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Bid on It

How online auctions will change retail as we know it

The advent of eBay has done more than just allow people to pawn excess inventory for a few bucks or feed their passions for collectibles. Daniel Nissanoff, author of FutureShop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell and Get the Things We REALLY Wantand co-founder of online luxury goods resale company Portero, asserts that eBay and similar online auctions have created a culture that will explode in the near future and completely change consumerism as we know it.

Entrepreneur: How is eBay affecting business?

Daniel Nissanoff: In the eBay ecosystem--a term describing businesses that feed off of eBay--we saw the first-generation businesses, PayPal being the home run. Drop shops are the first of the second generation.

Entrepreneur: What will be next for the eBay ecosystem?

Nissanoff: We're seeing a big surge in closet organizers and personal assistant services driven by a need to purge possessions. There's also a surge in appraisal services on items such as antiques and art. I predict we're going to have companies that [refurbish used products] so they'll sell for more. One company doing this is supplies customers with missing parts from appliances, enabling them to [repair old items and] sell them like new.

Entrepreneur: How is the auction culture changing consumer behavior?

Nissanoff: As people begin to buy items with residual value, they're going to shy away from middle-market stuff. Also, manu-facturers now have their current lines out while their older ones are being resold by consumers. Companies will have to develop strategies to help consumers resell and buy items, whether they develop certified pre-owned programs for their brands, partner with drop shops or build drop shops in-house as Circuit City did. With this secondary market, if you can harness the data of people buying and selling your products and your competitors' products in real time, it can be extremely profitable.

This story appears in the May 2006 issue of Entrepreneur. Subscribe »