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Yahoo looks to lasso big e-tailers

The portal woos major retailers into selling surplus and used goods online, working to shift "mom-and-pops" into paid customers. What's eBay and AOL got to say?

Yahoo is intensifying efforts to woo major retailers looking to sell surplus and used goods, a move that is expected to heat up competition with eBay and America Online.

Beginning 12:01 a.m. Wednesday, individual vendors won't be able to list used goods for free on the Yahoo Shopping Used Goods site, according to a notice the company sent to vendors. Instead, retailers will have to--for certain fees--sign up for Yahoo's Auctions and Classifieds properties or become a certified Yahoo Store merchant.

The decisions underscore Yahoo's goal to win business from larger retailers while making smaller "mom-and-pop" shops paid customers. Up to now, individuals could sell goods such as books and CDs directly to shoppers for free. Now, anyone who wants to sell on Yahoo will have to pay for the privilege.

"We're no longer having person-to-person transactions in the shopping platform," said Yahoo spokeswoman Nancy Evars. "Now we have more resources to go after larger retailers."

Used and surplus goods sales have become an appealing business for online companies, as it allows a company to take a cut of any transactions. The move is Yahoo's attempt to compete against Web auction giant eBay and America Online, which announced a similar strategy last week.

Yahoo's not alone in wanting to tap this market. With a goal of reaching $3 billion in revenue--through about $30 billion in sales on its site--eBay has been increasingly courting big businesses to sell excess inventory on its site. Among its stable of sellers are IBM, Kodak and Home Depot. also has been teaming up with large retailers. Following its breakthrough deal to host the online operations of Toys "R" Us two years ago, the online giant has signed deals with a string of traditional retailers, including Circuit City, Borders, Target and Office Depot.

One option for smaller outfits who want to continue listing used merchandise on Yahoo will be to sign up as a Yahoo Store merchant. Members are required to pay Yahoo $49.95 a month, a 10 cent listing fee per product per month, and a half-percent transaction fee for anything sold. Larger merchants will be charged on an individual, per-deal basis.

Putting the pieces together
Yahoo's relationship with small merchants has been shaky for the last two years. Last year, many sellers abandoned Yahoo's U.S. auction site after the company introduced fees.

Earlier this year, Yahoo drew criticism from some European auction sellers after deciding to shut down five of its European auction sites and promote eBay's rival sites instead. The European auction sellers were upset that they could not transfer feedback ratings--essentially their online reputations--to eBay.

Other problems have extended beyond auctions. In recent months, several anti-spam organizations have placed Yahoo's store site on their blacklists, effectively blocking access to the stores run by Yahoo merchants. Also, Yahoo irked some sellers by adding an advertisement to its checkout pages and not immediately telling sellers how to opt-out of the promotion.

Yahoo launched Yahoo Shopping Used Goods, originally called "Yahoo Warehouse," last year in an attempt to invigorate its shopping area.

Yahoo's mantra: fees
Yahoo over the past year has undergone a re-evaluation of its businesses to diversify revenue away from its dependency on advertising. CEO Terry Semel has made the strategy a cornerstone of Yahoo's turnaround, tacking fees onto some services that were once free.

These efforts appear to be working. Last week, the company disclosed it now counts 1.5 million customers who pay for services such as personals listings, e-mail forwarding and extra storage. Yahoo is also touting its partnership with SBC Communications to sell digital subscriber line (DSL) access as a major driver of paid services growth.

In the fiscal quarter ending September 30, 2002, Yahoo recorded $83.1 million in its fees and listings business, which encompasses paid services, its HotJobs division and business services, among others. That's a 124 percent jump from last year--nearly half of that from HotJobs, which it acquired earlier this year.

The company's e-commerce business has also grown quickly. Last quarter, the business witnessed a 118 percent surge from last year to $18.3 million. That's up from $16 million the previous quarter.