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EcommerceBytes-NewsFlash, Number 1689 - December 20, 2007 - ISSN 1539-5065    3 of 3

QuikDrop Closes eBay Drop-off Store Franchise

By Ina Steiner
December 20, 2007

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QuikDrop is closing its eBay drop-off store franchise business at the end of the month, but franchise stores will be able to continue to use the QuikDrop name, logos, and signage. A conversation with the company's cofounder Jack Reynolds on Wednesday netted a laundry list of complaints about the challenges of selling on eBay that contributed to his company's demise, beginning in 2006 with the Stores search and fee changes.

QuikDrop storeowners did not seem surprised at the news of the closure, which arrived via email from QuikDrop headquarters on Friday night - and some actually seemed relieved.

"I think it's healthy," said Erik Helgesen, owner of a QuikDrop franchise store on Long Island, New York. Helgesen said his 4-year-old business has been profitable since its second year of operation. He is very happy with his location in a town area across from a train station and said about 90 percent of his business is walk-in traffic. Not having to pay franchise fees will give his business working capital to market his business locally, and, he said, QuikDrop headquarters didn't do much to help storeowners anyway.

However, at least one storeowner was worried over QuikDrop's notice that it would cease offering the stores use of its proprietary software program on December 31. Bob Golub, owner of a Massachusetts QuikDrop franchise store, said he wasn't surprised at news of the closure, but is worried about finding replacement software and learning a new program in such a short period of time. "We're all scrambling," Golub said.

Reynolds said storeowners would be allowed to continue using the franchisor's QuikFlow software program and said there are people who will support it.

Golub said he wishes he had more time to deal with the software issue, but otherwise the closing is not a great loss. He intends to give up his retail space and go to a larger, less expensive warehouse when his lease allows him to in 6 months. He's also considering selling his own products on eBay to supplement the consignment business.

Was the franchise a good investment for storeowners? Reynolds said obviously not for those stores that opened and closed, but some have done very well.

The number of QuikDrop stores shrunk from a high of 95 in mid-2006 to under 30 stores today. Reynolds said the store closings, combined with a number of stores who were unable to pay franchise royalties, led to the decision to close the corporate franchise office.

In late 2005 and early 2006, Reynolds said eBay worked on joint marketing with QuikDrop and things were going well. eBay discovered that consumers who visited drop off stores became more active as buyers on eBay, so the auction site marketed to people who weren't sellers to promote eBay Trading Assistants. But things took a downward turn in 2006, he said.

Reynolds listed the familiar complaints about eBay: higher fees that resulted from eBay's Store changes in 2006; tougher VeRO rules in 2006 and 2007; changing policies that weren't communicated to sellers; and lower selling prices achieved on the site.

QuikDrop stores sold many branded products that got caught in eBay's anti-counterfeiting initiatives enacted in late 2006. "It got almost impossible to sell products. As soon as you got a few VeRO complaints, eBay would take down your PowerSeller status and place limits on how much you could sell." And in mid-2007, eBay implemented new policies (the Seller Non Performance initiative) that treated neutrals as negatives and put restrictions on how many items sellers could list when their feedback got below a certain point.

eBay's policies implemented in 2006 and 2007 hurt QuikDrop stores, which sell a lot of used and refurbished items, according to Reynolds. He said one store in Illinois sold refurbished home and garden products from a national retailer. They offered buyers a money-back guarantee, but even with the guarantee, buyers left bad feedback, Reynolds said. That store had 20 people on payroll and was doing a quarter of a million dollars a month in gross revenue, and when eBay shut the seller down for a week, it hurt. "The policies were not published. You'd call up and find out about a new policy," Reynolds complained.

Many of the eBay policy and enforcement changes came at a time when no one headed eBay's Trading Assistant program. Reynolds said he asked eBay North America President Bill Cobb many times to replace Walt Duflock after he left, but said the position went unfilled for a year.

"We had no one to talk to at eBay," Reynolds said

QuikDrop storeowners Helgesen and Golub both said they intend to continue running their stores and will continue using the QuikDrop name.


About the author:

Ina Steiner is co-founder and Editor of EcommerceBytes and has been reporting on ecommerce since 1999. She's a widely cited authority on marketplace selling and is author of "Turn eBay Data Into Dollars" (McGraw-Hill 2006). Her blog was featured in the book, "Blogging Heroes" (Wiley 2008). Follow her on Twitter at @ecommercebytes and send news tips to ina@ecommercebytes.com.

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