eBay for Small Business Part III

Small businesses have long since discovered that eBay is a great place to sell products. Now a growing number are finding that it's also a great place to buy stuff they need for their businesses.
It's not just printer cartridges either — although consumables of all kinds are available. The selection on eBay in many business-to-business categories — including big-ticket items — is comprehensive, and prices can be amazingly low.

Consider Robert Maple's experience. Maple runs Owen Aerospace, a $1-million-a-year machine and fabrication shop, building parts for big aircraft makers and government agencies in Longbeach, Wash. He buys "everything" he needs for the business on eBay — including heavy equipment worth in excess of $1 million.

"eBay has saved me so much money it's pathetic," Maple says.

How much? Over 302 transactions, he has spent about $300,000. The value of the goods he purchased, if he had purchased them new from a dealer, would be $9 million, he claims. And even if he bought used from a dealer, it would have cost him $3 million.

An example. He recently purchased a $250,000 electro-discharge machine (EDM) — a type of computer numerical control (CNC) device — for $500, used on eBay.

How is this possible? The company that was selling it, Maple explains, couldn't use it anymore because it was too big for its facility. It had replaced it with a more compact unit and was now looking to dump the old one.

"A lot of it is luck," he admits. "I fall in manure all the time and come out smelling like roses."

It also helps that he owns the heavy equipment needed to transport his bargains from the sellers' place to his own facility, which simplifies the transaction and may in many cases make him the only, or one of very few, bidders. Much of that necessary equipment, including cranes, forklifts and even an 18-wheeler truck, he bought on eBay.

Being able to buy equipment at bargain basement prices on eBay in many cases is the difference for Maple between being able to buy the equipment at all and having to do without. Or having to take out a loan — and loans are hard for small businesses to secure these days.

Having the equipment means he can bid on jobs that other operators his size cannot. And getting it cheap means he can be very price competitive. Maple is so confident he will be able to find specialized equipment he needs for a contract that he often bids on the work before he has the equipment.

"So far it's worked," he says. "I only had to buy one machine [needed for a government contract] that I couldn't get on eBay."

eBay also saves him valuable time. "I don't have to go all over the place to find what I need," Maple says. "I just go to eBay."

eBay itself has begun to realize the importance of the business-to-business (B2B) market, and of the small and very small businesses that are mostly fueling it.

Michael Rudolph, general manager of eBay's computers and networking business, says the company is now doing about $1 billion a year in B2B transactions, with about eight million transactions mostly involving small business buyers.

A lot of it, Rudolph says, is computers and office equipment. "But a really fast-growing segment is vertical industrial equipment — restaurant stuff, metal working. We just have this broad range of products available."

The core value proposition for small businesses is selection and price, Rudolph says. "What we've found is that the value proposition is so strong for small and very small businesses that for many, it gives them a real competitive advantage."

Maple is a good case in point, but he's not the only one. eBay can trot out other, just as enthusiastic testimonials.

Not that every small business has clued in to the opportunity. The ones that have, Rudolph characterizes as "the classic entrepreneur, the smart, creative business person who has found way, in this case through eBay, to improve his business."

But how is it that prices are so low on eBay? In many cases it's because manufacturers or distributors are selling off product that is over-stocked in traditional dealer chains. Most of the big computer vendors have a presence on eBay, for example. They can sell off surplus or slightly used equipment and realize more than they would if it languished in a warehouse or was dumped on a remainders distributor.

eBay has also attracted all kinds of smaller sellers many of whom would not normally have access to — or be accessible to — buyers. They are there because they see eBay as a golden opportunity to extend their reach and increase volumes, so they keep prices low. If they're in smaller, out-of-the-way communities, they may also have lower overheads than big city vendors.

Then of course there are the companies and individuals — like the ones Maple is so adept at finding — that are selling off used equipment they can't unload any other way, often at fire-sale prices.

In fact, that is one way that small businesses can double up on savings from eBay, Rudolph says — buy replacement equipment on eBay at bargain prices, then liquidate their old stuff, which might otherwise be junked, by selling it on eBay.

"Small businesses are really getting a competitive advantage when they use the whole cycle," Rudolph says. "If you're a small business, margins are everything. Anything you can do to bring more dollars to the bottom line, you will do."

eBay has few services and tools targeted exclusively at small business buyers, but many of the company's standard services are particularly valuable for buyers in B2B transactions.

Its escrow services, for example, provide a comfort level for both buyers and sellers — but especially buyers. When a deal is completed, the buyer sends the payment to an escrow company — a dependable middleman who puts the money in a trust account. When the seller delivers the goods and the buyer accepts them, the money is released to the seller. eBay recommends buyers and sellers use escrow services for any transaction over $500.

The company's SquareTrade dispute resolution service is another example. If a buyer believes he has been dealt with unfairly by a seller, he can launch an automated online process that has been remarkably successful in resolving disputes. The company also offers some fraud protection.

In fact, Rudolph would argue that eBay provides a more secure medium for trading than traditional channels — partly because of these services, but also because of the automated feedback on eBay that allows buyers to rate sellers — and sellers buyers — on how fairly and efficiently they do business.

"It's like you wear your reputation on your sleeve," he says.

Maple agrees. In fact, about the only advice he can think of to offer other small businesses just beginning to source equipment and supplies on eBay is to always carefully check a seller's profile and feedback record — usually shown as the number of positive comments they've received, minus the number of negative comments.

"I'm certainly not going to give $10,000 or $20,000 to a guy with a feedback rating of 20," Maple says. "Especially if the only other things he's selling are cameras and [other small items.]"


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