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Moving eBay Offline And Into The Center

Since eBay mushroomed into a retailing phenomenon in the late 1990s, a cottage industry has emerged of middlemen trying to make money on the auction site, selling everything from battered sofas to luxurious vacation villas.

Now, these third-party salespeople are hitting the bricks — and the mortar — opening up storefront sales centers, often in grocer-anchored or strip shopping centers. Customers apparently aren't keen on dragging used goods into enclosed malls. Most stores require 1,000 square feet to 2,500 square feet, according to those leading the new crop.

It wasn't immediately clear which developers are benefiting most from the rapid growth. But talk of the potential tenants was the buzz at the recent International Council of Shopping Centers New York Idea Exchange. “Owners are going to want one of these stores at each end of their centers,” said Henry Beer, co-chairman of CommArts Inc., a Boulder, Colo., architecture firm at the conference.

Drop shop of Greenwich, Conn., is opening its own streamlined shops, while AuctionDrop is teaming with big name retailers. QuikDrop, Snappy Auctions and iSold It are becoming the new McDonald's, with franchisees lining up to grab a piece of the white-hot business opportunity.

Big chains, too, are getting in the game. Best Buy is testing a program using AuctionDrop's service. Atlanta-based United Parcel Service also teamed with AuctionDrop, so consumers eventually can deposit goods at about 3,400 UPS stores for eBay sales.

It's still early, but the pace of growth is rapid. AuctionDrop reported more than $1 million in revenue in its first 11 months and iSold It has signed up 300 franchisees.

No Sure Thing

Circuit City tried — and failed — to attract customers to its Trading Circuit eBay drop-off stores. The Richmond-based retailer opened a handful of stores within its own Circuit City electronics locations, testing the concept in the Atlanta and Pittsburgh markets beginning last May. By November, the test was deemed a failure.

“There was not enough return on our investment,” says Circuit City spokesman Steve Mullen. “We were trying to learn the auction consignment business and we feel we did. While we closed the drop-off centers, we will continue to sell returned items on Trading Circuit.”

AuctionDrop, too, learned lessons. The eBay drop-off chain thought the concept would work well in malls, but a store in a California mall closed up after it was discovered that consumers didn't like hauling their used goods inside.

That's one of the few criticisms. For many, the concept beats yard sales.

Most people can pull about $2,200 worth of stuff out of their attics or garages, but don't want to trouble themselves with manning an auction on eBay, says Jack Reynolds, co-founder of Carson City, Nev.-based

That's what has propelled growth of QuikDrop and others. QuikDrop plans include 731 U.S. and international drop-off franchise locations. So far, about 40 locations are open.

“We're 100 percent franchise,” Reynolds says.

Snappy Auctions, too, is aggressively expanding, with hundreds of stores planned.

It's like taking stuff to a consignment shop, but instead of the merchandise being displayed around the store, its picture is taken, then posted on eBay, where it's auctioned off. Stores write the listings, respond to inquiries from potential buyers, process transactions and ship the items. After taking a cut, stores send proceeds to the seller.

Most stores only accept items worth $50 or more. Low overhead costs to run eBay drop-off stores, makes the concept an appealing business.

While eBay doesn't own or control the stores, it benefits from the fees it collects from auctions, which is about 7 cents per dollar of merchandise sold on its site last year.

Reynolds says he started the company in Feb. 2003, and a year later, opened its first QuikDrop store in 2,000 square feet in a grocery-anchored shopping center.

Drop shop, which operates three stores, hired the elite architecture firm Gensler to draw up its plans on a dime. Gensler designed the American Girl and Toys ‘R Us flagships in Manhattan.

For Drop Shop, the creation of their inviting, crisp, wide-open spaces became their calling card, with orange ceilings and specially designed transaction tables.

“The whole store is a brand piece,” says Lance Boge, a Gensler design director who handled the project. “If stores don't work, we haven't done our job.”

But eBay drop-off stores are meeting with resistance from landlords, many of whom have not heard of such concepts — at least not yet.

“Landlords think we're pawn shops,” says QuikDrop's Reynolds. “But we have high-end customers, not stolen goods.”

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