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Auction Drop-Off Stores & eBay: Part II By Frank Fortunato June 16, 2005 Drop-Off Stores: To Invest or Not To Invest Howard Bassuk, president of FranNet, a group of national franchise consultants, suggests that potential franchise investors ask themselves the following questions — most of which are appropriate for anyone contemplating their first start-up business. Do I really want to own a business? Do I like the idea of being part of a franchise system? How much can I afford to invest? Do I want to invest in the early stages of a franchisers development when the opportunity to grow is wide open? Or do I want to get involved only after most of the growth is finished so the risk is greatly diminished? Or where would I fit in between? Is the franchiser a leader in its industry? Is the industry stable and growing? Does the franchiser have a top-quality management team? Does it have a vision for the present as well as the future? If I buy it, can I afford an extra cushion if things take longer than expected to develop? Can I afford this business emotionally? Can I handle the stress of starting a new enterprise? Will I have support from my family? Is the competition weak or strong? Does the business fit my personal strategy for growth and success? Do I match the skills, abilities, corporate personality, etc, of this business, and do I match the successful franchises that are now part of the market? A Pending Storm Cloud Beyond the other considerations, drop-off storeowners face the prospect of legislative regulations against the industry that could complicate the business. Concerned that drop-off stores may become unwitting fronts for fencing stolen property, California, Florida, Texas and other locales are looking into whether the eBay drop-off stores should be governed by the same laws and regulations currently applying to pawnshops, antique stores and auction houses. Varying from state to state, these laws require establishing the identity of the seller, holding items for a period of time prior to sale, and in some instances, fingerprinting the seller. In California, secondhand sellers are required to report transactions, fingerprint the sellers of high-ticket items and hold the item for 30 days. In New York City, secondhand stores must obtain a license and record transactions for police inspection upon demand. "People are using pawnshops less and less," clams Danny R. Macagni, chief of police in Santa Monica, California, interviewed by the New York Times, "These drop-off stores don't have to notify us like a pawnshop, so stolen property could be sold and we'll never even know about it." eBay and the drop-off stores are joining together to oppose oversight. eBay is currently lobbying in California against a proposed law, Assembly Bill 1178, aimed at setting-up an electronic database to track stolen goods sold in California, including goods sold through drop-off stores, by January 1, 2008. eBay is asking that the drop-off centers be exempted from the proposed legislation. "We simply cannot see the need for any of this legislation," states Tod Cohen, vice president for government regulations at eBay. eBay and drop-off store owners argue that criminals are not likely to walk into a drop-off store, offer personal information including a phone number and residence, and wait for a check to arrive in the mail. Further, eBay points out that unlike pawnshops and secondhand stores, the drop-offs do not pay cash — they never own the item as does a secondhand store — an argument that won over a judge in a recent case against a drop-off storeowner in Florida. So far, no exemption for the drop-offs has been written into the California bill, nor has any legislation regulating the drop-offs been passed. But as they continue to proliferate the chances of regulatory legislation increases, giving potential investors another factor to ponder. Many antique dealers, faced with continuously shrinking sources for fresh merchandise for years, see the drop-off store trend as just another nail in the coffin of their business. Some veteran eBay sellers project a long-term glut of merchandise dumped onto the eBay market, driving down prices across the board. Others liken the drop-off store craze to a modern day tulip craze, with escalating store prices rendering profit next to impossible. Yet, the untapped supply of junk and treasures buried in people's cellars may be nearly as extensive as the oil buried under Middle Eastern sands — creating a market that can last many years. However, no one, not the nay or yea-sayers, possesses the crystal ball which can accurately predict the future of the drop-off store market. Will the average citizen line-up to sell their property through the stores? If so, for how long? Given the rush into the franchises, who will survive the inevitable shakeout, and when will it occur? The jury remains out. Frank Fortunado is a contributor to ECommerce-Guide.com and an avid eBay seller. Do you have a comment or question about this article or other e-commerce topics in general? Speak out in the SmallBusinessComputing.com E-Commerce Forum. Join the discussion today!

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