Companies stay afloat with online auctions

From...

By Jim Battey

(IDG) -- As corporate profits thin out in a sluggish economy, companies are increasingly turning to online auctions as a sales channel for surplus merchandise.

A wide range of businesses, including national retailer Ritz Camera, are choosing to go the Web auction route because it provides a good outlet for unloading excess inventory. Placing returns, closeouts, and older model items for sale online allows companies to make a bit of profit on goods that would otherwise gather dust in storerooms or end up in the trash can.

"We've always had excess inventory and we're always looking for resources for selling [those] products, such as outlet stores," says Andre Brysha, chief marketing officer of Ritz Interactive, an Irvine, Calif.-based corporate holding company that handles the e-commerce business of Ritz Camera Centers and Boater's World Marine Centers. After experimenting with various online auction platforms, Ritz Camera is currently hawking surplus inventory on eBay.

IDG.net INFOCENTER

Related IDG.net Stories

Features

Visit an IDG site

IDG.net search

Companies looking to set up online auctions can do it themselves, although many opt to go with established auction sites such as eBay. For example, Apple Computer peddles refurbished PowerBooks on the DoveBid auction site; IronPlanet hosts auctions of used heavy equipment for construction; and eBay, by far the dominant online auction house, keeps adding to its roster of corporate partners.

David Steiner, president of Natick, Mass.-based consultancy AuctionBytes.com says that "Companies could do auctions on their own, but it would depend on their infrastructure. By going with an established site, you can get everything up and running instantly."

Jared Blank, an analyst at Jupiter Media Metrix in New York, agrees. "Setting up an online auction yourself can be difficult and time-consuming. You may not have the internal resources [to do it well]."

As for the best option for large companies looking to liquidate merchandise, "It's still very early in the game," Steiner says. He points out that retailers operate on razor-thin margins to begin with, so any middleman would cut further into profits, plus "companies have to be careful not to cannibalize their own business."

Contemplating the cannibalization factor also brings up a key strategic decision for companies making the dive into auctions: Choosing exactly which products should be sold online.

"The real challenge initially is getting the processes in place of segregating inventory within your normal supply chain," says Ritz Interactive's Brysha, who adds that putting merchandise up for auction online is a labor-intensive effort that includes getting images and writing detailed descriptions of each product. Companies must also remember that the costs associated with auctioning products on the Web will exist whether or not the product actually sells, Brysha notes.

Choosing the best online auction partner can be a matter of setting up shop where the customers are. Consistently ranked as one of the more-visited sites on the Web and boasting more than 34 million registered users, eBay is emerging as the online auctioneer of choice.

"eBay already has the proven marketplace. Companies are using eBay as another outlet for their merchandise," says eBay spokesman Kevin Pursglove. "We've noticed an evolution in the last year with more retailers coming to the site. It still takes up a pretty small percentage of the overall pie here at eBay, but we're seeing steady progress."

"Ritz Camera has been around for 82 years so it helps that eBay customers are comfortable buying products from an established retailer," says Brysha, explaining Ritz Interactive's decision to go with eBay. "eBay is sensitive to its core function, which is one-to-one transactions, but they are also looking to get top retailers to supply products."

And of course, as Brysha points out, "There's an enormous audience on eBay." He estimates that the eBay auctions currently make up roughly 10 percent of Ritz Interactive's overall sales in terms of order quantity, and he expects that number to grow.

Brysha, for one, characterizes online auctions as an ideal channel for peddling excess merchandise and views their future as very bright: "As long as there are liberal return policies in the United States, there will always be a place for this kind of thing," he says.

But in the end, even as online auctions provide yet another option for retailers, "It's up to the buyers and sellers to determine which platform works best for them," says eBay's Pursglove.