The E-Bay Factor

Up on the internet, eBay continues to grow its sales of new and used foodservice equipment and supplies. FE&S spoke with the online auction leader and industry experts to find out who's buying, who's selling and the sort of impact this evolving web-based distribution option is having on our channel and industry.

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It's becoming increasingly apparent that foodservice equipment distribution channels are continuing to proliferate. From brick and mortar "big box" outlets to catalog houses and the internet, there are now more ways for operators to obtain needed foodservice E&S than there were just a few years ago. In the case of equipment browsing and purchasing on the 'net, buyers now have the option of researching or buying via E&S dealers' own proprietary e-commerce sites or through marketplace-driven auction sites such as eBay.

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The undeniably popular eBay portal has in recent years become a broadly recognized brand in and of itself, with transactions totaling $23 billion flowing through the site last year. Restaurant equipment sales through a designated restaurant business portal represented $100 million of that amount last year, according to John Anderson, eBay's restaurant equipment category manager. Because that $100 million represented a 100% growth rate over the previous year, FE&S thought it pertinent to take a look at what eBay is up to regarding foodservice E&S e-commerce.

An interesting aspect of the eBay phenomenon is the market-driven growth of the reverse auction site. "As far as we know, people have been selling some types of restaurant equipment on eBay as far back as 1999," said Anderson. "By late 2002, the growth of eBay transaction volume in used and new restaurant equipment was so notable that we realized it deserved a more specific focus in our marketplace. We started a marketing initiative targeted to buyers and sellers on the designated restaurant equipment part of the site. We also worked to make sure the online platform became more efficient and easy to use for both buyers and sellers.

"The message that we want to emphasize now to the traditional E&S dealer community is that eBay is not a competitive channel, but a tool for their use," Anderson stressed. "The eBay platform has the potential to expand a customer base nationwide, even internationally. For those dealers who are contemplating e-commerce initiatives but are not sure where buyers would come from or what type of internet platform they need to develop, eBay may provide a solution. eBay provides an already existing and expanding base of online buyers, plus an efficient, understandable buying and selling platform. For those dealers who already have internet e-commerce sites in place, a link on eBay can drive even more potential business to their own sites," Anderson noted.

Anderson, however, acknowledged that, initially, the restaurant equipment area on eBay was used primarily by auctioneers and liquidators who were selling used or "scratch 'n dent" equipment that wouldn't sell anywhere else. Today, there appears to be a growing community of legitimate equipment dealers who are using eBay in different ways to sell various types of products. Anderson said that even he was surprised at a trend towards the appearance of new, as well as used, foodservice equipment on the restaurant area of the site. Currently, of the approximately 14,000 equipment listings found on average every day on eBay, 30% of the listings are for new products. "I believe the evolution that we are witnessing in eBay's kitchen equipment commerce is a reflection of the convenience for buyers and sellers, as well as the bargains that can be found there," Anderson commented.

According to Anderson, a restaurant equipment transaction occurs every minute on eBay, with most listed equipment items selling in less than seven days. For example, according to eBay-provided information:

  • Over 100 ice machines are sold every month
  • Over 84 ovens sell every week
  • More than four soda fountains sell every day
  • One mixer sells every two hours
  • One piece of concession equipment sells every hour, and
  • One vending machine sells every 30 minutes.

Currently, buyers of restaurant equipment using the eBay site tend to be small, independent restaurateurs who are looking for bargains when working to equip or re-equip their facilities. These operators are part of a growing number of educated consumers of all types who are comfortable surfing the internet not only for bargains, but also for information. Online shoppers also appreciate the convenience of being able to browse at their convenience, 24/7, from work or home computers. One notable E&S seller on eBay is A City Discount, an Atlanta-based, bricks and mortar foodservice equipment dealer since 1973. In 1999, the company began to experiment with selling a few select items on eBay. The subsequent results were so successful that in 2000, ACD uniquely decided to close its walk-in retail operation and devote company energies completely to the development of its eBay and internet presence. This effort paid off to the point where ACD was named eBay's 2003 "Best Merchandiser" while reportedly experiencing a business growth rate of over 100%.

Another, better known eBay participant is The Wasserstrom Co. of Columbus, Ohio. "At Wasserstrom, we had used eBay in a limited capacity over the last couple of years to sell random items of equipment that we couldn't sell elsewhere," explained Brad Wasserstrom, a fourth-generation Wasserstrom. "I am an eBay user personally so when I was transferred within the company last year to manage the used equipment store at Wasserstrom, I started putting two and two together. This summer, as an experiment, I hired a part-time employee who is now focusing strictly on testing the eBay marketplace for our company. "We have over 30 items for sale on eBay right now. Most are duplicates or refurbished items that we offer at used store cost or slightly below cost. We're also experimenting with the 'buy right now' designation for items, which is another selling feature available on eBay besides the auction function," he commented.

Wasserstrom added that he was able to help a company customer recently who was buying new espresso machines for a facility through the Wasserstrom dealership. "This customer was going to scrap his old machines but, instead, we took them, cleaned them up and listed them on eBay as a consignment deal for that operator.

"Wasserstrom has always been the kind of company to embrace new channels, albeit cautiously and with our eyes wide open," Wasserstrom continued. "Currently, about 25% of our equipment sales are driven through our e-commerce catalog site, but these sales are derived from an already established customer base. The eBay site is designed to reach a much broader audience and is less cumbersome to use for browsing consumers," he observed.

"By this fall, I expect we'll know more about whether eBay can truly provide a channel for us to increase sales or if it will simply remain a small niche, used to get rid of obsolete items. Personally, I am hoping that we can build eBay into a new revenue channel for our company, particularly for used, refurbished and scratch 'n dent equipment."

In Brad Wasserstrom's view, eBay poses no threat to full-service equipment dealers. "No serious operator opening a restaurant would rely on eBay to provide everything needed to open a business," he asserted. "A dealer's involvement in a one-on-one relationship with a customer -- providing planning, equipment specs, installation and related services -- is still integral to the success of all involved."

Rick Ellingson, current FEDA president and a principal of Tacoma, Wash.-based dealership Bargreen-Ellingson, reiterated Wasserstrom's comment. "Equipment sales are only one of a dozen functions a full-service dealer provides to customers. At FEDA, we generally view eBay as just another online player in the increasingly diversified equipment sales channels that our industry has to deal with," he stated.

Ellingson provided a cautionary tale, as well, relating how his company recently lost some business to eBay. When a personal acquaintance approached Ellingson for help in opening a restaurant, the dealer provided his potential customer with plans, and specced out all the equipment needed for the new venture. "This customer then went 'cherry-picking' on eBay and was able to buy some of the equipment we had specced for him at lower prices than we were able to offer. This was frustrating because equipment dealerships are already struggling with such low margins on equipment sales," explained Ellingson. "What's more, when this equipment was drop-shipped by eBay, our customer expected us to help him with the installation and service of the equipment he had purchased on eBay, as well as those items that we had provided through our dealership. If I had been aware that this was going to happen, I might have been motivated to try to provide an even better deal on my customer's total equipment package than I did," concluded Ellingson.

One informed industry veteran (speaking off the record) believes that while it was possible that some dealers could find ways of using eBay to create additional revenue, dealerships should take a lesson from the online auction giant when it comes to creating their own company's e-commerce sites. "After all, eBay, as the profitable venture that it is, does collect fees from sellers. Some dealers balk at that and also may feel that they want to retain company control over any commerce initiatives," he opined.

This industry member went on to observe that equipment-based internet sites, including manufacturers' informational sites, as well as the restaurant equipment portal on eBay, may serve to provide unintended long-term benefits for the industry. "These sites serve to raise awareness of potential careers in the foodservice industry and could serve to help expand our markets. As more people decide to get involved in owning and operating restaurants and other foodservice venues, they will, in turn, buy more equipment, which would spur growth across our entire industry."

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