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A 30-minute business idea in globalizing the many eBay sites around the world.

While it may not work for my bathroom sink on sale now in Paris, if you found items that were cheaper in one market than another and the shipping costs were low, you could safely bid in one country's ebay to sell in another.

This is something that you could automate for certain objects.

The idea was suggested by Mahesh Murthy at the SIME conference in Stockholm last week and I cannot see anything against it.

The only hinderance is if eBay started offering such a service.

12 Comments

The idea goes much beyond arbitration, actually. An intermediary system between auction markets is somewhat similar to the functioning of a stock market (with the difference that the goods traded are, unlike securities, typically not fungible)

The stock market operator – e.g. the NASDAQ — acts as the counterparty both to the seller and to the buyer. The seller of a share can be confident that, if he delivers the shares, NASDAQ will pay for them. The buyer can be confident that NASDAQ will deliver the shares bought if he makes the payment.

A price discovery mechanism makes public the going price for a particular share, the information being propagated e.g. by ECNs between separate markets like the AEX and NASDAQ.

This hints that an intermediary system could conceptually work, in principle, even between non-eBay auction markets — e.g. between Yahoo Auctions in Japan and eBay. The intermediary would act as the counterparty both to the seller and to the buyer, like an escrow service. Unlike a typical escrow service, however, the intermediary would have to assume the credit risk both from the seller's (non-delivery of the goods purchased) and from the buyer's sides (non-payment for the goods purchased).

Provided fairly reliable automated rating assessment and payment processing systems can be devised, there might indeed be scope for a well-capitalized intermediary to earn a decent (commission-based) financial return linking e.g. eBay's and Yahoo Auctions' currently disconnected pools of “liquidity”.
Furthermore, setting up such an intermediary themselves might even be a way for eBay to increase the market size/liquidity of a fledgling re-entry into the Japanese on-line auction market ;-)

Wow! If I understood the economic theory in that, I think you said it might work.

The problem is that on eBay, its hard to compare apples & apples. eBay is a flea market, and most items on it vary enough from the norm that it is difficult to easy distinguish betwen them. Remember when pranksters were selling X-Box boxes on eBay for $300???

The stock market is a standardized market. One share of a public company is a standard SKU for all intents and purposes.

I'd argue that Amazon is a better market for what you're talking about. Amazon requires that you use a UPC or ISBN to list numbers, so its alot easier to figure out what exactly you are buying or selling.

Its nice to see that my old friend Mahesh hasnt lost his penchant for coming up with creative ideas. But I still have my doubts.

Arbitrage is something that generally works best with huge volumes and wafer thin margins of cost saved.

Trading pork and oil futures across continents online, and arbitrage on those, goes on all the time, with "b2b" portals trading volumes reaching orders of magnitude more than eBay.

I dont know how that model would scale when someone is buying and selling in small quantities on ebay. Shipping and Handling costs, and customs duties, suddenly become very real when they involve shipping a kitchen sink from France to Japan .. or the latest electronic fad to hit the japanese toy stores getting shipped to Paris from Tokyo.

When you're arbitraging currency, oil or pork across continents, the stuff can stay just where it is, in bank vaults, tanks or pigpens .. the transaction is completely virtual, with the ownership passing back and forth to achieve cost advantages of a fraction of a cent on a dollar. No import duties. No shipping costs. Nothing.

It's pretty unlikely that on for small scale transactions anything like this would generate any pricing efficiencies, except perhaps for small collectibles with a rather arbitrary value.

If I want to order even something small like a package of tea or a CD or something, any cost savings by ordering from Asia would be eaten up. I only "save" money buying from abroad when I can order a pallet or container. If Alibaba.com is the application target rather than eBay, then maybe this would work out for a certain market segment, but then again, most companies don't publish their pricing on Alibaba until you've interacted with them.

I suppose a tool could be used for arranging consolidation of multiple shipments from one destination to another, but the customs clearance cost per waybill would still be pretty high.

erm.... you can already sell worldwide. Whenever I post something on eBay I select 'will post worldwide' that makes my auction show up on eBay globaly. I have just sold a classic Mac game to someone in Japan, I sold 3 cushions with Apple logo to someone in Spain, my GP32 to someone in Bulgaria and a Neo Geo game to an Italian.

The kind of arbitrage described above works ok when you're dealing with commodities. But a lot of the items traded on ebay aren't straightforward commodities. Second hand goods is a lot of it. You can't trade second hand stuff the same way you can trade T-bills or frozen orange juice options.

The other thing is that the margin eBay takes is quite large, especially if the item has to go through the system twice. For a physicial sale, the item would also have to be packed, palletized for shipping and inspected twice, so the whole economics go out the window pretty quick.

A system like Ebay generally knocks the intermediary out, unless the intermediary can add real value to the overall trade.

Hi Everyone. We are currently developing a service with the project name (although probably the service name) of Rakubay which was conceived in 2004 to do exactly what Mostly Vowels has described between Rakuten Ichiba and Ebay but we are now preparing the system to work with Yahoo Auctions. We did not plan to release information of our project yet, but hey, it looks like we are not in control of when a good idea decides that it wants to say hello to the world ;-) By the way we are putting together our technical/management team so if any body in this site would like to contribute to our project please post here. Who knows - Joi might like the idea of funding a project that got wings on his site. (And good old Thomas might want to publicise us in the IHT - only joking Thomas.)

As Gerard pointed out, you can already sell/search worldwide on ebay, although that is only one half of the equation. A good model of what such a service *should* look like is www.pricenoia.com which compares prices and shipping costs of items on amazon. But even they don't do import duties/taxes I think.

Thomas,

As has been pointed out, Ebay is already global. By tailoring your search string you can search and buy worldwide so the potential arbitrage is limited to the amount the premium people are willing to pay to make the transaction in a foreign currency and deal with international shipping.

There really is only one ebay database, not separate databases for each country (speaking about the data in the database here - certainly they must have the database replicated in different locations)

The larger arbitrage opportunity is between users who know about and feel comfortable using ebay and those that don't. I know of at least one person who buys Japanese antiques from the US on ebay and then ships them back to Japan to be sold in a store.

I think Gerard and Jack are right - there are lots of traders on eBay that are already doing this.

I know people who buy all sorts of antiques on international eBay sites and have them shipped back to the States to sell in their own very profitable shops.

I have seen lots of international sellers offering electronic goods - laptops, cameras, etc. - on eBay that are making most of their money by taking advantage of currency exchange rates between countries, e.g. offering new iPods sourced in the US to UK buyers. Even with the cost of shipping, it's still less than what people would have to pay for them in the UK.

I don't know the details of Mahesh Murty's idea, but from what I have seen, buying goods in one country to sell in another is currently a thriving business on eBay.

Boring. Been there done that, wasnt the first to do so back at the end of the 20th century either.

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