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EBay Wholesale Takes Off

29 Jul, 2003 By: Holly J. Wagner

Rapid growth in the movie category and especially DVD led planners at eBay to create an area for wholesale lots in the online auction site's movie category.

Since the wholesale movie category opened last September, it has grown so fast it has been split by format, and soon eBay will split those categories by lot size.

“About a year ago, we started to see bulk lots of DVDs. Since then, we have seen 1,400 percent growth in the category,” said Matt Ledwith, movie category manager for eBay. He and colleagues will conduct eBay university sessions at the VSDA show this week to teach retailers how to make the most of what the site has to offer.

“At first, what we saw was a lot of video stores selling off their previously viewed product. Occasionally, we saw someone who said they are liquidating their store,” Ledwith said. “What we find now is that they are buying and selling it online and on other channels.”

The idea is to build a symbiotic relationship that lets suppliers and distributors clear their warehouses and creates opportunities for smaller retailers and for businesses that have not previously sold video products.

Distributor Ventura and supplier Artisan Entertainment have taken advantage of the new area to sell off “end-of-life” product.

“Essentially, it is product that we have earmarked for that type of sale. It is either moratoriumed or we can't return it,” said Syd Birenbaum,Ventura SVP of sales and marketing.

“We're using this primarily as a VHS vehicle, or DVD where we have taken back excess returns or we are coming out with an ultimate edition or an extreme edition,” Artisan Home Entertainment COO Bob Denton said.

Sometimes that means real deals. Lots can be as small as 10 copies, but the largest lot to date was a mixed lot of Artisan DVD and VHS in which 305,000 pieces sold for $168,000.

“The whole reason we got into this game was we wanted to stay ahead of the curve in the transition from VHS to DVD,” Denton said. “At the same time, we wanted help the retail market stay healthy by not dumping product into it. It allows us a way to alleviate our inventory risks and at the same time realize a higher per-unit price than dumping product through traditional liquidators.”

Other examples Ledwith offered were a customer who bought 100 copies of The Blair Witch Project for $2.05 each and sold them for about $8 each; and another buyer got DVDs of 8 Mile for $7.10 each in a lot and sold them for $13.95 individually.

“It provides a potentially very substantial channel for the customer base that is not accessed through the customary distribution channels,” Birenbaum said.

Ventura typically sells boxes of 30 to 50 units on eBay, which gives retailers outside video specialty a chance to start selling video products, he said. Although he does not monitor who ends up with the lots, he said Ventura builds steps into its auction transactions to “avoid things showing up on street corners and at flea markets.”

Artisan qualifies bidders for very large lots to ensure the sales will go through, but most bidders for smaller lots are indies or people outside the video industry who resell individually, Denton said.

That's great for smaller retailers who are shifting their patterns from selling off used titles to buying cheaper copies anywhere they can for customers who can't get enough of pre-viewed product.

“Retailers are buying more and selling them off as previously viewed at about the fifth rental,” said Video Buyers Group president Ted Engen. This practice continually depletes rental inventory and feeds the demand for new-condition catalog product offered in eBay's wholesale movie category because the pricing gives retailers a great margin.

“We know that a certain number of our retailers are involved with eBay, either buying or selling,” he said. Video Buyers Group representatives have spoken with eBay, but there is no formal relationship, Engen said.

Engen will lead a retail strategy seminar at the VSDA show in which he plans to discuss previously viewed product.

“If you give an indie — especially a seasoned retailer — a niche like [previously viewed], they are going to go for it,” he said. “This is where video retail, mom-and-pops, will catch up to sellthrough [chains].”

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