Editorial
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| © 2007 eCential Group, LLC |
| On May 4, 2007, AuctionBytes published an article written by Debbie Gordon, CEO of SnappyAuction. Click Here to read it. I wrote a response to Ina which follows. |
OK, Ina. I can't let Debbie's article, The Truth Behind Successful
eBay Drop-off Stores, go by without a comment or two.
My first issue is in the title; "successful eBay drop-off store" is an oxymoron. Their
success must be measured by the return on investment, not the level of sales on eBay,
average selling price, or sell through rate. None of the stores nor the franchisors have
yet to provide hard data to prove they have a sustainable, positive ROI. Even if a
store has a "break even" month it usually didn't pay back the investor, owner, SBA
loan or who ever funded the startup. Either way, break even is the exception, not the
rule.
Debbie is correct about "pioneering a new category of business" and the problems of
awareness. That would be extremely critical to a new business if the concept worked.
The failure of the drop-off stores is not a lack of traffic, it's the variety of items that
the traffic brings in. The time and cost of processing stays the same even if your
traffic doubles or quadruples. It just means you must hire more people to process
them. And, since the variety will always be there, the stores will never get the
economic advantage of niche sellers.
Next, the "3 Fundamental Truths for the Future." These three "facts" aren't the
future, but the past. They are the same reasons people bought the drop-off store
franchises two or three years ago. They were led to believe that the existence of a
potential market, meant there was a guarantee of a successful business to service it.
Nobody had a proven model then, and still doesn't. I've follow the iSold It forum, and
see how the franchisees are used as guinea pigs. The companies don't know what
works and are periodically changing the model in hope of hitting on something that
does.
Debbie puts a lot of value on the Average Selling Price of the items sold.
Unfortunately, that figure is easily skewed by high-ticket sales. Occasionally a store
may sell an item for $2000-$3000 and thus raise the ASP for that month, but take
out the thousand-dollar sale and the ASP drops significantly. It may even show that
your ASP is below what it costs you to process an item. To get a more accurate
number, it must be calculated for a year of more. By that time, you realize the
concept doesn't work and want out.
Debbie suggests an ASP of $100 for successful stores. How many items per day do
you get in that will sell for over $100? If your store commission is 1/3, are you
meeting your costs at $33 per item? Are you making enough to cover the "no sales",
the returns, the breakage, and other loses?
What about, Sell Through Rate? It is important to know how much time is spent on
items that don't sell, and then learn why they didn't sell. But, how many items that did
sell, went for a price that doesn't cover the cost of processing? STR doesn't tell you
that.
Debbie says, "In general it takes as much time to list and sell a diamond ring as it does
a pair of used hiking boots." I don't know how general she's thinking, but processing
times can vary greatly, and she's assuming the ring will bring a greater price than the
boots, which is not always true. My point is, processing costs are killers because the
types of items vary, not the value of the item.
Want more hidden fees? The ring requires a safe for storage, the boots don't. Are you
going to trust the processing of the ring to just anyone or will that increase the chance
of theft? Photographing the two items requires different settings and techniques. If
the ring starts at a higher bidding price and doesn't sell, you're stuck with higher fees.
From a shipping perspective alone, you have to keep in stock ten times as many box
sizes as a niche seller. The next item you sell might not fit in a ring box or a shoe box.
That drives up the costs, too. Debbie fails to cover these and the many other fees
involved in opening a drop-off store.
The Operations Software is important. It is the "brains" of the store, and I hear
SnappyAuction's software is among the best. Unfortunately, I have yet to see any
that can do everything required by a business that has:
Location, location, ...look out! Debbie wants a store owner to open in a high rent area
in order to get better merchandise. Think again; your cost of doing business will be
higher and there is no guarantee that your ASP will go up. People with money often
buy better goods because they intend to use them longer or pass them on to someone
else. Will they really go out of their way to take it to a drop-off store? They know the
value of time and money, and what you have to offer probably won't interest most of
the affluent. They have other ways of disposing of their unwanted items; like
donating them for a tax write-off. So now you have a high-rent store and cheap stuff
coming in. These stores don't need visibility; they need viability.
Ina, Karen and I have Snappy owners call us with the same complaints--the concept
doesn't work. As a company, it appears Snappy hasn't had a lot of the other
management and software issues as iSold It or Quikdrop, so the level of frustration
has been more tolerable for the zees. As they continue to loose money, they all see
the reality of Amitheonlyone.org. No one has yet to disprove our facts.
Thanks, and hope to see you at eBay Live.
Gene & Karen
eBay Drop-off Stores, go by without a comment or two.
My first issue is in the title; "successful eBay drop-off store" is an oxymoron. Their
success must be measured by the return on investment, not the level of sales on eBay,
average selling price, or sell through rate. None of the stores nor the franchisors have
yet to provide hard data to prove they have a sustainable, positive ROI. Even if a
store has a "break even" month it usually didn't pay back the investor, owner, SBA
loan or who ever funded the startup. Either way, break even is the exception, not the
rule.
Debbie is correct about "pioneering a new category of business" and the problems of
awareness. That would be extremely critical to a new business if the concept worked.
The failure of the drop-off stores is not a lack of traffic, it's the variety of items that
the traffic brings in. The time and cost of processing stays the same even if your
traffic doubles or quadruples. It just means you must hire more people to process
them. And, since the variety will always be there, the stores will never get the
economic advantage of niche sellers.
Next, the "3 Fundamental Truths for the Future." These three "facts" aren't the
future, but the past. They are the same reasons people bought the drop-off store
franchises two or three years ago. They were led to believe that the existence of a
potential market, meant there was a guarantee of a successful business to service it.
Nobody had a proven model then, and still doesn't. I've follow the iSold It forum, and
see how the franchisees are used as guinea pigs. The companies don't know what
works and are periodically changing the model in hope of hitting on something that
does.
Debbie puts a lot of value on the Average Selling Price of the items sold.
Unfortunately, that figure is easily skewed by high-ticket sales. Occasionally a store
may sell an item for $2000-$3000 and thus raise the ASP for that month, but take
out the thousand-dollar sale and the ASP drops significantly. It may even show that
your ASP is below what it costs you to process an item. To get a more accurate
number, it must be calculated for a year of more. By that time, you realize the
concept doesn't work and want out.
Debbie suggests an ASP of $100 for successful stores. How many items per day do
you get in that will sell for over $100? If your store commission is 1/3, are you
meeting your costs at $33 per item? Are you making enough to cover the "no sales",
the returns, the breakage, and other loses?
What about, Sell Through Rate? It is important to know how much time is spent on
items that don't sell, and then learn why they didn't sell. But, how many items that did
sell, went for a price that doesn't cover the cost of processing? STR doesn't tell you
that.
Debbie says, "In general it takes as much time to list and sell a diamond ring as it does
a pair of used hiking boots." I don't know how general she's thinking, but processing
times can vary greatly, and she's assuming the ring will bring a greater price than the
boots, which is not always true. My point is, processing costs are killers because the
types of items vary, not the value of the item.
Want more hidden fees? The ring requires a safe for storage, the boots don't. Are you
going to trust the processing of the ring to just anyone or will that increase the chance
of theft? Photographing the two items requires different settings and techniques. If
the ring starts at a higher bidding price and doesn't sell, you're stuck with higher fees.
From a shipping perspective alone, you have to keep in stock ten times as many box
sizes as a niche seller. The next item you sell might not fit in a ring box or a shoe box.
That drives up the costs, too. Debbie fails to cover these and the many other fees
involved in opening a drop-off store.
The Operations Software is important. It is the "brains" of the store, and I hear
SnappyAuction's software is among the best. Unfortunately, I have yet to see any
that can do everything required by a business that has:
- front-end and back-end customers,
- no idea what their inventory will be in three days,
- no idea what the product will sell for,
- has to wait seven days to know if the item will generate a profit or loss, and
- is at the mercy of an ecommerce giant who is more concerned with litigation
than giving you a break on listing fees.
Location, location, ...look out! Debbie wants a store owner to open in a high rent area
in order to get better merchandise. Think again; your cost of doing business will be
higher and there is no guarantee that your ASP will go up. People with money often
buy better goods because they intend to use them longer or pass them on to someone
else. Will they really go out of their way to take it to a drop-off store? They know the
value of time and money, and what you have to offer probably won't interest most of
the affluent. They have other ways of disposing of their unwanted items; like
donating them for a tax write-off. So now you have a high-rent store and cheap stuff
coming in. These stores don't need visibility; they need viability.
Ina, Karen and I have Snappy owners call us with the same complaints--the concept
doesn't work. As a company, it appears Snappy hasn't had a lot of the other
management and software issues as iSold It or Quikdrop, so the level of frustration
has been more tolerable for the zees. As they continue to loose money, they all see
the reality of Amitheonlyone.org. No one has yet to disprove our facts.
Thanks, and hope to see you at eBay Live.
Gene & Karen