A case against eBay to sustain the middle man

On a recent flight, I overheard an incredible conversation about how one large vendor not only prevents its dealers from selling on eBay but actually penalizes them for doing so. It got me thinking about the value of the middle man and how it may be preserved.

The death of the small town or regional storefront has been occurring for decades. The introduction of ‘big box’ stores like Walmart, Target and Home Depot have been giving consumers better prices and more choices than the local hardware store on the corner. While one can argue that those bigger stores can’t compete with knowledge and service like smaller stores, consumer behavior seems to indicate that people care less and less about what to buy vs what’s the best buy.

My dad and family run a smaller regional store, one that my grandfather started over 60 years ago. They’ve been able to compete price-wise by teaming up with other stores and buying their merchandise collectively. This means that vendors sell volume indirectly to them in similar numbers compared to larger chains, thus keeping their cost low and, in turn, allowing them to compete in price. And instead of hiring any twenty-something looking for any job to raise college money, retail stores like my dad’s employ career experts who know every single detail about the model AND can advise on the exact item that is perfect for you.

I would consider myself a frequent online consumer, usually opting to buy things not from a local store OR even a big box retailer. I buy online when I can, and as often as I can. I’m also a huge fan of eBay, leveraging the mass of buyers to re-sell almost every gadget I own after 3 years. On a recent flight, I overheard an incredible conversation about how one vendor not only prevents its dealers from selling on eBay but actually penalizes them for doing so.

The company makes high-end bicycles. They recognize the value of the local store for the fact that their market (consumers who buy their brand of bike) appreciate the unique fit and performance of their product and understand why they cost more than other brands. For this and a few other factors, they work very hard to preserve the middle man by refusing to sell directly to the consumer.

If they or their re-sellers start selling on eBay it would create a marketplace where anyone could use the remaining re-seller as nothing more than a stop to try out the bike, only to then buy online for a more competitive price. This would lead to re-sellers losing sales and drive them out of business. Without enough local retailers stocking this brand of bike, the company would no longer be able to manufacturer nor justify a higher quality and costly bike since fewer people would be able to experience the quality first hand.

I think there are many products that this concern does not apply to. Gadgets, for one, are things that don’t necessarily need to be experienced first hand. MP3 players and camcorders have a similar feel, and we seem to trust blogs and review sites to report on sound and visual quality. But a bike, clothes, and anything that we really need to experience for ourselves may always need a middle man.

chuckstar

2 Comments

Michael Kaufman

This is an interesting story, indeed and reminds me a lot of a great Office episode 🙂

I think in 50 years the middle man will be few and far between and I feel bad for retailers such as your family. I am amazed that every 45 seconds of everyday, a passenger vehicle is sold on eBay. You would think a car is something someone would for sure want to test before buying but usually not so. Call me slime, but I have purchased at a retail store many times, and after testing, I go buy it online way cheaper and return it. So I cannot blame the bike manufacturer for being smart, but it depends what their profit margin is.
One day I needed a CAT5 cable ASAP so I went to my local Radio Shack and bought a 50 foot cable for $45. Used it for about 2 weeks until the better the one I bought online for $6 came in the mail. The fact is, the internet is slowly making sure profit margins are kept in check. Operating expenses aside, why should Radio Shack get away with a 700% profit margin? Because people pay it and don’t know or explore all their options….yet. I wonder what the margin was on the bike? Congrats on the BT purchase. I’m guessing you get to do a lot of online shopping now 🙂

Anonymous

that was great i am very proud of you. i love you grandma

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