eBay bids on b-to-b

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In a bold move to capitalize on the growth of its business and industrial category, eBay in January will launch eBay Business, a new service to link b-to-b buyers and sellers. The effort will be supported by an aggressive marketing campaign aimed at small and midsize businesses that use eBay to buy and sell computers and office equipment, and at vertical industry segments.

EBay Business will be a subsite of the eBay site, and it will be accessible directly at Like the consumer side of the business, it will have no fee for users.

The unit has named Slack Barshinger, Chicago, as its agency of record to handle marketing communications. The marketing budget was not disclosed.

"EBay is proving to be an effective way for sellers of small product to reach small businesses and for small businesses to efficiently and cost-effectively purchase and source equipment," said Jordan Glazier, director of eBay Business.

Over the last two years, eBay’s business and industrial category has grown by more than 90% a year, with a 2002 run rate of more than $300 million. That’s only 2% of eBay’s expected total run rate of $15 billion this year, but the phenomenal growth in the category has spurred eBay to aggressively go after the business.

Among the companies that have been using eBay to sell products are Motorola Inc., IBM Corp. and Hewlett-Packard Co.

"EBay has recognized that their business model is not about auctions—it’s about creating markets," said Leslie Fiering, VP-mobile computing at Gartner Inc. "The way for a business to grow is to understand what it’s doing functionally, then leverage what they do."

Fiering said that in order for the new model to succeed, eBay will need to understand exactly who the target customers are, make sure it has all the services and features in place to satisfy the needs of customers and line up business partners to help provide additional functionality. In addition, it will need to communicate effectively to the target audience.

So far, eBay is on track to meet these challenges.

Prompted by customers

Glazier noted a key difference between eBay Business and other b-to-b start-ups: It’s not starting from scratch. Rather than launching as a new business and having to find customers, eBay Business was created because existing customers have already discovered a b-to-b use for the auction site.

"EBay Business is a phenomenon that has bubbled up in an organic fashion," Glazier said. "This is not something we dreamed up. This is something our community of users has done on their own."

One long-time user of eBay for business purposes is Reliable Tool Inc., an Irwindale, Calif., company that buys and sells used tools. It started using eBay in 1998, and now 18 of its 25 employees are dedicated full time to buying and selling tools through the site.

One employee, Richard Smith, even has a title that reflects the influence of eBay on the business. As eBay sales manager and purchaser for Reliable Tool, Smith spends between 20 and 25 hours a week on the auction site. He said sales from eBay account for about half of the company’s annual sales of $3 million. "EBay has provided a way to quickly turn inventory," he said.

Smith said eBay has provided a good base of small machine shop buyers and that he hopes the new business model and its related marketing efforts will help him locate even larger shops.

Marketing plans for 2003

EBay is now working with Slack Barshinger on the marketing communications plan, and the first ads will roll out in the first quarter of 2003.

"For an agency, it’s an absolutely incredible opportunity to help a company of the stature of eBay rapidly build awareness for a new business," said Gary Slack, CEO of Slack Barshinger, who will oversee the eBay account.

"Everything eBay does is led by its community," Slack said, noting that intensive research is now being conducted to find out exactly how eBay’s customers are using the site for b-to-b transactions and how eBay should effectively market the new service to target audiences. The marketing plan will include print ads, e-mail, direct marketing, events and PR. Slack said the creative and media vehicles currently are under development.

Brian Osborn, director of category marketing for eBay, said the marketing approach for eBay Business will be two-pronged. A horizontal campaign will target small businesses looking for general business equipment, such as computers and office supplies, and a vertical campaign initially will target five industries. These will be restaurants, metalworking, MRO (maintenance, repair and operations), construction and agriculture. To reach these industries, eBay will use print advertising in vertical trade publications, events and other industry-targeted marketing.

"From a marketing perspective, the challenge for us is to communicate that eBay is a terrific solution to help them run their businesses," Osborn said. "We will continue to build awareness and consideration around that idea and help [business customers] feel comfortable with the transactions."

To provide the depth and breadth of services that will be necessary to conduct larger transactions for business customers, eBay has formed alliances with several service providers, including Accenture, and Pay Pal, which it acquired in October. In May, Accenture launched Accenture Connection to eBay, which provides product listings, inventory management, warehousing and logistics to midsize and large businesses that want to sell on eBay.

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