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THE CUTTING EDGE

What Am I Bid?

At online auction sites, you can find everything from the functional to the frivolous. 'It's classifieds on steroids.'

March 02, 1998|GREG MILLER | TIMES STAFF WRITER

In this area of e-commerce, the "e" stands for everything you can imagine.

Brand-new computers for $199, ski vacations for two, $299, and 30-year-old Pez candy dispensers for somewhere in between. All of these items and thousands of others are flowing out of family attics and corporate warehouses into one of the hottest corners of online sales: auction sites.

Buyers elbow one another with digital barbs as they jostle for goods like children scrambling under a cracked pinata. "It is my birthday today . . . let me have it!" exclaimed one shopper in a recent bidding war for a Hewlett-Packard PC.

Merchandise ranges from the functional to the frivolous. For charity, http://www.onsale.com recently auctioned a date at Spago with Miss California. Another time, a cola war broke out on the site, with people posting ordinary cans of Coke and Pepsi to see how high the bidding would go.

This mix of competition, frivolity and variety has online shoppers flocking to auction sites, often for hours on end as they hunt for bargains, check their bids and brag about their deals. Revenue and ratings are rolling in.

Http://www.ebay.com recently became one of the five most-visited shopping sites on the Net, beating out powerhouses such as http://www.barnesandnoble.com and http://www.autobytel.com, according to ratings firm Media Metrix. Onsale, still the sales leader, reported gross merchandise sales of $115 million last year, compared with $30.7 million in 1996.

If there is a secret to this success, executives and analysts say it is mainly that compared with plain old buying online, bidding online is a blast.

"This is the first form of online commerce that engages the customer," says Jerry Kaplan, co-founder and chief executive of Menlo Park-based Onsale.

Auction sites still account for just a fraction of the $12 billion in annual sales on the Internet, mostly from one business to another. Dell Computer Corp., for instance, says it does more than $3 million in business on its Web site each day.

And most of the auction sites are still too young to be consistently profitable. Onsale, the only publicly traded company in the category, posted a loss of $2.5 million last year on revenue of $89 million.

But online auctions seem well-positioned if they can divert even a small part of the vast stream of the economy that flows through garage sales, flea markets, pawnshops, antiques stores, collectible shops and real-world auctions.

According to some estimates, there are more than 1,000 auction sites on the World Wide Web, including many that cater to specific markets, such as http://www.winebid.com, http://www.philatelists.com and http://www.milehighcomics.com. There is a directory of such sites at http://www.usaweb.com.

The online auction business comprises two categories. There are sites, such as http://www.firstauction.com--a subsidiary of Home Shopping Network--that deal mostly in new merchandise, buying excess inventory from suppliers at deep discounts, and then selling at a markup to consumers or corporate buyers.

Then there are person-to-person sites, such as Ebay, that never touch the merchandise but simply match sellers and buyers, charging as much as $2 for the initial listing and taking up to 5% of each transaction.

Compared with real-world auctions, online versions are almost hassle-free. No car trips and no crowds. Anybody with a modem can browse at will. To bid, a person simply has to fill out a name and address form. Listing an item is almost as easy: Describe the item, name the price and, if you wish, submit a scanned picture.

Analysts say they are amazed by the surging popularity of auction sites.

"It's really difficult to get someone to buy anything online, let alone something from an individual they've never met," said Nicole Vanderbilt of Jupiter Communications in New York.

But auction sites have come up with some innovative ways to soothe consumers' fears about the Net. Ebay, for instance, solicits feedback from buyers about each seller, then posts the comments. Too many complaints, and a seller is barred.

Many also have deals with escrow services, which hold a buyer's payment until the merchandise is delivered and deemed satisfactory. But most important, executives say, auction sites are following an age-old American tradition of shopping as entertainment.

Ebay, for instance, has created a "cafe" at its site, where bargain hunters can meet online to swap stories. Many sites are developing new ways to keep buyers engaged even when they're away from the site. For example, shoppers can download software to their PCs to alert them when they've been outbid.

Auction sites do seem to draw users in. Visitors at Ebay and Onsale spend an average of 23 minutes on each site per day, compared with an average stay of just five minutes at bookseller http://www.amazon.com, according to Media Metrix.

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