Don't bet your success on it
If you want to deal primarily in Business-to-Business merchandise, you don't need an
expensive retail store front. A cheap, low-rent warehouse will do. But, you do need to
realize that your sources for items may not be as easy to find and willing to deal with
as you as were led to believe.
Folling is an excerpt from an article in InternetRetailer that appeared in June of 2003--
before the drop-off store boom. Even then, some companies were realizing the
problems of liquidating on eBay. Using B2B to supplement walk-in traffic may not be as
easy as you think.
The learn-as-you-go plan at eBay
By Kurt Peters - June 2003
Strategic liquidation
Liquidators quickly embraced the online auction model. But they also learned that
auctions have a dynamic of their own. Take the case of the camp cots. Excess
Technologies LLC, a merchandise liquidator, had overstock camp cots to sell, so it
began putting them up at eBay. But as it put more cots up for auction, the price that
each fetched went down. “If we have more than five a day at eBay, prices go down
by 10-20%,” Joel Holtzman, president and CEO, says. “If we keep adding, the prices
keep going down. If you have 200 of something that you want to sell in faster than a
year, you’ve got to find places other than eBay to sell it.”
As a result, Excess Technologies has radically shifted the proportion of revenue it
derives from eBay. Two years ago, 80% of sales came through eBay auctions; today,
that portion is 5%. Excess Technologies now sells liquidated merchandise at Amazon
and Yahoo stores, Yahoo auctions and Overstock.com as well as at eBay. It sells
wholesale at Bid4Assets.com, Overstockb2b and eBay’s wholesale operation. It also
maintains a database of 1,500 buyers to whom it makes product available, based on
the channel the buyer operates in and the strategy of the seller. So, for instance, if a
seller wants to liquidate some merchandise in bulk and sell the rest over eBay, Excess
Technologies would not sell any of the products to customers in its database who sell
on eBay. “It’s strategic liquidation,” Holtzman says. “Rather than blowing it out there
and degrading the price or the brand, you make decisions about where and how to
sell it.”
What would you do with your overstock?
Remember, this information is from 2003. With the opening of hundreds of drop-off
stores eagerly pursuing the overstock business, the market is even more saturated
and the realized return for processing the items lower. As the owner of a drop-off
store dealing with overstock, you may get some economics of scale by repeatedly
processing similar items; but, that may only offset the cost of finding the businesses
willing to work with you until the surplus is depleted.
Manufactures who regularly have excess inventory will most likely find it to their
advantage to do the online selling in house rather than rely on someone who doesn't
know their products, the market nuances, and wants a cut of the proceeds. There
are exceptions if you have the time and money to find them.
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