Wednesday, January 31, 2007

Markdown Manager for eBay Stores!

Today eBay announced a new feature exclusive to store owners, the eBay Stores Markdown Manager. It does pretty much what the name suggests and allows sellers to offer items at sale prices to drive buyer interest in their store items. The idea is very similar to what happens in B&M stores. Best Buy for instance has sale prices on advertised items or selected sections in the store but the prices in the rest of the store are closer to retail. They use the Sale items to drive traffic to their store where they hope the customer will add a few more items at the higher price. The practice is commonplace in the real world but up till now on eBay -- it has been my experience – most sellers already have their items priced to sell, in essence on sale all the time, they just couldn’t call it that until today.

When I was selling, I discounted auction items and listed items with higher prices in my store for much of the same reason’s the B&M stores do it. We offered flat S&H of $3.95 per order (we would occasionally ship 100 or more items in one order for $3.95 total S&H) so 25% of our orders were multiple items. This model actually worked wonderfully and was part of our early success until a competitor came into the marketplace and decided to change the dynamics. This seller who will remain nameless auctioned off items at around the same price as we did but they discounted everything in their store, some items sold for $1.50 to $2.00 less than we sold them for and ultimately that’s the strategy that did us in. As our sales flattened out we had to lower prices to compete and we never again saw any growth. That was in August of 2004, today it’s even more competitive and regardless of what anyone tells you, the lowest price gets the sale. So, In order to make this Markdown Manager work, sellers are going to have to go back to the approach we took in our early days and raise prices across the board so that when they do actually have a sale there is marked difference in the price. The problem I envision is that sellers who are using the Wal-Mart model of lowest price every day won’t change their strategy negating any benefit from the Markdown Manager.

I’m sure this will not be the case in every category but I feel fairly confident nothing will change in the Media Category.

5 comments:

Frank Ross said...

Thanks for the heads up Randy! This might be a good way to manage those things that don't sell well on eBay. Yes we all have 'those things that don't sell well' no matter how hard we try to minimize them and it's best to take a proactive approach to them rather than the '99 cent approach'. Also anything that gets customers to the eBay store helps the customer acquisition strategy!

Randy Smythe said...

Frank, you might hold off on doing a big sale. I understand the roll-out has had several major glitches. A small test might be beneficial though.

Randy T said...

Randy, great blog. I am an ebay seller of mostly high end music antiques (records, event posters, memorabilia)-I've been in music retail for almost 20 years, long before ebay or the internet-for me, its passion driven. I'm a former musician myself, as well as a big fan.

In early 2004, I decided to augument my small ebay music items store with a finite selection of music DVDs, stocking around 1000 titles. Of course, I had no idea that overnight, the marketplace would be down to all sellers, large and small, selling all DVDs below wholesale cost, with shipping being the only profit. What a shock!

Thankfully, I never planned for DVDs to ever become my primary revenue stream, so I'm still doing OK overall.

Since, I actually stock my DVDs, as opposed to just SKUs, I follow the market very closely. It seems now, almost 3 years after Movie Marz began selling (and changed everything), that the marketplace must be very hard even for them. I mean, Movie Marz and eforcity, and all the other big sellers built their business plans based on the ebay stores catagory pricing and stores in search visibility.

My question for you, is: Can sellers like Movie Marz really be making any money anymore? I realize that financial success and the work/lifestyle equation are all relative to the individual, but....knowing what I know about the overhead, especially ebay and Paypal fees...I just wonder how much longer these businesses can survive with these tiny price margins? eforcity and their other IDs are selling way below cost and charging $6.99 to ship media, with no combined discounts. Crazy! Reminds me of the Ginsu Knives commercials we all made fun of in the 70s!

You are VERY correct about rock bottom pricing meaning everything on ebay. Look at the feedback for sellers like eforcity or Moviemarz. Inflatible Madness got over 450 negative feedback remarks in just the last month alone! Why would people buy from these sellers with feedback like that?

It's the lure of the below cost price. Unfortunately, it says as much about ebay buyers as it does ebay sellers-2007 sure looks alot different than, say 1997. What a shame.

Good luck with the blog!
Randy T.

Randy Smythe said...

Thanks Randy T.!

My guess is that MovieMarz is just playing the cashflow game. Which is what I ended up doing. I won't speculate on the condition of their business but I can't imagine they are making much money.

The Media Category on eBay is in bad shape. If everyone just raised prices to reasonable levels it might be easier to make a buck but don't count on that because the big guys can't afford to see a reduction in sales volume or they will topple and buyers are used to the low prices.

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