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When salesman Bradley Bonifacius first asked his managers at Dean Stallings Ford in Oak Ridge, Tenn., to let him list some of their stock on eBay Inc. (EBAY
) a couple of years ago, they doubted it would be worth the effort. But once Bonifacius started selling cars to eBay buyers as far away as Hawaii and the Virgin Islands, instead of letting them gather dust on the lot, his bosses became believers. "You get a whole lot more people looking at the cars on eBay," says Bonifacius, who sells several vehicles a week on the site. It "is by far one of my better sources for buyers."
It's people like Bonifacius -- multiplied by 28 million, the number of active users on eBay -- who have vaulted the seven-year-old online marketplace onto the BW50. Last year, eBay's profits jumped 176%, to $250 million, on a 62% rise in sales, to $1.2 billion. That represents its commissions and fees on nearly $15 billion in gross merchandise sales. This year, analysts expect eBay's revenues to climb 60%, to $1.9 billion.
Why is eBay thriving when so many other dot-coms have struggled? It continues to excel at its basic business proposition. "At our core," says CEO Margaret C. Whitman, "we help make inefficient markets efficient." In these tough times, that simple message resonates with just about everyone, from eBay's collectibles merchants to newer sellers such as IBM (IBM
) and Sears Roebuck (S
), which are unloading everything from laptop computers to miter saws.
What makes eBay unique is not just that it used the Internet to set up a virtual marketplace. Its customers, to a large extent, create the business. After an eBay manager noticed listings for real cars in its die-cast cars category, for instance, the company created a new category for them. Now, eBay's sales of more than 300,000 cars make it the largest U.S. used-car dealer online or off, surpassing even AutoNation Inc. (AN
) And in January, after spying listings for restaurant gear and medical equipment, eBay opened a site aimed at the $1 trillion market for industrial goods.
EBay has added plenty of its own wrinkles. For one thing, it has made some of its software public, allowing other sites, such as RitzCamera.com, to run their eBay auctions on their sites. EBay still gets a cut of sales -- plus a small fee for the software -- while the other sites get a new sales channel. And last year, it paid $1.5 billion for payment processor PayPal Inc., which allows people to pay online instead of mailing checks.
The company's next big push: taking its efficiency drive abroad. Overseas operations from Germany to Korea are the fastest-growing part of eBay, with fourth-quarter sales up 172%, to $109.1 million -- about 26% of revenues. Whitman says foreign sales ultimately could surpass those of the U.S.
Of course, rivals have noticed how eBay thrives in good times and bad, and they're piling in. Amazon.com Inc.'s (AMZN
) eBay-style marketplace sales, including auctions, now account for 21% of all units shipped, up from almost zero two years ago. Meantime, eBay's current stock price of $89, at a three-year high, values the company at $28 billion. That's a price-to-earnings ratio of 67 -- more than double the 25 that mighty Microsoft Corp. (MSFT
) commands. For all its success, eBay has little room for mistakes -- or inefficiencies.
MARCH 24, 2003 |
Copyright 2003, by The McGraw-Hill Companies Inc. All rights reserved.
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