Beyond eBay Small e-tailers discover life outside the big online marketplaces By DAVID KESMODEL Staff Reporter of THE WALL STREET JOURNAL July 18, 2005; Page R8 For years, small retailers looking to hawk their goods on the Internet have flocked to eBay Inc. and Amazon.com Inc., which bring together buyers and sellers in huge online marketplaces. These days, however, small e-tailers have many more options -- from e-commerce companies that help them operate their own Web sites inexpensively, to smaller auction sites that offer lower fees than eBay. THE JOURNAL REPORT See the complete Technology report. Small retailers can now run an independent Web site with the support of an e-commerce hosting company for as little as about $10 a month. And with every sale they make on their own site, they will save the transaction fees that Amazon and eBay collect from the retailers who sell on those sites. Operating independently of the big online marketplaces has one major drawback, of course: Many e-tailers find it difficult to attract many customers to their little corner of the Web, even if they take advantage of hosting services that help them place search-related ads on the major Internet search sites. So, merchants and analysts say, many retailers are maintaining a presence on the big shopping sites even as they open their own sites or use cheaper auction sites, such as those owned by Bidville Inc. or Overstock.com Inc. "The trend is toward multichannel selling," says Ina Steiner, editor of AuctionBytes, an online newsletter that tracks the online auction business. This approach allows small retailers to benefit from the exposure that massive sites like Amazon and eBay offer, while also giving them the opportunity to do business more profitably on their own sites or on alternative auction sites. Consider Beth Harlan, who sells new and used books, DVDs and CDs through Amazon, which lets retailers list products for sale next to Amazon's at fixed prices. "Amazon is huge as far as getting sales," says Ms. Harlan, but it takes as much as 15% of every sale she makes on the site. If she sells a DVD, for instance, for $10 on Amazon, Amazon gets $1.50. So, Ms. Harlan launched her own Web site in May, hosted by BizLand Inc., of Burlington, Mass., for which she pays about $29 a month. She also continues to sell her wares through Amazon, hoping that customers who find her there will start visiting her own site, where she sells items for less because she isn't paying a transaction fee. When she ships a product to a customer who came to her through Amazon, she inserts a business card promoting her site, OldDogNoNewTrick.com. Getting an independent site off the ground can entail additional expenses. With the proper computer skills, e-tailers can build a site from scratch, but many merchants lack that kind of expertise -- meaning they have to pay someone to get them started. When Dave and Sabrina Brautigan wanted to start selling children's clothing and toys from their Atlanta home last fall, they turned to StoreFront, operated by LaGarde Inc., of Olathe, Kan., because StoreFront will design entire Web sites for its customers. CUTTING COSTS Beth Harlan of Wentworth, N.H., runs a Web site called OldDogNoNewTrick.com, where she sells new and used books, CDs and DVDs. The site is hosted by BizLand Inc. Ms. Harlan also sells her wares through Amazon.com, which lets sellers list products next to Amazon's at fixed prices. Here's a comparison of Ms. Harlan's cost of doing business through the two sites: HER OWN SITE MONTHLY HOSTING FEE TO BIZLAND: $28.75 LISTING FEES: None TRANSACTION FEES: None AMAZON.COM MONTHLY FEE: As a member of Amazon's "Pro Merchant" program for frequent sellers, she pays $39.99 LISTING FEES: None TRANSACTION FEES: She pays as much as 15% per item. For example, on the sale of a $10 DVD, Amazon would take a cut of $1.50 The Brautigans had considered operating their store on eBay's virtual mall, where merchants can sell goods at fixed prices, "but we wanted something that looked like it was ours, not part of eBay," says Mr. Brautigan. "We told [StoreFront] what sites we liked that were out there and what we wanted to be, and they came back with a bunch of different ideas." The couple spent about $1,200 for the design of the site, RedBarnKids.com, and they pay about $50 a month to have it hosted by StoreFront. The hosting service includes shipment tracking, 50 email accounts, a tool to ensure secure transactions and other features. The Brautigans are able to change prices and make other adjustments to the site at their convenience. If they run into problems, StoreFront offers technical support 24 hours a day, seven days a week. While the Brautigans chose to start their business on their own site, they recognize the power of eBay and have found a way to tap into it. Mr. Brautigan says the couple lists some of their unsold inventory in eBay auctions, largely to promote their business. "More than anything, it's cheap advertising," he says. EBay, meanwhile, launched a service last month that helps retailers set up and operate independent Web sites. But eBay will still take a commission on each sale made on those sites. Small retailers looking to pay less than the $50 the Brautigans shell out each month to run an online store have many options, though they may get less space and therefore be able to list fewer products than they could through higher-priced alternatives. Companies such as Netfirms Inc., BizLand, ShopPal LLC and StoreSecured Inc.'s EasyStoreCreator all offer low-priced packages. Changing With Ease Netfirms, which hosts more than 12,000 online stores, charges its small-business clients as little as $9.95 a month. The basic service includes a tool to help e-tailers design their site even if they have no programming experience. They also get a shopping cart -- the software that allows customers to collect items as they shop and then pay for everything at once when they're done -- and can create customer newsletters, track sales trends and let customers post product reviews. Jeannine Ranni, who sells gourmet coffee and tea online from her home in Lagrangeville, N.Y., says she likes the Netfirms service because it is inexpensive and she's able to easily make changes to her site despite not being "a computer geek." She began using Netfirms in March. Previously, she worked with a Web designer who insisted that any changes to the site, EmbellishedBean.com, be done by the designer -- for a fee. Ms. Ranni estimates she is saving $2,000 to $3,000 a year. That's huge, she says, because "I'm a small business with a small budget." For merchants who want to work with a host that has more of a track record, one option is Yahoo Small Business. The Yahoo Inc. service has been capturing a big chunk of business from companies looking to start their own Web sites, hosting more than 30,000 online stores for small merchants. Many e-tailers find Yahoo attractive because it boasts a lot of experience running Web businesses of its own. Raymond Galeotti, president of jewelry site EvesAddiction.com, says he chose Yahoo, of Sunnyvale, Calif., to host the site because "we wanted reliability." The site, operating for about 18 months, hasn't been down for technical reasons at any time, Mr. Galeotti says. In contrast, he says, he had a bad experience with another Web site he has operated, which suffered long periods of down time. EvesAddiction pays a flat rate of about $300 a month, as well as a small transaction fee on each sale, for a package that includes automated marketing -- a service that recommends products to shoppers based on their purchases. Yahoo also offers much less expensive hosting services for smaller e-tailers, starting at $11.95 a month (with a $25 one-time setup fee). Other e-commerce services help retailers do much more than sell their wares online. For example, NetSuite Inc., based in San Mateo, Calif., provides services that also allow companies to manage their accounting and their customer information. The fee for small e-tailers to get started is $99 a month for the first employee and $49 per each additional employee. Kapil Juneja, chief financial officer for Corporate Toners, which sells printer cartridges online and from a storefront in Canoga Park, Calif., says the company expects to nearly triple its annual sales this year, in part because of NetSuite's customer-tracking service. Among other features, the service alerts Corporate Toners when a certain amount of time has passed since a customer's last purchase, reminding the company to have a salesperson encourage the customer to restock. The company previously had used a half-dozen different computer applications to manage its business. NetSuite's package of services "has reduced all the inefficiencies," Mr. Juneja says. 'A Lot of Potential' Alternative auction sites also are gaining popularity with e-tailers, in part because eBay in February raised some fees for sellers. Bidville and Overstock.com's Overstock Auctions are among sites gaining sellers who primarily have used eBay in the past, says Ms. Steiner, the AuctionBytes newsletter editor. Still, those sites don't have nearly as many buyers as eBay does. Ebay has about 147 million registered users world-wide. In contrast, Bidville has about one million, though that's up from about 71,000 just 18 months ago. Businesses that have sold primarily through eBay in the past can turn to other auction sites for their more attractive pricing "and tell all their customers" to come over, Ms. Steiner says. But if "you were just brand new, and you started listing things on Bidville, it would be challenging, because you wouldn't be getting the same traffic as eBay at all." Again, Yahoo is an option for those looking for a bigger name. Yahoo recently announced it was eliminating listing fees and transaction fees for its U.S. auction site. Nole Bolinger, who runs an online business called Bolinger Antiques from St. Petersburg, Fla., began listing war medals and other memorabilia for auction on Bidville about a year ago. He has used eBay, where he sells goods both for fixed prices and at auction, since the late 1990s, but has gotten tired of fee increases. "There's a lot of potential with Bidville," says Mr. Bolinger, who also runs a bricks-and-mortar store called Bolinger Memorabilia. Still, "I don't think enough people know about them yet. EBay is huge everywhere, all over the world." Consequently, he says, he continues to list products on eBay. He estimates that he gets about 60% of his online sales through eBay, compared with about 40% through Bidville. --Mr. Kesmodel is a reporter for The Wall Street Journal Online in New York. Write to David Kesmodel at david.kesmodel@wsj.com
