Back in August, we reported that eBay is expecting a 25% growth of million-pound businesses in the UK this year, with 159 companies surpassing the magic million milestone. 10% of these will secure over £3m in sales – that’s a hell of a lot of padded envelopes, bubble-wrap and trips to the post office.
In case you missed the first report, it seems that Home & Garden, Fashion, Motors and Consumer Electronics in particular are driving this growth. And for the last full calendar year (2010), five businesses secured turnover on eBay UK of £1m in their first year of trading.
If you’re reading this, there’s a good chance you’ve bought or sold at least something on eBay in your life. eBay.com was founded in 1995, and is one of the biggest e-commerce success stories. Its UK-specific auction portal was launched in 1999, and today it secures over 17m unique visitors per month, with over 40 million live listings on the site at any given time. And contrary to what you may expect, fixed-price goods constitute almost two-thirds of all items sold on eBay.
Danny Barenga, PF Jones (Manchester)
After studying for a degree in politics at Manchester Metropolitan University, and a short stint as a coffee shop manager, Danny joined family business PF Jones to boost its revenues by setting up an online store, selling the likes of towbars, diesel injections, fuel pumps, camping and caravan equipment and such like. The company’s eBay turnover has doubled in the past 12 months, and its online success has led to the purchase of larger distribution facilities. Danny said:
“PF Jones was an established bricks and mortar business, with four shops across the North-West and over 300 employees. I launched our eBay shop, which now employs five members of staff, to increase our customer base and profits. In the last year alone we have had to expand our existing premises to cope with the demand.
“Our ability to predict changes in the market and adapt quickly has been the key to our success. Exports are also playing an increasingly prominent role in our business model as we continue to increase our overseas sales, in particular to Europe and Australia”.
PF Jones has 4 ‘bricks and mortar’ branches across England and Wales that have been trading for decades, in Manchester, Stoke on Trent, Buckley and Wigan. The company started trading on eBay UK in February 2009, inspired initially by the knowledge that one of its competitors was already trading on eBay. “Our main rival already had a successful eBay store”, says Danny. “And we knew that we could challenge and be successful”.
Whilst PF Jones also has its own dedicated e-commerce website, Danny believes there are inherent benefits to having an eBay store. “Selling on eBay, you don’t have to worry about driving traffic to your listings like you would a normal website”, he says. “Plus, the tools available from eBay are excellent for people starting up with little or no experience”.
Including Danny, PF Jones has five people working on its eBay store, all of whom are based in Manchester. “Though this will soon be more as we are expanding quickly”, he says. “We all work on all areas that are needed to run our eBay store. This includes creating listings, researching the market, working our cost prices, taking photos, booking out orders on our stock system and creating Royal Mail/courier labels, answering emails, eBay messages, calls and live chat. Then we also have to order stock from the suppliers”.
The company has dedicated eBay personnel, but PF Jones has a specific packaging team which takes care of that side of operations across the board.
Although the company is exporting, 95% of PF Jones’ eBay transaction are UK-based. “We complete on average between 100-150 transactions a day”, says Danny. “2.5% of this is Europe-based, and 2.5% is the rest of the world. We’ve shipped to some pretty exotic places, such as Le Tampon on Reunion Island, Trinidad & Tobago and Malaysia”.
As with any commercial enterprise, running an eBay store doesn’t come without its challenges. “Adapting to the constant changes that eBay implements on its selling platform is one such challenge”, says Danny. “And so is reaching and maintaining the exceptional levels of customer service that eBay demands to achieve their Top Rated Seller status”.
Furthermore, given that PF Jones operates across multiple selling platforms, Danny notes that managing stock levels in real-time can be particularly challenging, with retail stores, a website and eBay store to cater for.
Room for improvement?
When I asked Danny if he felt there was anything eBay could do to make life easier for major traders, he said they could do many things to make eBay fairer and much better for all business sellers on eBay. Interestingly, he also suggested making it imperative for buyers to leave feedback for items they’ve bought. “Too many customers buy on eBay and don’t leave feedback”, says Danny. “Feedback is invaluable to eBay sellers”.
“eBay could also be more transparent with its Top Rated Seller status criteria”, continues Danny. “They could offer sellers specific details on what, if anything, they are failing on. The current system does not allow sellers to pinpoint any specific issues that need addressing so that they can improve, resulting in better feedback and more sales. There are so many things that eBay could do to improve as a platform for sellers. I could go on for hours”.
The final point Danny hit on in terms of how he felt eBay could improve things for sellers related to how the buyer feedback system works. “A buyer leaves feedback and Detailed Seller Ratings (DSR) for the following criteria: item as described, communication, dispatch time, postage and packaging charges. eBay disables the postage and packaging charges DSR if you sell an item with free delivery, and you automatically get a 5-star rating, which is good. However, the dispatch time DSR can still be marked.
“The point is that even if we do what we advertise and dispatch the item on time – or even before the advertised time – and upload a tracking number, the customer can still mark us as having poor dispatch time. How is this fair? It is the low DSR ratings that can put sellers out of business as they do not get or maintain the discounts that eBay offer to top sellers”.
To get an idea of what life inside a million-pound eBay company is like, it’s worth considering this. In the past 12 months, the eBay side of PF Jones spent £144,000 on postage and shipping.
Ian Moore, Ghost Bikes (Preston)
Ian set up his Lancashire based eBay shop, Ghost Bikes, with a friend in March 2004. Before this, Ian worked in IT, selling equipment to local education authorities. His business partner, Adam, was running market stalls, and the pair set up on eBay to target the millions of motorcycle enthusiasts around the world.
Ghost Bikes sells motorcycle clothing and accessories and after the success of its eBay store, which has grown 30% year-on-year, the pair opened a bricks-and-mortar shop in Preston to meet the demand from customers to try on the items and handle them before they purchased.
The company now has 32 employees including in-store, and a dedicated customer service team for the eBay part of the business. Ian is planning to open a second large motorcycle destination store eventually. “We are now looking at creating a purpose built destination store to reach out to a wider customer base whilst having just one site for all our operations”, says Ian.
Ian says the business has maintained its level of success during the recession by adapting its buying structure to make it more efficient. Exports also play an important role in the business, with 10% of orders being exported to Europe, the USA and Australia.
So, was there a specific moment which made Ian decide to launch his eBay store? “We decided to have an eBay store because it was the least expensive method of retailing at the time”, says Ian. “There was no initial costs other than stock and no rent”.
“Our in-store sales, as with our eBay store, have grown year-on-year”, says Ian. “But the majority of our in-house sales are repeat customers or are based on referrals from other customers. Only a small amount of our customers actually come to our shop after finding us online. Besides our ghostbikes_uk ebay ID, we have two main websites, ghostbikes.com, which offers motorcycle clothing and accessories, and pro-jump.co.uk which is a community-based website which offers our own jumping stilts, which have been featured on TV programmes such as ‘Famous and Fearless’ and ‘Guinness Book of World Records’”.
So it seems that Ghost Bikes is selling across multiple platforms, with bricks and mortar stores, dedicated e-commerce websites and, of course, an eBay store – but is there an inherent benefit to running an eBay store over other outlets? “eBay gives us access to millions of active customers who enjoy the simplicity of finding and ordering an item”, says Ian. “We also receive direct feedback of our service through eBay’s feedback and Star Rating system, enabling us to adapt to the customer’s need. A combination of the immense exposure of eBay and our high level of customer service, have given us a huge platform to showcase our business”.
Over the years, Ghost Bikes has streamlined its operations so that all its sales avenues are processed and controlled through one central customer service department. However, Ian says that at some point during the day all of its 15 customer service staff will be dealing with eBay. “Across the company we have 6 Managers, 15 Customer Service Assistants, 2 shop assistants, 5 buyers, 4 warehouse staff, and 3 accounts staff”, says Ian. “Alongside specialist external strategic consultants.”
I asked Ian what some of the main challenges were of running such a successful eBay store. “Competitors who don’t know the difference between turnover and profit”, says Ian. “They struggle eventually, however, but in the meantime this impacts on the more professional sellers”.
So this suggests that it’s so easy to set up shop on eBay, that those without a natural business nous struggle to survive in the long run, but not before impacting on the sales of established sellers. “Many sellers are cutting prices in order to gain extra sales”, says Ian. “But they don’t realize the true margins after taking all costs associated with online selling into account”.
Similar to Danny from PF Jones, Ian also pointed to the ongoing changes that eBay implements as another challenge it faces. “We appreciate that this is to enhance the customer experience and make it easier for us in the long term”, says Ian. “However, it does set us back sometimes”.
With that in mind, I asked Ian if he thought eBay could do anything to make life a little easier for the major traders. “We don’t expect anything for free and it is not for us to demand extra privileges or ‘special terms'”, says Ian. “It is for eBay themselves to recognize companies that bring positivity to eBay and reward them accordingly”.
In the past 12 months, Ghost Bikes spent 8% of its turnover on postage and shipping, with 120,000 individual items dispatched in that period. And more specifically, Ian told me they used 13,000 padded envelopes, 2,500 plain cardboard boxes and 5,000 courier bags. “This only accounts for 20% of our shipments”, says Ian. “As the rest are pre-packed or packaged using recycled packaging”.
Dean McFadden, Tool Stop (Huddersfield, Yorkshire)
Dean works for Huddersfield-based family business Tool Stop, and it has been in the family for generations. He manages it alongside his dad and brother.
They set up shop on eBay in May 2004 as a means towards supporting their offline operation, which was going through financial troubles at the time. Dean says that making the move to online has given the business access to a global customer base they would otherwise not have been able to reach through their offline channels.
In the past 12 months, the eBay side of its operations turned over £1.3m, selling drills, saws, screwdrivers and such like – pretty much doubling its sales on the previous year.
The Tool Stop UK has 6 people working on its eBay store, and it’s opening up a new bricks-and-mortar outlet in early November. Currently, 98% of its business comes from the UK, with the remaining custom coming from across Europe. I asked Dean what he felt the main challenges were about running such a high-turnover eBay store, and whether eBay could do anything to make life easier. “The hardest thing is probably finding the right products”, says Dean. “And there’s nothing I feel eBay could do to make life easier – we have a key Account Manager that works with us”.
Location, location, location
Although the three eBay million-pound businesses profiled here are based in pretty close proximity in the north west of England, London – perhaps predictably – tops the list of million-pound business hotspots on eBay UK. Birmingham comes in a close second followed by Nottingham, with Manchester, Wakefield and Southend-on-Sea next on the list.
“We’ve seen a surge of businesses starting up on eBay since the recession which shows the vital role online businesses play in supporting the fragile UK economy”, said Angus McCarey, Retail Director for eBay UK back in August. “Many eBay businesses including some of our millionaires are selling offline as well so their total contribution to the UK economy is even more substantial. Whilst the UK economy is often compared unfavorably to Germany, our figures show good reason to be optimistic. Online SMEs are growing faster on eBay.co.uk with millionaire businesses developing at three times the rate compared to Germany”.
eBay’s global operation netted $9.15bn in 2010, up $429m on the previous year. So, is eBay going from strength to strength as an e-commerce platform, or does looking at top-line figures and a handful of successful traders mask what’s really going on there? Certainly, a quick search online for eBay or PayPal horror stories unearths more than a few angry sellers, but this wasn’t something that really came across from the companies I connected with here.
Are you an eBay seller, either in the UK or anywhere else in the world? Do you have any stories to share about your experiences as an eBay trader? Leave your comments below, or drop me an email.