What Am I Bid?


In this area of e-commerce, the "e" stands for everything you can imagine.

Brand-new computers for $199, ski vacations for two, $299, and 30-year-old Pez candy dispensers for somewhere in between. All of these items and thousands of others are flowing out of family attics and corporate warehouses into one of the hottest corners of online sales: auction sites.

Buyers elbow one another with digital barbs as they jostle for goods like children scrambling under a cracked pinata. "It is my birthday today . . . let me have it!" exclaimed one shopper in a recent bidding war for a Hewlett-Packard PC.

Merchandise ranges from the functional to the frivolous. For charity, http://www.onsale.com recently auctioned a date at Spago with Miss California. Another time, a cola war broke out on the site, with people posting ordinary cans of Coke and Pepsi to see how high the bidding would go.

This mix of competition, frivolity and variety has online shoppers flocking to auction sites, often for hours on end as they hunt for bargains, check their bids and brag about their deals. Revenue and ratings are rolling in.

Http://www.ebay.com recently became one of the five most-visited shopping sites on the Net, beating out powerhouses such as http://www.barnesandnoble.com and http://www.autobytel.com, according to ratings firm Media Metrix. Onsale, still the sales leader, reported gross merchandise sales of $115 million last year, compared with $30.7 million in 1996.

If there is a secret to this success, executives and analysts say it is mainly that compared with plain old buying online, bidding online is a blast.

"This is the first form of online commerce that engages the customer," says Jerry Kaplan, co-founder and chief executive of Menlo Park-based Onsale.

Auction sites still account for just a fraction of the $12 billion in annual sales on the Internet, mostly from one business to another. Dell Computer Corp., for instance, says it does more than $3 million in business on its Web site each day.

And most of the auction sites are still too young to be consistently profitable. Onsale, the only publicly traded company in the category, posted a loss of $2.5 million last year on revenue of $89 million.

But online auctions seem well-positioned if they can divert even a small part of the vast stream of the economy that flows through garage sales, flea markets, pawnshops, antiques stores, collectible shops and real-world auctions.

According to some estimates, there are more than 1,000 auction sites on the World Wide Web, including many that cater to specific markets, such as http://www.winebid.com, http://www.philatelists.com and http://www.milehighcomics.com. There is a directory of such sites at http://www.usaweb.com.

The online auction business comprises two categories. There are sites, such as http://www.firstauction.com--a subsidiary of Home Shopping Network--that deal mostly in new merchandise, buying excess inventory from suppliers at deep discounts, and then selling at a markup to consumers or corporate buyers.

Then there are person-to-person sites, such as Ebay, that never touch the merchandise but simply match sellers and buyers, charging as much as $2 for the initial listing and taking up to 5% of each transaction.

Compared with real-world auctions, online versions are almost hassle-free. No car trips and no crowds. Anybody with a modem can browse at will. To bid, a person simply has to fill out a name and address form. Listing an item is almost as easy: Describe the item, name the price and, if you wish, submit a scanned picture.

Analysts say they are amazed by the surging popularity of auction sites.

"It's really difficult to get someone to buy anything online, let alone something from an individual they've never met," said Nicole Vanderbilt of Jupiter Communications in New York.

But auction sites have come up with some innovative ways to soothe consumers' fears about the Net. Ebay, for instance, solicits feedback from buyers about each seller, then posts the comments. Too many complaints, and a seller is barred.

Many also have deals with escrow services, which hold a buyer's payment until the merchandise is delivered and deemed satisfactory. But most important, executives say, auction sites are following an age-old American tradition of shopping as entertainment.

Ebay, for instance, has created a "cafe" at its site, where bargain hunters can meet online to swap stories. Many sites are developing new ways to keep buyers engaged even when they're away from the site. For example, shoppers can download software to their PCs to alert them when they've been outbid.

Auction sites do seem to draw users in. Visitors at Ebay and Onsale spend an average of 23 minutes on each site per day, compared with an average stay of just five minutes at bookseller http://www.amazon.com, according to Media Metrix.


The demographics of the Internet remain predominantly male and techie, and most sites cater to this crowd. Onsale, for instance, says about 90% of its bidders are male, so its product mix includes a lot of computers, sporting goods and consumer electronics.

But Ebay says about 40% of its bidders are female. The site specializes in collectibles, including antiques, jewelry and toys. Recently, there were more than 288,000 auctions going simultaneously in 371 categories.

John Thibault, vice president of business development, sees online auctions reviving an ancient sales tradition that thrived until 1872, when Aaron Montgomery Ward decided that haggling wasted too much of his sales staff's time.

There are cheaper ways to sell used goods online. Yahoo, for instance, allows people to place free ads in its classified pages. But Thibault says no classified site can match the 75% sell-through rate of items auctioned at Ebay.

The San Jose-based company had gross merchandise sales of $25 million in January alone, quadruple its sales for all of 1996. Its list of registered buyers has swelled to more than 500,000.

The auction market is not just for flea market and garage-sale types. It's becoming an important source for serious corporate buyers. David Klatman, for instance, recently became Onsale's first $1-million customer.

Klatman is chief information officer for Keane Inc., a Boston-based software services company. He began buying computer equipment for his company at online auction sites 18 months ago, and now such sites account for about 25% of his total purchases.

"The stuff I buy online tends to be commodity items--desktop computers, monitors, notebook computers," he said.


Klatman estimates he saves at least 50% on the goods he purchases through auction sites. He recently bought a number of IBM Thinkpad notebook computers for instance, and figures he saved $1,000 per machine.

But success invites competition. Ebay recently got into a scrape with another auction site that allegedly stole Ebay's list of registered users and spammed them with promotional e-mail. Ebay executives fired off a cease-and-desist letter and say the spamming has stopped.

Even traditional suppliers are already moving into the auction space. Ingram Micro Inc., a Santa Ana company that is the world's largest distributor of computer products, recently announced that it was creating its own auction site to cater to resellers who buy big quantities of high-tech products and then sell them to businesses.

Ingram is one of those businesses that might have been threatened by the emergence of auction sites. Newspapers are another, since person-to-person auction sites could imperil papers' lucrative franchise in classified advertisements.

Executives at the Hartford Courant set out to protect that franchise by creating Auction Universe Inc., a new site that plans to link arms with newspapers and exploit local markets ignored by nationwide auction sites.

They may be onto something. Serving the entire United States, let alone international markets, really works only with items that can be shipped long distances. What about refrigerators, furniture and even cars?

Auction Universe wants to carry those kinds of items in addition to computer products, collectibles, sporting goods and the other mainstays of the national sites.

"It's classifieds on steroids," says Larry Schwartz, chief executive of Auction Universe, which is based in Yalesville, Conn., and is owned by Times Mirror Co., which also owns the Los Angeles Times.

Auction Universe's plans are intertwined with Times Mirror's fleet of newspapers across the country. The newspapers will promote local auction sites--such as http://www.ctauctions.com in Connecticut--with special pages in the classified section. In return, Auction Universe will help sell ads for those pages and share its online revenue with the paper.

The site could also help newspapers reclaim markets lost as classified ads have become more expensive. Many knickknacks aren't worth the $30 or so it commonly costs to place a few lines in a newspaper, for instance.

But the Internet changes the economics of advertising. Auction Universe will charge only 25 cents for each listing, plus about 2.5% of the sales price.


Schwartz said he's counting on the marketing muscle of newspapers to vault Auction Universe ahead of other sites.

"Onsale may be big on the Net, but nobody has heard of these companies in the real world," Schwartz said. "I talk to people around the country about auction sites, and they scratch their heads."

But executives at Onsale, Ebay and others don't seem worried. If the rush is on to create blockbuster auction sites, they say they have the early lead.

"This," said Onsale's Kaplan, "is a franchise with staying power."


Staff writer Greg Miller can be reached via e-mail at Greg.Miller@latimes.com


Online Bid-ness

Auction sites have become a popular way to peddle goods, from computers and consumer electronics to jewelry and toys. According to some estimates, there are now more than 1,000 auction sites on the Internet. A sampling:

Web site: Specialty

http://www.Ebay.com: Collectibles and antiques

http://www.Onsale.com: Computers, sporting goods and electronics

http://www.Winebid.com: Wine

http://www.Philatelists.com: Stamps

http://www.Milehighcomics.com: Collectible comic books

http://www.Firstauction.com: Assorted consumer goods (subsidiary of Home Shopping Network)

http://Auctionuniverse.com: Time Mirror's consumer-goods site

http://USAWeb.com: Directory of auction sites

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