High bidders: with its new business division, internet auctioneer eBay hopes to be the go-to source for pro dealer equipment, product offloads, and even new market expansion

Prosales, July, 2003 by Chris Wood

After typing a brief product description of some custom-order window returns and an extra pallet of door hardware that the vendor won't take back, your inventory manager clicks a button on the computer screen. Instantly almost 70 million prospective buyers have the opportunity to bid on your products, and the prices on your dead inventory keep going up and up. This isn't a fire sale. It is eBay's new business marketplace, where millions of dollars of pro dealer product and yard equipment is expected to change hands this year, and the doors are open 24 hours a day, seven days a week.

With small businesses increasingly logging on to eBay over the past several years to buy and sell products, the San Jose, Calif.-based online retailer decided to spin off business auctions into a unique marketplace away from the vinyl records and autographed bowling balls and quickly discovered some unmined tuff in professional construction supply. Since launching eBay Business in January 2003 at www.ebaybusiness.com, the company has found sales in the construction equipment category--called a "vertical"--dominating the new eBay Business division. Based on 2003 Q1 results, eBay expects more than $44 million in gross sales this year from the construction vertical, representing a 220 per cent annual growth rate since the company first began tracking construction sales activity in its "everything else" category back in 2000.

As the market grows, pro suppliers are emerging as strong user bases on both the buy and sell side. "I think pro dealers in particular are quite familiar with the challenge of finding a market for used [equipment], returns of special orders, and excess inventory," says Benjamin Hanna, senior manager of construction for eBay Business. "Those challenges are something they deal with every day. With eBay, there is such a huge potential market that you can often [offload used, excess, and returned] inventory before it even gets to the point of having a 'Saturday Sale' and that fits in nicely with the pro dealer business."

If the activity of Vernon Hills, Ill.-based Wickes Lumber is any indication, Hanna is probably right. Since September 2001, the pro dealer has operated its own eBay "store" on the Web site, closing 1,050 separate deals on tools, hardware, and work-ware, all the while maintaining a spotless customer feedback rating. According to eBay, more than 8,000 new construction listings hit the eBay Business construction vertical every week, with skid steers and forklifts, surveying equipment, and contractor tools rounding out the most popular sales categories. For example, an average of 270 contractor tools are sold every day in the construction vertical.

"eBay allows you to streamline customer service efforts," says Woody Alphonse, co owner of ABC Tools in Hollywood, Fla., and a seller on eBay for two years. "On eBay, you input all of the product information and details once, so everything is there and available for all prospective buyers. Customers can come to the site and quickly make a purchase instead of waiting angrily on [the phone] line with [product] questions." Since ABC began selling tools over eBay, Alphonse estimates that online sales have grown to represent approximately 20 percent of the company's $1 million take in annual tool sales, and virtually all of the tools and equipment ABC lists on eBay are going to out-of-state buyers.

Going Once, Going Twice

Indeed, the ability to reach beyond local market geography is a primary key to eBay's draw in construction, whether you are trying to offload six scratch-and-dent entry door returns or 100 pairs of work gloves. "As a seller in an isolated market, you are subject to how many people can fit in your parking lot or how many people you can reach within a delivery radius," says Jordan Glazier, general manager of eBay Business. "With eBay, you have 68.8 million registered users who have access to your product 24/7."

Access to a marketplace of that size is also attracting pro suppliers with expanding businesses looking to source capital equipment, from racking and storage packages to skid steer loaders and truck-mounted forklifts. "Forklifts are going like gang-busters on the site," says Glazier. "The ability to find concentrations of used capital equipment for sale can be quite difficult for a buyer. If you look at eBay, there are thousands [of items] available every week as opposed to jumping into a pickup and driving around your area looking for forklifts for sale."

According to Glazier, typical savings that you'll see on eBay for used capital equipment run from 25 percent to 50 percent compared to other avenues, such as classifieds. "When you are talking about a pair of overalls, it's probably better to just go get it at the five and dime," Glazier says. "When you are talking about a skid steer loader and you are looking at saving over $1,000, eBay Business is worth it."

While eBay traditionally takes a "hands-off" approach to transactions, preferring to simply provide the marketplace, the company does offer some basic services to help both buyers and sellers close deals in an expeditious and cost-effective environment. In addition to escrow, shipping, and insurance opportunities, eBay uses a "feedback" mechanism, allowing buyers and sellers to report on past transactions to prospective shoppers and merchants. "Feedback is one of the most compelling forces behind our success," Glazier says. "It allows buyers and sellers to research each other's background and establish a level of comfort and trust."