EBay Entrepreneurs Bidding on Success

You can find everything on EBay from a Learjet to a velvet painting of Elvis. But Jay and Marie Senese have found something far more rare on the auction site: a new way of life.

EBay Inc. has afforded the husband-and-wife entrepreneur team the chance to earn a living selling CDs from their Sierra Madre home. They wrote a business plan, found sources for the more than 5,000 used CDs they put up for bid weekly, worked out the considerable logistics for handling their auctions and hired two full-time employees and several part-timers. The Seneses report to no one.

If only they could take a day off.

The couple’s operation, known as 1 Cent CD, is by far the most successful home-based business operating on EBay, as measured by volume of merchandise.

But like thousands of other full-time EBay merchants, the Seneses have discovered one of the great ironies of the Internet: The 21st century technology that has enabled them to run a business from home also has trapped them in an 18th century, work-consuming lifestyle reminiscent of farmers tied to their land or shopkeepers who lived above the store.

This autumn afternoon in the Senese living room is typical. Marie Senese, 42, sits at a retro-style Formica table set up in front of the television. Stacked on the table and spilling onto the floor are 37 plastic trays, each holding 20 CDs. She picks up and types in the information that will be listed on EBay when the disc is put up for auction.

Then she picks up another and another.

“It’s like having your own shop, except at the end of the day you don’t get to go home,” she said. “You’re already there. And so is the work.”

Every day -- including weekends -- the Seneses put 800 used CDs up for bid. Nearly all will be sold five days later, when the auctions end.

They begin the workday just after dawn and often don’t finish until midnight. Weekends, when they are without their paid staff, are worse. Since founding 1 Cent CD three years ago, they have taken exactly four vacation days, and even then they took their laptop along.

“It gets weary,” said Marie Senese.

‘Global From Day One’

With the advent of EBay, launching a business seems seductively easy. There are no bricks-and-mortar storefronts to rent, no distribution channels to create, no marketing campaigns to launch, not even an Internet domain name to register.

“Most of the expertise you need to have a professional-looking business is already built into the system,” said Jerome Katz, a professor at St. Louis University who has written several academic journal articles about EBay. “One of the marks of business maturity is that you get to the point where you sell to global markets. On EBay, you’re global from day one.”

Executives of San Jose-based EBay said they have no detailed information on how many of the sellers among their 50 million registered users consider it their full-time work. But they estimate about 90,000 of them make at least $2,000 in monthly sales.

“Almost since the beginning, 20% of our sellers have accounted for 80% of sales volume,” said EBay Chief Executive Meg Whitman. “These people, including those who sell full time, are central to our success.”

For 1 Cent CD, the workday begins at 6:30 a.m. Jay Senese, 44, fires up the desktop computer in the couple’s bedroom and peruses the approximately 800 e-mails that arrive each day. Marie Senese gets their 9-year-old son off to school.

On weekdays, Jay Senese climbs into his 1994 Saturn wagon and makes his rounds to the used CD shops in Southern California that supply 1 Cent CD with products.

Record shops always have played an important role in Jay Senese’s life. He met Marie in Lovell’s Records in Whittier 20 years ago. Dressed in jeans, a paisley shirt, and with his long, graying hair pulled back in a ponytail beneath an ever-present baseball cap, he still looks the part of a rock fan. A business degree at Whittier College and a job at Merrill Lynch hardly damped his enthusiasm for head-banging music.

With a stockbroker’s salary of $250,000 a year, Jay Senese spent lavishly on his music habit. He sometimes bought 500 CDs at a time, eventually amassing a library of 30,000. To make room for them all, he discarded the plastic jewel boxes and pressed them disc-to-disc on wooden racks in the living room and bedroom. He not only bought CDs, he sold them to other rock fans who frequented Internet message groups.

He said it was a hobby, but Merrill Lynch saw the online CD sales as an entrepreneurial venture, and in July 1998 the firm terminated him in part because he was running an undisclosed business. Merrill Lynch also cited his “personal trading in penny stocks and financial adjustments to his own account” in a report it made to the National Assn. of Securities Dealers, the brokerage industry’s self-policing organization. Senese, who said the reason for the firing was a money dispute, filed a suit against the firm in 1999 that is still unresolved.

A Business Is Born

After he lost his job, he began shedding his CD collection in earnest to pay the mortgage and put food on the table, selling 10,000 in six months. But some titles found no takers.

That setback became a business inspiration. In late 1998, Senese turned to EBay, offering some hard-to-unload discs at a minimum bid of a penny apiece. But the penny price didn’t last long as EBay users around the world engaged in bidding wars over the music. The experiment worked so well that the Seneses began formulating a business plan for a full-time endeavor.

Jay Senese began calling on the CD shops he knew so well. They often bought used CDs for about $1 and tried to sell them for $6 or $7. But there were always some that remained in the bins for weeks or even months.

“They would end up marking them down every week,” he said. “I said to them, ‘Give me first crack at it and I’ll give you $2 or $3 for a CD, right now.’ ”

For independent CD shops, which operate on tight profit margins, the quick return that Senese offered was irresistible -- especially given the large number of discs he was looking to purchase.

Senese won’t even go to a shop unless he can buy at least 1,000 CDs on a single visit. He pays an average of $3 to $4 per CD and often contacts the shops at the end of the month -- right before the rent is due -- to get a more favorable price. “I used to be a very good customer at a lot of these stores,” he said. “Now I am their best customer.”

Compared with Internet message groups, EBay offers the Seneses access to a much bigger and more diverse group of potential buyers. In turn, the Seneses’ location just miles from Hollywood gives them access to a wider range of music than many of the fans trolling EBay’s auction listings.

“We realized that we could get a used Posies CD here, but a guy out there in Iowa can’t just walk down the street and find it,” Marie Senese said.

The Seneses won’t say how much their operation makes each year. But on a recent Saturday, 1 Cent CD completed 716 auctions that brought in $3,556.72, according to results available on the EBay site. Among the CDs that sold that day were offerings from No Doubt, Jimi Hendrix, The Chieftains, Luciano Pavorotti, k.d. lang, Roy Orbison, Peter Gabriel and Roy Rogers.

A Penny for That CD

The bidding on every CD that the Seneses offer starts at a penny. The average winning bid for a CD on the recent Saturday was $4.97, with the highest of $41 for an out-of-print edition of the 1976 Peter Frampton release “Frampton Comes Alive.” Among the discs that sold for only a penny were the soundtrack from “National Lampoon’s Senior Trip” and a Hallmark CD collection called “Peace Train.”

The biggest expense for 1 Cent CD is fees to EBay, which top $100,000 a year. The Seneses pay 30 cents to list an item whether or not it sells. If it does, they also pay a 5.25% commission.

They pay their workers near minimum wage and spend $1,500 a month on rent for two small storage spaces and an unassuming office in Sierra Madre, where three workers sit at computers to process payments and track items through the system.

Postage, which is paid by the buyer, will amount to about $300,000 this year. That makes 1 Cent CD the biggest customer at the Sierra Madre Post Office, according to postal workers there.

In the office, which doubles as the shipping center, clerks pull CDs from the racks, stuff them into padded envelopes and apply stamps. Shawn Kniep, 19, points out to Jay Senese that one of the discs in a multi-CD order is missing. The winning bid for the item was $1.25.

Without hesitation, Senese pulls three dollar bills from his pocket and drops them into the package for the customer. No note is included.

“That would take too much time,” he said. “I figure he will understand.”

With fees, rent, salaries and other expenses, Jay Senese figures a CD needs to fetch $5 to $6 at auction to make a profit.

The highest price they ever got -- $293.88 -- was for a rare recording of the Charles Gounod opera “Le Medecin Malgre Lui.” At the other end of the scale, about 5% of the 1 Cent CD listings are not bid on at all or go for a mere penny.

“We are working for margins of pennies,” said Jay Senese. “If something costs 3 cents extra, it kills us.”

At the house, Marie Senese continues inputting CD information on her laptop. Her goal is to finish 60 CDs before the day is out. She also will truck CDs to and from the storage spaces, deal with the typists and do paperwork.

Sometimes work and family time are combined.

“They asked my son in the first grade what he does at home and he said, ‘I help my mom sort CDs and put them in trays,’ ” she said. “It’s one of his earlier memories.”

Jay Senese often spends part of the afternoons working at the laptop in the living room while his son watches his favorite cartoon show, “SpongeBob SquarePants.” It’s not undivided quality time, but he says it’s better than when he worked as a broker and logged 18-hour days.

Dreaming of Vacation

The Seneses speak longingly of taking a real vacation. But that would mean getting thousands of CD titles typed up ahead of time so an employee could start the auctions later. They haven’t managed to do that. “On paper, we should be able to get ahead,” said Jay Senese. “But something always comes up.”

Besides, Senese, who personally launches every auction, has a dire fear of breaking his string of new postings. “I’m superstitious,” he said.

There are only two days a year the Seneses don’t put new CDs up for auction: Dec. 19 and Dec. 20. If they did, those auctions would close on Christmas Eve and Christmas Day, when bidders would be scarce and the chances of getting a good price would be reduced.

Jay Senese said 1 Cent CD generates a six-figure income for his family, but the amount is far less than what he made as a stockbroker.

So for the time being, he continues to work daily toward that moment, usually between 8 p.m. and midnight, when he will push a button on his computer to trigger another batch of hundreds of new auctions.

Despite the sacrifices, the couple are proud of what they’ve accomplished with 1 Cent CDs.

“In the back of my mind,” Jay Senese said, “I think this business might be something we can pass on to our son.”