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EBay may benefit as more 'drop-off' businesses open

Posted Saturday, March 20, 2004

Think of eBay, the world's largest online auctioneer, as a virtual garage sale where potential customers aren't just down the block, they are around the globe.

Now imagine holding a garage sale without having to arrange your second-hand treasures on tables, stick on prices and fight boredom as customers pick over the merchandise.

ExpressDrop is a new business at 1900 W. Belmont Avenue in Chicago that will post your item for sale on the eBay Web site accompanied with a photo they've taken, monitor the auction, ship the item to the buyer in a timely manner, collect the money and then mail you a check when it's all over.

It's eBay made easy for people who don't have the time to monitor online auctions and ship out items to buyers or aren't comfortable enough with a computer to upload digital photos and manage the auction process.

ExpressDrop is one of hundreds of stores popping around the country that cater to people willing to pay a third party to sell their merchandise on eBay. About 650 more so-called "drop-off" stores are planned this year.

While eBay doesn't own or control them, it stands to benefit.

"We're excited about this," eBay Chief Executive Meg Whitman said recently at a Goldman Sachs investor conference. "Clearly they are getting an incremental customer that would have never come to eBay on their own."

EBay, which collects fees from sellers who pay to list and conduct business through its online marketplace, got more than 7 cents from each dollar of merchandise sold on its site last year. EBay's 2003 revenue was $2.17 billion.

The stores are among the estimated 430,000 small businesses and individuals eBay says either make their living or supplement their income through the online auctioneer.

The drop-off stores, which write listings, respond to questions from potential buyers, process transactions and ship items, are piggybacking on the success of eBay, but their long-range potential is unclear.

A pioneering effort by MyEZSale.com, a Framingham, Mass.-based firm backed by $8 million of venture capital, shut down in 2002 after offering the service at 200 locations.

"All of these companies are rushing after this land grab and we're still not quite sure it is a business model that works," said David Steiner, who helps run AuctionBytes.com, a Web site that tracks the online auction market.

EBay, based in San Jose, Calif., rewards drop-off stores that sell enough merchandise. Shares of eBay gained 91 percent last year as net income jumped 77 percent and sales rose 78 percent.

The drop-off stores' fees cover those paid to eBay as well as their own costs and margins. In general they only sell on eBay and take consignment items worth at least $50 while charging a commission ranging from 20 percent to 40 percent.

At ExpressDrop, the commission is 32 percent of the first $500, 25 percent of the next $2,500 and 10 percent of the remaining amount over $3,000.

There's an upfront fee of $20 if you want an extended auction and want to set a price for the opening bid. The basic package with a seven-day auction and an opening bid of $1 is free.

ExpressDrop is owned by four eBay devotees who have been selling on the site since 1998. They bring all that experience to bear, promising software to research the selling prices of goods on past eBay auctions, detailed photography and a narrative written to set your item apart from the rest.

• Daily Herald Business Writer S.A. Mawhorr contributed to this report.

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