Edeal helps with the art of the deal

Inventory can be a nasty thing. Too little and production and sales come to a screeching halt, too much and the financial drain can be the lethal.

Looking to help companies move merchandise, edeal Services Corp., a Toronto-based on-line auction technology provider, recently released AuctionEnabler, a free application that companies can use to add auction functionality to corporate sites. Up until now the biggest barrier for companies to overcome was cost, according to edeal CEO Colin Webster. He said solutions range from $10,000 for the hosted variety to more than $50,000 for a packaged solution.

The edeal solution, though aimed at the business market, provides the ability for all Web sites to add auction technology. “We at edeal are breaking that (cost) barrier down and, on top of that, providing premium technology for the business to business market, a sales and distribution channel for the business-to-consumer market and content and revenue community building for the C2C market,” Webster said during a combination conference call, Web-based tutorial.

He said a Boston Consulting Group Inc. study found that less than one per cent of all retail merchandise is sold in auctions and concluded that about 20 per cent of on-line retail sales are auction-based.

“So there is quite a difference in the way the on-line world perceives how to do business,” he said. Cambridge, Mass-based Forrester Research Inc. projects on-line auctioning to grow to around US$19 billion by 2003, Webster added.

Chris Silva, associate research analyst with Framingham, Mass.-based IDC, likes what he sees in edeal but said the competition is not likely to sit by and watch edeal amass market share.

“What is to stop a competitor like [eBay or Yahoo] from coming up with a similar strategy to edeal’s…that is something that they are going to have to look out for,” he said.

He said the AuctionEnabler’s user interface is good and the solution is robust enough for clients who want to get their hands dirty, to customize the AuctionEnabler.

Mark Gambale, auctions analyst with Lincoln, Mass.-based Gomez Advisors Inc., an independent rating company, also likes what he sees. “This new auction enabler brings them to another level entirely,” he said. He too likes that customers can customize the look and feel of their sites. Gambale added that the closest competition, Fairmarket, is more of a cookie-cutter solution.

making cash from a dormant stash

“Our vision is to not charge people unless they are making money themselves,” Webster said. Buyers on an auction site are charged no fee, while sellers pay a portion of the sale price to edeal.

Sellers who get $1,000 or more for an item are charged 1.25 per cent; between $1,000 and $25, 2.5 per cent; and below that five per cent, Webster said.

Silva added that edeal’s overall strategy could be improved upon. “I don’t have a problem with [their revenue model] but…I think they should really illustrate the value of their pay solutions and their strong partnerships where the technology is going to be kind of re-branded,” he said.

edeal’s relationship with b2bScene, a division of Waterloo, Ont.-based Open Text Corp., is an example of the kind of partnership Silva is talking about. “One of the additional resources that we are adding is our ability to do industry-based auctions, so edeal is providing that service to us,” said Dan Latendre, vice-president of marketing and business development at b2bScene, an extranet applications service provider. He added that the partnership will benefit both companies equally, with edeal getting access to b2bScene’s clients while it can now offer edeal’s technology as an added service.

the six step solution

During the conference call, edeal’s CTO, Leon Kuperman, went through the six steps necessary to add auction functionality to a Web site.

The first step requires choosing a URL and a business model. There are currently three models available; B2B, B2C and C2C. The first allows the user to create a private auction site (if desired) for members of distribution or manufacturing networks. The latter two are essentially the same except the B2C solution lets the user decide whether listed merchandise is shown exclusively on their site or incorporated into the larger edeal network. The following steps let users add logos, customize their solution and categorize product inventory.

edeal’s goal is to have 10,000 sites incorporate this technology by the end of the first calendar year, thus keeping the people at edeal rather busy. “Every component of the application sits on our servers. It is a completely outsource solution,” Kuperman said.

Silva concluded, “I don’t think you are going to see too many solutions that are identical to this. This is kind of a unique solution, in a good way. I see it as you setting up your own garage sale at edeal whereas at eBay you are participating in a flea market.”