Monday, January 03, 2005

ebay drop off stores

8 months ago a friend of a friend who I've met several times, just not enough to yet call him a friend called me out of the blue to ask what I thought about starting up a ebay drop off store site.

He told me the details. At the time there were a few of these in California doing very well, and not really any stores anywhere else in the U.S. The idea: People would bring in their stuff to a brick and morter store, and the store would sell the stuff on ebay. The store would do all the work. They would give an estimate of what it would sell for, post it, field all questions, and then ship it. In return the customer paid 30% of what the good solf for. So if the store sold 100,000 in goods in one month they would get 30k cash. 100,000 is not very much, especially when the California stores were not touching anything that they didn't think would sell for under 50 bucks. The Cali stores were selling over 1MM in goods a month. Furthermore the customer paid the price to post it up front!

This sounded like a no-brainer. Mike had ebay skills. (he sold a 5k TV for me and routinely sells on ebay). So, I did my homework. I contacted each store that I could find that did this, or any derivation of it. I talked to owners. I requested financial statements. (I told them I was interested in starting a franchise of theirs in STL, and most of them started mailing me anything I requested). Of course I wouldn't do a franchise, that is like paying a tax, on something you can do on your own.

I was going to contact ebay and get them to subsidize the advertising expenses, and pay for my signage, and what not. My goal would be to get 10 of these in STL, and then sell them.

It sounded like gold.

I lost sleep over it.

I kept asking myself. Why wouldn't this work? What would keep this from working.

Price war. A 30% margin is insane. Once people caught on to the markup, more of these stores would arise. I promise you these stores are going to pop up like starbucks. All over the place. And when they do, the only way they are going to be able to differentiate themselves is price and customer service. The latter is easy to dominate (you just have to care, because no one else does), the former scared me off.

So what's the point of this blog post? Time will tell.


Anonymous Anonymous said...

I knew I had just read about this somewhere. They were talking about this in the Kansas City Star. I think it's a quality idea. I don't know why people would be willing to pay that much for service. The moral of the story is that people are stupid and will pay almost anything for convenience (i.e. 9% to count your change at the grocery store). Here's the quote from the Star article.

"Drop-offs for eBay

QuikDrop International, which operates eBay drop-off stores in 11 states, will open 26 franchises in the Midwest in the next three years.

The first area store, which will be in Overland Park, is expected to open in February, said Rick Welsch, who with two partners will operate the store. An exact location has not been announced.

Welch, whose company RJ Auctions is managing QuikDrop's Midwestern franchise development, said at least six of the stores will be in the Kansas City area.

Stores are expected in Kansas, Missouri, Nebraska, Iowa, Oklahoma and Arkansas.

The stores will sell items on eBay valued at $50 or more. Customers can drop off an item and, for a commission of 20 percent to 38 percent, the QuikDrop store will manage the online auction — from photographing the item to shipping it.

QuikDrop operates 26 stores and has contracts for more than 600 to be opened in the United States and 95 to be opened internationally." - Suzanne King


Mon Jan 03, 04:12:00 PM EST  

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