Call it the paradox of eBay drop-off stores. A recent AuctionBytes survey shows that while 63 percent of storeowners say the business has not met their original expectations, the majority expects growth in the area of online consignment services. Thirty-one percent forecast high growth opportunities in online consignment services over the next 12 months, while another 43 percent forecast some growth. And with all the challenges of running a drop-off store, 69 percent of respondents said "educating the public" is one of their biggest challenges, and 42 percent said it is the biggest challenge.

AuctionBytes sent an invitation to 602 eBay drop-off stores in April 2007 and got a 17 percent response rate (101 participated). The survey asked stores about marketing, operations, sales and their overall satisfaction.

A follow-up survey was sent to the 101 respondents asking specifically about profitability. Forty-three percent responded to the follow-up survey; of those, 74 percent said their store was not profitable after paying themselves a salary. Full results of the follow-up survey are found at the end of this article.

Respondents

Eighty-nine percent of respondents were based in the US; 5 percent were based in Canada; 3 percent were based in the UK; and there was one respondent from France, one from Italy, and one from The Netherlands. Seventy-two percent said they were official eBay Trading Posts, approved by eBay and displaying the Trading Post logo on their website.

Twenty-two percent of respondents were new to the business, having operated their stores less than 12 months; 67 percent had operated their store between 1 and 3 years, and 11 percent had operated their stores for 4 years or more.

A significant number - 32 percent - said they had not been selling on eBay before they opened their drop-off store.

Fifty-eight percent of those taking the survey operated a franchise consignment store. Thirty-three percent were independents with one location, five percent were indies with multiple locations, and two percent operated a store that was part of a non-franchise chain with plans to go national within the next 12 months.

Of the franchise store respondents, 42 percent were Snappy Auctions franchisees, 30 percent were iSold It franchisees, 12 percent were Quikdrop, and the rest were Auction It Today, e-Powersellers, Imagine This Sold and Venduto.

Services Offered

Thirteen percent offered no other services beyond auction consignment services. Thirty-six percent offered pack & ship/shipping services; 10 percent offered training classes, 7 percent offered copying services; 5 percent offered site design services; 2 percent offered web-hosting services; and 10 percent offered "other" services, including appraisals, shopping services and notary services.

Regulation

When asked what licensing requirements applied to their store, 9 respondents said they were required to have a consignment store license; 8 said they needed an auctioneers license; and 3 said they needed a pawnbroker license; 1 said they needed a second-hand dealers license; 1 said they needed an auto-broker liense; and 1 said they possibly needed an auctioneers license - it was under review in their state.

Ninety-nine percent of respondents require consignors to sign a contract, and 60 percent require consignors to show a photo ID. Twenty-six percent require that all payments be sent to the consignor's address on the photo ID, and 6 percent require a holding period before listing an item. One respondent required consignors be fingerprinted, one required a deposit, and one had a 10-day holding period before releasing funds to the consignor.

Asked if they had ever been notified by local law enforcement that their eBay drop-off store was in violation of governmental regulations or laws, 4 respondents (4 percent) said they had.

Marketing

Ninety-eight percent of respondents get business from walk-in customers, and 78 percent get most of their business from walk-in customers.

A variety of marketing techniques was employed by eBay drop-off stores to market their consignment businesses. Newspapers were most frequently used to advertise (by 64 percent of respondents); followed by email marketing (51 percent) and direct marketing print (50 percent). Yellow Pages - print was used by 41 percent of respondents, followed by Internet advertising (40 percent), coupons in Val-Pak or other comparable mailings (35 percent), radio (33 percent), search-engine advertising (28 percent), TV (23 percent), link exchanges (12 percent), and "other" (19 percent).

Those other ways of marketing consignment businesses included:

• Sports teams
• Church bulletins
• Homeowners Associations Newsletters
• Local School Advertising
• Local community groups
• Word of Mouth
• Local non-newspaper publications, newcomers visit service, flyers
• Awesome "Snappy Auctions" logo on owner's SUV vehicle "Snappymobile"
• Direct Sales Force
• eBay Trading Assistant directory

Over half had over $100 but less than $500 each month in their marketing budget; 20 percent had between $500 and $1000 in their marketing budget, and 11 percent had over $1,000 in their budget. Seventeen percent had $100 or less in their marketing budget.

Software

When asked which auction-management software was used as a primary tool, 26 percent of drop-off stores said they had developed their own software. Sixteen percent used Infopia; 7 percent used Auction Sound; 5 percent used Resale World; 3 percent used eBay Selling Manager Pro; and 1 percent each used Andale, Auctiva, ChannelAdvisor, eBay Selling Manger, TurboLlister, and Vendio.

Thirty-seven percent used software other than the programs listed in the survey, which included AuctionWagon, AuctionWizard2000, InkFrog, Liberty 4 and ListQueue.

Thirty-five percent of respondents were very satisfied with their auction-management software, and 45 percent were satisfied with it. Fifteen percent were not satisfied, and 6 percent were very dissatisfied.

The software features most cited as needed or as needing improvement were templates (39%); communicating with bidders/buyers (32 percent); tracking consignors (26 percent); and calculating shipping (26 percent).

Running the Store

Most respondents said their stores were open to walk-in traffic between 41 - 60 hours a week (73 percent). Mondays and Saturdays were the busiest day of the week in terms of getting consignments. November was the busiest month for getting consignments, followed by April.

Seventy-three percent had one or two full-time employees, and seventy-seven percent had 1 or two part-time employees.

Sixty-two percent of respondents said there were 0 - 5 drop-off stores located within a 50-mile radius of their location; 27 percent said there were 6 - 10 competitors; 8 percent said there were 11 - 15 competitors; and 3 percent said there were over 15 competitors within a 50-mile radius of their location.

Listing Items for Sale & Fulfilling Orders

Not surprisingly, 100 percent of respondents reported selling items on eBay. Other marketplaces included Amazon (8 percent), Overstock (4 percent), Yahoo and Bidville, each with 3 percent, and uBid (2 percent). Respondents wrote in under "other," Craigslist, winecommune.com, gunbroker.com, shopbyproxy.com, Marktplaats, website, iOffer, art auctions and direct.

On average, 28 percent of respondents serve between 1 - 10 customers (consignors) a week; 30 percent serve between 11 - 20; 19 percent servie between 21 - 30; 12 percent serve between 31 - 40; and the remaining serve over 40 customers a week.

On average, 69 percent of respondents list between 1 - 5 items for each customer during one visit from the customer; 25 percent list between 6 -10; and the remaining list over 10 items.

When asked how many clients come back with more items after their initial item sells (the client return rate), 34 percent said between 20 and 40 percent; 21 percent said between 40 and 60 percent; and 19 percent said between 50 and 80 percent.

Twenty-one percent of respondents achieved an average selling price (ASP) of under $50; 51 percent achieved an ASP of between $50 - $100; and 27 percent achieved an ASP of $100 or more. See the chart for the sell-through rates.

Twenty-three percent of respondents said it takes between 10 and 20 minutes to research, caption, photograph and list one item on eBay; 23 percent said it took more than 40 minutes. (See chart for full breakdown.)

Satisfaction of Franchise Stores versus Independents

We looked at whether franchise stores had a different experience than independents with regard to expectations. Independents were evenly divided on the issue, with 50 percent reporting the business had met their original expectations, and 50 percent reporting it had not met their original expectations.

However, 27 percent of franchises said it had met their original expectations, while 73 percent of franchise stores said the business had not met their original expectations

Profitability

AuctionBytes invited the 101 respondents to come back and answer three more questions about profitability and satisfaction; 43 percent responded. Here are those results.

Forty-three percent of respondents to the follow-up survey said their store was not profitable before paying themselves a salary. Fifty-five percent said their store was profitable before paying themselves a salary. Two percent did not know.

Seventy-four percent said their store was not profitable after paying themselves a salary. Twenty-four percent said their store was profitable after paying themselves a salary. Two percent did not know.

When asked, knowing what they know now, would they open/operate an eBay drop-off store again, 44 percent said no, 30 percent said yes, and 26 percent said they didn't know.

2005 Survey Results

AuctionBytes conducted its first survey of eBay drop-off stores in January 2005, the results can be found on the AuctionBytes.com website: http://www.auctionbytes.com/cab/abu/y205/m01/abu0135/s02

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