In 2002, Kevin Harmon started Inflatable Madness, a business selling media (DVDs, CDs, video games, and books) on eBay. He later expanded his business to Amazon.com, and in recent years, the business grossed over $6 million in sales. Mr. Harmon announced this week he was closing the business and had accepted a position with a competitor, Noram International, as Vice President of Business Development.

Mr. Harmon said of the 20 large media sellers on eBay, there are now three left in addition to Buy.com in the media category. The news of his site closing comes as another eBay seller in the media category (White Elephant Media) shuts its doors, though for different reasons, according to a message posted on its site.

Mr. Harmon talked to AuctionBytes about making the difficult decision to close Inflatable Madness; some of the lessons he's learned; and what's next for this eBay entrepreneur.

AuctionBytes: Why are you closing your business, and what led up to it?

Kevin Harmon: We really got pummeled this year on all fronts - 1) the credit market tightened up, which affected our borrowing power and thus our ability to buy product, 2) the poor retail environment meant fewer customer returns and thus fewer product available to us, and 3) the DVD market has begun to mature, and sales price is coming straight down on new and used product.

AuctionBytes: You have 132046 feedback on Amazon and 352908 feedback on eBay. What does it say about these marketplaces that such a high volume seller is forced to close?

Kevin Harmon: I feel it was the DVD buying/selling environment that killed us in the end, and not the marketplaces.

AuctionBytes: Why not sell the business rather than closing it?

Kevin Harmon: We certainly entertained that option, but the simple truth is that having 350,000 feedback on eBay still means that you've got no real asset to sell - unfortunately, being a large eBay seller does not carry a lot of weight in the rest of the e-commerce world.

AuctionBytes: The media category is tough - you join Randy Smythe, formerly of Glacier Bay DVD in exiting. Who is able to compete and make a profit - what kind of seller - in the media category?

Kevin Harmon: The other day, I was comparing my competition 3 years ago with who is left now, and it is very sad. Three years ago, I had roughly 20 DVD competitors, including Glacier Bay. Today, 3 are left. That should tell you just how tough it is trying to be a media seller these days. Your best chance of success if you are a media seller now is to go with the backend fee model, aka Amazon, Half.com, etc - you only pay them if your item sells. That makes them a partner of yours with a vested interest in selling your item.

AuctionBytes: Do you think there are categories in which sellers can do well on eBay, Amazon.com or on their own websites?

Kevin Harmon: Sure - tons of them! I wish I could be more specific, but my knowledge really is with media.

AuctionBytes: What do you think eBay management is doing right, and what are they doing wrong? And what do you think Amazon.com management is doing right, and what are they doing wrong?

Kevin Harmon: I think all the data right now leads one to the conclusion that Amazon is doing EVERYTHING right - we are really seeing a company firing on all cylinders right now. Sales are way up, traffic is way up, the Kindle is changing the print world, and their backend products like cloud computing are solid as a rock.

I think the largest difference in performance between eBay and Amazon is that Amazon has had a clear vision of what they wanted to be as a site and as a company for a long, long time, and now they are simply continuing to execute that vision. eBay has proven to be the opposite situation. They have made so many major shifts in focus and direction in the past 5 years that they have managed to shake many good sellers off their tail.

eBay was, at one time, an excellent auction site that now wants to throw that away and become a fixed price marketplace, which already has significant, experienced competitors in it.

AuctionBytes: What was your annual revenue, and what was your net profit? And have you always been profitable?

Kevin Harmon: In our first year, 2002, we did $250,000 in sales. By 2006, we were up to $6.5 million, and have hovered between 5 and 6 million since then. This year and last year were not profitable, but all the rest were. On average, in our profitable years we were happy with around 6% net profit.

AuctionBytes: What would you tell online sellers about lessons you've learned over the past 8 years?

Kevin Harmon: Ina, I could and might write a book on that! You'll be the first to see it.

AuctionBytes: Any specific tips on selling software and tools, or shipping services?

Kevin Harmon: I would say that the twin towers of complete end to end auction software is Channeladvisor and Monsoon. In my opinion, Monsoon is more Amazon-centric, and CA is very eBay-centric and working hard to become Amazon-centric as well. For shipping, we have used DHL Globalmail since very early on and have always been very happy with them. Of course, as media sellers, our shipping services just needed to focus on a few light weight options - most sellers will need to work with UPS and FedEx I'm sure.

AuctionBytes: Can you share any tips on marketing and branding that you think worked well for you?

Kevin Harmon: The unfortunate truth is that branding on eBay and Amazon is nearly impossible. Both sites own the transaction as theirs, and allow very little branding. If you want to create a brand, fire up a website and hire John at Colderice.com to handle your social media for you. I have always considered the (literally!) millions of dollars in fees that eBay has charged me over the years as a marketing/advertising expense.

AuctionBytes: What is the hardest thing about shutting down your business?

Kevin Harmon: No question, it's letting go of the people who have worked so hard for me over the years. We had a staff of 35 three months ago, and we are down to 7 - it hurts.

AuctionBytes: And what is next on your plate?

Kevin Harmon: I've been very fortunate to have been snatched up immediately by Noram International (eBay Store and Amazon Storefront). They are a large media seller and service company in the media space - they are the company behind Amazon's media trade-in program, for example. I am now their Vice President of Business Development, and I am responsible for finding product for them to sell and for developing new business relationships.

I have also been asked to be an e-commerce and lifestyle blogger for Startupnation. You can find me right here. I'm sure I'd be a good gun for hire on e-comm projects as well.