eBay: A cultural phenomenon that's also an Internet success The search for bargains isn't the only appeal for "eBayers."

Posted: December 16, 2001

Christopher Schleyer cut his college years short at Rowan University in Glassboro, Gloucester County, after his collectibles business took off - on eBay, the online auction site.

"I was on full scholarship, but I dropped out because I was doing so well," he said. "Everybody thought you could get rich on eBay."

That was four years ago. Today, Schleyer's eBay sales have slowed considerably, as more and more sellers of collectibles have crammed their wares onto the popular site.

But Schleyer, 24, is doing fine anyway. He's moved his business from the virtual world to the physical - he opened a storefront about three blocks from the boardwalk on Asbury Avenue in Ocean City, N.J., in April - and keeps it stocked partly by trolling eBay for merchandise.

His experience is just one example of why the site has become one of the Internet's most striking commercial successes. Unlike most of its dot-com brethren, eBay - sometimes portrayed as the world's largest flea market - has been a moneymaker from the day it was conceived.

On eBay, registered users list items for sale, and bidders have a fixed amount of time to place electronic bids. The winning bidder then works with the seller to arrange for payment and shipping.

"They've got a great business model that ends up working," said David Kathman, an analyst at Morningstar Inc. in Chicago. "They are one of the only survivors from the dot-com bubble. A lot of people are looking at them."

The eBay model includes relatively low overhead costs because eBay does not store or ship items - those costs are absorbed by the buyers and sellers. The company makes money by charging fees for listings and by taking a small cut of each sale.

In 2000, eBay, based in San Jose, Calif., posted net income of $48 million on revenue of $431 million. Its stock peaked at $121.88 in March 2000; on Friday, it closed at $66.59 on the Nasdaq.

Last year alone, 265 million items were posted on the site, and $5.4 billion changed hands.

Millions of people flock to the site daily to buy, sell and trade anything and everything, from vintage Barbie dolls to Bob Dylan's childhood home. Much of the merchandise is used, although some is brand-new.

Founded in 1995 as a site where collectors could trade Pez candy dispensers, eBay has become an improbable cultural phenomenon, with 37 million registered users. Among them:

Jennifer Reynolds, 43, of Media, who thought eBay was "creepy and weird" when she first encountered it, but who is a devotee now. She has sold several books of vintage paper dolls - $85 each - through the site. "People would never have found me if I had a backyard sale," she said.

Charles Lundquist, 72, of Radnor, who has been auctioning vintage copies of Time, Life and Sports Illustrated magazines on eBay for three years. "It's a bazaar," he said. The concept "goes back centuries to Roman and ancient times. Some of the stuff is pure junk; some is pure gold."

Patricia Sullivan, of Chalfont, who says the eBay auction process is like a game. "It's the thrill of the chase," said Sullivan, who is in her early 30s. "I was neck and neck with this guy from Holland for a soccer jersey. It's like an online war with people from all over the world."

But the search for bargains and hard-to-find items isn't the only appeal for "eBayers." Some say surfing the site is relaxing, entertaining, even a social experience.

Logging on and trolling eBay every night is "almost like a complete relief" from the workday, said Dava Guerin, 46, of New Hope.

Guerin said she bought all her Christmas gifts this year on eBay.

"I got crystal, four outfits for my niece, leather jackets, wineglass sets, and a watch," she said.

Experts say simple human nature has allowed eBay to flourish.

"Aristotle said one of the most basic things humans do is exchange goods with one another," said Don Hantula, director of the graduate program in social and organizational psychology at Temple University.

"At our core, we are social creatures," Hantula said. "We're interdependent on one another. eBay provides a high-tech way of facilitating a very old practice."

Most eBayers say trust is a key to the site's success. Buyers need to be assured that sellers aren't misrepresenting an item and that they will deliver it.

To ensure smooth transactions, each seller's Web page contains feedback from customers. A figure in parentheses after the seller's ID is the number of positive comments that person has received from previous transactions. EBay recommends that bidders read the feedback carefully before making a purchase.

If a seller has changed his ID - perhaps because he has received negative feedback - a sunglasses icon appears next to the ID.

"Ninety percent of the time, I feel pretty confident" about buying items through eBay, Guerin said. "If [a seller] has sunglasses or negative feedback, I don't buy from them."

The Federal Trade Commission says Internet auction fraud is on the rise, "with an increasing number of consumers complaining about sellers who deliver their advertised goods late or not at all." But according to eBay, fraud remains rare on the site, occurring with less than one-hundredth of 1 percent of the total items listed.

As Schleyer's case demonstrated, it is not unusual to find people using eBay to supplement their income - or even as their primary income.

Reynolds estimated that over the last year and a half she and her husband have sold enough items on eBay to "pay the mortgage several times over."

At first, Reynolds said she found that selling on eBay was an ideal way to get rid of clutter in her house. Nowadays, when she buys almost anything, it's with an eye toward reselling later.

"I've almost become a dealer," she said. "The sad thing is that my children see a new book I got them, and they say, 'Mom, can I keep this?' "

Lundquist, the purveyor of Time-Life magazines, said eBay has allowed him to operate a "little cottage industry" from his den.

He noted, however, that his sales over eBay slowed considerably after the Sept. 11 terrorist attacks. "I sold nothing in November, and only three copies each in October and September," Lundquist said. "Business is terrible right now."

Because there are so many would-be sellers on eBay now, Schleyer - who once relied upon the online auctions as his primary source of income - must sell elsewhere; his eBay income has dropped by about half since 1997. That's why he opened the shop in Ocean City.

"The problem with eBay is that there's a lot more competition," Schleyer said. "It used to be that the majority of people were buyers. Now it's sellers."

Still, he figured out how to use the situation to his advantage: He became a buyer.

"I'm able to buy things on eBay and sell them at [trade shows] and make a profit," Schleyer said. "The market completely flipped."

Because so many sellers have discovered eBay, only very rare items can command serious dollars now, he said.

"You have to be selective about what you put on eBay," he said. "The good thing about eBay is that when you have a hot item, you can make a lot of money fast. But hot items are few and far between."

From time to time, though, lightning still strikes. Last year, for instance, Schleyer was able to auction off 500 sets of Tiger Woods trading cards on eBay - at $250 to $400 per set.

Today, eBay remains the biggest and most well-known online auction site. Other major Internet brands that have jumped into the auction fray - namely, Amazon.com and Yahoo - can't match the breadth and depth of categories and customers on eBay.

"It's the 800-pound gorilla and will be for quite some time," Schleyer said. "The Internet doesn't need another auction site. People can only buy so much."

Wendy Tanaka's e-mail address is wtanaka@phillynews.com.

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