eBay Revs Up Its Industrial SaleseBay Revs Up Its Industrial Sales
July 7, 2003
San Jose, CA-Gregory Culkowski clicks on the eBay site. His goal is to save a bundle on used or excess goods. But he's not looking for comic books or a 1960s era original Barbie. He needs to buy new test and measurement equipment. There, he's found it, the analyzer he needs. Through normal channels it would cost $30,000. He bids $6,000 and wins.
As Chief Technology Officer at Transmitter Locator Systems, a Burke, VA-based satellite communications equipment manufacturer, Culkowski needs to purchase equipment with advanced capabilities. And he goes to the same place you would expect to find Mickey Mantle's rookie card. Culkowski has purchased more than $100,000 in test and measurement equipment over eBay in the past year, and although eBay has a reputation for selling collectibles, the equipment Culkowski buys is high-tech-and it comes at a discount. "I've saved between 50 and 100% over list," says Culkowski. "The biggest savings have been on the scopes and analyzers."
As the largest auction site, eBay had 5 billion auction transactions in 2002. The company is one of the few Internet enterprises that continues to be wildly successful at both driving sales and creating profits. eBay netted nearly a quarter billion in profits in 2002, reporting overall sales growth of 62% and a profit growth rate of 176%. Not surprisingly, eBay trades high for a dot com stock, getting near $100 per share at this writing. The company's 62 million registered users post auctions across 18,000 categories. More and more of those categories include business and industrial goods. In January of this year, eBay rolled out a section of its auction site designated specifically for business and industrial goods. You can now find categories such as agriculture, construction, industrial supply, restaurant, electronic components, and of course test and measurement. A full 20% of the company's business in 2002 was made up of business and industrial sales.
"We have about a dozen vertical business marketplaces," explains Karl Wiley, senior category manager in business and industrial at eBay. "Those categories represent a good portion of our sales." Wiley says that sales in business supplies and computer equipment purchased through the consumer eBay areas also contribute to the billion in commercial purchases. "We estimate that a large percentage of technology items, including computers, networking equipment, and office products, is purchased by small companies."
Not just shabby chic
The goods sold on eBay are not necessarily used or reconditioned. As much as 40% of all business and industrial items sold on eBay are new goods sold as excess inventory or in wholesale lots. "There is a growing amount of wholesale business on eBay," notes Wiley. "Instead of buying for end use, some customers are buying for resale or buying materials for the manufacturing process."
To some degree, eBay's success in business and industrial products can be attributed to the downfall of industry-specific B2B e-marketplaces. When industry markets first began to open in 1999 and 2000, they touted themselves as "eBay for electronics" or "eBay for agriculture." But most of these companies vanished with the dot com collapse. They failed to attract venture capital and were not able to gather enough buyers and sellers to create a valid market. In the meantime, their potential buyers and sellers started to use eBay to buy and sell goods.
Officials at eBay are quick to acknowledge that they didn't go out and drum up business commerce. "We looked up and noticed that it had happened on its own," says Wiley. "The e-marketplaces went away, but there was still a need for trading. So businesses created it on eBay." And those business buyers and sellers-many of them techies-continue to show up in large numbers. In any given week, 500,000 new listings for business items appear on eBay. The business category transactions grew more than 90% in 2002, a faster clip than eBay's overall growth rate of 70%.
Kevin Rochford, owner of KGR Tech Services in Hudson, NH, launched his RF microwave lab last year after buying test equipment on eBay. In total, Rochford spent about $25,000 on eBay for equipment that he claims would have cost him three times as much if he purchased it retail. He also notes that eBay was a big time-saver. "If you're familiar with the equipment and you know specifically what you want," Rochford says, "you can go into the site and use the search tools to go right to the items you need."
Companies purchase a wide range of materials over eBay, and not all equipment is purchased for company use. TR Electronic Inc., an optical transmission manufacturer in London, Ontario, buys products from affiliates whose products interact with those produced by TR Electronic. "If one of our customers tells us they use a product from ABC company with one of our products, we'll buy the product over eBay to see how it works with our products," explains Aldo Liberatore, manager of distribution and market development."That way, when we walk into a sales meeting with the customer, we have a better understanding of how they use our products."
Liberatore notes his experience on eBay has been consistently successful. "We've never had an issue of purchasing something and it hasn't worked. Most people are pretty honest," says Liberatore. "I've never had a need to alert them about fraud. Every person I've dealt with has been good."
As well as a purchasing tool, eBay also provides companies with selling opportunities. Last year, Jim Strycker worked for a contract manufacturer that needed to get rid of some electronic equipment. Strycker was accustomed to selling football cards on eBay and suggested the company put up its excess inventory for auction. The company agreed, and Strycker started to move the materials successfully. Soon the company went out of business, so Strycker bought its leftover equipment, filled his garage, then sold it on eBay.
During the two months before he took a new job, Strycker managed to run 10 auctions each day, becoming one of eBay's "Platinum Power Sellers." After taking a new job, Strycker has continued to sell roughly $10,000 per month in equipment.
Executives at eBay started to notice an increase in business trading back in 2000. Since then, the company has started to work to encourage business and industrial activity. The company has developed category managers for the individual industry verticals, and recently, eBay has decided to use advertising to encourage business owners to buy and sell over the marketplace.
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