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Drop-Off Stores Dropping Off the Map

March 16th, 2007 by Skip McGrath

The rise and decline of eBay drop off stores

In my last newsletter, I wrote an article about drop-off stores and my opinion about their continued viability in the current marketplace. Shortly after it published, I received an email from an eBay seller who manages a drop-off store.

He gave me permission to publish his email so long as he was kept anonymous. If you have not already read the article I wrote, I suggest you read it first as he references certain parts of it.

“Hi Skip,

I thought I would respond to your article on “Are eBay drop off stores still a viable business?

The situation considerably worse than what you indicate. To begin with most stores spend between $2400 and $3500 per month on rent. The two largest franchises required their franchisees to be located in a strip mall, preferably near an anchor. That can easily increase the above rent by 50%

The 33% commission is about average and correct. We were averaging approximately $140.00 per auction, and by being selective, have a sell through rate in excess of 90%. This is far higher than the average franchise store.

Most of the franchises used to require a minimum value of $50.00 but their average sales price per item have been less that from the get go and sliding down ever since. Many accept article that will only sell for $9.95.

We did enforce the $50.00 minimum, but because of a slowing volume we to have been forced to drop down to of $30.00. This in turn has dropped our average sale down, not up. In order to compensate we have had to increase our shipping charges. While on that note, in your article you failed to include the cost of shipping supplies, which is a major cost factor.

In reality, after all expenses have been taken in, break-even is over $20,000 per month. A couple of the large franchise chains even state that their stores need $40,000 in sales per month to be profitable. That may be because the initial investment is between $80,000 and $120,000 invested and a monthly royalty as well. Further, that is even before an officer’s draw. That explains why so many eBay drop off stores now closing up. In order for us to survive we had to add some office products, and packaging and shipping services.”

What our anonymous seller said is very true, the drop off stores that are still around are not solely drop-off stores. They offer other services to bring people in. Franchises don’t seem to be the way to go anymore. You can do just as well by advertising your services as an actual location. Most people who will use a consignment seller don’t expect them to have a professional store. So my advice, is to become a Trading Assistant and get listed on eBay, then look to market yourself locally. You can afford more PR if you’re not paying rent of franchise fees!

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