What's Your Story Idea March 4, 2009, 12:01AM EST

Hey eBay, Say Hello to Bonanzle

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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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Flight to Niche Players

Usher Lieberman, an eBay spokesman, says the company works to incorporate feedback from its members into the site, but admits that the changes of the past year were geared toward larger sellers. When asked about Bonanzle, Lieberman says that "while there will always be niche marketplaces, ultimately our volume and velocity keep sellers turning to eBay while our value and selection continue to attract buyers in a virtuous cycle."

According to Scot Wingo, CEO of e-commerce consultant ChannelAdvisor, the flight of eBay sellers to smaller marketplace sites like Bonanzle, niche players like handmade-goods site Etsy, and sellers' own personal Web sites could pose a threat to eBay's dominance. "If eBay doesn't change course, certain categories like collectibles, autos, handmade items, can definitely be dominated by niche sites," says Wingo.

Harding confirms that a large chunk of Bonanzle vendors came to his site because they were unhappy with eBay. "The biggest complaint is that they're not listening to their sellers," Harding says of the competitor. He and his co-founder, Mark Dorsey, spend much of their time reading and commenting on Bonanzle's forums, helping address user concerns, and reaching out to sellers directly whenever problems arise. The site also has a tool that allows new sellers to quickly import their product listings from eBay. So far, that tool accounts for half of all inventory listed on Bonanzle.

Charged for Sales, Not Listings

"The money it costs me to sell on Bonanzle is about a third of what eBay costs," says auctioneer Kolenda. That's mainly because Bonanzle only charges its sellers a percentage of what they sell, rather than for every item they list, as eBay does. Kolenda says Bonanzle also makes it easier to list a large number of items, saving him valuable time. Lieberman, the eBay spokesman, says the company opens "access to a global market for sellers who otherwise would have difficulty addressing a broader audience."

Of course, while profit margins and convenience are high, the slow trickle of shoppers to Bonanzle booths leaves much to be desired. "The traffic isn't there yet," says Chris Nelson, an Albany (N.Y.) online seller of jewelry, cosmetics, and New Age gifts such as tarot cards. Since December, Nelson has listed items on both Bonanzle and eBay. So far, she's sold only two items on Bonanzle vs. more than 200 on eBay during the same period. "It's not costing me anything to list [on Bonanzle]," Nelson says. "It's worth it to be there as that site starts to grow, and hopefully they will."

In January, Bonanzle received 185,000 unique visitors, according to data from comScore (SCOR)—peanuts compared to the 72 million that visited eBay. But since November, Bonanzle's traffic has grown 214%, while eBay inched up by less than 1%. One way Harding intends to increase traffic is by working with other product listing sites, such as Google (GOOG) Base. The search engine's classified listing service allows Bonanzle—and eBay—sellers to co-list their items on its pages, dramatically increasing the number of potential buyers. The Google site is a relatively easy process, but still not simple for everyone, and Bonanzle co-founder Dorsey has offered to personally set up some users with Google Base listings. Harding says about half of all traffic to Bonanzle comes through Google Base.

Loyal Band of Users

But perhaps Bonanzle's greatest growth potential lies in the evangelism of its small community of dedicated users. "The sellers have adopted [Bonanzle] as their own Web site, as if they created it themselves," says Harding. "In a sense, they have." That could be a line straight out of the pitch of an e-commerce startup from the 1990s: eBay.

Douglas MacMillan is a staff writer for BusinessWeek in New York.