At eBay, Showrooms Push Aside Yard Sales
A lot of car dealers hope to hawk autos on eBay (EBAY) over the next few weeks as part of a trial with General Motors, announced Aug. 10, that lets 225 GM dealers in California post new models on the site through Sept. 8. Long known as an online flea market for secondhand goods, eBay wants to ramp up sales of new products to jump-start its growth. "They have realized that the secondhand market in most goods is only growing at 1% or 2% a year and if they want to be seen as a growth company they have got to get into new products," says Jeffrey Lindsay, an analyst at Sanford C. Bernstein.
With sales cut by the recession and rivalry in e-commerce, eBay could find a new growth vehicle in new but out-of-season goods, analysts say. The company is pursuing deals with manufacturers besides GM to sell excess inventory on its site, says eBay spokesman Usher Lieberman. "People looking for the latest iPod or the latest TV are more likely to go to Amazon (AMZN) or Best Buy (BBY)," says Colin Sebastian, an analyst at Lazard Capital Markets. "But for those who may be willing to buy merchandise that's not so perfect, eBay should be an interesting channel."
EBay Motors: Clearing Dealer Lots In July, eBay reported that sales in its core shopping business fell 14%, to $1.3 billion, in the second quarter. While e-commerce continues to feel the impact from the slowdown in consumer spending, analysts said the slide appeared to be nearing its bottom.
In the case of GM, eBay will play the role not of a retailer, but of a liquidator. "A big part of the focus will be helping dealers clear inventory from their lot," says Rob Chesney, vice-president of eBay Motors. All of the cars listed on gm.ebay.com are new, but many are 2008 and 2009 models that have been passed over for the 2010 arrivals. EBay spokesman Lieberman declined to name additional manufacturers whose wares may end up on the site, but analysts say makers of consumer electronics and other auto brands are likely candidates.
Indeed, some retailers and manufacturers already use eBay to sell returned, refurbished, or past-season wares, and many of its largest merchants are volume discounters of new products. Such e-commerce sites as Overstock.com (OSTK) have established businesses selling liquidated goods to consumers online.
Last year e-commerce site Buy.com began offering a portion of the millions of electronics, DVDs, books, and other products it sells each year on eBay. Buy.com is one of several "diamond tier" merchants on the site, meaning it receives special negotiated rates in exchange for selling at least $500,000 worth of items per month. EBay says the number of diamond-tier sellers is growing at a steady rate.
A Back Seat for eBay's Small Sellers? Despite sales of some new items, eBay has failed to shake its reputation as a bazaar for used goods. "When a majority of people think of eBay, they think of an auction site for the stuff in your garage," says Piper Jaffray (PJC) senior research analyst Gene Munster.
Whatever else the impact of selling more new products, the move will probably further alienate the legions of existing smaller sellers who rely on eBay for part or all of their livelihood. "You'll always see a market on eBay for secondhand and vintage goods as well. We don't think those are mutually exclusive," says eBay's Lieberman.
Manufacturers forging closer ties with eBay also could put a wedge between themselves and existing retailers, analysts say. "With items as powerful as TVs, Best Buy would be infuriated if [eBay did] something like discount last month's model—and they could threaten" to retaliate, such as by phasing out certain goods, Munster says.
For eBay, the benefits of hosting bigger sellers are numerous. In addition to processing higher volumes of goods, the site is likely to see more consistency in sales. "When you do a yard sale on eBay you may not do many of them, but when you have retailers and distributors, they're going to have this pattern year after year, season after season," says Gene Alvarez, an e-commerce strategist with Gartner (IT).