eBay Dips Toe in Consignment Selling
By Ina Steiner
eBay is tackling one of the toughest business models an online seller can get into: the eBay drop off store, by testing its own "pick up" service that works in conjunction with consignment sellers. Those unfamiliar with the concept may remember the movie, Forty Year Old Virgin, where the main character brought his collectibles to his love interest's drop-off store to sell on eBay on his behalf. And while it may look easy, the Internet is littered with failed attempts to make the eBay drop-off store model profitable.
EcommerceBytes spoke with the two participants of a new pilot program eBay is testing and learned the nitty-gritty details behind the eBay Selling Assistant program, which is aimed at reinvigorating consumer engagement using the Trading Assistant and Trading Post consignment programs.
Karen Blankenship runs KbeeTradingPost in San Jose, California, which she opened in July 2011. She processes about $250,000 in merchandise on eBay annually on behalf of her clients. She takes a 45% all inclusive cut of the proceeds - but between eBay and PayPal fees, she actually earns about 30% of items' selling price.
She began participating in the eBay Selling Assistant pilot program the day before Thanksgiving. eBay advertises the program in the San Jose market. Interested parties (the "consignors") call a number - 855-EBAY-VAN - and arrange for eBay employees to pick up their items at their homes. The items are then delivered to KbeeTradingPost, which lists the items for sale.
eBay then gives consignors in the Selling Assistant program 75% of the item's selling price (see the program offers on this page). The remaining amount, 25%, is well below what typical eBay consignment services charge for their services. When eBay and PayPal fees are factored in, that could leave Trading Assistants with 10% to cover their labor, rent and other expenses.
EcommerceBytes learned that eBay is subsidizing the two participants in the pilot program so they receive their normal fees - but their clients get a big break on fees.
Kevin Bittner runs an iSold It franchise in Topeka, Kansas, and is also participating in the eBay Selling Assistant pilot program.
He opened two iSold It drop off stores in May 2006. His previous experience as Senior Vice President at a telecommunications firm was key to surviving the rocky business. "This is the most difficult business to be in. If I hadn't had a business background, it would have been near disastrous."
Bittner explained that he has more than one customer - he has the seller customers (the consignors), and the buyer customers - the people who purchase the items online. Balancing those two customers is difficult. In addition, the marketplaces, whether it's eBay or Amazon, will always side with the buyer customer, he said.
Bittner did not share his dollar sales volume, but said he usually runs 600 - 1200 items/month online. He began participating in the eBay Selling Assistant program last week, so it was too soon to say what kind of effect it would have on his business, he said.
Linda Miller has been following the eBay drop-off store model since the mid-2000's and created a directory of consignment businesses called ConsignmentPal that now includes antiques dealers, art galleries and other resale businesses in addition to eBay consignment sellers.
She said the most successful consignment businesses, including eBay Trading Assistants and drop off stores, charge 50 - 60 percent for their services - that includes selling fees. She said some businesses charge 20 - 25 percent "if they don't know what the are doing or are new."
However, Miller said it made a lot of sense for eBay to pay attention to the consignment business, pegging the industry as a whole as "absolutely huge" as Baby Boomers look to downsize but don't have the time to do it themselves.
"There's an enormous market for it, especially in hard economic times," Miller said.
The biggest challenges for eBay consignment sellers are people who don't have the toolset, Miller said, and that eBay makes it hard to find consignment sellers. Another challenge is making it easy for people to know if a consignment business is legitimate.
Both Bittner and Blankenship said eBay drop-off stores was a tough business. "We worked extremely hard for a lot of years to make it profitable," Bittner said, "and the margins don't leave a lot of room for error."
Blankenship said she's excited because the pilot program gives eBay insight into what it's like to sell on the site. "It's a great opportunity for them to see how much work is involved. It's more about them learning about themselves," she said. She called herself an advocate for sellers, and said eBay would likely discover that selling on its marketplace is a little harder than they thought.
eBay spokesperson Johnna Hoff said while eBay has opened up the "buy side" in local markets, the new pilot programs are giving people new ways to sell on eBay and are attracting "people who wouldn't have previously interacted with eBay as a destination." She said customers who haven't been on eBay or been active as buyers or sellers have been participating in the Selling Assistant program.
"It's a benefit down the road," Hoff said, as the program increases the eBay ecosphere.
More information about eBay's new pilot program is available in Thursday's EcommerceBytes Newsflash.
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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 email@example.com.
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