New Online Auction Site Tries to Take Advantage of eBay Vulnerability
Trying to take advantage of unrest among the eBay (EBAY: 26.36, +0.90, +3.53%) community, start-up Wigix is betting its auction Web site can give eBay some much needed competition.
“There’s enough unhappiness with the current model that even if we were to take a pretty small percentage away we would be doing pretty well,” said Bob Lee, co-founder and chief technology officer at Wigix. “EBay is the gazillion-pound gorilla and, even as they acknowledge the model needs a bit of tweaking, for them to make a change is pretty difficult.”
Oakland, Calif.-based Wigix, which has venture capital backing from Draper Fisher Jurvetson, launched its online-auction site this past spring. Taking a page from stock market trading, the former Charles Schwab (SCHW: 22.82, +0.96, +4.39%) executives who developed Charles Schwab's initial web trading platform created a model that lets people buy and sell items based on a bid-and-ask system.
For example, visitors to Wigix who want to buy an iPhone will see a list of all the sellers and can name the price they want to pay. An interested seller would then accept the price, with the parties arranging shipping. People searching for an iPhone would only see the iPhone and all the pertinent information at one page instead of how eBay (EBAY: 26.36, +0.90, +3.53%) does it, with multiple listings showing up from a search.
“Chuck Schwab made the comment that if you build a great trading platform you could even sell baskets on it, and we took that to heart,” said Lee.
Wigix also incorporates what it calls "passive selling," which means users are able to create a portfolio of their stuff and people can make offers for that stuff. “Just how you want to know what your stocks are worth, you can know what your stuff is worth,” said Lee.
Wigix comes at a difficult time for eBay, which has faced unhappiness among its community over recently implemented seller polices. The company’s move to ink a deal with Buy.com in which Buy.com will list thousands of items on eBay for set prices upset eBay sellers because of the competitive threat Buy.com poses. Many people make their living selling on eBay. Officials at eBay weren't immediately available for comment.
Still while some eBay users may not be satisfied, the market as a whole is moving toward fixed prices, which may not bode well for online auction start-ups like Wigix. Scott Devitt, an analyst at Stifel Nicolaus, said eBay’s biggest problem has been in fixed prices, where Amazon.com (AMZN: 80.51, +3.56, +4.62%), Google (GOOG: 495.01, +15.89, +3.31%) and traditional retailers have been hurting the company. He said that successful international eBay competitors have incorporated fixed sales into their models.
Nevertheless Wigix’s Lee thinks the company will lure sellers and buyers. “A lot of our users are people who are very frustrated with eBay right now,” said Lee, noting that Wigix’s fee structure is a selling point. For items that sell for less than $25, Wigix doesn’t charge a fee. The buyer and seller is charged $1.50 for items that sell for between $25 and $100, with an additional 2% for sellers for anything between $100 and $1,000. Anything over $1,000 has an additional 1% fee for sellers. Visitors can pay via PayPal and Google Checkout. The company plans to add more options in the future.
Given Wigix is an Internet start-up operating in the Web 3.0 era, the company not surprisingly also includes social networking in its service. Aiming to create the Internet’s largest catalog of items, Wigix pays people to create a page within Wigix on a specific item and become the expert in that category.
For example, you can create a Web page for a specific BMW and, if someone eventually sells that BMW model at a later date, you would share in the revenue generated from the sale. Category experts are well vetted through Wigix and have to apply just like any other job. Their expertise is rated and an expert can change from year to year. So far Wigix has a million items in its catalog and is tapping the community because of its goal to have almost an infinite amount of items.
“We don’t have the wherewithal to build it ourselves,” said Lee. “We’re leveraging the community to help.”