eBay Drop Off Stores-A Bad Business Model Gone Worse

Posted by David White at 12/21/2007 10:40 AM and is filed under uncategorized
eBay drop off stores. The concept was simple. Create a franchise of storefronts around the country that offers to sell items on the internet. Specifically eBay. The explosive growth of eBay and selling on the internet over the past 7 or 8 years (yes I know eBay is over 12 years old) has given rise to hundreds of the franchise type stores all over the world. The biggest drawback to this business model is very simple...It doesn't work!

Let's take a look at the latest failure QuikDrop which Friday December 14th sent an email to franchisees announcing the closure of the franchise effective December 31st 2007. One franchise owner in Michigan I spoke with stated he didn't see his notice until Monday morning. QuikDrop franchisee's were required to have $80-$100K business capital, including the $25K franchise fee. Then there is the cost of their "proprietary software" plus the monthly franchise fees based on lisitings and sales. Below is the chart of fees charged by this franchise for items brought into their store. This was taken directly from their website.

  The basic plan includes:

7 Day listing on eBay, Gallery photo on all listings, BOLD title for more exposure.

The fees are calculated from the selling price:

38% of the first $200
30% of the next $300
20% of the remaining (over $500)

The above fees DO NOT include the eBay listing fees, 2.9% payment processing fees, and DO NOT include shipping, packaging and insurance fees (usually paid for by the buyer). Sales tax may be charged where applicable. All items not sold and not picked up within 15 days will be donated to charity.

Take a look at the chart below for some sample listings:

  
     
 
           
  $50.00 $3.70 $19.00 $27.30  
  $100.00 $5.07 $38.00 $56.93  
  $150.00 $6.45 $57.00 $86.55  
  $200.00 $7.82 $76.00 $116.18  
  $250.00 $9.20 $91.00 $149.80  
  $500.00 $16.07 $166.00 $317.93  
  $700.00 $22.95 $206.00 $471.05  
  $1000.00 $29.82 $266.00 $704.18  
  $1500.00 $37.32 $366.00 $1096.68  
  
     
As a potential customer, I don't believe I would be happy with selling an item for $1500.00 and paying a commission of over 20% which doesn't include the insertion fee nor the PayPal fee.

Many have tried the franchise type drop off store concept, and almost all have failed! QuikDrop closing, I-Soldit no longer selling franchises, the numbers of active stores dropping like leaves on the trees here in Western NY in October.

The upfront costs to this type of business model are too high, the monthly overhead, coupled with increasing eBay fees, all coupled with lackluster numbers of items being brought in for sale, all combine to make this type of business doomed to failure. Now, have there been successes? Of course, but these are the very rare exception.

The overwhelming majority of the successful consignment stores that I know of are independent. These business owners have built up their business over time and simply expand as they need to.


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