We're All Middlemen Now... A Lesson From Retail and eBay

I have written in these pages on occasion that among one of the great truisms of the Internet is that it perfectly disaggregates that which was once aggregated. Newspapers wrestle the myriad of sites pulling users to other content, other ways to find "classifieds" and other buying information. Broadcasters wrestle audience migration. MSO's wonder what their role will be in a broadband world where viewers can download or stream any program they want.

Though the repercussions are still being sorted out, this is old news.

What is less old (though getting old) is the phenomenon of how these sites are being re-aggregated by the individual. In a future column I'm going to start digging more into the role of blogging, RSS, MyYahoo, PVRs, and other new capabilities to explore how we all are becoming our own aggregators.

But today I'm going to digress and tell a tale of eBay. I figure I'm less controversial if I point no fingers at us in the media world, but turn to retail instead. I hope, however, the parallels in implication are clear to us all.

As many of you know, eBay University was established a while ago to educate sellers on how to best use eBay. I've been dying to go to one of these free sessions, but was out of town. A friend of mine, however, did go and here is what I learned.

For three days in the Washington area, eBay held seminars primarily led NOT by eBay employees but by a regional success story. Roughly 500 people showed up per session -- a mix of retirees, entrepreneurs, and small business owners. All had at least bought on eBay, some had sold, but there were only a smattering of "power sellers" - those who have over 100 ratings for their sales. For nearly two hours, the audience sat enthralled by Bob (not his real name).

For 10 years, Bob was a corporate attorney making the requisite corporate attorney six-figure salary. In part as a hobby, in part to make a little extra money, he began to post items on eBay for sale. It started simple enough - small items one sells at a garage sale. But one day he began to think about furniture and how furniture retailers can get three times the mark-up on the costs of goods.

What, he wondered, would happen if he could buy a chair from a wholesaler, sell it on eBay and have it drop-shipped to the buyer? Since he had none of the expenses of owning a store, he could charge, say, two times mark-up. Using Pay-Pal, he'd have to take no inventory or financial risk as he'd buy the furniture only after the cash had cleared his checking account. Everyone - everyone but the local furniture store - wins!

What happened? He found a quality wholesaler, posted six different leather chair types on eBay, and when the sales were made, cash in the bank, he'd call the wholesaler and have the products drop-shipped around the country. Last year, he sold over $150,000 in leather chairs. He quit his job as an attorney, and in the first quarter of this year, sold another $150,000 of chairs.

The story gets more interesting. One day last year the wholesaler called him and said, "hey, you must have a lot of stores, you're drop-shipping all over the country!" When they learned that Bob had NO stores, they balked - "we don't sell directly to the consumer!" So Bob asked them who their freight company was, called them, and the freight company was not only thrilled to have his business, but offered him the SAME wholesaler discount!

So today Bob takes orders on eBay, places orders with his wholesaler, arranges for the freight company to ship, and spends perhaps two hours on e-mail at the beginning and end of his day taking care of any customer service issues and questions. That's it!

The customer service is fun for him, by the way, and helps him to create better eBay postings. When he learned from prospective clients that they would love his furniture but didn't think his chairs would fit through their doors, he posted photos of how a large chair comes in three easy-to-assemble components. Sales doubled the next week.

As an aside, these eBay Universities share all sorts of helpful hints to buyers and sellers that I'll only pass on if you e-mail me your reactions. (OK, one hint - a LOT of eBay sellers misspell their postings. So type in Labtops and you have a shot at getting a $1,300 laPtop computer at a fraction of the price and no bidding competition...)

Tens of thousands of small business folks are reaching customers they never reached before with imbedded cost advantages previously impossible. Everyday individuals are creating businesses once reserved for the big, established, brick and mortar juggernauts.

For those of us in the traditional information, content and advertising businesses, there is some lesson here, no?

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