This year's toy story: gray auction market

But this year, widely predicted to be a turning point for mainstream commerce online, a growing legion of self-styled entrepreneurs are stockpiling what they think will be the season's hottest toys at retailers and then turning to Web auction sites for a quick profit, sometimes tripling the return on their investments.

The phenomenon is creating something of a gray market on eBay, Amazon, Yahoo and other popular online auction sites. Jupiter Communications digital commerce analyst Mike May said auction sellers are essentially doing the same thing as brokers who snatch up concert tickets and then mark up resale prices.

"These consumers are using eBay to become toy brokers," May said. "They're buying low and selling high, because they know that the market will bear a higher price than retailers are asking."

eBay spokesman Kevin Pursglove said that unlike ticket brokers who often skirt local laws that regulate or prohibit ticket scalping, what eBay toy sellers are doing is perfectly legal. The toy sellers are simply filling a need, he said, meeting the accelerating demand for such items as the Amazing Ally doll or Pokemon Yellow Special Pikachu Edition Game Boy.

"As far as we know, it's an example of supply and demand in the marketplace," Pursglove said. "Every Christmas season has a hot item that people have got to have."

But consumers could sour on the idea of having to bid against each other to get the hot toys each holiday season, especially if they are forced to pay prices that far exceed the retail charge. On eBay, for example, collectibles such as the Millennium Princess Barbie have reached nearly three times the retail price.

One eBay user who won an auction for the Amazing Ally doll said that while she was happy she won one for her daughter, she was outbid on nine previous auctions. "You get outbid in the last minutes many times," she said.

"The existence of eBay and similar sites represents an opportunity for enterprising individuals to turn a fast buck," May said. "It also affords consumers who aren't so price sensitive a chance to get this year's hottest product, provided they're willing to pay a premium."

This holiday season is expected to be a record year for retail e-commerce, with Forrester Research projecting that consumers will spend $4 billion online between Thanksgiving and New Year. Despite all those dollars floating around cyberspace, some items simply aren't available anymore at conventional retail sites.

The online auction sites could stand to benefit from those inventory shortfalls. That will help propel the online auction market, which Gomez Advisors expects to reach $15.5 billion in 2001.

One of the most elusive items this year is the yellow Pokemon game. Amazon.com's toy store has it on back order, eToys says the item is out of stock, and Toysrus.com simply doesn't list it. KBkids.com sells one along with Nintendo's Game Boy, but it's also out of stock. Of three traditional retail stores surveyed by CNET News.com, none had the item in stock.

A quick search on eBay, however, turns up about 1,500 Pokemon games both alone and bundled with Game Boy and other items. Yahoo's auctions has some 400 of them, and Amazon's auctions has about 90. The game sells for $27.99 on eToys when it's in stock, but the average closing price on eBay today was about $50.

A search for the similarly rare Amazing Ally yields more than 1,400 dolls and play sets on eBay, 290 such items on Yahoo and 126 on Amazon. Auction winners on eBay today bid an average of about $94; Amazon.com sells the doll for $69.99 when it's in stock.

Sarah Miller, a homemaker in Sulpher, La., said she bought three Amazing Ally dolls at her local Wal-Mart for about $50 and then sold them on eBay for between $79 and $89 over the last several days. Miller said she's sold some 200 toys on eBay this holiday season, with the Millennium Barbie leading the pack.

"It's going to pay for my kids' Christmas this year," she said.

Despite some backlash, many consumers seem accepting of--if not resigned to--the idea of getting toys like the Amazing Ally on auction sites, especially if they can't find them anywhere else.

Northern New Jersey resident Tiffany Gardner said bought an Amazing Ally doll for a friend's daughter. When she found out that she already had one, Gardner put the doll up for auction on eBay, where she had been buying and selling other items for about a year.

Gardner listed the item twice but didn't sell it because no one met her minimum price, known in auction parlance as the "reserve." Still, she said that interested buyers flooded her with email, wanting to know what her reserve price was. One buyer even offered to give her $300 for the doll if she would close her auction.

"The fact of the matter is that people can't get this doll," Gardner said. "It's like sitting on a gold mine."