Now It's One Big Market

By Daniel Eisenberg

When you're worth $10 billion, you can afford to collect Gulfstreams, Ferraris and yachts. But last week Jeff Bezos, the founder of e-tailing dynamo Amazon.com had his sights set a little lower. Like millions of Internet surfers searching for their favorite obscure trinkets, Bezos joined an online auction, bidding for a pack of 1977 Star Wars trading cards. Alas, the buying force was not with him. He dropped out when the price got too high.

Bezos may have lost that battle, but he is determined to win the e-commerce war. Last week Amazon.com launched its own electronic flea market to appeal to the millions of online hagglers who passionately bid for everything from stereos and cruises to a Coke bottling plant and the historic town of Johnsonville, Conn. Bezos' is just the latest firm to recognize the Web as the perfect medium to match buyers and sellers in a capitalist free-for-all: Net portal Yahoo rolled out an auction site last fall, and America Online just struck a partnership with industry leader eBay.

Meanwhile, Priceline.com a patented e-commerce service that lets you name your price for airline tickets, hotel rooms, cars and home mortgages and then goes out to find sellers willing to match it, went public last week, and Wall Street treated the company like a rare gemstone. Priceline.com generated $35 million in revenue last year and lost $114 million (it has pulled in $20 million in the first two months of this year), but the stock, priced at $16, was bid up to $80 by week's end. That puts the company's value at around $11 billion, worth more than a few major airlines combined.

With its own auction launch, Amazon continues its mutation from bookseller to e-tailer nonpareil. The auction area is carrying tens of thousands of items, including a signed copy of Hem-ingway's A Farewell to Arms--Amazon will, of course, be strong in rare books. "Our vision is to build a place to find and discover anything our customers might want to buy...[including] car parts and spark plugs," says Bezos, whose firm's ever inflating stock price jumped an additional 15% on the news. Says Larry Schwartz, president of rival Auction Universe: "It's kind of frightening--they cloned eBay."

Can you really blame them? Each month, some 6 million visitors flock to eBay's sprawling virtual tag sale, according to research firm Media Metrix, right behind Amazon's 8 million. A third of those browsers regularly bid on or sell a selection of nearly 2 million items, including computers, Ginsu knives, baseball cards and model trains, generating about $300 million in total transactions during the fourth quarter of fiscal 1998. "There's a constant trade show going on," says Steve Karas, of New York, who auctions sports cards on the site. By taking a 1.25%-to-5% cut on each of those exchanges, eBay is one of the few Net start-ups to turn a profit--albeit a small one--on sales of $47 million last year. Since eBay acts as an intermediary with little or no overhead to cover, "consumer-to-consumer auctions can be like printing money," says Marc Johnson, senior analyst at Jupiter Communications. No wonder investors have valued the fledgling company at a monstrous $16 billion--nearly that of Sears, which has 872 times as much in sales ($41.3 billion).

The Net has, once again, redefined an industry, in this case the highly fragmented market for antiques, collectibles and secondhand goods. From experienced antique dealers to homemakers and senior citizens raiding their attics, a new class of grass-roots merchants is setting up shop. "It's becoming a way of life," maintains Steve Westly, vice president of marketing at eBay, who himself has amassed a collection of 3,000 toy soldiers. "People love the thrill of the hunt."

Just ask Susan Sommers. Two years ago, she quit a job as a Milwaukee, Wis., fashion designer to join her fiance in Cedar Rapids, Iowa. Now she sells china, pottery and the odd fur coat on eBay, grossing around $30,000 a month and catering to customers as far away as Japan. "I'm making triple my old salary, and I only have to work when I want to," says Sommers. That kind of flexibility was one of the key selling points for Rolando and Lisa Anzardo, longtime New Jersey antiques dealers, who closed their retail store, moved to the sun and surf of Florida and established a virtual trading post. For a year now, they've been hawking their wares exclusively on eBay, shipping about 75 items a month, ranging in price from $100 to $2,000. "At the store, you [often] wouldn't make a sale for three or four weeks," says Rolando. "On eBay, the cash flow is always there."

Like many of eBay's merchants, the Anzardos are proud of their spotless service record: they've received more than 300 positive-feedback ratings on the site's system, which lets prospective buyers gauge the honesty of a seller before sending off a fat check in the mail. However, a small group of parasites, including a Florida eBay user who was recently ordered to pay $23,000 in restitution, continue to plague this electronic marketplace. Two-thirds of all Internet fraud complaints last year were directed at auction sites, according to the National Consumers' League. And antique dealers, who quickly adapted to e-auctions, find themselves dealing with amateurs who wouldn't know Caravaggio from formaggio. Peter Woolman, a British antiques dealer in Delray Beach, Fla., is one such frustrated buyer. "It's full of fakes," he complains. He recently flew to Texas to pick up a pair of bronze and ivory statues for which he bid $26,000, only to discover at a glance that they were knockoffs. "The sellers said they didn't know much about what they were selling ...All I can say is, it's better odds in a Las Vegas casino."

To help improve those odds, eBay, Auction Universe and Amazon.com all offer some type of insurance and recommend that people use escrow services. Industry pioneer Onsale.com which conducts only business-to-consumer auctions, guarantees its products.

There are tricks of the trade too. Savvy bidders know how to swoop in to bag their quarry during the last few seconds of an auction (which can last hours, days or weeks). And certain merchants collude to drive up prices artificially. For the most part, overpaying at these electronic garage sales is the consequence of being too enthusiastic--just as it is with the old-fashioned kind. Caught up in the competitive frenzy of an auction, many people don't know when to fold their cards. Says Tim Brady, vice president of production at Yahoo: "Anybody who's the least bit competitive hates to be outbid." And that's why sellers, and investors, love it so much.

--With reporting by Greg Aunapu/Miami, Maggie Sieger/Chicago and Chris Taylor/New York

With reporting by Greg Aunapu/Miami, Maggie Sieger/Chicago and Chris Taylor/New York