This Recommerce Company Is Mounting A Challenge To eBay's Dominance
As far as online marketplaces are concerned, eBay (NASDAQ: EBAY) has been the dominant player in the industry for the past 10-15 years. While many companies have tried to recreate and, in turn, compete with the online auction site, none has been able to achieve eBay’s level of market penetration. However, one company might have finally found a way to do so. Its secret? Enhanced seller experience. The company? uSell.com (USEL).
What is uSell.com?
uSell is an internet technology company that offers an online marketplace within which sellers (users) can sell their belongings. Initially set up as a mobile phone resale site, the company now offers users the chance to sell a range of items including mobile phones, small consumer electronics, women's and children's apparel, textbooks, video games and gift cards.
How does it differ from eBay?
The uSell marketplace differs from that of eBay in a number of ways. The first, and perhaps most attractive to users, is the sale price comparison feature. Before a user sells an item on uSell, the platform presents them with a range of buyers, each offering a different price. The platform customizes the offers to the user and their product, based on factors such as the item’s age and condition. This feature allows users to find the best possible sale price for their product. In this regard, the company’s model replicates that of kayak.com in the travel industry, or bankrate.com in the finance industry.
The uSell marketplace also differs from eBay in its buyer registration process. The site refers to buyers as "professional buyers," and uSell vets each one before they qualify for this status. Fraudulent buyer activity is a well-documented problem on eBay, and the vetting process through which uSell buyers must go through makes fraudulent activity on the site much less likely.
Finally, but not exhaustibly, uSell transactions are seller-centric. The uSell model requires buyers to prepay postage and packaging and the company sends the required postage material to the seller. It then collects the sale item, and forwards it to the buyer. This makes the selling process much simpler and smoother for the users of the platform and again dramatically reduces the likelihood of fraudulent buyer activity.
How does uSell make money?
Initially uSell generated revenue through resale. The company would purchase items directly from its users, and sell them through various channels at a premium. In July 2011, uSell shifted its focus to providing the aforementioned marketplace. Rather than buy and cell items directly, the company now brings together consumers (sellers) and partners with buying organizations. When a seller agrees to sell to one of uSell’s partners, uSell receives a fee from the partner.
The company released its second quarter financials on August 19. Revenues for the period totaled $1.2M compared to $591,000 for the same period last year, an increase of 107%. Gross profit margin for the period was 92%. Operational loss for the period totaled $1.13M compared to $1.97M for the same period last year, a decrease of nearly $840,000. Net loss for the period totaled $1.1M compared to $6.1M for the same period last year, a decrease of $5M. Resulting earnings per share improved from ($0.47) to ($0.02).
uSell has also reported consistently improving financials on a consecutive quarterly basis. The latest reporting represented six consecutive quarters of sequential revenue growth.
Finally, the company’s user metrics have improved. It reported unique monthly visitors at a record of 800,000 in June, with repeat customers ranging between 13-15% and rising.
Last month Apple (APPL) released its latest handset, the iPhone 5S. Apple has already reported better than expected sales of the new handset, and analysts expect the trend to continue. It is reasonable to assume that the vast majority of these sales come from individuals who are already using mobile phones, and that on purchasing the latest iPhone the older model they own will become redundant. To coincide with this mass retiring of old handsets, uSell released "uSell Current," an iPhone app that allows users to monitor the resell price of their mobile phone handsets in real time. The app offers a service to users in that it helps them avoid underselling their handsets, and serves as a marketing tool for uSell.
The recommerce industry has an estimated value of over $57B. Analysts expect it to grow in coming years, as large consumer electronics retailers seek to promote the value in older devices, the ability to trade in and encourage faster turnover of devices.
According to research firm NPD Group, the average US household contains $7,000 of unused items. As economic conditions continue to wane, and consumer awareness of resale opportunity grows, companies like uSell stand to benefit.
The company’s CEO and Chairman of the Board is Sergio Zyman. Prior to leading uSell Mr. Zyman founded Zyman Group, an international marketing consultancy firm which he sold to MDC partners in 2008. His resume also includes a Chief Marketing Officer role at Coca-Cola Co (KO).
Co-Founder, President and Director is Daniel Brauser. Prior to his current roles Mr. Brauser served as both CFO and COO at the company. Before founding uSell, he served as the Senior Vice President of Health Benefits Direct Corporation, a health industry marketing organization with a specific focus on insurance.
Finally, COO and Director is Nikhil Raman. Prior to joining uSell Mr. Raman founded and led EcoSquid, a consumer electronics recycling company with a business model similar to that of uSell.
uSell and its platform face competition from a number of sources. One is the aforementioned eBay. The online auction site continues to dominate the recommerce space. A number of factors are reportedly driving users away from eBay however, the majority of which are rooted in increased seller fees. uSell allows its users to sell items completely free of charge.
Competition also comes from retailers. Apple, Wal-Mart and Target have all announced trade in plans that allow mobile phone users to trade in old handsets for discounts on upgrades. With uSell’s price comparison facility however, uSell guarantees sellers a better price for their handsets if they use the platform.
With consistently improving financials, strong leadership and a business model that has proven successful for companies such as kayak.com, uSell offers investors the opportunity to buy into a company with massive upside potential. If the company can successfully market its platform and benefits it offers its users concerning the price they stand to receive for their items, it could compete with eBay in the next two to five years.
The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.