High street retailers with their own eBay stores are getting better prices and clearing more stock. Liz Morrell weighs up the risks and rewards of a relationship with the auction site

Retailers have long used the internet to sell full-price product, but what about Sale, surplus or returned stock?

When shoe retailer Schuh saw it was losing out to eBayers selling its Sale stock, it realised it was missing a trick not doing so itself.

In February 2005, when a pair of Red or Dead court shoes sold on the auction site for 10 times the price they would have achieved normally, Schuh found it was on to a powerful new channel.

The result was an all-singing, all-dancing, unashamedly Schuh store on eBay: Schuhbrandedshoesonline. “We started with sales of about£5 or£10 a day, but are now selling around 2,500 pairs a week. In our biggest week, we sold 6,000 pairs,” says Dan Lumb, head of the retailer’s eBay business. Schuh is now eBay’s biggest selling high street retailer.

In January last year, Littlewoods Clearance also launched a site on eBay to supplement its 28-strong store chain and web site Bargaincrazy.com. “For us, eBay is another channel to market and we knew we could do it at a low-cost investment,” says Littlewoods Clearance managing director Geoff Dykes. “The sales in the first year are comparable to a top 10 store. By the end of this year, 10 per cent of our sales will be online, of which eBay is a sizeable portion.”

Retailers claim that moving onto eBay opens up the customer base. Mobile phone company Orange has had an eBay store since March 2006. “The Orange store on eBay offers an additional and different way to reach new and existing customers,” says Orange UK director of online sales Keith Reville. “With 11 per cent of all online traffic in the UK passing through eBay, it’s a great place for Orange to be.”

EBay also offers huge opportunities for converting customers, says Lumb. “It’s a way of showing you can offer great service – for instance, we send all shoes out within 24 hours even though our delivery window is three to five days – and to get shoppers to go direct to your mainstream web site. We will send out literature directing them to the full range at Schuh.co.uk to try to recruit them as a full-price customer too,” he explains.

One of the biggest benefits of eBay stores is that they can be used to clear Sale or surplus stock and the competitive nature of the auction process means higher prices can end up being paid. However, it does depend on the product. “We are achieving similar rates as in our retail stores, but, with specialist and collectables, we can get more because we are reaching out to more people and specialist dealers,” says Dykes.

Retailers will generally sell by using a combination of buy-it-now, fixed-price deals and auctions. “We have about 3,000 items listed and, of them, around a third are 99p starts. That gets lots of people interested and watching and then the customer decides how much it is worth,” says Lumb.

EBay is also a useful market for selling returned or slightly damaged items, but this is an area that retailers are often a little more hesitant to put their name to. Dykes says all product sold through the Littlewoods Clearance eBay store is new, but admits that the retailer is looking at options for a similar store selling returned products. “We’ve run a small trial with another part of our group, but once you start selling returns, there is a potential for it to damage the brand. We sell returned product through the stores, but we are happy to do that because we can have a face-to-face conversation with the customer,” says Dykes.

The danger is that the more anonymous nature of eBay may mean customers do not realise, for instance, if a product is damaged because they may not have read the listing closely. This could lead to negative feedback, even though the problem has been clearly stated.

Lumb says a way around the problem is to be unequivocal when stating what is wrong. “Some of our shoes may be marked – for instance they are ex-display and may be scuffed or have a pen mark. We wouldn’t then just use the original stock picture, but would add a couple more pictures illustrating the fault and make it clear in the listing that it’s not 100 per cent,” he explains.

In the spotlight

Retailers can be nervous about the high visibility of eBay’s customer feedback. Companies such as Schuh and Littlewoods say they are committed to keeping their feedback scores above 99 per cent, but admit it can be a tough task, with customers on eBay expecting great prices and great service – and not being afraid to state publicly if a seller fails on either front.

Both of these retailers encourage customers to contact them by phone first with any problems. “We try to reply to every single negative feedback and resolve that situation. We push them to contact us before leaving feedback,” says Lumb.

Customer service is one of the biggest challenges of operating a store on eBay. “One of the issues we found very quickly is that, because there is no face-to-face feedback, there are lots of customer queries, so it is very important to get your listings right. We have invested in a dedicated customer support team,” says Dykes.

Schuh uses a similar set-up. “We have a team dedicated to eBay customer service. It’s hard work, but it’s worth it,” says Lumb. “EBay is more of an e-mail-focused environment. With our mainstream Schuh site, if we sold 3,000 pairs of shoes, we would get around 300 e-mails. With the Schuh eBay site, we would get around 3,000 e-mails.”

If a retailer does not respond to these e-mails, it risks losing sales. “For every customer that e-mails us, they want to find out more about the product, so they are more likely to bid and we are more likely to get a higher price,” says Lumb.

So why are more retailers not harnessing the power of eBay? IMRG chief executive James Roper says they are missing a trick. “It’s a golden opportunity,” he says. “If you make the right moves in the right way, you can absolutely clean up.”

Some retailers that still associate eBay with its flea market tag will be worried about harming their brand, but having a dedicated store can actually help protect a retailer’s brand on eBay. “We were confident we would do it well enough not to damage the brand,” says Littlewoods Clearance e-commerce manager Paul Gedman.

Having the right systems and stock control in place is vital and, undoubtedly, an eBay store creates more work because products must be listed individually in order to maximise sales. “For every pair of shoes, we have six size options, but we will only list one size in a style at any one time and will sell as though it’s the last pair. We then automatically put the next pair on after the auction has ended,” says Lumb.

“The biggest issue is scalability and being able to constantly upload products. You mustn’t underestimate the amount of work it takes loading product,” warns Dykes.

Roper says eBay offers a great opportunity for experimentation. “E-commerce is becoming more and more central to retailers and there is no better place to cut your teeth than eBay,” he says. Similarly, Dykes adds: “We can use it to test prices, so it will tell us how much we can sell things for in our stores.”

What is more, other businesses can also grow out of it. Dykes is considering a mainstream Littlewoods Clearance web site, something that Schuh has taken a step further. About six months ago, it launched another eBay store called Branch 309. “We originally used eBay to cleanse our own stock, but now we are going to brands to say: ‘Have you got any more close-out stock we can clear for you?’ We are doing that with around 20 brands so far and have created a whole new business out of it. We have also got an Amazon site and a Co.uk site for Branch 309, which we launched at Christmas,” says Lumb. “Without eBay, we wouldn’t have had that business.”

Some retailers are even running their own auction sites to clear stock. Comet has been running its clearance site, Clearance-comet.co.uk, since 2002. “It was set up to present our ex-display and customer-returned clearance models to a bigger audience than a traditional clearance store. The main benefits are offering clearance to a larger audience and therefore achieving a better price and keeping our stores free of clearance product so they can offer the most current range,” says Comet head of direct channels Simon Rigby.

Ignoring eBay can be a huge mistake. “With 49 per cent of all those who go online in any month visiting eBay, large high street stores have recognised that they can’t afford not to sell into the largest online market in the UK,” says an eBay spokesperson.

“EBay is a huge phenomenon to be taken extremely seriously these days,” says Roper. “You are mad not to be looking to it, because the world’s your oyster in terms of what you can do.”

Lumb agrees. “If you have a brand name, are a high street name of any calibre or have searched-for product and can cope with the customer service, then you should do it. It’s a case of embracing it as another channel rather than being frightened of it,” he says. Given the success achieved by those who have ventured onto eBay so far, this sounds like good advice.