Business & Industrial Category Helps
Small Businesses Tap Into New Markets
eBay Staff Member
Dead stock comes to life on eBay
eBay’s print ads featured Mariano’s
success in popular trade magazines.
In 1998, Reliable Tools (reliabletools on eBay), a small company specializing in machine shop tooling and inspection equiment, was bracing for a slowdown in the metalworking and aerospace industries, its traditional customer base. Mariano, the owner, and his four employees were faced with tough times in their business. Then, as a collector of old tools and rare machinery, Mariano remembered that eBay had a Metalworking category. As an experiment, he had his nephew (who was also one of his employees) list some face plate and lathe accessories on eBay.
He was astonished to see how quickly they sold. “This equipment was just ‘dead stock' in my brick-and-mortar store,” Mariano recalls now. “It could have stayed in my store for ten years and never sold.”
Based on that initial experience, reliabletools began listing more and more of its inventory on eBay. Over the years since, the company has helped pioneer eBay's Business & Industrial (B&I) category to develop and serve new markets, not just locally but around the world. Today reliabletools is one of eBay's top-grossing sellers, doing almost $1 million in business every month. Mariano now has over 40 employees, lists over 4,000 items a month on eBay, and the troubles of 1998 are a distant memory.
Making markets efficient for small and medium businesses
Jay Fiore, Senior Manager of Marketing and Planning for the B&I category, says that eBay is becoming a robust venue for small and medium businesses. “What eBay does best is make markets efficient. And we're doing the same on the business-to-business (B2B) side that we do on the consumer side bringing buyers and sellers together.”
Ben Hanna, a Senior Category Manager for B&I, explains how it was only inevitable that small and medium businesses (SMB) would turn to eBay to sell to a wider customer base and reduce their costs. “Small and medium businesses often operate under constraints that the big players seldom worry about. Small businesses typically lack the buying power that would allow them to negotiate better prices with their suppliers. Especially if they're based in rural areas, they also have a limited choice of suppliers restricted to what's available in their local geographies.”
In the same way, explains Hanna, small and medium businesses often lack the resources to expand their customer bases. Access to eBay's global Community of members, numbering over 157 million people, opens up a whole new world for them.
Mariano's success on eBay proves Hanna's point. Today reliabletools has customers all over the world from Mexico to India. They've even shipped machinery to the North Pole for an oil exploration company.
A quiet revolution
It was sellers like Mariano who opened eBay's eyes to the possibilities of the Business & Industrial category. Although the site didn't have a formal B&I category until December 2000, that hadn't stopped sellers from using their entrepreneurial spirit to extend the fundamental concept of eBay to their businesses.
Fiore recounts how, in early 2000, eBay began noticing that sellers were beginning to use the site for business and industrial applications. Small and medium businesses realized that eBay made perfect economic sense both as buyers and as sellers. As buyers they were getting tremendous value in terms of the large selection available on eBay. As sellers they were gaining access to a huge and growing market, and getting better prices than selling locally.
“eBay was an early pioneer of what's known today as ‘wholetail',” Fiore recalls. "Wholetail" is a word derived by combining “wholesale” and “retail”. It's a market where buyers are able to get prices that are better than retail prices. And sellers can get better prices than if they were liquidating their inventory. It's a scenario that especially benefits small and medium businesses.
eBay’s print ads highlighted the success
B&I sellers in restaurant equipment.
Fiore illustrates by giving an example from the restaurant-equipment industry. “Consider a dealer whose business is taking used restaurant equipment in trade for new equipment. That is, he buys an old pizza oven from a restaurant owner and sells him a new oven. Before eBay, the dealer would have to work hard to find a buyer for the old oven near his location. Thanks to eBay, the dealer can offer a better price for the old oven, and be able to sell it to someone located maybe six states away.”
I need a new warehouse…again
A similar strategy helped accelerate reliabletools' growth on eBay. Mariano recalls being amazed at how fast items he listed on eBay were moving, even inventory that he had written off in his mind as having only scrap value. “I realized that someone, somewhere had a need for these items.”
This epiphany made Mariano go to local auctions in his area to look for good deals on used machine shop tools and other equipment. He also rented a 6500 sq. ft. warehouse to store all this inventory. As he gained in confidence, reliabletools began offering bigger and high-capital items on eBay, such as lathe machines, high-end instrumentation equipment, and material handling equipment. Mariano found that reliabletools was outgrowing their warehouse every year, and progressively rented bigger and bigger warehouses. Today the company needs four buildings to store its inventory.
Furbies, yes. But forklifts on eBay?
Like Mariano, a lot of sellers initially had some reservations about buying and selling capital-intensive heavy machinery on eBay. Early sellers in the B&I category were sometimes held back by the FUD factor, Hanna says. “Fear, Uncertainty, and Doubt,” he explains. “We observed a lot of skepticism about buying and selling expensive equipment running into thousands of dollars online. But the FUD factor wasn't just about eBay. It was for online commerce in general. Back then people were still figuring out how doing business online worked.”
Realizing the importance of reassuring these buyers and sellers that eBay was the right venue for taking their businesses to new levels, the B&I team moved rapidly to institute programs, features, and partnerships aimed at catering to the specialized needs of small and medium businesses. Some of these specialized features include:
- Buyer Protection To increase confidence in the marketplace, the B&I team created a specialized protection program to cover buyers looking to buy capital equipment. Called Business Equipment Purchase Protection, this program helps protect buyers against fraud and material misrepresentation. Buyers are protected for up to $20,000 or the equipment purchase price, whichever is lower. Of course, other protection programs on the site, such as PayPal Buyer Protection and eBay Standard Purchase Protection also cover B&I transactions.
- Payments and Financing For small and medium businesses, financing considerations often play a key role in making high-outlay purchase decisions. Realizing this, eBay teamed up with a third party partner, Direct Capital, to offer equipment financing for equipment purchases of $2000 or more. It's a program that benefits both buyers and sellers—if a buyer finances their equipment purchase on eBay through this program, Direct Capital will reimburse the seller for the final value fee.
- Shipping Transactions involving heavy equipment, where the buyer and seller are separated by hundreds or thousands of miles, present a whole new dimension of shipping and logistical challenges. eBay's Freight Resource Center provides a slew of resources that U.S. and Canadian buyers and sellers can use to overcame their shipping obstacles.
Innovating for success
Just as the B&I team is constantly thinking of innovative ways to improve the marketplace, sellers like Mariano are also pursuing their own innovations to hone their competitive edge. As early as 1998, when reliabletools' eBay business took off, Mariano realized that the company needed sophisticated systems for order management, inventory tracking, and records management to keep tabs on the myriad types of paperwork that accompanies a capital equipment transaction. Over the course of the last few years, reliabletools has developed an array of customized, home-grown systems to make their operation more efficient. Today their systems for inventory management, invoicing and customer support are helping reliabletools service a growing customer base.
Innovation isn't restricted to only the technology aspects of the business. Mariano's success can be attributed to creative problem-solving around a wide range of challenges, from customer support to moving heavy equipment across continents. Mariano's innovative strategies have paid dividends in terms of building up a loyal base of satisfied customers who often return for repeat purchases.
Some of these innovations include:
- Listing with No Reserve
reliabletools' listing strategy is based on listing their items with a starting price of $1 and not setting a reserve price. On the face of it, it seems like an incredible gamble who would not have a reserve price while listing an expensive piece of machinery? But reliabletools has consistently demonstrated that it works. Buyers and sellers in the B&I category are extremely savvy and knowledgeable. So in most cases, the final selling price shakes out to be close to the true market price. Mariano says that his team has enough experience now to make near-accurate projections on the final selling price. “We're usually pretty close,” he laughs.
- Moneyback guarantee on all items
reliabletools offers a moneyback guarantee to its customers on all items. The company even picks up the freight charges if the customer wants to return the item. Mariano explains how this customer service philosophy pays off in the long run. “As you can imagine, freight can be pretty substantial on such high-value items, running into thousands of dollars. And when we pick up the tab, our customers know they can trust us. They often come back again to do business with us.”
- Developing Good Relationships
Mariano knows the importance of building good relationships, not just with his customers, but with his suppliers and partners as well. He describes how good relationships with trucking companies have helped reliabletools achieve a competitive edge in shipping. Mariano says that when his competitors ship, they have to rent an entire truck to transport the item. This results in higher costs all around. But thanks to the relationships reliabletools has built up with trucking companies, they are able to rent space on trucks with partial loads headed to destinations near their buyers' locations. Mariano's team has become very good at identifying opportunities when a truck with just the right amount of space will be heading towards a buyer's location. This approach has helped reliabletools reduce shipping costs for itself and its customers.
Building Awareness, Building the Platform
Jay Fiore and Ben Hanna highlight some of eBay's marketing and product efforts to take the B&I category to the next level. On the marketing side, these initiatives include advertising and Public Relations efforts to increase awareness about the category and its credibility. A print advertising campaign in leading trade magazines is helping more and more small and medium businesses learn how eBay is a viable channel to grow their operations and reduce costs.
On the product side, the B&I team is constantly working with the B&I Community to refine the category and sub-category structures available on the site. The recently launched eBay Business page is a convenient destination for business buyers and sellers on eBay. It brings together B&I categories with other business-focused categories across the site, such as computers and networking, professional specialty equipment, and commercial trucks. These efforts have helped make B&I one of eBay's biggest categories, with an annualized gross merchandise value of $1.4 billion.
It's an evolving journey for Mariano as well, who looks back on his B&I experience with pride, tinged with wonder. “I was able to extend my expertise in my field to the eBay platform. It didn't happen overnight, and it needed a lot of patience. But it paid off and continues to do so.”