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US-based consumer electronics retailer Dyscern is a great case study of how to make serious money on online marketplaces like eBay.
The company, which started up only five years ago, is now sixth in Inc. Magazine’s list of America's fastest growing retailers and is reportedly the most rapidly expanding eBay Powerseller on the other side of the pond.
We spoke to Dyscern COO Bill Frischling about the pros and cons of eBay as an e-commerce channel for merchants, and how the firm is looking to ramp up its European sales.
Can you give us a bit of background about Dyscern and how you got it on the map?
In terms of getting on the map, it was all eBay. When we started out, my wife [Jennifer Canty, CEO of Dyscern] had just had her first child and she was looking for something to do on the side. Of the three partners, she has by far the best business head among us and is the most analytical. She listed a small batch of PDAs and iPods on eBay and when she got the results back she said ‘we should do more of this’.
We are a little different from typical consumer electronics businesses as we focus on refurbished goods. We are really starting to push the green message.
Making a circuit board for a phone uses something like 300 gallons of water once you count the plastics and shipping and everything else. More and more people are recycling cell phones and there are a lot of people out there who don’t use the latest and greatest devices. A lot of people look at the iPhone at $299 and think ‘you are out of your bloody mind’.
Last year, our sales were $9.3m, which I think is about £5m nowadays. This year, our target is $12m. We’ve been doubling about every year and we were in the Inc. 500 last year, as well as number six on the retailer list.
How have you dealt with the intense competition on eBay, particularly in consumer electronics?
It is very competitive: eBay sells, on average, about 45,000 iPods in the US every two weeks. In a good month we would account for about 5% of that. We are not even a ripple.
The key is to watch the market very closely. Occasionally someone who has, by some miracle, found 50 Blackberries, will list them all on one day within five minutes of each other. We have programmes that watch for those types of clusters and will remove all of our auctions for 12 hours before and after them.
How big a drain is eBay on your customer service resources, compared to other marketplaces?
In terms of customer service, eBay is the most high touch channel that is out there. It is less of a marketplace and more of a community. If you view it as a community, it starts to make much more sense.
We will answer 1.5 emails for every item we sell on eBay. We will answer one email for every five items we sell on Amazon and one for every eight items we sell in-store.
It is that topsy-turvy. eBay sucks up around 90% of our customer service resources while accounting for around 50% of our business overall.
At what point did you decide to expand beyond eBay? What other marketplaces have you expanded into and what challenges have you faced in going multichannel?
It was something we were looking at once we signed up with Channeladvisor; about two years in. Our systems had been very optimised around eBay and we started to look at things more strategically.
In the last three months, we have really picked up on UBid. UBid has been around for 11 years and we would try it out every year to see how it was going. When we tried it out in November , it was totally different. For Blackberries, we find UBid outperforms eBay in terms of both volume and price. We have never seen that on any other channel.
In terms of challenges, everything gets measured for how it is performing on each channel in terms of price and velocity. We look at our total pool of inventory and we then make appropriate decisions. UBid has changed the equation because our Blackberries are now by default going on UBid.
Do you see eBay becoming a channel of last resort?
I don’t. eBay is consistently our lowest gross margin channel. But nobody can move inventory like eBay can. Nobody even comes close. If I had 200 iPods, I could get more money on Amazon but it could take me four weeks to sell them. I could sell 200 iPods on eBay in a day.
I might potentially take a 10% to 12% price hit on eBay, but when you are a company our size, we are only just starting to be taken seriously by the banks. For people like us, the issue is cashflow. We will yield more by having that cash than by sitting on those iPods.
We do get some assistance from banks but two thirds of our volume is coming out of our cashflow. It’s the opportunity cost. Is it worth that 10% to 12%? The answer is usually no.
Have you looked at Facebook as an e-commerce channel?
We’ve looked at Facebook but people don’t buy on Facebook. It’s a great way to build brand consciousness but don’t expect traffic. It’s great for when Ford is releasing a new car but not great for selling something. People’s primary mission isn’t to go shopping when they go on Facebook.
With the dollar being so weak, have you looked at developing a presence on the ground in Europe?
We did do some tests in Barcelona about two years ago. But there are certain expectations that people have from merchants and the biggest one we were not set up for was the language.
If I am selling something on eBay.it, the customers’ expectation is that you will email them in Italian. If they are buying from eBay US, most expect they will have to email you in English. We’re multi-lingual in the sense that we have translate.Google.com bookmarked.
The regulations were also, quite frankly, not what we were used to. Also, if someone is buying something from the US, they expect they will have to pay customs duties and taxes, rather than us.
There was a boost but it wasn’t enough to make it economical. It’s much easier to ship worldwide from the US.
How much business are you doing in the UK?
The UK is not actually one of our top three EU markets, which is surprising. Our international traffic is one third to Canada, one third to the EU and one third to the rest of the World.
The Maldives, for some reason, gives us more business than Denmark. It's one of those things that the data says but you don't know why. It's not all the same person either. Our customer service team know more about the Maldives than most people in the US.
In the EU, the single biggest market is Italy, followed by France, followed by Germany and then the UK.