Entrepreneurs Hitch Their Ventures to Online Auctions
Virtual businesses from the burbs to the boonies are catching a cheap ride on the Web
Atlanta, Tex., can be a tough place for a small business. Ask Judy
Williams. She lives in the 6,000-person town near Texarkana. Williams,
a single mom, tried for years to run her own antique shop. But with bad
health and slack sales, she had to seek food stamps to make ends meet.
"The local population won't support a shop," Williams says.
Then last year, a friend told her about eBay, one of many online auction
sites where people can sell just about anything they own. Williams charged
a computer with a modem on her credit card and put a few things
up for sale, including some old tape measures and jewelry. To her amazement,
her merchandise sold right away. Within a month, Williams says she had
sold enough to get off food stamps. Now, she says she sells about $400 to $500
a week on average. And her problems are more on the order of managing
sales-tax records for a business that ships throughout the U.S. and abroad.
GOING, GOING, GONE. Williams is one of a growing number of small-business owners using online
auctions sites as virtual storefronts to sell everything from baseball
cards to automobiles. "More and more people realize they can start their
own businesses out of their homes, and they can live wherever they want
to live," says Steve Westly, vice-president for marketing and business development
at eBay, one of the most successful consumer auction sites on the Web
with nearly 1 million registered sellers.
The sites also allow people who may not have the money or the technical
knowhow to set up their own Web store or site to do business on the
Internet, greatly expanding their universe of customers. Auction sites also serve
people who haven't been able to draw traffic to their own Web sites.
The Atlanta area has become a hotbed of online auctioning. Williams'
friend, Reva Shaddock, a widowed ex-trucker and music teacher, sometimes
grosses $3,000 a month selling things she finds at estate and garage sales.
"If it can go in a box and it can go in a truck, I will ship it," Shaddock
says. Judy Reynolds, owner of Judy's Books in nearby Queen City,
thought she would have to close her bookstore after the local U.S. Army base shut down. After listing her wares on eBay and several online book club auction
sites, Reynolds' online sales are totaling $400 to $900 a week.
This niche of the online auction world is called person-to-person. But it's becoming a bit of a misnomer. In reality, the Atlanta
crowd and entrepreneurs like them use sites such as eBay, AuctionUniverse,
or City Auction to sell merchandise directly to their customers. And plenty
of customers turn out to be entrepreneurs, too, sometimes giving
the person-to-person service a distinctly business-to-business flavor.
Most of the auction sites are mainly places on the Web to list goods.
Typically, the sites charge a nominal listing fee, between 25 cents and
50 cents per item, and a 2% or 3% commission when something sells.
Sellers list their goods with brief descriptions and often photographs. The seller also sets the starting auction price. Bidders contact
the sellers via an E-mail link found above the item for sale. Auctions
last between three days and a week. When the auction closes, the seller
contacts the highest bidder, usually by E-mail or telephone, and the two
parties work out the payment and shipping details.
Each auction site has a slightly different approach, depending on its
specialty. OnSale, an exception in the online auction world, buys merchandise
it auctions from manufacturers and resellers. eBay is an online exchange.
OnSale, which has 820,000 registered buyers, guarantees the merchandise it
sells for at least 30 days. eBay, which lists nearly 800,000 items for
sale and closes 100,000 auctions a day, assures quality by relying on a
seller rating method. Buyers have the opportunity to rate the sellers online. Sellers who get more than four bad ratings are thrown off
CYBER-SAVINGS. With customers buying sight unseen from unknown sellers, the ratings
system develops a sort of virtual goodwill for a business. Williams has
614 positive ratings posted where she lists her goods. Ratings or not,
why would anyone buy on that basis? Price, for one thing. Bill Fanning,
systems administrator for a small advertising agency in San Francisco, bought
eight computers for $6,000 from OnSale this year. He says he saved 20%
to 40% off retail prices on each computer. Fanning turned to OnSale because
he had previously had a good experience with the site buying electronics
for his personal use.
One peculiarity of the online auction craze has been its benefits to
the dealers themselves -- especially in some rural communities. In Atlanta, for example, the dealers say they have sold to buyers as far away
as New Zealand, Singapore, Amsterdam, and England. And the auctions can
have a decidedly nonvirtual effect on local economies. In Lake Panasoffkee,
near Tampa, Fla., Ray Geeck and his wife, Anne, say they have hired eight
people in the last year to help them meet the demands of their skyrocketing
antique doll business. They live in a seasonal resort town where their
shop was not getting much traffic. Geeck says sales this year will reach
$1 million. "My wife and I are seriously considering turning everything
over to our employees next year and let them work," says Geeck. "We will kick back and
What's the long-term outlook for small businesses based on these auction
services? It depends to some extent on how voracious the global appetite
is for Beanie Babies or Depression glass. Vernon Keenan, president of Keenan
Vision Inc., an Internet market research firm in San Francisco, thinks the collectibles market is enormous and growing every year. In
1998, he expects person-to-person sales via online auctions will be about
$500 million and will grow to around $8 billion in the next three years.
The figures are based on his company's research.
Varda Lief, an analyst for Forrester Research, a market research firm
in Cambridge, Mass., thinks collectible auctions will ultimately be little
more than a footnote of a much bigger online auction world. "Business-to-business
auctions are where the big money is," Lief says. She estimates that these auctions,
ranging from commodities like electricity and crude oil to computers,
will be a $52.6 billion market by 2002.
But Ross Viens, a 33-year-old seller of collectibles in Chicopee, Mass.,
thinks the online auction world will always have a place for him. Viens
was making $300 a week as a customer-service rep for Home Depot
before he quit in frustration. Now he says he makes four times that selling
dishes, glasses, vases, and pottery on the Web. "It is human nature to gather
and to have, and there are people who will always need to have stuff,"
he says. That's something the entrepreneurs of east Texas and other
rural areas around the U.S. are taking to the bank each month.
By Jeremy Quittner in New York
Back to top of story