Bidding for business

By Margaret Kane
Staff Writer, CNET News.com
August 18, 2003, 4:00 AM PT

Don McMahan was looking through eBay about a year ago to help his son find a new bugle for his Boy Scouts troop.

Then McMahan, who is vice president of sales for Fujitsu's imaging products group, recalled some announcements about companies such as Hewlett-Packard and Sun Microsystems selling on eBay. A few months later, Fujitsu opened its own stores on the auction site to sell refurbished equipment such as corporate scanning systems that can run as high as $30,000.

The bugle hunt "was the first time I really spent time on eBay. Then I started looking around," he said. "What kind of did it for me was when Sun and HP both signed up. When they validated it, I said, 'You know, that could be a channel for us.'"

eBay may have a reputation as an online flea market that caters to memorabilia collectors and mom-and-pop businesses, but large corporations are increasingly using it to peddle used or refurbished assets that previously would have been sold to wholesalers. And while the trend has affected many industries, it has been particularly popular in the high-tech market, where it has attracted some of the biggest names in the business.

Technology itself has been a key factor in the proliferation of this online marketplace. Many companies are building internal pipelines that can send inventory data directly and automatically to eBay for listing--essentially turning the auction site into an arm of their operations and purchasing departments.

Moreover, the early successes of its corporate customers represent an important victory of another kind for eBay, which endured wide criticism from small sellers when the company announced its intentions to court corporations a few years ago, in part to show how its expansion potential justified its relatively high stock price. Many individual sellers feared their needs would be superseded by those of large companies, and members of the auction site's impassioned community worried that eBay was losing its grassroots Internet culture.

"We maintain what we like to call a level playing field," said Michael Rudolph, general manager for computers and networking at eBay. "From a community standpoint, Dell, IBM, Sears--all those guys (pay) the same fees that you or I do."

That appears to be a price well worth paying for such large companies, which have found that they may be able to get significantly more for their discontinued or end-of-life products through eBay's auction process than they could through a traditional liquidator.

Enterprise software maker SAP recently announced a deal to incorporate eBay's auction process into its company operations. The auction management software will automatically schedule eBay listings and aggregate product data, linking to existing sales channels and software.

"Some of our customers were doing business on eBay on an ad hoc basis, doing some auctions to get rid of excess inventory and end-of-life assets that they couldn't otherwise get rid of," said Ajit Nazre, managing director of the SAP unit that runs the company's eBay service. "They realized it would be much nicer if it were an integrated solution that could be automated to a great extent."

IBM has been selling products on eBay since December 2000, mostly laptops and desktops at the end of their product life cycle or refurbished items that come from the company's global financing group.

"The yields are significantly higher than through the other channels," said Billy Sturtevant, global auction sales manager for IBM. "We're selling to the end user, which is always good; you're taking out a layer there."

It also can be an effective way to attract new buyers, Sturtevant said. About 50 percent of the sales Big Blue makes through eBay are to first-time customers for IBM.

Betting on the big players
eBay notes that most of it business still comes from smaller sellers, estimating that corporations account for less than 5 percent of the gross sales volume on the site. But the company is hoping for the corporate market to play a lucrative part in its future, and Wall Street has taken a sizable stake in that prospect.

So far, eBay seems to have been able to introduce its corporate expansion without losing the loyalty of its core customers. While initial reaction to the larger players was neutral, according to the company, some of the smaller sellers found that they were benefiting from a "halo effect" that was generating new business from buyers who came to the site looking for brand names.

This year, eBay introduced a special section aimed at this marketplace, saying that business buyers now represent more than $1 billion of annual merchandise sales in the categories of capital equipment, office technology and wholesale lots.

Sellers have responded in kind. Thousands of high-volume operations have signed up to use a new tool designed by eBay and Accenture specifically to help business customers sell idle assets, excess inventory and returned products on the auction site. The adoption rate was nearly double eBay's expectations, Accenture said.

The concept has become so popular that several companies, including Accenture and ChannelAdvisor, have begun consultancies that advise businesses on how to sell through eBay. The help can consist of everything from auction marketing to the integration of the auction site's processes with a company's existing network and operations.

"For some customers, we'll roll up with an 18-wheeler and take all of their inventory, put it in our warehouse, sell it on eBay, and just cut them a check at the end of the month," said Norman Jones, vice president of business development and sales for Connection to eBay, an arm of Accenture.

There are, however, some sensitive issues for companies to consider when selling through eBay. For instance, they may face concerns from other retail partners about competition.

To ward off such complications, Fujitsu's McMahan said he informed key customers and distribution partners a month before the company's eBay store went live, telling them exactly how he planned to operate the business. He said he has no plans to sell any new products through the site.

"I have a good channel and don't need to move new equipment on eBay," he said.

Jordan Glazier, general manager for eBay business, believes that the corporate business is a healthy development for competition in all industries, online and off.

"Sometimes the phone rings, and they're calling us because they've either read about or heard about peers in their industry selling online," Glazier said. "We've had some in the (high-tech) business, but it's really coming in across all categories: home improvement, sporting goods."

Those who have done well selling on eBay say it's simply the result of good business sense.

"It's like economics 101--supply and demand. If you have too many listings up, the average price drops; if you have too few, the price goes through the roof but you're not moving your product," said David Spain, director of sales for SureFit, a slipcover manufacturer that sells its discontinued and closeout products through the auction site.

"It's almost a whole new closeout channel for us," he said, "and we see it doing nothing but growing going forward."