The Model of Resilience

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The director of bidorbuy Andy Higgins explains why the online auction and marketplace business model thrives in a recession environment

The economic downturn does not seem to be affecting the biggest local marketplace, While the South African retail sector recorded another slump in September, bringing the 2008 performance to minus 1.7 percent, the total sales made on bidorbuy increased by 121 percent on year-to-year basis. The value of the items traded on the site in the period July-September 2008 reached R56 million, more than double the value recorded in the same period last year.

In line with the international trends, South Africa is experiencing stronger growth in online sales than in offline ones. Local online retailers, some of whom saw increases in the region of 30 percent during the last two years, expect this trend to continue, though many are lowering their estimates due to the fears of recession.
In words of its director Andy Higgins, bidorbuy is not beset by the worries of any imminent effect of the sluggish economy. “The bidorbuy business model sets us apart from the standard online shops, where a company sells to consumers. On bidorbuy, consumers transact directly with other consumers. That is why bidorbuy, to some extent, thrives in a recession environment”, says Andy Higgins and explains: “In difficult economic times, people will be more than ever looking for bargains, and will consequently come to bidorbuy to shop for discounted, last season’s or second-hand items. The new sellers will come too, looking to sell whatever it is they can sell. And on bidorbuy, sellers very quickly become buyers”.

That is why the success of an online auction-plus-marketplace business model partially depends on the growth of the number of its registered users. This can be at times an uneasy dependence, as shown by the turbulences besetting the icon of all such business models, eBay – to the effect that it is not quite clear how much of eBay’s current fall in the revenue from the core business is due to the general economic slump, and how much to the disenchantment of its sellers. In that regards, one of the most disquieting indications is that the number of eBay users rose by only 3 percent to 85.7 million.

With its September 2008 figure of about 290,000 registered users, the local auction-cum-marketplace site is definitely in another category. However, the 40 percent increase recorded on the year-to-year basis augers well for bidorbuy. The director Andy Higgins is looking forward to further growth, given the present low penetration of Internet in South Africa and the expected increase in the local broadband availability and affordability after the completion of one set of the undersea fibre-optics cabling next year.

In the words of its director, bidorbuy is also aiming to improve its online auction and marketplace business model by fostering its fixed-price offering, which currently represent only 20 percent of all sales made on the site. Auction-style sales account for the other 80 percent. “Up to now”, Higgins admits, “sellers have been somewhat reluctant to increase their fixed-price listings, simply because they often get more sales, and at better prices too, in the auctions.”
This auction vs. fixed sales ratio may be the reason why bidorbuy is not pinning its hopes on the Christmas shopping surge the way both offline and traditional online stores are. “Our time comes after Christmas” says Andy Higgins, “when everybody rushes to bidorbuy to sell all the unwanted Christmas gifts.” And people being what they are, one person’s horror gift will be just what another person’s heart desires.

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