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If it's called Daily Blah, how come you don't ... hey, wait, you're writing every day!
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I say, old chap, you forgot the "u" in "colour."
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Daily Blah for... Tuesday, January 20, 2004
Too Much Stuff
A hefty piece here about a company called AuctionDrop, which I put together late last year for Fortune Small Business, and which has finally hit newsstands. I can't wait for AuctionDrop's San Francisco office to open. I've got way too much stuff myself. My attic, rather than my garage, is heaving.
E-COMMERCE
eBay for Dummies
Auction Drop, a fast-growing Bay Area startup, will list, sell, and ship your surplus stuff—for a price.
By Chris Taylor
Randy Adams had a common American affliction: an outbreak of junk overpopulating his garage. There were so many unloved gadgets residing there that his wife couldn't get the car in anymore. Why not sell them on eBay, she asked? Adams, 51, demurred. He'd never sold on eBay, but as a retired entrepreneur who'd started six technology companies, he had no illusions about what would be involved. He'd have to take digital photos of everything. Then he'd fret about getting a good feedback rating, without which he was unlikely to empty his garage. "It's hard to start out on eBay," he noted. "It's hard to be a casual seller." Well, then, said his wife, her exasperation growing, why not found another company to do it for you?
Which is exactly what Adams did. The firstAuction Drop store opened its doors in San Carlos, Calif., last March; it was so popular that Adams opened another four stores by the end of 2003 and plans at least 15 to 20 more this year. And Auction Drop is only the most visible of a number of new companies that piggyback on eBay's massive success. The premise is simple. A vast, global marketplace is opening up. You have possessions that could be selling in it, but you don't have the time, the equipment, or the inclination to do it yourself. For a percentage of the proceeds, Auction Drop and its ilk will do the job for you. All you have to do is sit back and wait for the check.
Adams has a track record of getting a jump on good ideas. He founded one of the web's first e-tailers, the Internet Shopping Network, in 1994 (and later sold it to the Home Shopping Network). Selling secondhand, he believes, could be just as big a business. "Think about how much consumer equipment is bought every year," he says. "Even if just 25% of electronic and sporting goods are candidates for resale, that's a $25 billion market." Call it the re-retail model.
Since last March, Auction Drop, which isn't yet profitable, has sold at least 10,000 items and has generated more than $1 million in revenue. It charges a commission of between 20% and 38% of the selling price. The more expensive the item, the lower the commission. (eBay's seller fees, roughly 5%, are included in the commission.) Auction Drop won't sell anything it appraises at less than $50 (although you can give it a whole box of books, say, as a single item) or more than $1 million, or anything that weighs more than 150 pounds. To make money, what it is looking for is what Adams calls a "good value density"—something that is heavy in value relative to its weight, like watches, cameras, and laptop computers. Or like the pair of lifetime season tickets to the San Francisco 49ers the company sold for $30,000—its most value-dense item yet.
Chances are you won't see your stuff again—Auction Drop sells 92% of everything it puts up on the website, a phenomenal rate compared with eBay's 50%. But if by chance your item isn't sold, Auction Drop will either ship it back to you or donate it to charity, in which case it will send you a tax receipt.
Naturally there were teething troubles. "At the start they needed a lot more handholding," says Carol Shaffer, 47, a software training director and a regular customer of Auction Drop who lives in San Carlos. "You had to wait with your stuff at reception while they typed in a description for each item. It could take hours." With hundreds of customers flooding in every day, the company had to speed up processing. Experts in appraising items like jewelry and accessories were brought onboard, as were trained copywriters and photographers. Staff workshops on subjects such as pricing a designer purse were hastily arranged.
Adams—who had originally envisioned each Auction Drop store as a self-contained unit, receiving, selling, and mailing each item—switched to a spoke-and-hub model. The spokes were stores throughout the Bay Area in Los Altos, Menlo Park, San Leandro, and San Rafael, which would concentrate on getting the goods out of the customer's hands fast; the hub was the warehouse store in San Carlos, where every item would be processed on a conveyor belt.
The overhaul worked. "They've gotten a lot better about using their own judgment," says Shaffer—who has been selling items on eBay since 1995 and has now switched entirely to using Auction Drop (which sold 150 of the 170 items she left with the company). Take a stroll along that conveyor belt now, and you get the impression of a well-oiled (if somewhat minimalist) machine in rapid motion. Items travel in crates, each with a unique bar code. Open one and you might find a Lladro collectible dog figurine, or a Brighton Caroline tote bag, or a stereo autographed by the singer Thomas Dolby. Photographers have ten minutes to shoot each item from a variety of angles; the copywriting team aims to list 300 items on eBay every shift. Knowing that the description sells an item as much as its photo, they try to invest the writing with a certain sizzle. One listing for a Batman pogo stick begins "Holy rare collectibles, Batman!"
For eBay the timing couldn't be better. The San Jose-based website faces a couple of big challenges if it wants to maintain the startling expansion rate that made it No. 8 on FORTUNE's list of America's Fastest-Growing Companies. First, it has far more buyers than sellers. Second, new sellers are harder and harder to come by; most of those who have the knowledge and patience to sell on eBay are already doing so. Adams's company has become adept at bringing in eBay virgins: 18% of its users don't even have a computer. "We're thrilled about the success of Auction Drop," said Walt Duflock, eBay's senior manager for user programs. Indeed, Adams got eBay's equivalent of the royal seal of approval last summer when CEO Meg Whitman dropped by and sold off a few used goods of her own, including a genuine bristle dartboard and a Coach belt.
But Auction Drop isn't the only piggyback rider eBay loves to carry around. A company called PostNet, based in Henderson, Nev., is rolling out a similar business model. PostNet has the advantage of being well established; it has 425 Kinko's-style copier stores nationwide. eBay dropoff points have been set up in 11 test stores in Arizona, California, Georgia, and Nevada. Staffers take digital photos and write descriptions of each item; everything else is taken care of at PostNet's headquarters. The commission has been tentatively set at 40%. "I'm very impressed with Auction Drop," says Steve Greenbaum, PostNet's CEO, "but we already have our overhead costs taken care of. We're very confident of our ability to compete."
Mindful of the rivalry, Auction Drop is expanding operations with all the gung-ho fearlessness of a late 1990s dot-com. Adams has bought a Los Angeles warehouse that he hopes will become the basis of a new hub-and-spoke system. By April he intends to have ten stores in the Bay Area and another ten in L.A. Next on his list: New York City and surrounding suburbs. Adams is quite willing to lease out franchise operations too. "Our goal," he says, "is clicks and mortar on every corner."
Will it work? Some longtime industry watchers are skeptical. After all, PostNet and Auction Drop are not the first players in this space. Two predecessors, TIAS.com and MyEZSale.com, had 14 and seven dropoff locations, respectively, at the height of the dot-com boom in 2000. MyEZSale had to shutter its doors for lack of funding, while TIAS now simply sells antiques and collectibles on its website. "Consignment companies don't have a lot of control over the inventory," says David Steiner, president of Auctionbytes.com, a news website for online sellers. "They're at the mercy of whatever comes through the front door."
For now, at least, Auction Drop doesn't have a problem with intake. Adams is eager to hire 140 new staffers on top of the 60 he already employs and still expects to post a profit this year. Neither TIAS nor MyEZSale had a hub-and-spoke model, let alone a well-oiled one. And Adams is no dot-com spring chicken. His years as a serial entrepreneur—one of his companies failed, the other five left him a multimillionaire—will provide invaluable experience as Auction Drop goes nationwide.
By the way, a couple of months ago Adams filled a truck with consumer electronics from his house and drove it to Auction Drop. His garage is now gadget-free, his car is sheltered, and his wife is happy. If only he could cure the rest of us of the too-much-stuff disease.
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