Chapter 2: Deciding Products to Buy for Resale

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Worried that you and 50 others will be selling the same thing on eBay? Seek barriers to entry. I give clear guidelines on product branding, quality, and targeting businesses versus individual consumers.

Selling the Same Thing on eBay?

You should be worried. On a product as specific as the suit I mentioned in chapter 2, there are at one moment in time 188 E. Zegna suits for sale by at least 22 different sellers.[1] As I mentioned earlier, eBay will almost certainly be one of your sales channels. You can’t ignore eBay’s contribution to your Total Available Market. According to an April 2007 press release, eBay has 233 million registered and about 100 million active users.[2] Importantly, the number of registered users continues to grow at a healthy clip.[3

Consider this consumer electronics example: For something as “exclusive” as a plasma television, the phrase “plasma tv” returned 1014 items for sale![4]

The Internet tends to commoditize products. For us, this means that product differentiation is difficult to achieve. Recent data implies that 49% of Internet shoppers are making their purchase decisions based on price alone.[5] What can you do?

Seek Barriers to Entry

Classic Marketing theory suggests two options: (a) Make customer switching costs high; and (b) look for or create barriers to entry. Switching costs tie customers into your product or service. Cell phone companies used to make customer switching costs high with number portability. In other words, the companies made it difficult for you to switch carriers because you could not take your phone number with you from one carrier (i.e., Verizon) to the next carrier (i.e., AT&T). It took a recent FCC ruling[6] to remove the number portability barrier. Cell phone companies then re-priced handsets so that customers sign one or two-year contracts in order to have the handset subsidized. If the Apple iPhone successfully gets AT&T new customers from other carriers despite the barriers, well, the carriers will seek additional ways to make switching costs high!

This is wonderful for the businesses that can make switching costs high for their customers. If you decided to follow a Business-to-Business model, you can explore ways to impose high switching costs on your customers. For instance, you could seek a 3-year contract with a significant cancellation penalty as a way of penalizing a switch from you to someone else. In our small business world, offline, only “friendly service” can save them from the Wal-Marts of the world.

That said, you will probably not be able to make switching costs high in an online product business. As I will explore shortly, it is likely you will be selling large, expensive items such as pool tables, pianos, or Jacuzzis. If your model targets customers (and not businesses), you won’t have many repeat customers[7] anyway—hence no need to seek high switching costs.

In contrast to high switching costs, you can and must look for barriers to entry. A classic barrier to entry is something that deters others from competing against you.[8] For instance, let’s say you decide you want to turn your hobby of building cool cars into a business like De Lorean.[9] The challenge of competing successfully against Porsche and Toyota is monumental, given the costs of designing and producing just one of your new cars. The barriers that exist from your perspective eventually keep you out of the market. These barriers include the obvious industry characteristics like a large number of competitors, frequent price wars (with 0% financing), and the relative inflexibility of the distribution system. In other words, why would car dealers sell your new car? Other barriers keeping you at bay inevitably come down to the disparity in cost positions—you can match neither GM’s economies of scale nor their experience curve.[10]

Not to worry. In the product world, in OUR world, here is what you do to keep the threat of new entrants reduced:

  • Buy and sell products that weigh more than 150 lbs. This is the maximum weight that U.P.S. will deliver. If a product weighs more than 150 lbs, or has unusually large dimensions, the item must be put on a pallet and shipped by a freight company. Examples could include the following:
  • caskets[11]
  • huge pottery
  • Jacuzzis
  • koi ponds
  • decorative rocks
  • large antiques
  • furniture
  • stainless steel kitchen appliances
  • large medical equipment
  • tractors (used or new)
  • wave runners
  • scooters
  • industrial tires
  • kids outdoor play equipment
  • preformed construction equipment
  • anything else BIG and/or heavy.

By having a product that can’t easily be shipped, you create a barrier that will probably be around for a decade—longer than most barriers and a key aspect of your strategy. I’ll explain how to ship large freight and get 50% discounts on freight shipping later.

Buying and selling products that weigh more than 150 lbs is the key way to limit competition within your eBay category. This is backed up by data which shows that large, heavy items have much lower sell-through percentages than easy-to-ship (and easy to copy) items. To illustrate, I’ll take three products from above and compare them to top sellers on eBay as of June 30, 2007 (data from May 2007).

Item # for sale # sold Sell-through %
Any brand upright piano 127 70 55.1%
Viking refrigerator 39 22 56.4%
John Deere tractors 851 513 60.3%
Happy Feet’ DVD 1,082 974 90.0%
Cell phones w/o contracts 2,281 1,387 60.8%
Apple iPod 78,455 54,620 69.6%

A lower sell-through percentage points to difficulty or pricing gaps somewhere in the system; my belief is that the trouble associated with and cost of shipping large items is the key culprit—something you will become very good at (shipping large items, that is). Note also the sheer number of items for sale in the smaller goods means more competition and lower prices for all sellers.

For those of you not sold on this idea, I have an Appendix which will help you utilize XML and technology to create “virtual” inventory and processes which will help you achieve low-cost status: but you will never be a low-cost leader in that space. Other ways to keep the threat of new entrants reduced include:

  • Focus your business around a small product line. Having 50 items for sale, or 500 or 5 million, is never a sustainable competitive position, because a better-funded competitor can always match and beat your product line size. Most businesses make the majority of profit on a small number of popular products. For instance, the Bluthner Piano Company[12] offers grand pianos in six sizes and countless finishes, including mahogany, flame mahogany, pyramid mahogany, ash, beech, white, cherry, walnut, walnut with burl inlay, jacaranda, jacaranda wood fitted with leather, and ebony. However, according to Bluthner’s president, 95% of all grand pianos sold are finished in ebony.[13] Bluthner needs to offer pianos in all of these finishes because they are a product leader—you do not. You would do well to pick one grand piano size—or two sizes at the most—and sell only ebony.
  • Sell your product entirely online to compete against the big corporation. Most organizations prohibit others, or are prohibited themselves, from selling online. This prohibition—effectively a barrier in your favor—is to protect the established dealer network and to keep some kind of control on prices. I’ve run lots of calculations on small businesses renting local retail space…and the additional revenues just don’t add up.
  • Buy your product by container-load from China to compete against other small competitors. I tell you how and why in chapters 5 and 6. I fyou buy from the U.S. distributor, you cannot have a true low-cost advantage and you play by their rules.
  • Establish a PowerSeller[14] rating on eBay as soon as possible. PowerSellers are top eBay sellers with high sales and positive feedback. According to my observation and experience, eBay PowerSellers can achieve a much higher margin than a one-time or infrequent seller—based on the PowerSeller’s reputation and eBay feedback score alone.[15] For instance, Jennie Blaser and Marissa Johnson tracked every piano listed and sold on eBay in March, April and June 2003. In April 2003, 153 pianos were sold. The Average Selling Price (“ASP”) of the lone eBay PowerSeller was $6,233, compared to everyone else’s ASP of $2,807. In June 2004, the average selling price for upright pianos (by PowerSeller) was $1,867, versus everyone else’s ASP of $1,207. eBay is the focus of chapter 10.
  • Learn the ins and outs of Logistics Management and how to maximize your shipping discounts will also be very important. I show you how later in this book.

Which Product do you Buy for Resale?

You already know the most important criterion: that the product’s shipping weight is too large and/or heavy for U.P.S. to deliver. I have one more suggestion: pick a product that you know almost nothing about. Why? Because one’s intimate product knowledge can cloud their early execution and decision-making. As referenced earlier, current authors believe that product experts (or “technicians”) make lousy entrepreneurs.[16] By picking a product you know little about, you can make clearer decisions about product branding, selection, and so on. And really, how hard is it to research everything you need to know about pool tables?

I have a new service on mauiceo.com called the eBay Sales Assistant, which will help you analyze a product every which way imaginable….giving you hard data with which to consider and calculate your future success.

Speaking of pool tables, let’s quickly discuss product branding, quality, and segmentation—in the context of pool tables.

Using Your Own House Brand (Product Branding)

In chapter 3, I discuss the importance of your corporate identity and connection between identity and branding.

At this point in the text, it is important to set your expectations regarding product branding. What name are you going to put on your pool/ billiard tables? How about Brunswick? Everyone would like to sell Brunswick pool tables, because Brunswick has a good reputation. However, as you may or may not know, Brunswick will not let you sell their pool tables online. Why? If you sell a pool table to a buyer in Omaha, Nebraska, for instance, the authorized Brunswick dealer just lost that local sale. Worse, the buyer probably used your Web price as leverage against the dealer, whose cost structure is higher than yours, forcing the dealer to decide between 15% margin or losing the sale.

Therefore, you use your own “house” brand. A Google search on pool tables yielded a Web site selling brands like Showood[17] and Black Bear.[18] When you get a company in China (or anywhere, for that matter) to put your name on their product, this process is called an Original Equipment Manufacturer (OEM) agreement.

The obvious question you might have is why would someone buy a Black Bear billiard table instead of a Brunswick? The answer is price. Here is a surprising and important piece of data: Customers pay only 3.1% more for brand-name items online.[19] This data comes from a study of consumer behavior on a shop bot.[20] A shop bot lets consumers compare sellers and prices on a singular product. My longtime favorite has been www.mysimon.com. Once you choose the product (say, a particular digital camera), the “bot” finds Web prices for that model and sorts the data based on the vendor paying the most for this privilege. The output data can then be sorted by low price, including shipping and collected sales tax (if applicable).

This data leads me to a conclusion: Don’t over-invest in your brand development. Beyond the initial design of your logo and development of your brand information and positioning (see chapter 3), monies spent on product brand development are wasted this early in the business life.[21] In fact, Professor Clayton Christensen of Harvard Business School points out that in certain segments, valuable brands are not on the products but on the channel itself—such as Old Navy or eBay. (The Innovator’s Solution, page 165.)

Another key reason for using your own house brand—perhaps the most practical—is that you have total control. If you are selling someone else’s brand, either legitimately or otherwise, you are subject to that brand owner’s heavy hand. A common discussion topic at the 2007 eBay Live conference was how manufacturers are asking volume sellers to avoid eBay or face loss of buying privileges. If you violate a company’s selling policies, you loose your ability to buy product from the company or their resellers. Ways companies are combating the sale of their products online include the following:

  • Minimum advertised prices (MAP). These mean you cannot list a sale price lower than the company-set floor.
  • Territory. Companies don’t want you to sell, or even quote, outside of your granted “territory.”
  • Demo. To avoid saying a product is “new,” companies force sellers to claim phrases such as “demo,” “scratch & dent,” “warranty does not transfer,” and so forth.
  • VeRO program. This is strong-arm enforcement tactics through eBay.

In my mind, this is one of the biggest changes affecting eBay sellers in the history of eBay.

Avoid Getting Stung by EBay’s VeRO Program

EBay’s Verified Rights Owner (VeRO) Program[22] was apparently created to help cut back on the sale of counterfeit items. My first observation of counterfeit items for sale on eBay was seeing the New York City fake Rolex watches. Given the sheer volume of auctions, eBay decided to shift responsibility of intellectual property protection to the companies.

Let me illustrate this with a personal, real-life example from Fall 2004. I was visiting my mother in Utah and bought a McIntosh[23] amplifier ($6,000 list) from the local authorized dealer. I decided to sell the product two months later and listed the amp for sale in a Buy It Now auction on eBay. The manufacturer, McIntosh Laboratories/ Parasound Products, Inc., had the auction shut down (before the 7-day auction period expired) through VeRO. Just like that. I as the seller was not contacted prior to the auction being shut down,[24] and the auction text is subsequently not available in your Unsold category so that you can see what violated policy, or to aid you in relisting the item appropriately. In other words, it’s a big pain! There is currently, in my opinion, no effective appeal process. I sent three e-mails to the address listed, with an inadequate response time.[25]

I believe what violated the owner’s intellectual property was my use of a stock photo image from their Web site.[26] So I relisted the item using my own photos. Within 9 days of the auction start, the manufacturer used the serial number (visible in the photos) to figure out who sold me the item. McIntosh then threatened in a retaliatory manner the seller with his dealership rights. So my twenty-year relationship with this small-business owner (and his very livelihood, given the importance of the McIntosh line to his profitability) are challenged by this VeRO program. And I was a valid titleholder to the product!

Take it from me—this time next year, small business owners will not be able to effectively sell new, brand-name products on eBay like today. You must understand this. EBay will be your most effective channel in the early stages of your business life. The small business model of buying used junk at local garage stores, then selling the items on eBay, does not generate enough revenue for you to live on—much less live in Maui. There are hosts of more successful small businesses on eBay today, but they sell Tommy Bahama shirts, Linksys routers, Panasonic televisions, and Swiss Army knives. These items will not be for sale next year by anyone other than authorized resellers, under the thumbs and restrictions of the manufacturer or distributor. Evidence of this is already showing up in customers “opinion,” where more and more eBay buyers are feeling like the good deals are gone (i.e. the sellers have to sell at MAP and therefore the prices are higher). If selling new items, you have two choices: you can either sell them as “slightly used,” “demo,” or floor models; alternatively, you can skirt the rules and risk having your auctions closed by eBay and then you’d have to switch your product niche. You don’t need the stress—you’re moving to Maui, right? To conclude, plan from the start on putting your own “house brand” on products you plan to sell.

Single Versus Multiple Product Lines

You also need to decide whether you will have a business that sells multiple product brands or instead have a business that sells only its own house brand.

Here’s the difference: a local sunglasses store sells 27 brands of sunglasses from six manufacturers.[27] I would strongly discourage this many choices online, but you could effectively have a Jacuzzi store that sells three different brand names—all names you have created for different price points—or perhaps two house brands and one brand that allows you to sell online and may give your business credibility. For instance, let’s say you decide to sell three brands of wave runners: the Good model is Chinese-made generic, the Better is Japanese-made generic, and the Best is Yamaha. It is a viable strategy to sell Yamaha legitimately and at their MAP—and use the Yamaha name to draw in buyers via Google AdWords.

Alternatively, you could have a single brand of Jacuzzi that carries the same name as your business. This strategy assumes that your customers don’t really care who made the item, but rather they buy for another reason (like price or ease of the purchase process). Old Navy sells shirts with their name, not the name of the manufacturer.

If you are having trouble with this decision, consider keeping it simple.

Quality

The simple fact of the matter is that for almost any product you buy, quality is good enough.

Therefore, unless you are a product leader, you should not focus on product quality as a differentiating factor. You will be a low-cost leader. When customers buy product from a low-cost leader (like Wal-Mart), those customers do not expect top quality. You as the seller need only provide passable, good quality. Note that service of the product will most likely be the responsibility of the customer in their local market. It is just too difficult to tune a piano, fix a Jacuzzi crack, or refinish a pool table post remotely. There may be individual exceptions: for instance, I know a guy from California who started a business inspecting cars that buyers found on eBay. A buyer would find a car they liked and hire this business to outsource a local inspection based upon a pre-defined list of items. It’s a great idea, but now the founder is selling real-estate, so perhaps it wasn’t a sustainable idea or business model.

New versus Used

Used items can have higher margins than new, because used items are harder to price-compare and acquisition cost can vary—which gives you a possible advantage. In an obvious parallel, car dealers (at least in the U.S.) make more money on used cars than new. However, selling used goods means you need detailed photographs and descriptions of each item. This raises your costs and risks and effort-level, plain and simple.

To mitigate the higher costs and effort, you need to optimize the photography processes. You could get a time advantage here if you photograph the items in the country of acquisition. For instance, if you’re acquiring French antiques, take pictures of them in France before the items are loaded into the container. That way, the items can be catalogued and even sold before they reach your warehouse. Good photos are obviously important to the final sales price, and you should manage the lighting area with a professional setup. Try www.clouddome.com as an example of a portable, affordable photography studio. Managing the photos and upload process is also time-consuming (and therefore profit-reducing), so once you get the basic process down, try managing your photos and uploads with software such as the offerings from www.listd.com and www.listqueue.com.

Finally, a key to avoiding cost-overruns is to avoid returns. Returns happen when the customer’s expectations aren’t met; therefore, I find that slightly under-representing a used item’s condition is helpful if not critical. This would account for someone’s overly-high expectations or slight shipping scratches.

Selling new items avoids much of these hassles; you get one set of stock photos that you can use all the time; the descriptions don’t change much; and you can quickly relist items that didn’t sell the first time. If you’re buying new items in China, you can easily have the manufacturer prepare the items for proper shipping, such as putting a small wooden pallet on the bottom of each item, which greatly facilitates moving in the warehouse and damage by the fork-lift. This process is illustrated in great detail later in Maui CEO.

Speaking of fork-lifts, let’s examine some pricing data from eBay.com. In May 2007, here’s what new and used forklift sales and looked like:

New forklifts: ASP = $4,461, Sell-through percentage is 29%.

Used forklifts: ASP = $1,630, Sell-through percentage is 75%.

It’s likely that if you follow the Maui CEO process, the pricing spreads will be similar to those above. Expanding the timeframe a bit, here’s what Rolex watches sold for between March 30 and June 27, 2007 (sorting out fakes below $500):

New Rolex watches: ASP=$5,385, 1,052 listings, 543 successful, sell-through 51.6%

Used Rolex watches: ASP=$3,287, 36 listings, 22 successful, sell-through 61.6%

In conclusion, whether you sell new or used product really depends on the product itself; whether you can “refurbish” the used product to an appropriate standard in a consistent manner; and whether the challenge of selling used is rewarded in higher product margin. In order to help you make this assessment, I am offering an eBay Sales Assistant tool on mauiceo.com. Check it out when you get a chance.

Segmentation and Target Customer: Businesses or Individual Consumers

A 2004 episode of “The Apprentice” had Donald Trump touting the importance of knowing your customer.[28] Even the Alfred Sloan professor at MIT’s Sloan School of Management encourages customer intimacy above almost all else[29]. In our situation, at this point, I don’t want you to spend too much time focusing on your target customer. Identifying demographics and grouping your customers based on a segmentation scheme is not necessary right now. You might disagree. If I told you your target customer was a 51-year-old white pool player with an annual income of $58,300, how does that data change your decision-making? It doesn’t, at least not yet.

Rather, what you do need to decide is whether you will target either businesses (“B to B”) or consumers (“B to C”). Stating the obvious, dealing with and selling to a business is quite different from selling to a single consumer. B to B transaction sizes tend to be at least ten times larger than a consumer transaction—which means your capital costs are going to be higher. In other words, in order for you to sell a store ten Jacuzzis, you will need to have the money to buy that many (and more). Profit margins, in my mind, are about the same between the two models, given the commoditization on the consumer side by eBay. Businesses will have different expectations of post-sale service, availability of credit and floor-financing, and even fulfillment and delivery requirements.

In order to decide whether you will target businesses or consumers, you need to estimate which is more profitable and whether you have the appropriate capital to target businesses initially. Take refurbished PCs,[30] for instance. On eBay, a sample search found a lot of 10 IBM Netvista 2.4 Ghz personal computers for sale at a unit cost of $355 each (plus $20 each for shipping). This is a lot of PCs for sale, targeted to businesses. The same company is selling an individual unit for $365 each and $23 shipping. Also consider that a different vendor is offering a very similar machine for $479 with free UPS ground shipping. Assuming these auctions represent valid ASPs, what conclusions can you draw when you decide to form your business?

Assume it costs you $20 to process each transaction. Also assume that your unit cost is $300 when buying a container full. In this realistic scenario, the first part of the financial analysis is to sell your widgets to businesses, because the higher profit on sales to individual consumers ($10, or $100 total) is offset by the higher transaction costs of processing each transaction ($20 each, or $200 total). So you would make $100 more by selling to businesses than individual consumers.

For the second step of your financial analysis, you should also try to estimate your turnover rate—in other words, how often you rotate or sell your inventory. Selling to businesses with higher margin—but lower frequency—can yield lower returns over the course of a year. For illustration, earning 40% gross profit margin selling your inventory 3 times per year means a 120% annual return on capital invested in inventory (ROCII). In contrast, earning a lower margin on your inventory (say 28%) while simultaneously turning your inventory 5 times per year means the same ROCII—120%. In other words, just because you may earn less margin selling to consumers, the lower margin can be offset with the accompanying higher volume.

Ever wish you could have real-time pricing history from actual eBay sales? Want to know what your target price is in China? See www.mauiceo.com.

If, after this general guidance, you still cannot decide whether you should target consumers or businesses, I suggest targeting consumers first. Then, after you work out the kinks in the processes and start to earn a little money, you can reconsider targeting businesses. In the offline world, retained customers are empirically cheaper to keep than gaining new customers. However, in the new networked economy—our world that we’re creating together—we are not striving for repeat business.

This is a change in mindset for many. Most customers don’t buy two or more pianos, Jacuzzis, or pool tables. It is critical to have goodwill from paying customers which translates into word-of-mouth purchases from friends—this is the concept made famous by Crossing the Chasm[31]and we will discuss this in the context of post-sale communication. But for now, let’s figure out your business name and identity.

[1] Search performed Thursday, October 7, 2004, at 3:40 p.m. PST.

[2] Q1’2007 Financial results available on www.ebay.com.

[3]“Confirmed Registered Users – Cumulative confirmed registered users at the end of Q1-04 totaled a record 104.8 million, representing a 52% increase over the 68.8 million users reported at the end of Q1-03.” 2007 results available on www.ebay.com.

[4] Search performed Saturday, June 30, 2007, at 3:44 p.m. PST.

[5] Rayport and Jaworkski (2004). Introduction to eCommerce (2nd ed.). New York: McGraw-Hill, pg 114.

[6] Action by the Commission, November 7, 2003, by Memorandum Opinion and Order and Further Notice of Proposed Rulemaking (FCC 03-284).  See http://www.fcc.gov/cgb/NumberPortability.

[7] I am well aware of the argument that customer bonding and repeat business both create barriers to entry and high switching costs. See The Delta Project: Discovering New Sources of Profitability in a Networked Economy. I don’t think this is the right way to look at the problem in our networked economy.

[8] M.E. Porter, “How Competitive Forces Shape Strategy,” Harvard Business Review, March—April 1979, pp. 137-45.

[9] See http://www.delorean.com/

[10] For an interesting discussion of experience versus learning curves, see generally Pearce and Robinson, “Strategic Management: Formulation, Implementation, and Control of Competitive Strategy,” McGraw-Hill/Irwin; 8th edition (August 19, 2002).

[11] Interestingly enough, it appears that funeral homes are required by law to offer services to all customers, even if a casket is not purchased from the funeral home. See the Federal Trade Commission’s “Funeral Rule” 16 CFR Part 453.

[12] http://www.bluthnerpiano.com/

[13] Verbal conversation with Christian Bluthner, January 2004, Anaheim California.

[14] http://pages.ebay.com/services/buyandsell/welcome.html

[15] For instance, Jennie Blaser and Marissa Johnson tracked every piano listed and sold on eBay in March, April, and June 2003. In April 2003, 153 pianos were sold. The Average Selling Price (ASP) of the lone eBay PowerSeller was $ 6,233, compared to everyone else’s ASP of $ 2,807. In June 2004, the average selling price for upright pianos (by PowerSeller) was $ 1,867, versus everyone else’s ASP of $1,207.

[16] Michael E. Gerber. The E-Myth Revisited: Why Most Small Businesses Don’t Work and What to do About It. HarperBusiness, 2004)

[17] Trademarks and brand names are the rights of their respective owners. See http://www.cornerstonebilliards.com/. Search done on Tuesday, October 19, 2004, at 10:21a.m. PST.

[18] Trademarks and brand names are the rights of their respective owners. See http://www.cornerstonebilliards.com/. Search done on Tuesday, October 19, 2004, at 10:21a.m. PST.

[19] Mitch Betts, “Brands Still Matter, Even for Shopbots,” MIT “Sloan Management Review” (Winter 2001) pg 9.

[20] A shop bot lets consumers compare sellers and prices on a singular product. My longtime favorite has been www.mySimon.com. Once you choose the product (say, a particular digital camera), the “bot” finds Web prices for that model and sorts the data based on the vendor paying the most for this privilege. The output data can then be sorted by low price, including shipping and collected sales tax (if applicable).

[21] In fact, Professor Christiansen points out that in certain segments, valuable brands are not on the products but on the channel itself—such as Old Navy.  The Innovator’s Solution pg 165.

      [22]See http://pages.ebay.com/help/confidence/vero-removed-listing.html and http://pages.ebay.com/help/community/vero-aboutme.html

[23] www.mcintoshlabs.com

[24] The process apparently works as follows: the intellectual property holder notifies eBay VeRO of the “violation,” eBay visually verifies the claim, then eBay shuts down the auction. The IP holder sends this kind of e-mail to eBay: “Please act expeditiously to remove the following listing. Item no. xxxxxxxxxx, which infringes IP owner’s registered U.S. trademarks, including No. y,yyy,yyy, and infringes IP owner’s copyrighted materials. This ad has unlawfully reproduced IP owner’s copyrighted product photographs, which have been downloaded from IP owner’s Web site without IP owner’s permission. For confirmation, please go to http://www.zzzzzz.com.” The problem is procedural: While the IP holder must specifically identify the offending portion of the auction (i.e., photos or text), eBay does not pass this information on to the seller. The seller is only notified that “your listing uses a rights owner’s image and/or copyrighted text without authorization.” When I finally got ahold of the law firm (see next note), even they could not provide me proof (i.e., a copy of the auction) of my offense. In the end result, a relatively innocent party does not know exactly what he or she did wrong.

[25] This listing was removed October 6, 2004, and my e-mails to the contact listed (a Southern California law firm hired by McIntosh) were not returned until October 27, 2004.

[26] Apparently, while the Copyright Act does limit damages if no copyright notice appears, the right to control reproduction is not affected by whether or not there is a notice. In other words, you cannot take a photo from the Web without permission—even if the Web site owner has no copyright notice. You can get photos either for free or a small charge—see www.gettyimages.com and www.inmagine.com as two places to start.

[27] Based on a conversation with the assistant store manager at a Sunglasses Hut in Folsom, CA, on October 25, 2004.

[28] Episode 6, Season 2, aired on Thursday October 14, 2004.

[29] See The Delta Project: Discovering New Sources of Profitability in a Networked Economy.

[30] EBay search performed Tuesday, October 19, 2004, at 12:30 p.m. PST.

[31] Geoffrey A. Moore. Crossing the Chasm. Collins, 2002.

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