eBay for Small Business (Part I)

When Brent and Priscilla Crouch of Greenbrier, Tenn. heard about a neighbor’s teenaged son earning $15 to $20 a week re-selling products on eBay, it started them thinking. Could they do the same thing on a slightly bigger scale and turn it into a viable small business for Priscilla to run from their home?

Three years later, with their company, Jillian Distributors, on track to hit $200,000 in annual revenues, the answer is a resounding yes — as it has been for scores, possibly hundreds, of other eBay entrepreneurs.

Yet despite the remarkable success of start-ups like Jillian Distributors, eBay remains an often overlooked resource for small and medium-size businesses (SMBs). The e-commerce services provider has more to offer than just a forum for auctioning unwanted personal items.

eBay Stores, for example, depart completely from the sometimes problematic auction paradigm and offer a more familiar and easy-to-manage store-front/catalog selling model. The Stores are also one of the great bargoons in e-commerce, as the Crouches and hundreds of other small businesses have discovered.

“I just can’t imagine why anybody with any business would not want to do an eBay Store — because it’s so cheap for what you get in return,” says Nancy McNamara, co-owner of eBay power seller MacNan Biologicals of Birmingham, Ala.

Not that eBay is a one-size-fits-all panacea for small businesses. If you’re a corner convenience store, eBay probably isn’t a great fit. And there is, as with anything, a down side. The sometimes complex rules of conduct and procedure are not always in sellers’ &#151 or even buyers’ — interests. “You have to realize when you’re on eBay that it is their business,” McNamara notes.

Still, eBay offers significant opportunities for small businesses, as we’ll see. In this first in an ongoing series on eBay for SMBs, we look at how Jillian, a start-up, and MacNan, an established regional small business, exploited those opportunities.

After their eBay awakening three years ago, the Crouches first experimented with auctioning unwanted household items. They quickly progressed to buying products from wholesalers — end-of-line and off-brand watches, leather goods, dollar store items, anything they could find — and auctioning them on eBay. Eventually they formed Jillian. Today the company also sells wholesale to other eBay and flea market vendors from its own Web site — and it maintains an eBay Store.

Jillian had sales of $25,000 two years ago. Last year it jumped to $97,000. This year, with 70 percent of sales coming from eBay and 30 percent from the Web site it launched last year, the company is on target to bring in close to $200,000 in revenues.

And that’s with just one full-time employee — Priscilla, who quit her job over a year ago. Brent, an engineer at General Electric, moonlights in the business, and the couple employ a neighborhood man on a casual basis to help out with warehousing and shipping. The company’s 12,000-square-foot warehouse is on their residential property.

If it all sounds too easy, it’s not, Brent Crouch says. “It’s tons of hours of work. For us, it’s a trial-and-error process. When we find a new [supplier] we look for items of interest. Of every ten items we try [on eBay] maybe only two end up being winners. So then we try another 15 items. In the end, we’re just left with what sells.”

Even though Crouch uses Auctiva, an online auction management tool, managing the auctions is still labor intensive. “If a product isn’t selling, you try a lot of different things — change the picture, the [length of] time [the auction] is running, the descriptions, you might change the categories. It’s a lot of work.”

The Crouches’ eBay Store, which they set up shortly after starting the business, is not their primary focus, Brent admits. But that is largely because the Store, with its simple catalog listings, takes so much less effort than the auctions.

It also contributes less to overhead. Jillian pays a flat monthly fee of just $10 for a basic eBay Store. It costs five cents to list each item — as opposed to over $3 to auction an item in the main eBay. At those prices, they can afford to let the Store run on its own, which for the most part it does, while still accounting for about 10 percent of total sales.

Not only are costs lower, the Crouches discovered they could set prices slightly higher than what they expect buyers to pay in auctions, and the Store also attracts customers interested in buying more than one item at a time. “It’s a lot more profitable,” Crouch says.

MacNan’s eBay Store is a more important part of its business. It accounts for about 25 percent of total sales and again contributes more significantly to the bottom line.

MacNan is another family business. It’s run by the McNamaras — Nancy, an experienced retail manager and antiques dealer, and here husband, a veteran of the science education and lab supplies industry. MacNan sells everything from beakers to bunsen burners, as well as classroom experiment kits with step-by-step instructions that it assembles itself and sells to schools and parents.

The company’s original business was selling direct to Alabama school boards and teachers. It still does that. But after Nancy learned the ropes on the Internet and eBay to help her antiques business, she started applying what she’d learned to the struggling firm her husband started after he was laid off in 1995 from a big biologicals company.

MacNan soon took on a new life. Today, eBay — auctions and Store — accounts for 50 percent of sales. The company’s own Web site and direct selling, the latter mostly still within Alabama, account for the rest. Last year saw revenues grow by 25 percent to about $500,000 — most of the growth coming from eBay. The company has four employees besides the McNamaras and maintains a 20,000-square-foot warehouse.

E-commerce — first eBay, later its own Web site — did for MacNan exactly what it was supposed to do: it transformed the company from a regional seller with limited reach into a global enterprise. One in five eBay sales are international, Nancy McNamara notes. “eBay has opened up a whole new market for us.”

The Store, which she launched only four months ago, has been a revelation. McNamara put off setting one up because, as she says, she has only limited resources. Getting MacNan’s own Web site up and running to help the company reduce its reliance on eBay seemed like a better way to invest those resources.

But she finally realized that the economics of an eBay Store — five cents per item to list, no transaction fees — were irresistible. For one thing, it meant the company could now use eBay to sell even low-priced items such as its 25-cent beaker stoppers. And the economics were good even though MacNan opted to pay more — $49.95 a month — for a deluxe store that gives it international exposure through Google and Yahoo listings managed by eBay.

It wasn’t just the low overhead and international exposure. A company like MacNan relies more on repeat business than one like Jillian. But eBay makes it difficult — quite deliberately — for sellers to turn auction customers into direct customers. Sellers can’t link from an eBay auction page to their own Web site, for example.

One key advantage to having an eBay Store is that MacNan can now link from its eBay auction pages to the Store. The auctions, in fact, have become a way to drive customers to the Store. At the same time, the Store’s Google and Yahoo listings help MacNan attract customers that wouldn’t think of using eBay’s search engine.

“I could do a lot more with the Store,” McNamara says. “I could do just the eBay store and do very well.”