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Politics : Rat's Nest - Chronicles of Collapse -- Ignore unavailable to you. Want to Upgrade?

To: Wharf Rat who wrote (1497)	8/5/2005 2:56:07 AM
From: Wharf Rat	Respond to of 24224

Peak Oil Jobs No.3 The eBay Seller Thursday, August 04, 2005 Ask somebody about pawnbrokers and they may think you were talking about dodgy dealers in sex movies. Ask them again about eBay and the look of familiarity will become apparent. The phenomenon of online auctions is one of the big success stories of the Internet era. Well, at least if you are a user or shareholder of eBay. With about 85% market dominance, internet users have voted with their money into turning eBay into a virtual monopoly. In fact, even pawnbrokers themselves speak of increased business in prosperous times according to the website of the National Pawnbrokers Association. Visiting their website reminded me of Peak Oil as the first sight to greet me was the latest prices for those major peak oil investments - gold and silver. So I felt quite at home amongst the digital brass balls. It has to be noted though that the basic business models of eBay and pawnbrokers differ in their approach, despite both dealing greatly in second hand goods. On eBay, you offer your used and new goods for cash via an online auction or a fixed price purchase ("Buy It Now") with eBay taking a combination of fees depending on the sale. The pawnbroker offers the customer up to 50% of the value of the item as a short term loan at a suitable rate of interest. The customer then has the option of reclaiming the item by repaying the loan. Since about 20% do not repay the loan, the pawnbroker recovers his costs by selling the item on the retail market. So, what is the Peak Oil prognosis for these differing dealers in second hand goods? Is that career as an eBay seller guaranteed or will that depression-era symbol of the brass balls be making a comeback to a street corner near you? There are several things you could say about Peak Oil and the flow of second hand goods. The long term economic contraction it causes will lead to a decrease in the quantity of their competitor - brand new goods. That will be because income will not have increased in line with the higher cost of producing and transporting such items. So, does economic privation increase demand for second-hand goods? The answer is a qualified yes because it depends what is in demand. Essential items in second-hand condition will see demand increase but items related to discretionary spending will vary. Moreover, there is a time factor involved. As the supply of brand-new goods falls, the supply of second-hand goods will come in to meet lower-price demand. At some point this will drop itself because there are less brand-new goods becoming second-hand goods. This will have two effects, the price of such second-hand goods will rise and where appropriate a rental market will emerge. For example, televisions used to be rented from shops as lower-income people didn't want the upfront costs and maintenance charges. The arrival of cheap, disposable televisions changed that and Peak Oil will change it back again. How does eBay and the pawnbroker fit into that scenario? Simply put, eBay will see its revenues fall like every other retail company in the post-peak oil era, but it will be mitigated by the influx of more second hand goods as people liquidate their assets. During that transition period, eBay had better change its business model before both flows of first-hand and second-hand goods decreases. Professional eBay sellers can forget their careers unless they can readily obtain to resell (or rent) second hand goods obtained from local sources. Simply put, inventories are going to drop and the least efficient sellers will go bust. Those that are relying on cheap, wholesale goods from China will be the first out of the door. Those that thrive on local car boot sales will have the survival advantage. What about the customer base? The common reason made against eBay beyond the oil peak is that costs will go up to mail items to buyers. That is true to some extent, but it will be a sliding scale as high weight and high volume items will take a proportionally higher hit. Note that high volume items need not be very heavy as carrier space is maximised in the high fuel price era. So, CDs, DVDs and baby clothes will prosper longer than heavy books or computers. The successful, future eBay seller will specialise in low volume, low weight items that help people forget about their Peak Oil woes. I guess used DVDs of "It's a wonderful life" are going to do well! This will also lead to a tendency for the "local pick-up" option to become more popular as buyers and sellers combine local driving tasks with picking up or dropping off eBay items. Will the increase of local buyers offset the loss of remote buyers for items with high delivery costs? For established big eBay items, probably not as the size of an international market will always outnumber the local market. However, we will also see new classes of items making it onto the local eBay market which we did not see before, such as furniture and larger electrical goods. But overall, the sales volume will be down as a whole. Meanwhile, the pawnbroker will see increased transactions but also higher loan defaults. He will also become a direct competitor with eBay as the local market takes on greater significance and more players enter it. The deciding factors will be whether the owner of an item wishes to sell it or borrow against it. Most likely they will sell their least emotional items first, but as things get worse, items of more sentimental value will be pawned rather than lost to the family. We can expect to see plenty of eBay sellers frequenting the cheaper goods found in pawnshops. Speaking of competition, I have noticed a proliferation of charity shops over the years as they resell the disposable items of this consumerist age. These shops will vaporise like the morning dew when the peak oil economics of second hand goods begins to hit. Indeed, charity shops have already complained that items originally intended for them end up on eBay. We can expect that trend to accelerate as people view their worldly goods as more valuable in an age of decreasing wealth. In conclusion, localisation is the keyword of the Peak Oil era. The eBay formula still has its advantages because a virtual shop is less energy intensive than a street shop, but the rubber still hits the road when real and increasingly expensive goods have to be delivered from A to B. Though eBay can still survive as a global entity due to its low energy costs, the raison d'etre for that will become increasingly irrelevant as diverse markets become unconnected markets. We can expect to see the e-shops that eBay has so carefully nurtured begin to grow within their local situations and take on lives of their own as sellers and renters of local goods. As they become less dependent on eBay for international customers, they will disengage and go it alone. The only way eBay can combat this is to enact a franchise scheme and rent out the brand name. The eBay seller will then continue to grow, but eBay will be in danger of becoming just a label that ends up in the pawnbroker's window of the world. newerainvestor.blogspot.com