In today's AuctionBytes "Vendor Monday" column, franchisor Snappy Auctions founder Debbie Gordon discusses the eBay drop-off store model. Each week, AuctionBytes.com runs an article submitted by a vendor or marketplace in the online-auction industry about a topic helpful to online sellers. Story submissions are welcome by emailing the editor.

If a new restaurant opens up down the street, you are likely to give it a try. Why? You already know you like food, you know you need to eat, and you know how a restaurant works. You sit down, you order, you get your food, you eat it, you pay, then you leave. If the food and service were good, then you will likely return. Most restaurants generally work the same way by appealing to the needs and desires that people are already aware that they have.

Pioneering a new category of business
Let's go back before the restaurant was "invented". Before restaurants existed, if someone were to put up a sign that said "RESTAURANT," do you think people would just walk in when they were hungry, sit down, and expect to eat a great meal? Probably not. The new pioneer of this "restaurant" would have to educate people and explain how it works and ask people to give it a try. Even though the restaurant owner based the concept of this "restaurant" on the fundamental facts that people need to eat, people are busy and will pay for a convenience, and they like the kind of food that is served there, he still has to educate the public as to how this concept works and encourage people to try it.

But, if the owner didn't market the concept to get customers in the door, the restaurant as we know it today may never have come to be. Some people would have even said "the concept doesn't work," solely because it was a new concept and the pioneers in the business had not yet effectively conveyed the value of this new thing called a "restaurant." Educating the public does not happen overnight.

3 Fundamental Truths for the Future
Creating a new category of business is a process and all the pioneers in the drop-off industry must continue to drive the concept in their local areas. Otherwise, these pioneers may say "it doesn't work" or "there is not enough business." But just like the fundamentals on which the concept of the restaurant is based, drop-off stores are also based on fundamentals that will define the vast future of the industry if the public is educated and the service is exceptionally performed.

FACT #1 People buy things, use them, retire them, and potentially replace them. This is nothing new, and will continue as long as we are called consumers.

FACT #2 The internet is the broadest medium in existence, so if you market something on the internet, it will have the widest reach (this statement is platform neutral).

FACT #3 People are busy and are willing to pay for a valuable service. Similar to people that go to a car wash, there are a large percentage of people who are busy and are willing to pay for convenience. Keep in mind,...it's a lot harder to successfully sell something on eBay than it is to get out the hose and a sponge and wash your own car.

These three facts are the principle reasons why the drop-off store industry has such a large future. The first key to success is educating people about the drop-off business. Again, this doesn't happen overnight. It takes repetition, consistency, and time. Next, performing the service in an exemplary fashion is necessary so that people will keep coming back. When this happens, a behavior has been created. On the other hand, if the service is not delivered properly, the "fundamental truths" are moot and a business can be in danger. If the service is delivered properly and delights customers, then these three fundamental truths will serve this industry indefinitely.

The most important ingredient for future success of a drop-off store is educating the public and creating awareness. A new category in business has been invented, and people need to see it, hear about it, talk about it and use it until it becomes programmed in them to sell their items when they are done using them. Creating awareness does not have to be done with expensive advertising. Grass roots and community-based marketing are necessary to get the word out and create the necessary buzz.

"Busy people have valuable items that will sell for the most money over the Internet and they are not likely to sell the items themselves. That is it in a nutshell and those facts are not going away."

Knowing how to write a good listing does not make a successful drop-off store.
Opening a drop-off store isn't just about selling other peoples' stuff on eBay. It is about helping to change the way people think about their belongings. It is an education process that won't happen overnight. The fact that a small percentage (less than 10 percent, according to eBay) of registered eBay users has ever sold anything tells us that there is an enormous market for quality drop-off stores. eBay attempts to target individuals who may be casual sellers, but the fact is that there are millions of people who just don't want to figure it out and spend the time selling their own items.

While drop-off stores must continue educating the public and creating a new category, there must be a combination of operational success and continued marketing at the store level. Drop-off store customers are sensitive and need to be handled with care or a store risks not being successful. Efficient operations will maximize labor and ultimately profitability.

Store Operations

Staff: Forget how well your write listings or how great your digital camera is. Also, forget how well your pack and ship items. The most important person and also the weakest link in the chain of marketing and operations is the person who is educating and servicing customers in a drop-off store. In successful drop-off stores, the most valuable employees are strong on both sides of the brain. They are sales people because they have to communicate benefits and overcome objections with customers, and they also have to understand the scientific nature of evaluating supply and demand metrics, then explain those to customers in order to set their expectations regarding the value of their items.

From the moment someone enters a drop-off store or calls to ask questions, the front of the house staff member is going to make or break that opportunity to realize revenue from that customer in the future. Remember, this prospective customer has reached out to the business, so the investment to acquire that customer has been successful, but it then has to be maximized. Successful stores leverage that opportunity by first educating the customer clearly on the process and the benefits of their service. They then ask the customer about items they are interested in selling, and also take the opportunity to let them know about the tens of thousands of things that they can sell on eBay. After all, many people still think eBay is for buying and selling collectibles, but less than 15 percent of items on eBay are collectibles today.

Customer Service and Managing Expectations: Everyone always thinks their items are worth more then they are, so it is imperative that the customers' expectations are brought down to reality, and are then ultimately exceeded. It never fails that someone will come into a store with a bag full of Beanie Babies and think that they are going to send their kids to private school with the proceeds. They need to understand the definition of value and the current market for their items. The truth can be disappointing to customers, but successful stores won't waste time selling valueless things, and their customers then see them as a credible consultant. Proper training is imperative in this process because there is both art and science in this process. If an employee gets lazy and just accepts the colorful bag of bears because the customer is so passionate about the collection, then ultimately the customer will be disappointed and not return after they get their check in the mail for thirty eight dollars.

Average Sale Price (ASP): The average sale price of items sold is one of the two most important metrics in the success of a drop-off store. In general it takes just as much time to sell a list and sell a diamond ring as it does a pair of used hiking boots. The ASP indicates profitability and most successful drop-off stores have ASPs over $100.

Sell Through Rate (STR): A store's sell through rate tells a lot of stories about how it is being run. First, if something doesn't sell, it is likely that the starting bid was too high, which was likely the result of the front of the house staff member not properly evaluating the item to determine the best starting bid for the item to get sold. Or, perhaps the customer insisted on a starting bid that was too high for the item to sell. In the latter case, the item should never have been accepted in the first place because that is a guaranteed way to waste time and not have a happy customer in the end. Let's say a store's STR is only 60%. That means that 40% of the items that are accepted to sell are not selling and a store has spent 40% of the labor dollars for nothing. That is also 40% of marketing efforts wasted as well. In addition, that also means that 40% of the customers' items did not sell. So guess what? 40% of those customers probably won't come back, and even worse, they won't tell their friends and family about the service. In fact, they may even say negative things if they wasted time and the experience did not result in a sale.

Sell through rate is not only a metric for profitability, but likely correlates with repeat customer rate and the ultimate success of a drop-off store.

Operations Software: Clearly the days of the spreadsheet and Post-it notes are over for most drop-off stores. Successful drop-off stores have software systems that will handle every aspect of day to day operations which allows staff to focus on their customers. These systems track transactions from the time someone comes in and asks you questions to the time they receive their check in the mail. These systems also manage the customer relationships beyond that and let stores remarket to their customer and understand who their customers are, where they are coming from and what they are worth to the business.

In addition, these systems help manage store labor. It is easy for people to get lazy, so good software tells an owner who is doing what so they are able to evaluate and coach staff based on that data.

Repeat Business: Measuring repeat business is a sure way to know how a business is doing. Customers are a business' most valuable asset. Once someone comes in for the first time, a business has already paid to acquire that customer. Successful stores continue to marketing to them, but most of all, they make sure they are happy. When businesses can learn from customers what they did right and what they can do better, they will generally have a more successful business.

Location: When looking at the locations of successful drop-off stores, the demographics of an area are most important, and the actual visibility and accessibility of the storefront must be strongly considered. Remember, people with money buy more valuable things and are more likely to use them and retire them faster than someone who saves up for five years to buy a new stereo. Drop-off stores must be in areas where wealthier people live. In addition, people who are affluent are more likely to pay for a service versus people with less money who may not see as much value in doing so. There is not much of a market for consistent, valuable customers in mid to lower income areas. People must have valuable things, and they have to be willing to pay for a valuable service.

The Present and the Future

The drop-off store industry is full of pioneers who understand that creating a category does not happen over night. Educating the public and changing human behavior takes time. But there also seems to be many people who opened drop-off stores who may have thought that they can just hang out an "OPEN" sign and people would start flooding in with their items. But as we all know, we have to create awareness and train the public to use the service, as well as provide exceptional service when we do acquire that customer.

Combining the three fundamental truths with educating the market and delivering an exceptional service is the recipe for success in the drop-off industry. Remember, people will always have items to sell and they will pay for a service to sell those items assuming the service proves valuable to that customer. Drop-off stores all have the opportunity to take advantage of that never-ending opportunity.
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Debbie Gordon is Founder and CEO of Snappy Auctions, the award winning franchisor of eBay Drop-Off stores and licensor of B2B liquidation and asset disposition solutions. Snappy Auctions has locations throughout the USA and in Japan. More information and franchise information is available at http://www.snappyauctions.com.