what the items actually sold for.  

The eventual profusion of Buy it Nows, the preponderance of snipers, the luring of the mega sellers to eBay,  and the loss of so many sellers and buyers due to eBay's don't-have-a-clue management has killed not only consignment stores but has killed eBay as it was.

Surfing eBay and winning auctions on eBay were FUN and now they're not.  People began to seek their Sunday afternoon entertainment elsewhere.  Facebook and myspace became the nation's main online entertainment and eBay started tanking.  The once iconic eBAY became just another overstock.com, interspersed with auctions for old times sake.  The end of consignment shops certainly, but truly the end of an era.  
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Sam
       Web Site
Sun Mar 28 14:08:00 2010
David,

Love the spring cleaning, were cleaning here too for Passover.. I wish it felt like spring though :)

eBay just takes too much of the fees and by the time it sells there's nothing left for the owner..Kinda reminds me of those lawyers, they take nothing unless they win but if they win they take it all...
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Jim This user has validated their user name.
       
Sun Mar 28 14:35:31 2010
One local eBay Consignment shop(Pelham AL) was a store front, now it is a desk in a computer repair shop.

I do consignment for one client.  We split 50% after shipping.  They are a recycling outfit.  Even then, they are disappointed at the results.  I get a lot of so and so will buy it for x.  I say sell it to so and so, because I am limited to eBay prices.  Yet the clearing after fees, taxes and shipping is about minimum wage.  

Figuring a $2000 month store front with labor and over head at $1000, figure your net at 20% after fees.  That is $3000 a month in costs, you will need $15000 in commissions a month each and every month.  At 30% commission that is 50,000 a month in sales each and every month.  One can plug in whatever figures they wish.  Makes me wonder what the heck the business plan for these things were.  
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Ray
       
Sun Mar 28 20:12:38 2010
Bear in mind that just because the remaining consignment business' haven't actually closed yet....that doesn't mean they are actually doing well (i.e. making a good profit).

A restaurant could be very busy (but behind the scenes, not really making net profits). Same goes here.

What would be very interesting is to know how many full-time ebay sellers (not closed yet) are still actually making any significant net profits just from ebay sales... I've found that most are relying on other private income (i.e. retirement funds, social security, spouse's income, you name it/etc)...
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: fat frog
       
Sun Mar 28 21:31:28 2010
When my accoountant called and said I make over 50,000 after all fleecebay and greedpay I almost had a heart attack.
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: pkarig
       
Sun Mar 28 22:24:21 2010
The sad truth now is that even if you get the stuff FREE by dumpster diving & such, You will still have a hard time making minimum wage .. So by the time you split with somebody else then add in all eBay's fees your OUT OF LUCK ..

It amazes me that despite the fact that eBay has QUADRUPLED its inventor or listings that they still only garnish the same number of sales as when they were smaller .. Their sell through rate isn't even as good now as most junk mail vendors!!
This pond is no FISHED OUT!!
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Joe
       
Sun Mar 28 22:27:17 2010
VERY Interesting Subject -- Wish you would consider writing a full length article about this. While people are not really getting into it now, the principles involved would be applicable to many other business ventures large & small.

PERSONALLY
Back in the hayday of eBay, I seriously considered getting into consignment stuff, but was mainly held back by the legal ramifications, ie stolen goods, eBay sales that went south, etc. [I am one of those that tries to think of all the bad stuff and than make a decision.]

Despite that I did make a couple half hearted attempts at it, one potential customer backed out at the last second [for reasons beyond my control], another one probably would have been a GREAT customer, but probably was a bit put-off by the rates I was going to charge and kept delaying [also partly due to reasons beyond my control], and a 3rd person would have worked out great, until I researched the item and discovered that virtually all the items selling for a good price were bought by Non-paying bidders, so I backed out of that one.

I do have a couple friends that I sell items for [some auctions, some long term fixed price stuff] don't really make much on it, but it adds variety to my selection and I DO make some money, so that is about the limit of what is practical for MOST sellers I would assume.

OBSERVATIONS regarding the niche
I think there are a couple reasons why some survived [and are still making money].
#1. Location / demographics.
#2. Closeouts / liquidations / etc [when a business goes under, some other business makes money selling off all the stuff]. This I believe is the MAIN reason so many survived.
#3. Questionable business practices, may not be legally wrong, but certainly morally wrong. [Remember most business schools only talk about legal aspects, not moral aspects of doing business.]
#4. Last but not least, some of these business are NOT strictly consignment, some/many of them sell their own stuff PLUS whatever anyone else is willing to let them sell and are probably making most of their money off their own items.

Lastly, in MY opinion a business commission rate while an issue, was NOT the main reason they failed. Most of the B&M consignment shops that I know charge similar if not higher rates than what would have been charged by drop off stores, in addition those consignment shops also generally would sell the stuff for less [in some cases much less] than what it would sell for on eBay and those places are packed & growing!!!
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Joe
       
Sun Mar 28 22:31:16 2010
Forgot one reason.
#5. They own/run a regular antique / collectible / second hand shop, so it is running an online dropoff store is just an extension of what they already do [which means their expenses are mainly paid for already by their B&M business] so online operating costs are much lower.
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: J.B. Malik
       Web Site
Sun Mar 28 23:20:41 2010
Very perceptive, Ina. A drive through anytown U.S.A. shows that most of these auction drop-off stores are out of business. The franchise business model just doesn't work. However, there is plenty of opportunity for independent consignors whom specialize in specific markets.
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Colonel John
       
Sun Mar 28 23:52:17 2010
We are still here but none of our competitors are.

One of the reasons is that auctioneering is a wholesale business. Those drop off's that are out of business must have thought they were some kind of retail business with their flashy strip mall uber expensive locations and their expensive advertising campaigns.

ebay did not help matters either. the shipping cost dsr was probably the last straw for these firms as well as fraud and chargebacks.

but the final nail in the coffin is the economy. auction lot prices are down. thats means you need to sell more to make the same money at the same commission rates.

there are probably a lot of other factors too like inadequate capital, poor planning, improper hiring procedures, poor location, etc.

I can write a book on it.

Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: zztopshlf
       
Sun Mar 28 23:59:23 2010
The only way to make it in the ''drop off store'' is to be picky about what you will sell. You need to sell higher ticket items that will bring in commissions that will see you actually profiting.

Of course even then, it's no guarantee with Ebay's constant state of change. Ebay is now so volatile with all it's changes, it's literally like trying to deal with a bureaucracy. Every year more red tape, more regulations, more rule changes. Will they at some point get smart enough to just ''keep it simple'' and let sellers worry about selling and making money for both themselves and Ebay?
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: RLG This user has validated their user name.
       
Mon Mar 29 00:39:15 2010
I am a partner in a dropoff store in a small town, going on 4.5 years old.  In the past we have been able to hire 3 part-time workers, but business has really dropped in the last 6-12 months (for all the reasons mentioned by other writers).  It's getting harder to justify being open (3 days - 11 hours a week total).  

We are helped by selling products manufactured by 2 local companies - some weeks those are our ONLY sales!  We are in the works to move those products to our own website, so that we can make a little more profit and not have to pay the final value fees.  We have also sold some really rare items through a big auction house instead of on eBay, and try to find outright buyers for specialized museum or library-type stuff.

It is not easy to stay afloat; some months' receipts are very discouraging.  I expect we can survive another year or 2 at most.

Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Hardrock Rules
       
Mon Mar 29 07:23:35 2010
@RAY / My Net Profits are about 29%, I never double my money, and last year with the money I got to keep before taxes was 29% profit on my total sales.

I have noticed also, since closer to March 30th, my poor sales, are dropping even more.

(2) Reasons for this, April through Sept. people are outside, not wasting their time on eBay, ( The Dead Season ) and it gets worse every year. OR this is eBays way of punishing me because I do not have a eBay store, and they think by making me get NO sales, I will subscribe.

Something happened, my poor sales just dropped off the face of the earth, and I am Top Rated
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: My Own Website Not Quite Paying My Bills Yet
       
Mon Mar 29 08:23:09 2010

Interesting topic David. Perhaps you can contact some of the ones that are still in business as ask them how they stay in business. I also agree that some of the existing ones are not actually making money.

@fat frog. Wake up! The reason why you almost had a heart attack was not because you made a profit. Lose some weight so that you can sign in as "slim frog".  
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Harmony Grove Antiques
       
Mon Mar 29 08:24:27 2010
Hardrock, you are not alone on the sales. Ours have been virtually non-existent during the same time frame and we, begrudgingly, did get a store. We are TRS and 100% positive feedback and still are sales have fallen off the face of the earth.

I'm sure we'll read about Ebay screwing with something during this timeframe in 6 months or so that will make us all realize that Ebay screwed us over, once again!
Where Have all the eBay Drop-Off Stores Gone?   Where Have all the eBay Drop-Off Stores Gone?
by: Joyful
       
Mon Mar 29 09:05:34 2010
A local eBay dropoff shop recently placed a help-wanted ad for an experienced eBay seller. From the job description, the new hire would run the operation, from recruiting clients to doing the accounting on proceeds. The pay offered was $8/hour.
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