eBay builds customer base, helps move inventory
By Rob Kaiser
Chicago Tribune
A $280,000 Lamborghini for sale on eBay sounds like another Internet prank, as likely to be legitimate as were prior online auctions for used dentures and somebody's soul.
But it's no joke to Fox Valley Motorcars in West Chicago, which in the past few months has used eBay to sell Ferraris, Porsches and a 1967 Corvette Stingray convertible.
"I get a real good feeling of what's going on in the county by having my inventory on eBay," said Mike Jernigan, Fox Valley's sales manager.
Originally a haven for collectors of Beanie Babies, Pez dispensers and antiques, eBay has increasingly become a trading post where businesses — particularly small businesses — list their wares and seek bargains on everything from computers to welding equipment.
Owners of existing brick-and-mortar businesses who have started listing products on eBay said the ability to inexpensively reach new customers outweighs occasional problems: high bidders backing out of deals or disappearing.
In January, eBay responded to the increased interest among small firms by launching a new Web site, eBayBusiness.com, which gets sellers to categorize products into particular industries, technologies, or wholesale lots of ice skates, DVDs or other items that retailers can sell.
Jordan Glazier, general manager for eBayBusiness.com, said most of the buyers on his site are firms with fewer than 100 employees, estimating that 75 percent of the people participating in the site's 500,000 weekly auctions are small firms.
Without purchasing departments or vendor contracts, these businesses are usually difficult for sellers to reach and more likely than large firms to seek good deals.
"If you can save $10,000 on metalworking equipment, that's your family's holiday vacation," Glazier said. "The savings are very tangible."
Thomas Donahue III, a chiropractor in Chicago, is using eBay to try to get all the equipment he needs to open a new office.
In the past year, he has bought an X-ray machine, chiropractic tables and physical therapy equipment on the auction site.
Donahue said he got started after visiting the site on a whim and typing in "chiropractic."
"I just thought it's a bunch of junk on here, people trying to get rid of their Levi's," he said.
But by using eBay to get used equipment instead of leasing new equipment, Donahue estimates he has saved $30,000.
Many businesses are also using the site as a new sales channel.
William Pater has been a distributor of drills and other industrial cutting tools for more than 20 years. A few years ago, his wife, Marsha, put some of Pater's surplus inventory on eBay. It quickly sold.
Now, Marsha Pater auctions products on eBay to more than 2,200 machine shops around the country, bringing in sales of between $7,000 to $10,000 monthly with profit margins of 25 percent to 50 percent.
"My husband's business has slowed up quite a bit, and eBay has taken up the slack," Marsha Pater said.
Chicago Industrial Equipment Inc. in Willowbrook, Ill., which sells forklifts and other lifting equipment, uses eBay to unload excess inventory and reach new customers.
The company sells about 15 pieces a month on eBay, averaging $5,000 per sale, and often gets calls from other potential customers who saw its listings online but need something slightly different, said Justin Cyrnek, Chicago Industrial's president.
"If it goes on eBay, it has to sell cheap," Cyrnek said. "But it does move inventory."
Other companies have found that eBay helps them solve problems.
Optimum Realty Corp. in Elmhurst, Ill., invests in properties with tax liens and sometimes ends up owning small, vacant lots and deteriorating homes.
Real estate agents refuse to sell the properties since they were worth only a few thousand dollars and any sales commissions they could earn would not be worth their time, said Dan Friedman, Optimum's president.
"They were piling up," Friedman said. "At one point we had 200 pieces of property."
Optimum tried selling the properties on its own Web site and other sites, but did not find anything comparable to the response it got on eBay.
Still, because of fake bids and fraudulent listings, eBay is not a perfectly efficient market, said Friedman.
"The legitimacy question is something that everybody on eBay faces," he said. "We've had a number of non-paying winning bidders that turned out to be bogus."
Glazier said eBay aggressively seeks to block fraudulent postings and ban illegitimate bidders.
Legitimate eBay users, he added, police the site for troublemakers through their feedback on transactions, which can be seen by other members.
"The seller is forced to wear their reputation on their sleeve," Glazier said. "That is the most powerful for building trust and liquidity in the marketplace."
