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Ebay’s Apparel Net

EBay wants a big piece of the apparel pie. It’s already succeeding in the arena, selling a pair of Nike shoes every two minutes, a Coach handbag every four minutes and a pair of Levi’s jeans every 1 1/2 minutes. "There are 34,000 keyword...

EBay wants a big piece of the apparel pie. It’s already succeeding in the arena, selling a pair of Nike shoes every two minutes, a Coach handbag every four minutes and a pair of Levi’s jeans every 1 1/2 minutes. “There are 34,000 keyword searches for Prada every day typed into our search engine, and 25,000 keyword searches for Burberry every day,” said Meg Whitman, the online market place’s chief executive, in her keynote address. “Our customers are looking for branded apparel and accessories at a value.”

According to Forrester Research, apparel will be the largest online category in retail sales by 2007, a $22.5 billion business. Whitman outlined her plans for substantially growing the category on eBay, with the goal of $1 billion in annual apparel sales by 2004.

Founded by Pierre Omidyar in 1995, eBay is the number-one consumer e-commerce site, but it wasn’t until February 2001 that the company launched apparel as a home-page category — a distinction that eBay uses when a business grows to a large enough size.

“Today, apparel is a $415 million [business] on the site,” Whitman said — a figure that already represents 9 percent of all online apparel sales. EBay’s apparel home page incorporates 800,000 listings, a 10 percent annual increase in average selling price, and a conversion rate in the 60 to 80 percent range, Whitman revealed.

Some 65 percent of eBay’s buyers are value-conscious, tech-savvy, educated women, 25- to 54-years old with an average income of more than $65,000. Its offerings “reflect the industry mix in terms of men’s, women’s, children’s and specialty. And year over year, 2002 versus 2001, we’ll have about a 60 percent growth rate.”

Since it began selling apparel, the offerings on eBay have changed dramatically. “Early on in our life,” Whitman said, “most of the apparel listings on eBay were used — products that people had that they didn’t need anymore.” But today, 52 percent of the products are new, products she defined as “end-of-life, obsolete, overstocked or returned. And I suspect that mix will only increase.”

This story first appeared in the November 18, 2002 issue of WWD.  Subscribe Today.

Right now, she said, there’s more demand for apparel than supply on eBay. And sales are being made in both the traditional auction format as well as fixed-price. “Everyone thinks of us as the online auctioneer, but 25 percent of our gross merchandise sales is in a fixed-price format,” she said. For example, a seller can post an item with a selling price of $50 and at the end of a seven-day period, the product is sold for that price. EBay also has the ability to sell large quantities of merchandise at a fixed price as well.

Whitman admitted that the growth of the apparel category surprised her. To fulfill the demand, eBay is “reaching out to small retailers, liquidators, even larger retailers to bring great high-quality branded supply to the marketplace. We know this will happen on its own accord. Where there are buyers, ultimately sellers will be. We can help accelerate it by bringing more sellers, who will bring more buyers, who in turn will bring more sellers.”

In apparel and footwear, she said, there has always been a way to get rid of “end-of-life, obsolete items. However, we think we are a more efficient channel [where] manufacturers and retailers get a higher yield on the dollar.”

What is astounding, she said, is that before eBay’s debut in 1995, the online marketplace didn’t even exist. EBay is not a retailer, Whitman said, but provides a global platform where practically anyone — individuals, small business, medium businesses, big businesses, even governments — can buy and sell practically anything. “And today, with 40 categories and 18,000 subcategories, just about anything you’re interested in you can find on eBay.”

In fact, Whitman revealed, there are some 150,000 people who make their living exclusively selling products on eBay. Several million more augment their income with money they make on the site.

Considering the fact that eBay operates in 27 countries outside the U.S., these sellers can serve a worldwide audience. “One of the biggest surprises of this model is how well it travels,” Whitman said. “We thought it was a uniquely American concept, but it’s not.” Twenty-six percent of the company’s revenues come from overseas; its largest market is Germany, followed by Canada and South Korea. “We think e-commerce will be bigger outside the U.S. and our revenues will reflect that. We’re really bullish on opportunities outside the U.S.”

Whitman said eBay works best in two spectrums of a product’s life cycle. “We do very well when products are new and scarce to find. And we do very well at end-of-life. Used and vintage is really where eBay plays. We have a little business with in-season retail.”

Although critics have asked why eBay doesn’t seek to increase its offerings of in-season products, Whitman said that by focusing on the other “two ends of the curve,” there’s a $1.8 trillion worldwide market up for grabs, “which will keep us busy for quite some time.”

At the end of the third quarter, eBay had 55 million registered users who had listed 160 million items for sale. “So in primetime on Sunday and Monday nights, we’ll be listing 1,600 items a second on eBay, which resulted in $3.8 billion worth of gross merchandise sales. That’s $15 billion on an annualized basis, $40 million a day or $463 a second.

“We have become a part of people’s lives. We are now the number-one e-commerce site in the world.”

Increasingly, Whitman said, eBay has discovered that big companies — Sears, Disney, The Home Depot, Radio Shack and Dell — are also “finding eBay a very cost-effective distribution channel. We have also turned into a very effective promotions vehicle. Because we are a part of pop culture, retailers, manufacturers, branded products can be highlighted on eBay to really give juice to promotions. Whether that’s Glamour, or Guess or Saks Fifth Avenue — we have become an incredible platform for people to launch a product, make a statement, get in the news.”

Whitman summed up her address by appealing to the fashion industry to embrace the eBay concept. “We think this has real potential to grow. The fashion industry is the most dynamic I’ve seen in 25 years. You quickly adapt to things that are new and exciting and this has a potentially really interesting application to this industry over the long haul.”