The Auction Block Rocket: Taking Off With Ebay
Clicks Today

In the past year and a half Internet iShop, a whitebox manufacturer of computer systems and components, has gone from 18 employees to 62. The secret to this 300 percent employee growth is the flexibility of eBay's pricing system. It might also have something to do with eBay's 42.4 million multi-national registered bidders.

In our recent interview, Tim Roh, VP of sales and marketing, told me the story of their rise through the tiers of whitebox distribution, and the ways that Internet iShop uses eBay to generate satisfied customers. Before we dig in to the eBay solution though, it's important to understand how this company operated before eBay.

Internet iShop builds and sells generic computers with brand name parts. There's no fancy metallic label on the front of the box, no "Dell," no "Gateway," but there is solid value built from solid components.

Before eBay, iShop's primary means of selling was through print media like Computer World, where they bought space to list their products.

The main problem with selling this way, said Tim, is that you have to post your listings from a month to two months in advance. Memory prices have been on a roller coaster in the past year, so selling through print media meant either pricing too high and being undercut, or pricing too low and losing money.

Internet iShop also sells software/hardware configurations. As you can imagine, there are as many different computer configurations as there are computer users. There's simply not enough room on a page to list all the possibilities, and no way of knowing what configurations the market will demand.

Advertising in print is, essentially, a guessing game. You're guessing what people want to buy, what prices your competitors will offer, and how much your materials will cost. All the guessing diminishes your profit margins and makes aggressive pricing difficult, if not impossible.

Now we know some of the reasons why print media didn't work, so lets get in to the reasons why eBay turned things around for Internet iShop.

The reason eBay works for iShop is pricing flexibility. Their prices can rise and fall with supply and demand. Listing products with eBay also allows a greater number of computer configurations, and iShop can react instantly when one system becomes more popular than another. Perhaps best of all, if a product isn't selling, for whatever reason, they can pull it that day and put something else up.

Another key to iShop's success is their close watch on their competitors. They check to see what items are selling well, and which items have the most bids. There aren't many industries in which you can have access to such sensitive information.

In addition to researching competing auctions, iShop receives valuable information from eBay. What are the most searched for computer parts? How many auctions closed today selling laptops? Because iShop is a power seller, they have close relations with the computer category manager, Lily Shen.

Contacting the category manager of the products you'd like to sell will take some legwork, but it's crucial to your success.

EBay's new method of sales brings with it new demands on your customer service.

Tim said iShop receives over 800 emails a day. These are high priority emails because auctions are over quickly and potential bidders expect accessibility and an immediate response. "Automate only when it makes sense," said Tim, who believes in a careful mix of automated customer response and real people.

If you do move a large portion of your sales to eBay be prepared to work on the weekends. EBay's always the busiest on Saturday and Sunday, when shoppers are out browsing for deals. Marketing on eBay takes seven days a week.

If that sounds like a lot of work, just remember the crucial role customer feedback plays in your auction ratings. Customers leave you a rating of: positive, which gives you 1 point; neutral, for which you receive no points; negative, for which you lose a point. In addition, your buyers leave comments, as much for you as for other potential buyers.

The feedback system pushes word-of-mouth to the next level, and good feedback is crucial to customer confidence in your company.

EBay has over 20 global sites, including Taiwan and Korea, and they recently acquired a Chinese auction site. With this market penetration, I was especially interested in how iShop has addressed their potential foreign customers, especially those in Asia.

They've been discussing the idea for several months, Tim said, especially since their manufacturing partners are already established in China and Korea. The main drawback, however, is cultural.

Haggling is a way of life in the Far East, even in major department stores. The price tag is merely the starting point for negotiation. "As a Marketer," said Tim "leaping this cultural hurdle and knowing what price is competitive or not will be the determining factor of success overseas."

Deadbeat bidders and cutthroat competitors (sometimes the same people) are the primary problems iShop faces on a daily basis. A deadbeat bidder bids on an auction, wins, and then splits, taking your product off the auction block and leaving you with nothing.

Because eBay has such a lax policy for accepting new members, potential deadbeats have no problem reentering eBay under new names and continuing their practices.

Deadbeats are sometimes competitors with similar items for sale. They close auctions with high bids so their items will receive buyer attention. There are, as yet, no legal penalties for such actions.

As for stolen credit cards, there's not much that can be done. If the sales department notices conflicting information, such as a shipping address that differs from a billing address, they verify the transaction with the credit card company. This process takes time, though, and is done only in extreme circumstances.

IShop's sales, Tim reports, have not yet leveled off. This increasing volume is due to eBay's increasing user base. IShop's growth potential is directly tied to how well eBay markets itself and how many new users they can entice into the world of the virtual auction.

The potential for you to grow your business exists on eBay – there’s no question. Whether or not your company sees a 300 percent growth in one year is entirely up to you.

Additional Links:
eBay's First Quarter Results
The eBay Marketing Vehicle
Tips For Newbie Vendors
Brick and Mortar Auctioneer
EBay Spawns Online Liquidators

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