Hey eBay, Say Hello to Bonanzle

Rankled by eBay, small online sellers are hanging out their shingles at new marketplace sites like Bonanzle

By Douglas MacMillan

The idea for "Hey eBay, Say Hello to Bonanzle" came from BusinessWeek.com reader Beverly Gonzalez, who buys vintage collectibles in and around her hometown of Torrance, Calif., and sells them online.

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The first Saturday morning of each month, licensed auctioneer Walt Kolenda holds live auctions on the Web. Buyers usually show up early to inspect the goods and ask "Auction Wally" questions through a live chat window. From the comfort of his home in Barre, Mass., Kolenda calls the action over a real-time podcast, taking bidders, offering bundle deals, and calling attention to the rarity of a set of antique postcards or the craftsmanship of a piece of ornate glassware.

Like many thrift stores and estate sellers, Kolenda has benefited from strapped consumers, many of whom have cleaned out their attics in search of valuables that might help pay the bills. "I can't keep up with what I'm doing because so many people are coming to me looking for advice on how to sell their items," Kolenda says.

The first advice he gives most sellers: Leave eBay (EBAY). Since 1999, Kolenda relied on the popular site that pioneered online auctions. But he says changes eBay made to its platform in recent years have hampered the ability of smaller sellers like him to compete with larger wholesalers who use the site as a clearinghouse to sell large amounts of goods at fixed prices. "Now, they want to be a big box [store]," Kolenda says. The changes that turned him away include higher fees for listing each item, the removal of a feature that allowed sellers to negatively rate buyers, and the elimination of all transaction methods other than PayPal, a payment service eBay owns.

Built-In Chat Feature

In September, Kolenda set up shop at Bonanzle, one of several niche online marketplaces that have sprung up to serve the growing number of online merchants who are leaving eBay out of frustration. Bonanzle was launched in June 2008 by Seattle computer programmer Bill Harding, who wanted to re-create the social dealmaking experience of a garage sale online. Anyone can sign up for a free Bonanzle "booth," a page where a seller displays items and interacts with visitors using a built-in chat feature. Sellers can easily reward good customers with markdowns, or hold regular "bonanzas"—events where all of their products are on sale.

Relying just on word-of-mouth buzz, the site has attracted some 35,000 registered users, a number Harding says has grown about 50% each month. Bonanzle collects small fees from each item that's sold—the company takes $1 for items that sell at an average price of $28.50, for example—and the site has facilitated tens of thousands of transactions so far. In February, Bonanzle says it turned its first profit, although it won't reveal how much.

By comparison, eBay posted its first-ever quarterly sales decline in January, when CEO John Donahoe admitted that he was "frustrated" with the performance of the business despite making several major changes to the site. Its fourth-quarter earnings report cited a 4% gain in active users over the previous year, to 86.3 million. But reader comments to a Jan. 22 BusinessWeek article, "eBay Sales: Going, Going…" told a different story. More than 200 current and former eBay sellers stated that they were abandoning the site because of the changes Donahoe has made.