If eBay is a boon to the small direct marketer, you could have fooled Mike Cachat, CEO of JensonUSA, a multichannel retailer of bicycles, bicycle parts and bicycling accessories.
In April 2004, Cachat noticed that there was an overall drop in revenue of 18%. Worse, his key products were hardest hit, falling some 50%. He began running reports and discovered that more and more of his real and potential customer base were buying from merchants on eBay. While Cachat was not able to quantify exactly how much business he had lost to eBay merchants, he did point out that cycling is one of eBay's more popular categories.
More important to Cachat was that merchants on the Internet auction site were consistently "undercutting" the minimum price that the manufacturers required be advertised.
The obvious solution -- advertising lower prices himself -- was not an option since that would violate his pricing contracts and agreements with those manufacturers. Cachat feels that the manufacturers are ignoring the problem hoping it will go away.
"Retailers know it won't go away," he says, adding that eBay runs seminars about how to get a business online on eBay at the same trade shows the manufacturers display their product lines.
Fortunately, while he could not advertise below market prices, he could advertise that he would match any below market price. With the help of software from CommericalWare, Cachat was able to offer price matching on any and every page a consumer viewed. Approval is automatic once the price is confirmed. Since the system stores earlier price matches, if the price offered is the same as an earlier match, approval is that much faster. The price matching capacity is also touted in the Jenson catalog and in its space ads in bicycling magazines.
Cachet claims that there was an immediate 10% increase in sales and by April 2005 he had recovered his 18% drop. May saw an overall increase in sales.
"It lowers margins and 25% or less cuts into the bottom line," Cachat notes. "But we've hit a sweet spot in sales where sales are growing and we're not losing all the profit margin dollars."
A typical price-match order is for a higher end product, which Cachat defines as selling for more than $300. Usually the order includes one or two lower priced items as well. The 500,000-name customer base is mostly male, 18 to 39 years old, who goes out mountain biking on weekends.
Cachet describes his business as Internet based. "It's less expensive to boomers," he said. "They buy more, more often, with less service."
That, however, still leaves the larger issue of what to do about the competition from small independent mom-and-pop businesses operating through eBay. "It's a hot topic in the industry," Cachat noted. "It was the same for mail order. They were resistant. They didn't like a new way of doing business."
