We believe that what we learned working with EBay and their history of success, the products we have created utilizing the Internet will change the Pawn industry.
We didn’t know how to react to EBay’s launch in 1998. We didn't know how to react to EBay’s trajectory of success. I became very concerned. Would our loyal sales customers go to EBay before they would come into our stores? Would our customers sell on EBay before they would come to our stores as well? Could America's new found love in purchasing second hand merchandise be a good thing? Could we shut down our stores and sell all of our merchandise through EBay? These are a sample of what we thought through but we never thought at this time that we would partner with EBay.
We didn’t know how to react to EBay’s launch in 1998. We didn't know how to react to EBay’s trajectory of success. I became very concerned. Would our loyal sales customers go to EBay before they would come into our stores? Would our customers sell on EBay before they would come to our stores as well? Could America's new found love in purchasing second hand merchandise be a good thing? Could we shut down our stores and sell all of our merchandise through EBay? These are a sample of what we thought through but we never thought at this time that we would partner with EBay.
In 1999-2000 we were embarking on the newest technologies and getting ready to launch PRIMA. Pre-owned, Retail, Internet, Managment, Retail system. I will elaborate more on PRIMA in future blogs. But after spending 2 years of planning and building out a platform for enterprise services, we were well aware that the Internet was going to change the way people could purchase second hand merchandise.
The EBay API developers lab was announced in 2001. We were like all newcomers to EBay, selling stuff and getting money in the mail from someone that you would never meet personally, this was really cool. And in the beginning it was really fun and rewarding. We loved EBay. Fun and rewarding is great, but when you are running a business this activity has to make money. "What do you mean we are losing money on EBay", was my response to Ron Rowan our CFO. These number guys always rain on my parade. How much money are we losing Ron? "I think its more than I currently know". Our direction was to figure it out and learn how to do more volume, and pick up efficiency.
We embarked on a Cost Activity Analysis to figure out where the loses were coming from. For you accounting geeks I am including this link http://en.wikipedia.org/wiki/Activity-based_costing. But for this discussion, we dissected the transaction and tracked every step in the activity when selling an item on EBay.
At the time we were operating 15 stores and we required each store to post 3 items per day. This was hard. Our store personnel were not as enthusiastic as we were. They thought it was time consuming. I didn't get it. "What's the big deal? Answers! "Wrap Pack and Ship". "We don't have the manufactures box". "We are taking lousy pictures, then cut and paste". "Posting an item on EBay is time consuming". "People ask to many questions". "Customers send back stuff"". Wow, were did the fun go! My personal observation, It was fun to sell on EBay from home, (no rent, no taxes, no license and no overhead). But, I was determined to sell on EBay; We believed that this is where we needed to be. "When they have the customers and we have the merchandise, we need to learn how to sell on the Internet!"We embarked on a Cost Activity Analysis to figure out where the loses were coming from. For you accounting geeks I am including this link http://en.wikipedia.org/wiki/Activity-based_costing. But for this discussion, we dissected the transaction and tracked every step in the activity when selling an item on EBay.
Cost Activity Analysis. So, I know a lot of you are selling on the Internet and you are wondering what this 2 month analysis suggested. It was astonishing $23.00 per item, not including EBay's fee. You could argue that the costs assigned were wrongly calculated, and we did, but my conclusion was even if it were off by 50-70%, we had a rough road to climb.
We were the first company to be assigned an EBay API account with EBay. But first we looked at what we could do better in the stores first. We tried centralizing the EBay selling effort. Facility, picture stations, wrap, pack, shipping stations, new staff, a high volume strategy! "This was a bomb, that experiment was expensive." It didn't work! Our biggest headache was picking up the stuff from the stores, breakage, and we later learned the stuff was selling in the stores fine. Why were we selling it to someone else when we had buyers coming into the stores? The stores lost the revenue. This wasn't looking good.
We had to become a good shipping company. And if we were going to be in this business we had to figure out how to make this easy for the stores to execute. We created a wrap, pack and shipping station with appropriate packing materials. This was created by Anthony Twist, our Internet evangelist at the time, currently V.P. at Cash America. The shipping station had to be small, our stores had limited space, and we limited our shipping capabilities to small and medium merchandise, unless we had the original box or case. Step 1, check.
Our cost analysis revealed that most of the cost was associated in selling on EBay was transactional overhead. Our store staff hated pushing paper, collecting money, calling , answering email, and data input. We had no buy-in! A week later, First Cash, a national chain of pawnshops abandoned their ecommerce effort.
After our licensing agreement was finalized with EBay we studied to understand how EBay technology was structured and how we could take advantage marrying our systems to this platform. Our PRIMA design included a configurable category engine. This was similar to the category engine that EBay currently uses. When you sell an item on EBay you select the category to sell in. Items get set in a data silo so items can be found on the web. EBay had the same challenge that we have. They also don’t know what the next item that might come through the door.
We created a marriage between the two engines. We ultimately eliminated 98% of the friction in loading the data, managing email, collecting money, and reinstating inventory when returned by the customer. To post an item on EBay became a single click function. Our teams engineering feat became known at EBay as the "Superpawn Model". EBay's API business group saw such an opportunity; they adopted our approach and eliminated their pricing model. That was a first!
We knew the stores needed help with shipping, so we delayed the launch of our EBay feature and adopted a shipping engine and the FedEx API. This resulted in a 0% error rate in shipping to an incorrect address and again a in store one click function to prepare, notify and print the FedEx label. FedEx would be automatically notified to pick up the item. Step 2, check,
How do you measure results? If your customers like it. If it’s easy to operate. If your employees like it. If the adoption rate is fast. The notorious EBay feedback. And if the feature lowered the cost to sell. Step 3, check. We LAUNCHED.
We became the fastest power seller in EBay's history. Our first day we posted 3000 items from 25 stores without adding a single employee to the stores. We never had to add employees in order to implement this strategy. We sold out our stores inventories in 30 days. Our employee adoption rate was off the charts. We still had a lot of lifting to ship all of these items, but we eliminated major friction points and the stores staff saw the opportunity. EBay sent out their executive team out to our stores, the numbers that we were posting were unfathomable and unprecedented. "These guys have figured out how to sell on EBay".
Ebay's first case study. Click here
Our submission. Click here.
Oh yeah..We lowered our activity cost to 25 cents per item. This did not include EBay’s fees between 8 - 15%. We also have a feature ecommerce solution that lowers these costs!
Post Analysis. We learned a lot from that point forward. The straight forward stuff like what sells what doesn’t. What type of auction to set up, etc?
Selling out our inventory became a real issue, but being able to sell everything that quickly and efficiently presented new lending strategies. Excess inventory never hits the radar anymore which translates, we never say no to a customer’s item because we can’t sell it or we have too many of a certain item on the shelves. It’s all a function of how much we can get for it and what we offer. Then we found undiscovered value, items that have extraordinary value on the Web. No brainer.
Data. We saw the transactions and learned more about retailing products than we ever imagined. We created, "Product Knowledge". We had 500 employees at the time and some really knowledgeable Pawnbrokers. I considered myself a pretty good pawnbroker, but when you look at comparable products selling in different stores and then add the Internet Channel. We all learned something. Wow!
Product knowledge was a 1 click display of information of the item that you had in front of you. It showed you what it sold for, (high, low, average), whether in "the stores", on "the Internet". How long it took to sell, how many defaulted, how many the store had in inventory and loans. The information was created in real time. The store operators in the stores were in charge, made decisions faster, more precisely. The in store and online channel to sell merchandise reduced the stores stress in figuring out what to do if the customer defaulted on their loan. We wrote a lot more loans. Our loan balances trajectories rocketed.
We did our homework and analysis. We conducted our focus groups and re-examined our business after launch. We then refined the methods we introduced. Please note: if you are currently selling on EBay and are unaware of your cost activities, you are losing money! If you have to sell the stuff for whatever reason, that’s okay, but know your costs and if you don’t have a relationship of technology between your store system and EBay stay tuned because it’s on its way.
My blog followers to keep your interest the first 5 customers will get this product FREE for the first year!
Thanks for your time today! There is a lot more to share.
Steve Mack
