Furniture grows at eBay
Online auction house quietly becoming a major force
By Brian Carroll -- Furniture Today, July 21, 2003
San Jose, Calif. — Online e-commerce gorilla eBay paradoxically is one of the Web's best-known brand names and at the same time one of its best-kept secrets in home furnishings.
The dominant online auction house is found in none of the rankings of top furniture retailers. That's because most of eBay's activity involves individuals selling to other individuals.
Meg Whitman, eBay's president and chief executive officer, said at a conference last month that approximately 97% of eBay's selling is done by individuals or small businesses, not corporate giants like Sears, Motorola, and Sharper Image, each of which also sells through eBay.
In eBay's "home" category, which includes furniture, only about 4% of sales are generated by large retailers, according to Kevin Pursglove, senior director of communications.
Last year, business in home-related goods spurred the online auction house to add the category to its homepage marquee, one of 22 such categories. Home includes furniture, home decor, lighting, bath, bedding, lawn and garden, major appliances, building and repair materials, housekeeping items, kitchen and barware, windows and floors, baby gear and pet supplies.
EBay has competition in the online auction business from Yahoo and Amazon, among others, but the site continues to far outpace the others. Last year, eBay rang up nearly $15 billion in revenues. A sign of its success, in February eBay was named by Oxford University as the world's most successful retailer.
Because eBay is an egalitarian, largely self-regulating marketplace, it is almost impossible to estimate how much furniture is being sold through its auctions. And publicly traded eBay isn't telling.
Anecdotal evidence, however, points to a powerful new force in furniture retailing, one that is open seven days a week, 24 hours per day, with "locations" throughout the globe.
From China to California
China's Shangri La Leather Furniture, which sells on eBay as Leather Sofa Quality, partners a California distribution presence with production in Foshan City in Guangdong Province. One of the largest furniture "stores" selling through the online auction site, Shangri La specializes in custom-made leather upholstery.
"Nobody in traditional furniture sales recognizes the huge opportunity (of) selling online," said Jan Szymanowski, general manager at Shangri La. "In other trades, it is almost impossible to imagine being in business without a good Web page. EBay has become dominant in almost every category."
Szymanowski said the relatively low profile of auctions in the retailing of furniture represents an opportunity for those, like Shangri La, who have been early adopters. An average auction sale for Shangri La runs about $1,200, she said.
EBay's largest furniture "store," La Verne, Calif.-based Home Direct, has multiplied its sales ten-fold using the online auction site, according to Eric Lau, director of Internet sales. Selling on eBay since March 2002, Home Direct also sells on the Web at HDLiving.com and at Bluetoile.com.
Sales on eBay quickly overtook those made through Home Direct's own sites. Lau said eBay now represents 70% of the company's Internet sales.
Because of its high volume — nearly 5,500 completed auctions — Home Direct is recognized by eBay as a "PowerSeller," which gives the company price breaks and the ability to participate in special eBay sales and marketing programs.
Another of eBay's "PowerSellers" in the furniture category, Dawn's Furniture — the second-largest furniture "store" at eBay — reports that around 500 customers view one of its auction items in a normal week.
"I am always amazed at the number of customers that look at my auctions," said Dawn Shaut, owner. "Having a small country store in the Adirondack Mountains, I could not imagine having over 500 families visit my store in a week. This allows me far more exposure than I would normally have."
The traffic is not only greater, it is self-selecting. A seller doesn't have to sit and wait for that special buyer to walk into their shop while he or she pays rent.
The costs of business
But eBay's reach does not come without sizable costs. The listing fees and commissions charged by eBay — fees Shaut calls "outrageous" — and the costs of shipping eat into profits already hit hard by the generally slow economy.
The cost of posting a single item ranges from 30 cents to $3.30. Sellers also pay a percentage of the sale price, beginning at 5.25% of the first $25 and declining incrementally for amounts above $25. The huge, growing and global audience eBay reaches, however, so far has been worth it for the larger furniture sellers on the site.
"We opted to use eBay, which has given us a direct tap into a major part of the online market, rather than advertising through regular search engines," Lau said. "Sales through eBay have brought us a broad customer base."
He said he also likes the seemingly unbiased nature of auction advertising, which is not perceived among consumers as advertising at all.
Lau's answer to the high costs of selling? "Volume," he said.
Szymanowski agreed with Lau that eBay's listing fees and commissions take a toll on already slim profits. At least for the first few months of operation, damaged goods, too, spoiled plans for quick profitability.
Around 60% of shipments in Shangri La's first few months on eBay were damaged, she said, leaving a trail of bills.
"My current shipper is not only less expensive, but it is also 100% damage-free," said Szymanowski, a former computer engineer from Silicon Valley. She has sold online for five years.
The biggest knock on online furniture retailing has traditionally been the lack of opportunity or ability to touch, feel and see first-hand the fabrics and finishes. To mitigate that problem, Szymanowski's company offers a full refund, which includes shipping costs.
"In the last year, we replaced the furniture in only three cases," she said.
EBay is also being used to move unwanted goods. In Tacoma, Wash., a furniture wholesaler closing down a showroom sold a gold-leaf console by Barbara Barry to a buyer from Toronto. Given the winning bid of $2,223 and a U.S. retail of about $4,108, the Canadian buyer got a great deal and the distributor unloaded a liability.
"You really could furnish the whole house on eBay," Michael Kaiser, co-author of "The Official eBay Guide to Buying, Selling and Collecting Just About Anything," told the Washington Post.
E-retailers utilizing eBay say the opportunity is great. Szymanowski said it is hard work for low pay, but that her company still is in the building phase. With a market so vast, "the sky is the limit," she says.
Dawn Shaut, too, said online sales will continue to grow. "In this day and age, customers do not have time to run from store to store to shop," she said. "It is much easier for them to order items online and have it delivered to them while they work."
Showtime organizer to auction jackets online
10/31/2008eBay Home Decor Barometer - September 2005
09/30/2005Auction site to sell surplus
08/23/2009Sofas No. 1 on eBay
04/13/2005
