Auction Drop-Off Stores & eBay: Part II By Frank Fortunato
June 16, 2005
In Part II of our series, we offer a survival strategy for selecting an eBay drop-off store for consignment, and examine the prospects and pitfalls of starting-up your own consignment store or purchasing a franchise.
Consignment to eBay: Trading Assistants or Stores?
For those with eBay auction-worthy merchandise they wish to convert into cash, but have neither the time nor inclination to become an eBay auction seller, the best route is to consign with a trusted, eBay-experienced friend or acquaintance, or a friend of a trusted friend. For those who lack this expedient, there are several alternatives.
eBay Trading Assistant Program
As discussed in Part I, eBay sponsors a program wherein members can find a consignment seller in their locale by punching in their zip code and categories for their merchandise. Depending on the consignor's location, this search could yield dozens of more eBay consignment sellers. The advantage is ease of contact — the process can be initiated with a few keystrokes on a computer.
But using an eBay consignment seller can be a bit like buying a pig in a poke. One problem is, given the liberal standards for becoming an eBay Trading Assistant, (just 50 or more feedbacks, as little as one sale conducted in the past 30 days, etc.) the trading assistant may not be very capable. If the consignor auctions his or her own merchandise not very motivated in the marketing of consignee items for which they receive only a percentage of the sale price. Further, eBay ends it's involvement in the program with putting the consignor and consignee together. All negotiations take place between the consignor and consignee, and all disputes between the two parties must be settled via eBay slow, laborious, email 'dispute resolution process.
Independent and Franchise Drop-Off Stores
For those who like to initiate business face-to-face in a fixed location with regular hours, and a phone that gets answered, drop off stores offer an advantage. The stores are fast. They are set up for accepting consignments and getting the consignor through the process as quickly as possible — as opposed to the email negotiations with a trading assistant who comes with a User ID for a face, and then a second step of getting your property to the consignment seller, etc.
This convenience may come at the price of higher commissions than one might find with an eligible consignee located through eBay. Further, it is possible to lose money consigning through a store. There are many additional charges at stores.
AuctionDrop, for instance, has no up-front fee for their basic service but charges a $20 "prepay" fee to list your item with more than a $1 minimum bid - a fee that is credited towards their commission only if the item sells. If the item fails to sell, you are out the $20; if your item sells for less than the store estimated, you're obliged to accept the lesser price, as the store is legally bound to sell to the high bidder.
Whichever path one chooses to consign with strangers, there are certain survival rules that should be followed:
Check feedback ratings.
Whether consigning through a store, or an eBay trading assistant, get the consignee's eBay User ID (which may be different than the store name,) and thoroughly review their feedback ratings and the length of time they have been selling on eBay. Avoid those with few feedbacks and those with too many negative feedbacks. Choose a seller with positive feedbacks as close to 100 percent as possible. Stay clear of sellers with positive feedback ratings of less than 98, regardless of how many feedbacks they have accrued. Negative feedbacks are eBay nuclear option, seldom used nowadays except where there are real problems.
Read the seller's feedback responses from buyers. Does the seller accurately describe what they sell, ship quickly and communicate well? If time allows, email the store's customers to determine their detailed feelings about the experience.
Check the seller's current auctions. Is the layout attractive? Are the descriptions in intelligible English, informative, professional and persuasive? Are the photos of good quality and in sufficient quantity?
Does the seller have experience in marketing what you have to consign? This is particularly important with vintage items and collectibles — many stores will not. If you suspect your item is rare and highly valuable, you will need to research its value before consigning to a store in order to set a fair minimum sell price.
Will the store allow you to place a reserve or minimum bid price on the sale of a high-ticket item? Many stores do not, or charge a fee for minimum bids above $1. The theory behind the $1 minimum is the belief that eBay buyers hate sales with high minimums, that a $1 start price encourages bidding and that quality items will reach their fair market price regardless of their starting bid. This is quite often true, but as veteran sellers know, from week to week eBay auctions can be a crap-shoot: if the 'right buyers are not active the week your item goes up for sale, and you do not have a reserve price protecting it, you will risk having to sell the item at a fraction of its value.
All things being equal, shop price in a drop-off store. As one descends the ladder of size from the largest drop-off franchise stores to the smaller chains and independents, the commission rates tend to drop and the personalized services increase. If you can find an independent consignment store that takes a 25 percent rather a 38 percent commission bite and you are comfortable with their track record, attitude and other terms, who needs a big name? The proof is in the pudding: if eBay buyers want what your offering and it's competently presented, it will sell, regardless of who sells it.
Start Up: Franchise Versus Independent Stores
Industry analysts give the franchise stores with built-in physical location and an established shipping business the long-term profitability edge over the independent stores. The franchise stores provide software, phone support, and, in general, try to make their models 'plug and play operations.
iSoldit sends what they call "a store in a box" — a complete store module — to your location, along with a crew they claim can assemble it and get you ready to open in two days.
All the franchise chains claim the 99 percent of Americans who have never sold anything online as potential customers. One chain store site touts the drop-off store market as a $30 billion annual business. Further, they argue, being a national franchise, they offer a better exit strategy for eventually selling the business than an independent store without brand name recognition.
On the other hand, prices for franchises range from about $40,000 to $100,000 and up. They require varying amounts of liquid capitol, a royalty percentage on profits, and set business policies that must be adhered to.
If you wish to avoid the franchise and other fees, and prefer to set your own business terms as an independent, there is software such as Store Manager Pro from Auction Wagon. There are also other tools that provide eBay consignment store solutions for managing inventory, payments and shipping, prints contracts, barcodes and inventory labels, as well as allowing multiple users to access information simultaneously. Most have a task-driven interface and include image hosting and a seller info site.
Depending on your location, knowledge of the online auction business and general business savvy, an independent store may well be the most cost efficient route into this market.
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