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EcommerceBytes-Update, Number 70 - May 19, 2002 - ISSN 1528-6703     2 of 7

U.S. Postal Service Evaluates Online Auction Performance

By David Steiner

May 19, 2002

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For as long as there has been a U.S. Postal Service, there has been undeliverable mail. In the 1700s, a person could purchase a piece of undeliverable mail for a penny. Three centuries later, the USPS has found a new outlet for relieving themselves of undeliverable packages: eBay.

For the past year, the U.S. Postal service has been testing the online auction waters by “eBaying” merchandise that could not be delivered to its destination or returned to its sender. Dubbed the “eBay Disposal Project” internally, the test was set up to evaluate the effectiveness of selling undeliverable items online compared to more traditional venues such as live auctions.

Every day, items ranging from Elvis scrapbooks and Yanni CDs to Hummel figurines and Harry Potter books found willing bidders on eBay, enabling the USPS to unburden itself of undeliverable parcels and replenish its general operating fund at the same time.

The Post Office is no novice to traditional auctions, having used them to dispose of undeliverable mail since the early 1900s. Every 6-8 weeks, the USPS would hold auctions at their three Mail Recovery Centers (MRCs) in Atlanta, St. Paul and San Francisco. However, because of obvious geographical constraints, not everyone was able to participate in these "huge garage sales." Odette Horne, Manager of the Mail Recovery Program for the USPS, noticed that, "We would see the same 300 people showing up to buy."

Spurred on by people who did not live close to Mail Recovery Centers, and who wanted access to this postal "gold mine," the USPS decided to take their act to the Internet. Early last year, they began test selling on the eBay auction site. Items from the MRCs were shipped to Topeka, Kansas, where a team of USPS employees got down to the business of listing online auctions.

Even for an agency as large as the USPS, the shift to high-tech auctions did not get off to an easy start. “We were very naïve,” said Ms. Horne. “There are so many little things to doing online auctions - taking pictures, identifying items, accepting payment - everything.We didn't know the learning curve was going to take so long.”

However, with a dozen or so postal employees participating, and assistance from one employee who was an experienced online seller, the MRCs were soon listing hundreds of auctions weekly on eBay.

The USPS quickly discovered that there was a difference in which items sold well online, and which items were more conducive to the live auction format. Collectibles, books, records and CDs realized much higher prices on eBay, while bulkier, more difficult to ship items like automobile parts and large lots - 500 Led Zeppelin T-shirts, a lot of 30 “left” shoes, and 76 Brassieres (34c) - seemed a better fit for live auction venues.

There were also some land mines that needed to be averted with online selling. Non-paying bidders, returned merchandise and dealing with complaints from manufacturers about the sale of their trademarked items proved to be challenging and not previously encountered in real-life auctions. “With public auctions, the buyers see it, they buy it, and they take it away,” saidMs. Horne. “At the end of the day, our shelves are clear. With online auctions, it may be in our storage for 6-8 weeks.”

What the USPS listed on eBay was miniscule compared to the sheer volume of items received by the MRCs. To try to take advantage of multiple sales channels, the Postal Service has simultaneously been testing other methods of selling undeliverable merchandise by contracting Recovery Management Corporation (RMC), a company that specializes in liquidating lost cargo shipments and unclaimed freight.

Recovery Management Corporation has been using eBay as a selling channel for 2 years, although the majority of sales revenue is still derived from more traditional venues including a company-owned retail store, direct sales and live auctions. The Missouri-based company disposes of products for 8 of the 10 largest carriers in the U.S and boasts over 360 employees, including on-staff experts who can quickly identify collectibles across categories. Business has been good for this 15-year-old company. So good, in fact, that a second facility was recently added in California.

eBay sales make up the smallest percentage of the RMC's revenue, although it has been highly effective for certain items. According to Dave Myers, Vice-President of Operations at Recovery Management Corporation, it’s a never-ending process to learn what sells better online and what is better suited for other venues. “Higher-end sporting goods and middle art goods, such as prints and collectibles, get a better price on eBay than in our retail stores," said Myers. “However, books, CDs, and large or fragile items that can be a problem shipping do better with other channels.”

The U.S. Postal Service ended the eBay Disposal Project last month to analyze its performance. They will also be evaluating the potential of the multiple sales channels provided by Recovery Management Corporation. So far, the jury is out for the USPS concerning the best way to liquidate their undeliverable merchandise. But it’s clear that the Internet has a place in the future.

“The online auction is one channel,”explained Ms. Horne. “What we found is when we have multiple channels, we do better.Some things do better selling online, other things do better at public auction.”

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About the author:

David Steiner is President of Steiner Associates LLC, publisher of EcommerceBytes.com and the EveryPlaceISell.com merchant directory. David, a former television producer, handles business development and advertising for EcommerceBytes. You can reach him at dsteiner@ecommercebytes.com

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