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Riding on eBay's coat-tails

Updated Thursday 16th November 2006

Elizabeth Daniel explores the growth of a piggy back economy created as online businesses grow up that add an extra, personal touch to other companies' offerings.

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‘Making it Big on eBay’ illustrates how eBay is now being used by thousands of people, either to earn their living or to augment their earnings from elsewhere. It appears that they use eBay because it provides them with three opportunities:

  • a new route to market for an existing business
  • an opportunity to create a business that wouldn’t have been possible before
  • a host organisation on which to piggyback

A friend collects and trades military memorabilia, specialising in medals from the two World Wars. He – and his long suffering wife – spent many weekends with their thermos flasks in chilly village halls attending collectors’ fairs, both to search for and sell items.

eBay has provided them with a new route to market. They now spend their weekends in the comfort of their own home, but have still managed to increase the turnover of their small business. Part of this growth is trading with people from outside the UK who they never would have met via the collectors’ fairs.

"You’ll be surprised how many people you know are eBay entrepreneurs"

Meanwhile, a friend of a friend (if you ask around, you’ll be surprised how many people you know are eBay entrepreneurs) gets to spend her weekends doing what she does best: shopping. She spends her time at discount stores such as TK Maxx and Primark, buying heavily reduced items.

Buyers are infected by the ‘auction fever’ of eBay and pay higher prices for these items than they would if they bought them in the stores. The thrill of the auction is providing a new business opportunity for her.

However, it’s the third of the approaches that I find most intriguing – creating a business by piggybacking on the internet giant. Many companies provide services to other eBay users, for example some specialise in packaging products for those selling on the auction site. Others examples include the US chain iSold It, and its UK equivalent Auctioning4u, that offer to sell items on eBay for people who do not have the time or inclination to do it themselves.

Such businesses provide goods and services that only exist due to the presence of eBay. This has been described as the ‘piggyback economy’ and has been likened to remora fish, that survive by clinging on to the back of larger fish and turtles, or to the small birds that live by grooming larger mammals.

The piggyback economy has been estimated to be worth tens of millions of pounds, and isn't confined to eBay or internet businesses. In the offline world, Mike Ear (I understand you have to say it out loud) is a small business that buys, delivers and assembles Ikea furniture. It targets those of us who can’t face a trip to one of their stores or trying to make sense of their assembly instructions.

Like the examples from the animal world, the piggyback relationships are symbiotic rather than parasitical. In the case of Mike Ear, customers benefit as they get a more convenient and personal service than they can from the host company, Ikea. The piggyback company, Mike Ear, has low overheads and benefits from the brand of the host company. The host company, Ikea, benefits from increased sales.

The phenomenon of large organisations supporting a range of smaller organisations is not new. Large manufacturing firms were traditionally surrounded by small organisations supplying components or services.

"Failing to provide personal service allows a niche in the market for the smaller fish to fill"

What’s unique about the current piggybackers is that there’s often no need for geographic proximity with the host organisation. Also, more interestingly, they tend to be found operating between the host and the end customer, rather than as suppliers to the host. This suggests that despite the many benefits of large organisations, they’re failing to provide the personal service that consumers want, allowing a niche in the market for the smaller fish to fill.

Further reading

  • Making It Big on eBayThe Money Programme follows a group of British sellers bidding for success
  • What makes an entrepreneur? – Take a test to discover if you’ve got what it takes
  • Small Business Service
  • HM Revenue & Customs
  • The eBay Business Handbook: How Anyone can Build a Business and Make Money on eBay.co.uk by Robert Pugh, published by Harriman House Publishing
  • The Ebay Entrepreneur: The Definitive Guide for Starting Your Own E-Bay Trading Assistant Business by Christopher Matthew Spence, published by Kaplan Business
 

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