Friday, January 27, 2006

Just hang a shingle out front and build on the sizzle of eBay ?

Article on eBay Drop-off Store Closing Gets Reaction
By Lissa McGrath
January 26, 2006
After a recent report that one of the oldest drop-off stores had closed (see Sinaas entry below on Mr. Lister) owners of two other long-running drop-off store businesses wrote to say they are still operating.

e-Powersellers opened their first location in December 2002 and added two stores in 2004 and 2005. However, e-Powersellers does not rely solely on the drop-off consignment aspect of their business. It purchases items for resale from various online and offline sources, in lots and estates, as well as working with industrial and business closeouts to generate additional income. This allows the business to be more selective about the items it accepts from consignment customers.

Another business called NuMarkets opened a store in August 2002 and opened a second store in February 2003. By July 2003, they were selling franchise locations and now have four corporate-owned and five franchisee-owned stores in three states, though five other franchise locations have closed since 2003.

NuMarkets' Chairman and CEO Russ Grove said the biggest reason for a store failing is lack of "marketing density" when it is the only drop-off store in a city. "The single barrier in front of this young industry is consumer awareness, and most people outside of our industry do not know what a drop off store is or how it can help them," Grove said.

Grove said two-thirds of NuMarkets stores are profitable. Although he would not share specific financial data, Grove considers a store profitable if it generates $45-$50k a month in Gross Merchandise Sales - the value of all goods sold.

NuMarkets received venture capital funding in early 2004. It continues with its drop-off store business and has also launched Blue Dot Commerce (, a service that "enables manufacturers and retailers to develop an effective eBay selling marketplace with minimum resources." According to the website, Blue Dot Commerce clients include one of the largest video rental companies and a 30-year-old manufacturer of fine jewelry.

e-Powersellers would not share any financial information about their stores, except to say they are profitable. CEO Craig Solomon wrote in an email, "Profits are tied up now on other projects, and expansion plans, legal documents, etc., and software developing projects."

Solomon said that a lack of training and experience is largely to blame for the number of drop-off stores closing their doors. He believes that many people who purchase franchises don't have the knowledge and experience, or enough corporate support needed to build a successful business. "They are sold a bill of goods without realistic expectations. People dump $50K to walk into a business they know nothing about and expect to live off the eBay name."

NuMarket's Grove said he thinks so many independent locations are closing due to a lack of enterprise systems that allow the drop-offs to reach an effective productive operation. "Most independents, we believe, thought it was about hanging a shingle out front and built on the sizzle of eBay and by buying a digital camera and storefront forgot about all the other tools required to build the infrastructure to meet the demands of this young industry," he said.

So while one of the oldest dedicated eBay drop-off store has ceased operations, there are a couple of older multi-location drop-off businesses that are still alive. However, neither has relied solely on walk-in traffic for consignment income since opening their doors in 2002.

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