Online Auctions Offer Stability Amid Turmoil
Lost a job recently? There's a life preserver floating out there that wasn't around in the last recession a decade ago: eBay, the online electronic marketplace.
eBay rescued Steven Levi, who was laid off from his sales job just before the tech bubble burst in early 2000. He hasn't taken a corporate job since. On a recent day he was presiding over 230 camera auctions on eBay. At his home office, phones are ringing, e-mail is flashing, and faxes are humming, part of his typical 100-hour workweek. His proceeds provide a nice life for his family of four in Manhattan, including two summer months at a beach house in Virginia. "I'll put my kids through college on eBay," he says.
The recent economic shocks -- from the tech bubble burst and the Sept. 11 terrorist attack to corporate scandals and the market's decline -- have boosted the national unemployment rate to a stubborn 6%. Some jobless workers, and others who don't show up in the statistics, are getting by -- or even getting ahead -- by selling on eBay and other online marketplace services.
"There's always been a surge of entrepreneurship in economic downturns," says Mark Vitner, senior economist at Wachovia Corp., Charlotte, N.C. "What's new here is eBay can make it easier for new entrepreneurs." He finds it a positive sign that many Web newcomers have the courage to take the step from dabbler to full-fledged eBay trader. "Necessity is the mother of innovation," he says.
A Booming Business
The recession certainly hasn't hurt eBay. The company already moves more than $5 billion a year in merchandise over its sprawling Web site. Its once motley collectibles and dolls are now just part of a larger universe that includes sales of cars, real-estate and professional services. The San Jose, Calif., firm said recently that its fourth-quarter revenue soared 89% to $419.9 million from the year-earlier quarter. It has already raised its profit and revenue projections for 2003.
For some of the jobless, dabbling in online auctions covers short-term expenses and provides an emotional boost. Aron Danburg of Houston worked for a couple of dot-coms, and the second one, which he believed was more stable, collapsed in two months. The technical writer snagged some contract work, but it ended a few months later. Expecting to move for his next job, he began clearing out his house, selling old college textbooks and compact discs on Amazon's new service, similar to eBay. (Sellers set a firm price on Amazon; it's not an "auction" as at eBay; eBay also has a "fixed-price" sales format that allows buyers to purchase without haggling or waiting.)
Though he landed a job after four months at the Halliburton Co., an oil-field and construction-services firm, the uncertainty was wearing, especially as he watched fellow job searchers struggle for months on end. "I had no idea how long it would take," he says. "It was quite frightening." He found just unloading a single book could add a spark to a gray day of online job-search rejection. "I'd get an e-mail saying something positive," he says. "I'd think, hey, I just made $15 bucks." His sales were enough to cover the rent for a month, allowing him to stretch his savings. He's still at Halliburton, and still sells the occasional book or CD online.
For the underemployed, including entrepreneurs hitting slow patches in the weak economy, eBay can fill an income gap. Boston-based Constance Mazelsky saw her communications and marketing work with Internet and software companies losing steam. "During the last few years it's not been a real vibrant market segment." Moreover, after she had a baby last year, she began working from home.
Now she's selling her expensive handbags, which she now rarely uses, on eBay. "When I worked outside the home I tried to be totally accessorized and fashionable," she says. Her collection of upscale designer purses that matched particular suits have fetched excellent prices, including a recent sale of a Dooney Bourke purse for $150. "People respond to a good photograph and accurate description," she says. "Name brand things sell very, very well."
To be a serious seller requires a certain degree of commitment, but the eBay Web site walks beginners through the process. eBay charges small fees to post items, and a small percentage of the sale, depending on the price. And eBay deploys a middleman payment system that allows buyers to securely use credit cards, forwarding the payment to sellers. Digital photos of the items help attract interest, as does punchy descriptive writing. Serious sellers need systems for packing and shipping their goods. eBay user sites help with suggestions.
eBay particularly courts "powersellers," such as Mr. Levi in Manhattan -- those with big sales and high customer-approval ratings -- with special perks including travel deals and health insurance. Powersellers must meet minimum monthly sales ($1,000 for the lowest level; $150,000 for the highest) and must have an approval rating above 98%.
When Mr. Levi, who sells used cameras from his Manhattan apartment, was laid off from his position at Carolee Designs, a fashion jewelry firm in Greenwich, Conn., the layoff came as a shock. He'd been a globe-trotting salesman, spending much of his time on the road in Hong Kong, London, Sydney and other cities. "I'd never lost a job," he recalls.
After a brief spell consulting in his old field, he more or less fell into eBay selling refurbished cameras. "I was unemployed and messing around," he says. The seeds of his new venture were sown after he made his first eBay purchase: four copies of Microsoft Office 2000. He used one for himself, and resold the other three on eBay. Those three covered the price of his copy.
Always a techie, he loved digital cameras and began buying and selling them on eBay. As the business improved, he realized he had to get better organized. These days, he often buys cameras returned to electronics chains. He puts a lot of work into his auction pages, and tailors different auction formats to different camera gear. For instance, some items do better with a fixed price. Suppliers handle shipping for a fee, so he doesn't have to handle and store the actual merchandise.
He tries to combine high volume with high service and is avid about maintaining his eBay customer rating -- a sort of grade card from each buyer published on the site for all to see. Over 99% of his are positive. He makes it a point to never mislead about the quality of a particular camera, distinguishing "class A" from "class C," which may, for instance, have cosmetic blemishes. "There's no fine print," he says. "I'm very Ralph Nader about it."
He's thought about selling other types of merchandise, but doesn't think the return will be as great. "I'm looking for growth in volume, margin and product offerings," he says. He declines to disclose sales, but says that they rose 75% in 2002 over 2001. He works 365 days a year, he says, but adds, "Working is different when you're doing it for yourself."
Ms. Thomas is a free-lance writer in Pittsburgh.
Copyright © 2003 Dow Jones & Company, Inc. All Rights Reserved