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Franchise Prospector » Franchise Trends
Franchise and Business Trends in the
E-Bay Drop-off/Auction Services Sector
The first online auction, OnSale.com, was established in 1995 and since that time, growth in online auctioning has grown into a multi-billion dollar industry. By 1998, other auction sites, such as amazon.com, Ubid.com, eBay.com and auctions.Yahoo.com, had joined the industry and were responsible for more than $1 billion in online transactions. By 1999, industry growth had increased by well over 200% with online, auction sites handling more than $2.3 billion in transactions. In 2004, eBay was responsible for the exchange of $34.2 billion worth of merchandise in the US, alone. eBay has more than 135 million registered users in 32 markets, worldwide.
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The drop-off auction industry is a, relatively, new market that began around the year 2000, as a method to sell eBay items. The eBay online auction house has grown into an industry of its own, requiring specialized skills in order to make the best use of the service. The vast amount of merchandise being sold on eBay and the complicated system of listing items and managing the auction process has limited access to the system, particularly for novice computer users. The idea behind drop-off auctioning is that individuals are able to assign their property over to drop-ff auction storefronts to be auctioned or sold on eBay by others with more expertise. The idea has grown into a very profitable industry, luring in big name companies. AuctionDrop, a fast growing drop-off action franchise, provides walk-in auction consignments for some 3,700 United Parcel Service shipping stores. The PostNet franchise recently added auction-hosting services to its nationwide copying and shipping stores. The list of new franchises and franchise expansions continues to grow.
Consumer Trends
Both eBay and cable television's antique shows are responsible for educating the public as to the value of their possessions. Many people have discovered that wholesalers and dealers, particularly antique dealers, have been paying lower prices for their possessions than they are worth. Many of these individuals do not have the time or expertise necessary to sell at online auctions, so consignment, through drop-off auctioneers, provides a convenient method of selling their items.
A survey conducted by AuctionBytes.com establishes that it takes drop-off auction employees about 20 minutes to research, caption, photograph and list an item on eBay. For the average person, this could be a very time consuming process, particularly someone unfamiliar with online auctioning. The average person could take several hours to accomplish the 20-minute task performed by drop-ff auction stores. The survey did not consider the time necessary to answer emails in reference to the item, pack the item or ship it to its destination. Drop-off auctioneers provide these services as well. They will track the auction, answer questions, ship the item and process the payment.
The only responsibility of the consumer is to research prospective auctioneers' eBay history to ensure that the auctioneer has demonstrated expertise in selling on eBay. Currently, there is no regulation or licensing regarding online and drop-ff auctioneers. eBay has established a system, which allows customers to rate their chosen service providers. Buyers are encouraged to make use of this feedback when choosing an auctioneer. By acquiring an auctioneer's eBay user-id, a buyer is capable to review the auctioneer's feedback, provided by other customers that have used his/her services. A buyer may also examine any existing listings of the prospective auctioneer to examine their style and approach to layout and describing items. By examining an auctioneer's feedback history as well as their current listings, the consumer is expected to ascertain the auctioneer's ability to provide the quality of service necessary to sell their items.
Business Trends
The drop-off auction market is a relatively new market, as such, business models continue to be developed and revised. For items, less than 500 dollars, drop-off auction commissions average between 35% and 40% of the sale. This does not include the cost of listing, taxes, closing or other fees, which could raise the total fee for selling to much as 50% of the selling price. Why, then, would anyone need drop-off auction services?
The drop-off auction franchiser offers to provide top quality photography and layout as well as its reputation for selling to get a better price than you would otherwise. A contract with a drop-off service ends with either the receipt of a check or the return of your items. Any issues of fraud on behalf of the buyer or seller fall within the responsibility of the drop-off auctioneer. eBay offers thousands of categories to choose from. The drop-off auctioneer should have the expertise to know where to list your item so that it sells.
The AuctionBytes survey indicates that most drop-offs spend more than $500 per month to market their services and serve between one and thirty customers per week. One of the conclusions, drawn from the survey, by David Steiner of AuctionBytes, " …this is not a rich-quick business, but rather a challenging, labor-intensive one. If you are not operating at peak efficiency, you are not going to cover your operational costs." Survey respondents indicate that their franchises were receiving merchandise with an average selling price of $91 or higher and they were achieving a 77% sell-through rate.
eBay has as many as 29 million items for sale every day with more than 3.5 million items added on a daily basis. eBay does not allow the sale of handguns, alcohol or tobacco products and working to establish policy that would ban pirated music and software sales. Of all the items sold on eBay, items listed under the category, automobile accessories are the biggest sellers, accounting for 22% of all sales.
Other online auction houses have, yet, to join the market. Yahoo auction, another well known online auctioneer, has experienced more sales in Japan and Canada than eBay. Yahoo claims to host 1/8 of all online stores. To solicit more U.S. business, Yahoo has recently eliminated fees for using its auction site.
Franchise Trends
According to Frank Fortunato, contributor to Ecommerce-Guide.com, as of June 2005, there are more than 7,000 drop-off auction stores in the U.S. The following drop-off auctions are the largest, established drop-off franchises in the U.S.
| AuctionDrop |
PictureItSold |
| Isoldit |
AuctionMills |
| EpowerSellers |
Bidadoo |
| PostNet |
QuickDrop |
| Snappy Auctions |
NuMarkets |
The drop-off auction industry is still in its infancy and with so much potential and so little competition, franchising in this market promises rapid and unlimited growth potential.
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