Middlemen mine eBay as new profit source
Shops open up to prepare, ship items for auction

ATLANTA - Yes, people go to eBay simply to buy and sell stuff to each other. But as the Internet auction site becomes increasingly popular, it's attracting a fast-growing crowd of businesses that want to be part of the process. Global shipper UPS's recent decision to link up with a company that helps auction goods on eBay reflects how much money businesses think can be made as middlemen.

They see people like Lee Ann Fletcher as a promising customer base. Fletcher, 35, wanted to sell a piece of china, a vase and a few other odds and ends around her home. She just didn't have time to do the legwork after long hours working for her family's roofing business.

So the Atlanta woman took her wares to The UPS Store, which shipped them to California-based AuctionDrop, a company that posted them on eBay and will send her a cut when they sell.

"It's worth somebody else making a little bit more money just to save the time," she said.

Companies big and small are now seeing even a small slice of eBay's action as worth the effort. In its last quarterly report, eBay said customers exchanged more than $8 billion in merchandise in just three months. It expects its sales to easily exceed $3 billion this year. Based in San Jose, Calif., eBay boasts 104.5 million registered users.

"The historical notion of eBay being strictly a consumer-to-consumer platform is somewhat anachronistic," said Scott Kessler, an equity analyst with Standard & Poor's in New York. "You have hundreds of thousands of folks on there now that make their living on eBay."

Mom-and-pop retailers seeking to expand their markets long have been part of the eBay landscape. Now much bigger partnerships are blossoming.

For instance, Hewlett-Packard Co. announced recently it would set up a "photography zone" on eBay to help people photograph their wares, a key part of the auction process. It's also a way for HP to pitch its own products.

And eBay's online payment unit, PayPal, has announced an agreement with consumer credit provider GE Consumer Finance to give qualifying customers virtually instant credit.

The majority of eBay's registered users are buyers. So, the several dozen companies out there acting as middlemen figure there is a windfall to be made by making it easier to sell for people who are sitting on the sidelines watching.

Ebay's happy to have them. "We think the idea is great," said eBay spokesman Hani Durzy. "What it promises to do is open up the eBay marketplace to that segment of society that are not listing items on eBay for any number of reasons."

The teaming-up of Atlanta-based UPS and San Carlos,Calif.-based AuctionDrop has gotten the most attention.

Customers can drop off items worth at least $75 at any of the 3,400 UPS Stores in the United States. UPS packs and ships the items to AuctionDrop. Employees there photograph the items, test their functionality and post them on eBay.

If the item sells, AuctionDrop sends the money to the customer, minus a commission that ranges from 20 percent to 38 percent depending on the value of the item. AuctionDrop pays UPS for the shipping costs. The only other charge to the customer are some nominal fees eBay charges.

If an item doesn't sell within seven days, AuctionDrop returns it to the owner at no charge.

AuctionDrop Chief Executive Randy Adams said his 5,000-customer company has not yet turned a profit since opening its first store in March 2003, but he believes that will change soon thanks to millions in venture capital and the recent UPS deal.

"If you look at the amount of sales on eBay, ($24) billion worth of items in the last year, we believe there is at least that much of available merchandise a year sitting in people's homes that is just depreciating and not getting sold," Adams said.

Another eBay middleman with national aspirations is Pasadena, Calif.-based iSold It. The company has two walk-in stores and plans to open 50 more by the end of the year.

Unlike AuctionDrop, iSold It is sticking with building through franchising its own stores rather than through the stores of another company that does multiple things.

"I feel strongly that consumers are going to have more confidence in a single-minded storefront focus on eBay," said iSold It President Elise Wetzel, whose stores act solely as an eBay middleman. "To me, it's like when gas stations sold videotapes and then Blockbuster came to town."

Since starting in December, privately held iSold has turned a profit, Wetzel said, although she would not release numbers.

HoustonChronicle.com - Middlemen mine eBay as new profit source