Going, Going…Gone!

From the smallest neighborhood stores to the nation’s largest operations, jewelry retailers are turning to Internet auction sites to move goods that otherwise wouldn’t sell, even at discounted prices. They’re finding that they can move such goods quickly and at prices closer to—or even exceeding—their original value.

That’s what Nicholas Randolph learned when his store, David Jewelers, opened a site on eBay (www.eBay.com) six months ago.

To move goods that weren’t selling “is the reason why we started on eBay,” says Randolph, vice president and operations manager of the store, which has two locations in the Erie, Pa., area. “It has worked out very well.”

The store has operated its own e-commerce Web site (www.davidjewelers.com) for more than a year, selling a variety of its inventory, but since opening on eBay, online sales have increased by 50%, Randolph says. “The major advantages are that we get national customers and it helps promote our Web site and our name,” he notes.

On eBay, the store sells mostly inexpensive items—such as gold charms, gold rings, and stone rings—that were not selling in the brick-and-mortar operations. Without the store’s presence on the world’s largest Internet auction site, Randolph says, many of the items would not have sold at all.

“Normally we’d end up having to scrap [items] because nobody wants them,” he says. “We used to scrap gold, which obviously isn’t worth much when you scrap it.”

An Internet success story. The San Jose, Calif.-based eBay has become the champion of the Internet auction world. It’s one of the few successful consumer e-commerce ventures in existence.

Approximately 30 million buyers and sellers subscribe to the massive Web community, including more than 1 million visitors per day eager to look for bargains and make deals. The company’s value increases daily, and it has vastly exceeded its own revenue expectations. Its goal is to increase revenues to $3 billion—a 50% annualized growth rate.

Jewelry is one of the better sellers on eBay, says Shira Levine, eBay senior category manager. A variety of retailers, dealers, and large operations have found at least some success selling on eBay. Even Zale Corp., the nation’s largest retail jeweler, has a presence on eBay—known as the “Zales Value Vault”—where it sells inexpensive jewelry.

“About 40% to 50% [of business] is being conducted by independent operators,” Levine says. “About 15% to 20% [of the business] on eBay is conducted by liquidators, mass merchants, etc.

“Close to 50% of jewelry sold on the site is new merchandise,” she adds. “Our sales mix looks a lot like [that of] independents: about 25% jewelry, and 5% to 10% watches and gemstones. Also, there’s jewelry supplies, fixtures, raw materials—from soup to nuts.”

The company is aggressively courting retailers, manufacturers, and individuals with an entrepreneurial spirit in all industries, particularly jewelry. Its latest initiative is “eBay Stores”—product- and category-specific stores on the eBay Web site where products can be sold by auction or at a fixed price.

Approximately 1,000 jewelry, watch, and gemstone “stores,” including David Jewelers, have taken up residence on eBay since the new format was launched in June.

Online only. Some jewelry and diamond professionals have become so successful selling on eBay that a number of retailers have closed their brick-and-mortar operations, and some manufacturers no longer sell to retailers.

For example, Ofer Davidoff of Davidoff Jewelry, a longtime 47th Street jewelry manufacturer and designer, has closed his business-to-business operation and now sells his products exclusively on eBay to consumers. According to Davidoff, on the Internet, the sky’s the limit.

“We’re going to hit it very big,” Davidoff predicts. “The market is so big there’s room for everyone to be there. There is competition, but there are plenty of customers. There are millions of customers. If you get 2% you should be very happy.”

Davidoff lists primarily wedding and engagement bands online. He says it costs him about $20,000 per month to list his items on eBay (at $20 per listing) but believes it’s money well spent. He plans to open a second site on eBay and also plans to have a listing on Yahoo’s auction site.

But for the most part, retailers are using eBay to sell items they cannot sell in their stores, or as another way to produce revenue.

Levine argues that it’s just plain stupid for retailers not to get started on eBay: It’s inexpensive, the tools are easy to learn, and for those who are aren’t tech-savvy or familiar with working in the auction format, the company sponsors a number of online and in-person educational courses. All a person needs to get started on eBay, she says, is an e-mail address, a Web connection, and a digital camera.

“If you are not examining eBay as a way to get rid of excess inventory, you’re losing money,” she says. “For a very nominal capital investment you can expand your marketing reach to 30 million people without building your own Web site.”

Levine adds, “It is a huge brand boost. I don’t care if you are on the corner of Broadway and 42nd Street, you will not have one million people a day visiting your store. And that’s how many people I have visiting your store on eBay.”

Increased interest. eBay isn’t the only auction site getting more business from retailers. Managers of other Internet auction sites also report increased activity from retailers, and most attribute it to the sagging economy and the prevalence of tech-savvy and bargain-conscience consumers. Retailers who are comfortable with technology are in the best position to capitalize on the boom in e-tailing.

“It’s increasing with the downturn in the economy,” says Peter Shemonsky, director of fine jewelry and timepieces for Butterfields auctions (www.butterfields.com). “I have people calling me who I never would have thought would be selling. Some are high-end retailers. Some are manufacturers. They’re trying to find a new resource to move property. Unfortunately, to a certain degree, the auction ground is a dumping ground for things they can’t sell or paid too much for.”

The San Francisco-based auction house, with offices in Los Angeles and Chicago, was recently purchased by eBay. Since then, it has dramatically increased its Internet auction capabilities and offerings, including a “live bid” option that lets people bid online during a live auction.

“On the positive side, we now reach a broader audience,” Shemonsky says. “The challenging part is that you don’t have the typical one-to-one interaction selling to the client, getting the person interested in the piece. There are a lot of e-mails going back and forth.”

Christiana Addison, director of online auctions, jewelry, and watches at Sotheby’s (www.sothebys.com), differs with Shemonsky and others who found that some retailers use auctions to sell items they can’t sell in their stores. “It’s a much nicer way of moving property instead of having a big ‘For Sale’ sign on your jewelry store,” Addison says.

Something for everyone. Sotheby’s held its first online auction in January 2000. The online auction site is independent of the Sotheby’s live auction business. Also, Addison notes, in many cases the two venues attract different buyers, which is good for those who sell new items—such as retailers. “The online auction buyer is clearly different from the live auction buyer, because we really do have a market for new goods,” she says.

Addison says about a quarter of those who sell online are retailers. She adds that the current economic conditions have had just a minor effect on the number of retailers looking to sell online. “It’s been pretty consistent,” she says. “The ones who use it have gotten it from the very beginning. Certainly more people have been interested in speaking with us in the last year looking for opportunities. But that goes across all boards.”

Dicker & Dicker (www.dickeranddicker.com), a manufacturer and retailer, also has been a pioneer both in the Internet auction business and in opening up auctions to average consumers. The company started its first online auction in 1994 and was the first auction house to conduct an auction using broadband technology, first with audio and now video. The company recently added a live bidding option to its site.

Early on, Dicker & Dicker saw the potential in opening up auctions to a larger and more diverse group of people. “We saw a much bigger market in the average consumer,” says co-owner David Dicker. “Our auctions are for Mrs. Brown, [who] wants to sell and get the most she can, and Mrs. Smith, who is looking for a great value. What we’re trying to do is unite buyers and sellers around the country.”With broadband and live bidding, the auction house will continue trying to attract the average consumer by turning its auctions into full-fledged television shows featuring entertainment and interaction with online bidders.

All of this is attracting not only more consumers but also retailers—sometimes to sell certain items, other times through liquidation.

“We have a lot of retail jewelry and jewelry from manufacturers,” Dicker says. “We buy anybody’s jewelry.”