Vikram Singh—Category Manager for cameras in the Camera/Photo Department at eBay—batted .500 when he addressed the recent meeting of the PMDA. He didn’t need the armful of statistics industry insiders invariably bring to these monthly forums to drive home Part 1 of his talk: “The internet is too big to ignore.” But they did come in handy in Part 2: “Get your act together and jump on the bandwagon.” With electronically-driven sales methods almost universally accepted, the only questions remaining are where and how to join in the fun.
In his effort to point out where the internet is going and how eBay plays its role, Singh began his pitch with the aid of the usual array of charts, bars, and graphs. In 2005, he began, $81 billion were spent online. For this year he predicts that figure will jump to $95 billion and, peering into his long term crystal ball, $144 billion by 2010. E-Commerce accounted for 3% of all retail sales in ‘04, 4% in ‘05 and, he figures, 6% this year.
“This is not pocket change anymore,” Singh deadpanned. “Online is a real channel, and it will continue as such. Its influence on retail sales totaled 27 percent last year and in four years it will be almost half. That means every company today must have an internet strategy to grow its business.” Citing the U.S.’s ‘05 population of 299 million he reported 203 million use the internet while 139 million shop online.
“I’m from India,” he chuckled, “so I’m used to a very big population. Those are very big numbers but they also mean that 56% of the population and 20% of internet users are not shopping online—yet. The potential is still enormous.”
So where does eBay fit in? This “fledgling” (at the ripe old age of 10 years, that’s the way it’s regarded by some older timers) outfit now boasts 181 million regular users with 120,000 joining every day. “That’s more than the population of many small US cities,” Singh pointed out. “eBay is a marketplace, not a retailer. But if it were a retailer it would rank 8th in the world, above Walgreen’s and just below Target. We do $44 billion a year with eBay—$1,511 every second.”
Singh feels that eBay is often considered sort of a garage sale, a place where people try to sell stuff they don’t want. In rebuttal he points out that a significant amount of new and in-season merchandise is also selling on eBay. In 2000—the year Singh joined the firm—eBay launched a fixed-price format. Prior to that, it was strictly all-auction. But the company’s research (“We know all companies love research and so do we.”) revealed that many people didn’t want to wait anywhere from 1 to 10 days to make their purchases, a fact that helped launch the “Buy It Now” program. Auction is still popular but fixed price is growing. As of the end of ‘05 34% of unit sales on eBay came from the “Now” format.
According to Singh a significant number of retailers in the New York market are coming online. Sixty-seven percent of them want to reach people in other locations, to get new demographics, and a different kind of customer. With the internet “the whole world is suddenly open, at a minimum the entire U.S. market,” he declared. “Sixty-nine percent of this group of converts were actually brick-and-mortar establishments before going online. For some it is now their only channel.”
You must have a “solid internet strategy,” Singh insisted. “The numbers are growing not only on eBay but across the whole internet. They are selling everything. A lot of it is new stuff, although companies also use us to get rid of refurbished items. On the other hand, if something becomes old and collectible, where else can you find it?” eBay’s research reveals lots of ways to use the internet—as a marketplace such as eBay, a website (for information), and existing channels—all of which can be used to promote products through comparison shopping.
That research has also led the company to realize that many large businesses are not equipped, or willing, to sell products “onesey-twosey” which has led to the development of the eBay Reseller Marketplace where companies can thus expose their unwanted inventory to thousands of eBay Power Resellers (those who can sell x-dollars per month). At last count there were about 40,000 of them. The seller lists the items to be sold—50 at a time—and the reseller then funnels them to eBay or other channels. Singh says they are “extremely popular with big businesses not set up to sell directly to eBay or online. Last year over $2 billion of product were sold this way.”
eBay offers another solution to the inventory liquidation problem. Called “Private Market Labeling,” it’s used by, among others, HP in their European operations. The manufacturer invites their resellers to bid on products they want to liquidate ahead of time. eBay claims the return is much higher. Resellers know the date in advance, bidding can become more active over a longer period, which usually results in a higher price.
In conclusion Singh repeated—and expanded—his rallying cry of the day—”The internet is way too big to ignore, it continues to grow, the numbers are staggering, reaching $44 billion four years from now.” Eventually, he believes, everything bought at retail will be influenced by what has gone by on the internet. Since most successful sellers don’t specialize or otherwise restrict their efforts, “there has to be a mix. You can use a website, post information on E-Commerce, rely on marketplaces, and shopping comparisons. You can offer it to online sellers or use your own resellers. The key is building the one strategy that works best for you and then resourcing it well. Again, it’s too big... [readers, you get the idea]. Every company should be thinking about that.”