Online Resale Worries Retailers

By: USAtoday.com
By: USAtoday.com

Triss Budoff of Houston spent about $1,000 on 25 Rafe handbags that were available for a limited time at Target. But Budoff didn't use the purses. Instead, she posted 10 of them on eBay and earned about $750 in profit.
"I viewed it as a low-risk investment," Budoff says. "Anything I didn't sell I could return to the store within 90 days and get my money back."

More than a million people like Budoff make a portion of their income from selling products on eBay (EBAY). And that has some retailers worried. To protect their businesses and their brands, they are taking steps to curtail customers who are buying products for resale.

Retailers are especially concerned about reselling of clothing and accessories, a category that has grown 73% on auction website eBay in the past year.

For retailers, "Jewelry and handbag sales are especially hurt by e-commerce," says Ken Nisch, chairman of retail consulting firm JGA. "More of these items sell online because people don't have to worry about clothing sizes."

Luxury leather goods maker Coach (COH) sends letters telling people that they can't shop at its stores if they are found selling Coach products on eBay. "Unauthorized distributors lack the proper commitment to the Coach product," says Andrea Resnick, the company's spokeswoman.

Companies often can spot potential resellers by their purchasing habits even before they get to the Web. EBay users are more likely to buy identical products in bulk because it makes selling them on the Internet easier. Selling 50 shirts of different colors would require making 50 posts on eBay, but 50 shirts of the same color can be sold on a single posting. "It increases productivity, and it's just easier," says Donna Klein of Birmingham, Mich., who sells plus-size and bridal lingerie on eBay.

Because of this, many stores limit the amount of merchandise a person can purchase at one time. Gymboree (GYMB), a clothing store for kids, won't allow customers to buy more than five of the same item.

"We need to protect our image," says Jamie Falkowski, Gymboree's director of public relations and advertising. "We can't ensure a product's quality on eBay, and we don't want people to think we're selling things on eBay."

Target limits a small number of collectibles and special promotional products. The company cautions consumers about the quality of products on resale sites. "This is a largely unregulated marketplace where stolen and fraudulent goods have appeared," Target (TGT) spokeswoman Paula Thornton-Greear says.

Besides purchasing limits, retailers can do little to prevent their products from being resold on Internet auctions, says John Devlin, an attorney who represents retailers such as Nordstrom (JWN), Home Depot (HD) and Nike (NKE).

"EBay is like a modern-day yard sale," says Devlin, who works for the firm Lane Powell in Seattle. "The Internet just allows people to reach a larger audience."

The top-searched clothing labels include Hollister, Abercrombie & Fitch (ANF) and Nike along with high-end designers such as Prada, Gucci and Marc Jacobs, eBay says. The most popular fashion items are dresses, shoes and handbags.

Some eBay sellers make huge profits on sales, especially for items available in limited quantities. An Anya Hindmarch white canvas bag printed with "I am not a plastic bag" sold in stores such as Whole Foods (WFMI) for $15. But quantities were limited, and buzz about the bags drew long lines of customers, many of whom were left empty-handed. So when the bags showed up on eBay, they fetched as much as $450.

A blue silk Proenza Schouler designer top that sold in limited quantities in the spring at Target for a bargain-basement $34.99 sold on eBay for $255.

Budoff monitors eBay sales and plans to sell the other 15 Rafe bags she has when buyers are willing to pay top dollar.

Why do people pay more for the products? Often, they have limited access to stores or limited time to shop, says Constance White, eBay's style director. "Plus, they're still getting designer items at a good price, even with the markup."


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