AuctionBytes is running a series of interviews with people who have had an impact in the online-auction industry in order to get their views on the current state of the auction world. In today's Industry Profile, we interview Rodrigo Sales. In 1998, Rodrigo became the second person hired at AuctionWatch, now called Vendio. Old-timers might remember that AuctionWatch started as a message board and a search tool for searching for items across multiple auction sites. Rodrigo has seen lots of changes in the online-auction world, and Vendio continues to adapt to those changes.
Rodrigo Sales, CEO of Vendio
AuctionBytes: Tell us a little bit about yourself. What did you do before you became involved in the online auction industry?
Rodrigo Sales: I was only 24 when I became involved with Vendio, then known as AuctionWatch, so I didn't have too much professional experience before that. I grew up in Southern California, then moved to the Bay Area after college to work for Quantum, which at the time was the world's largest disk drive company. In '97 I decided to go back to business school and it was there that I became involved with Vendio, during the summer of '98.
AuctionBytes: When did you discover online auctions?
Rodrigo Sales: My wife Celeste has always had a fascination with Star Wars memorabilia. She has tons of old toys and posters and so forth. We first heard about eBay – back when it was still known as AuctionWeb - from Mark Dodd, an old friend who later created the original AuctionWatch site.
He recommended eBay to us as a place to purchase hard to find Star Wars collectibles. Celeste and I started using eBay back in '97 and were just thrilled right off the bat. It sure beat driving around to conventions and trade shows trying to hunt down so many of those hard-to-find items.
AuctionBytes: How did you become involved in the online auction industry?
Rodrigo Sales: AuctionWatch began as a message board that Mark had created as a place where auction users could congregate and speak freely about their experiences with eBay. Shortly after Mark created the boards and began to develop a following, he asked me to come on board and help him build the site into a business. Both of us recognized the enormous potential of online auctions. It was the summer of '98, eBay was preparing to go public, and you could just feel that online auctions were going to become an enormous business. eBay had created a model that truly leveraged the power of the Internet, a marketplace capable of efficiently matching buyers and sellers from anywhere in the world.
AuctionBytes: So at the time, when it was a message board, what was the original goal for the company in terms of a revenue model?
Rodrigo Sales: What we set out to build initially was a portal to the world of online auctions. If you think of what Cnet is to technology, AuctionWatch aspired to be to the world of online auctions. We recognized very early on that the real value that eBay was providing was an efficient online distribution channel for sellers and that the value was in the buyer traffic. So initially, we set out to build a portfolio of free seller services to attract sellers, and a universal search service to enable buyers to efficiently find items not only on eBay, but also across the hundreds of other auction sites that existed at the time. We set out to become the first stop for buyers interested in finding products up for sale at auction. By combining our universal search product with services for online sellers, we set out to create a meta-marketplace or a meta-layer within the auction space.
AuctionBytes: And what about the Universal search service? eBay really didn't go for services that allowed buyers to search across multiple auction sites and filed a lawsuit against one such service. Were you involved at all in any of the litigation?
Rodrigo Sales: At the time, eBay was under heavy attack from Amazon and Yahoo! Auctions. EBay recognized that their competitive advantage rested in the fact that they had the most buyer traffic, a result of having the greatest number of listings. Services like our Universal Search really leveled the playing field for the smaller guys. If a buyer could find a wider selection of listings across multiple marketplaces by visiting AuctionWatch, they would have no reason to search for goods directly on eBay.
While no actual lawsuits were filed between eBay and AuctionWatch, there was a considerable amount of saber-rattling. Ultimately, eBay decided that the best approach to dealing with AuctionWatch was to block our access to their site. In November of '99, eBay basically shut off our access and it took us about a month to develop a technical workaround that eBay would not be able to block. During the same timeframe, eBay filed suit against BiddersEdge, another company offering a meta-search for auction listings.
AuctionBytes: And when did you stop providing the universal search service and why?
Rodrigo Sales: Vendio shut down its universal search service in early 2002. The reason was simply that the market had consolidated. You can imagine the tremendous value of searching hundreds of auction sites at once for all sorts of products. The value even exists if goods are distributed among a few larger auction sites. Unfortunately, as time went on, eBay's market share continued to increase. Ultimately the consumer benefit to our search service diminished because 95% of the items that were coming up were on eBay.
So at the end of the day, it was really eBay's competitive success in the marketplace, not legal measures or technical measures, that led Vendio to abandon its universal search service.
While consolidation was hurting our business, other trends were emerging that enabled us to successfully transform our business model. The primary one being the shifting demographic of the eBay seller base. If you think back to when eBay first started, it was all about individuals selling items in categories such as antiques and collectibles. As eBay's popularity increased, it became much more of a channel for small merchants. Many of these merchants were not only selling in categories like antiques and collectibles, but also in practical goods - electronics, computers and so forth.
So as the seller demographic shifted, the need for sales management services emerged. There was a growing need for services to help these powersellers and merchant sellers increase their sales volume. So while the door seemed to close for us on the search side, this new door opened on what you could characterize as the seller services side of our business. That's when we made the shift from providing basic image-hosting services and counters to much more sophisticated turnkey sales-management solutions.
AuctionBytes: What are some of the more memorable experiences you've had in this industry?
Rodrigo Sales: Where to begin? There have been so many. My first eBay Live really stands out in my mind. It just blew me away. Seeing so many sellers in one place was amazing. It really showed the power of eBay in the marketplace. Whenever I think of eBay sellers and what eBay's done, I think of my first eBay Live.
Another memory that really stands out is a conversation I had with one of our customers. This particular seller, a wonderful woman, had been diagnosed with a serious illness and was forced to quit her full-time job. I remember her telling me about her eBay business and how it had enabled her to continue to earn income. She even said that her doctors thought her eBay business was fantastic because it kept her spirits up and enabled her to work while she was feeling well and take breaks when she needed to rest. She said that the income she was making through her eBay sales was enabling her to put her daughter through school. It's stories like that that really stick with you because you recognize how the eBay marketplace has truly changed people's lives. This story really sticks with me as I think of the community and the great people who have helped make eBay the phenomenon that it is.
AuctionBytes: How has the online auction industry changed since you first became involved?
Rodrigo Sales: Oh goodness, an easier question would be, "How hasn't it changed?" There have been so many changes. Today's sellers are much more professional than they were years ago, and much more competitive. EBay has truly evolved into an efficient online distribution channel for small businesses. As a result, new sellers need to really hit the ground running if they want to make it professionally selling on eBay. The competition seems the most severe in the practicals categories, like consumer electronics, DVDs and games. Without a unique line of products, or a significant cost advantage, it can be very difficult to compete with the rest of the seller base.
AuctionBytes: Is it more expensive, would you say?
Rodrigo Sales: Yes, definitely, it costs much more. Ebay's fees are considerably higher, particularly on the listing side. It has become almost mandatory for sellers to pay for features like gallery, subtitle, bold, etc., just to compete. In addition, PayPal and/or credit card acceptance have almost become a must for any seller on eBay, which also increases their fees.
There have been so many other changes. Take the collectibles market for example. EBay has turned it on its head. It used to be extremely inefficient due to the perceived scarcity of items. Now with eBay, you can find just about anything and often times several of that "impossible to find" item that you are looking for. As a result, collectibles prices have come way down.
Another change is that fraud seems to have become much more prevalent. This seems to be a result of eBay's popularity more than anything else. Years ago, new online shoppers would get their feet wet buying first from branded retailers like Amazon, before moving to eBay. Now, many new online shoppers are jumping right into eBay. Due to the strength of eBay’s brand, many new buyers think that buying something off eBay is as safe as buying off Amazon, when in fact this simply isn't the case. Buyers need to do their homework before placing bids. Once you know what to look for, buying on eBay can be extremely safe.
AuctionBytes: Online buyers and sellers were very vocal in the early days, and they seemed to have leverage, and they seemed to have a voice. Would you say they have the same voice that they had in the past?
Rodrigo Sales: I think as individuals, the answer is no, but I think that to the extent that sellers are able to band together, their voices will be heard. If they can communicate with one another, band together, and form organizations they will still be able to have their opinions heard. They can still influence eBay, but they must be united.
AuctionBytes: Where do you see the online-auction industry headed?
Rodrigo Sales: One of the trends that we're seeing is that the larger sellers, the sellers who have really mastered how to leverage online marketplaces as a channel, are going continue to get bigger and stronger. I think it will become difficult for very small sellers to compete, unless they're selling a very unique item. In my opinion, smaller sellers in the practicals categories are going to have a tough time of it.
Another trend that we're seeing is that many of these larger sellers, who are becoming successful online, want to build their own brand, and there will be a continued interest in developing their own online stores. These sellers want their own branded store at their own URL that they can drive buyers directly to. One of the common things that we hear from our very large sellers is that they grow within eBay to a certain level, and then start to experiment with other channels. One you reach a certain scale, many other channels like keyword search, for example, become a much more efficient means of attracting customers.
So if you're a smaller seller, Google's AdWords and those types of things aren't truly cost-effective, but once you've reached a certain size and scale, they do. Once these large sellers have developed their own customer bases and can carry large amounts of inventory, they begin to migrate many of their sales off eBay to their own branded destination. This is a trend that is very likely to continue.
AuctionBytes: Do you think that eBay supports that, or is it that once a seller reaches a certain size, they're going to grow beyond eBay? Is there any way for eBay to capture that so they can provide services to help them? Is eBay is too afraid of off-eBay transactions?
Rodrigo Sales: I think it poses an interesting challenge for eBay moving forward. I think the steps that they have taken there have been the right ones, because eBay must shift in that direction without cannibalizing their core marketplace business.
Take PayPal for example. With PayPal, eBay can capture a percentage of any eCommerce transaction that uses the payment service, regardless of where the item is listed. EBay is making a huge push with eBay Stores as well and you can see where they are modifying their Stores fee structure depending on whether eBay sources the buyer, or whether the seller advertises their eBay Store.
To a certain extent, the direction eBay seems to be moving is similar to what Yahoo has done with Yahoo! Stores and Shopping. Yahoo! Stores offer a greater level of customization and branding. In addition, their fee structure varies depending on whether the buyer finds the item through the Yahoo Shopping search or whether the seller drives the buyer directly to his or her own store.
AuctionBytes: What are the biggest challenges facing online auction sellers in the next 5 years?
Rodrigo Sales: Differentiation. Online sellers will need to build their own brands and differentiate themselves to compete and preserve their margins. Is it a product thing or a service thing? It can be either or anything else for that matter. Ultimately they run the risk of simple becoming, for lack of a better term, someone who is just doing the "pick, pack and ship" functions.
AuctionBytes: Is there room for sellers who have full-time jobs, that really like the income they get from doing this on the side, but don't want to deal with creating an empire?
Rodrigo Sales: I think it really depends on the category. I think for relatively unique items, there absolutely is room, and there will always be. But, for practical goods, it's going to be very tough, just because they will be competing against companies who are focused exclusively on increasing their sales in those categories.
AuctionBytes: Is Vendio working on any products for the future?
Rodrigo Sales: Absolutely. Our goal is to double the size of our development team this year. We've also increased our product marketing and support staff. This was done to dramatically expand our development capacity, which will enable us to simultaneously develop products. We have been making a major push to target the very large-volume sellers in the practicals category. Because historically we've been incredibly strong in collectibles and antiques, but not as strong in things like DVDs, Movies, electronics and so forth.
One of the products we're rolling out this month is a new inventory-based sales manager service that will be called Sales Manager Inventory Edition. One of the reasons that we decided to roll this out as a separate service versus simply tweaking our existing service is that we did not want to isolate our current seller base, many of whom helped eBay become what it is today. Our current Sales Manager product is fantastic for the seller who is very focused on merchandising and is selling unique items and who wants something that is very easy to use. It's intuitive and it works very well for sellers selling unique items. But it wasn't designed for sellers with large inventories who sell many of the same goods. Sales Manager Inventory Edition targets eBay's largest-volume sellers.
Sales Manager Inventory Edition has an enormous amount of automation attached to it. It has our patent pending bulk item-create-and-edit feature, which is a huge time saver for sellers as it enables them to create and edit up to 50 items at once on a single page. Many of our upcoming features and products are designed to make Vendio the best service in the space for eBay's largest volume sellers.
In addition to this, we're very focused on our Web-hosting product. We announced a Beta version of the product earlier this year and are now very close to launching the full version. This product will be ideal for these large sellers who truly want to have their own branded stores.
AuctionBytes: So are you going head-to-head with services like ChannelAdvisor and Marketworks?
Rodrigo Sales: In that segment, absolutely. We will certainly have an extremely competitive offering in that space, but that's not the only area where we'll be working. We intend to compete with Marketworks and ChannelAdvisor in the high-end space, while still having a fantastic offering for other types of sellers.
AuctionBytes: Where do you see Vendio in the next 5 years?
Rodrigo Sales: We have so many exciting new projects and initiatives in the works that it is tough to say exactly where we will be as a business. While I cannot share our exact plans, we do intend to make a major push in a new, but related area. Vendio is ultimately about developing services to help merchants market and sell effectively online, regardless of the venue and we will continue to develop very innovate solutions for our customers. This is certain. As to what those will be... Stay tuned!
