The highest profile Internet auction site is going after b-to-b marketplaces.
EBay Inc.’s new eBay Stores service, launched last month, is courting b-to-b marketing and sales organizations with the promise of new customers, improved features and upgraded services. For a base monthly fee of $9.95, a merchant can establish a site at eBay Stores to promote and sell products.
Although backed by eBay, the stores do not provide auction capabilities. Instead, they are stand-alone storefronts where vendors can list their inventories at full or discount prices.
The new venture is separate from Half.com, another eBay site that specializes in deep discounts. The Half.com site does not create branded storefronts for merchants but aggregates an individual vendor’s listings within its search engine. By contrast, eBay Stores allows a vendor to cater to individual customers once they enter the eBay Stores area. It also allows buyers to bookmark a site, whereas Half.com does not provide this return-to-the-store technique.
Momentum is building for eBay Stores. At press time, there were 147 stores listed under the "business, office and industrial" heading. The list includes IBM Corp., a carbide tool supply store, a scale seller, glove manufacturers and an office furniture distributor.
Vernon Keenan, an Internet analyst with Keenan Vision Inc., San Francisco, said the incursion of eBay is a major threat to b-to-b marketplaces, which often demand a percentage of revenues or resources in exchange for a business’ membership. It is not unusual for a marketplace to charge 10% of the sales price, analysts said.
"EBay Stores is the epicenter of the hottest growth area of e-commerce today,’’ Keenan said. "There’s an opportunity for enterprises to become directly connected to eBay’s high-liquidity markets, and eBay has a very good chance to suck liquidity from other markets.’’
New business services for b-to-b sales and marketing departments are on the upswing. In 2001, Internet companies such as eBay, Andale Inc., CommerceFlow Inc., GoTo Auctions’ ChannelFusion and Realm Connect have all announced ways for companies to automatically connect their auction and storefront presences with existing business systems, Keenan said.
B-to-b auction services will account for just $82 million in revenues in 2002, but the market will grow to $1.9 billion in 2005, according to Keenan Vision research.
A land grab has already started among the auction sites to create b-to-b storefronts.
Competing sites such as Yahoo! Internet Auctions, uBid Inc. and Amazon.com Inc.’s Amazon.com Auctions beat eBay to the b-to-b storefront arena, but they now face the full force of eBay, one of the Internet’s best known brands.
EBay transacted more than $5 billion in merchandise sales in 2000, with an undisclosed percentage done by businesses. In recent weeks, President-CEO Meg Whitman has trumpeted eBay’s level-playing-field approach of charging businesses exactly as much as it charges consumers to sell online. That policy will continue, Whitman said.
EBay executives said the advent of eBay Stores gives b-to-b merchants another arrow in the quiver to drum up sales. Sales efforts are being concentrated on existing eBay b-to-b auctioneers to convert to eBay Stores users. The sales and marketing strategy will expand to recruitment of new customers within the year, said Kevin Pursglove, eBay senior director of communications.
``Liquidators, manufacturers and other b-to-b companies find they can no longer ignore the liquidity of this marketplace,’’ Pursglove said. ``It’s altogether possible for companies to participate in other marketplaces with other pricing formats, but large brand managers are finding the eBay marketplace is too large and too liquid to ignore.’’
To spur adoption, eBay waived the monthly $9.95 fee for eBay Stores to sellers who sign up before Aug. 1, charging instead between 1.25% and 5% of the sales price, depending on volume.
One aggressive b-to-b company tapping eBay Stores is PC Parts Inc., a Harrisburg, Pa.-based computer parts reseller that already does 25% of its business across the eBay auction and store sites.
"The Internet came along and gave us new opportunities with online auctions,’’ said George Crist, president of PC Parts.
Begun as a computer services company in the 1980s, PC Parts passed $6 million in revenue in 2000. It is expecting to reach revenues of $8 million to $9 million in 2001. It had never experienced that level of growth before using Internet b-to-b auctions and sales.
Initially, PC Parts had one person in charge of conducting auctions for parts on eBay, but that number has since grown to 12 people, Crist said. Moreover, PC Parts has launched an eBay division, selling exclusively on the eBay site.
The parts company quickly moved to set up a site under the eBay Stores site, looking to attract buyers who want to skip the bidding process, Crist said. The storefront is essential for this group of buyers, because it lets PC Parts establish relationships with new customers who might not be reached easily via direct sales, telemarketing, e-mail or Internet auctions, Crist said.
Downside of auctions
Indeed, a weakness of an auction is that business buyers who need a part or service to keep running are unlikely to rely on this mechanism to make a deal, analyst Keenan said. Storefronts allow first-time buyers to lock in a product immediately.
A drawback to doing business on the Internet is that first-time relationships have to be closely monitored at the outset, PC Parts’ Crist said.
"We experience a higher level of fraud with eBay customers,’’ he said.
For instance, items such as processors and memory chips are the equivalent of currency because of their liquidity, and buyers who shop only for these items are red flagged and monitored, Crist said. PC Parts makes sure payment has cleared before these items ship, and verifies the credit card numbers and addresses of eBay online buyers more thoroughly than usual, he said.
Acquiring new customers is also the goal for Rainbow Barter Inc., which sells copiers and cameras to businesses.
Steven Faulkner, president of Rainbow Barter, said it has done more than $2 million in sales since its launch last year, and more than half of these revenues came from auctions.
But Faulkner cautioned that the fees for auction listings can cut into sales margins if not enough units are moved. Commission fees on sales sites generally include a one-time listing fee, he noted. Devoid of volume, the listing fee can kill a promising business proposition, Faulkner said.
For example, Rainbow Barter recently put up 100 printers for sale on an eBay sales site at $69 apiece. Only five sold.
"It cost me $45 for $350 sales, which is no great shakes,’’ Faulkner said. "If all 100 units had sold, I’d be looking at $7,000 in sales at a total cost of $150.’’
Other organizations are expected to add b-to-b might to the eBay site.
IBM has already taken a featured listing on the stores page, although the hot link points to its auctions. Other active b-to-b sales organizations on eBay are Sun Microsystems Inc. and Egghead.com Inc., but neither has launched a major store presence yet.
Sun did not return calls seeking comment. An Egghead spokeswoman said the company is looking at the sales sites to augment its auction activity.
PC Parts does not directly market or promote its eBay auctions or storefront, Crist said. Instead, it pays eBay a $99.95 fee to list its auctions prominently when customers search under selected key words. That alone provides the marketing and promotion needed for robust Internet sales.
What’s one big benefit of the eBay Stores strategy? Auctions link to the store, and vice versa, allowing marketers to capitalize on volume across either sales format.
While eBay was not the first to offer b-to-b storefront sales, it is the auction site with the greatest clout, analyst Keenan said. PC Parts listed items on "auction sites of" or "storefronts of" competitors uBid and Amazon auctions, but had lackluster results, Crist said.
"We were wasting our time,’’ he said. "We didn’t have 10% of the results we had with eBay.’’