The New “Secondhand” Market

By Wagner, Cynthia G

Economics

The next new thing you buy may be old.

The “throwaway society” is transforming into a “sell-away society.” Consumers eager to part with their purchases after only a few uses increasingly are heading for eBay rather than the landfill, notes Web entrepreneur Daniel Nissanoff in his new book, Future Shop.

Temporary ownership has long been common among high-end automobile fanciers, who buy (or lease) the latest car model and then trade it in on a later model. And many thrifty young brides have found the gowns of their dreams in consignment shops rather than designer boutiques.

Now, thanks to the Web and what Nissanoff calls the “new auction culture,” secondhand buying and selling is becoming second nature. And the online auction giant eBay has become a global flea market.

One factor contributing to this accelerating buy-and-sell cycle is the diminishing durability of durable goods. Appliances once were built to last; now, they are built to last until the warranty runs out-or so it often seems. A less-cynical interpretation is that “new” really is improved. Nissanoff writes: “Who wants the old model to last forever when the new one is smaller, lighter, more capable, and better looking, has more features and provides a better experience overall?”

With a faster turnover from new to used, the secondhand car, dress, or baby buggy is newer than ever. This puts more high- quality products within the reach of budget buyers. When deciding to purchase something new or used, consumers should look at the cost of owning, says Nissanoff. For example, buying a new iPod for $350 versus a slightly used one for $225 means that you would be paying about $125 just to be the first owner.

Whether to clean out closets or find bargains, more consumers are turning to burgeoning secondhand markets online.

Ironically, this temporal attachment to stuff may make consumers less materialistic, Nissanoff believes: “Temporary ownership is an exciting new way of thinking about our connections to objects, a way of thinking that will empower us to enrich our lives by making purchases that we find more satisfying overall.”

PayPal was one of the first new businesses to capitalize on the democratization of capitalism that eBay launched. The PayPal system allows individuals to make secure electronic transactions with one another as easily as they would at a department store. This made the consumer-to-consumer marketplace of eBay much more tenable, says Nissanoff. EBay eventually purchased PayPal, which now generates nearly 30% of eBay’s revenues.

Just as rivals to eBay have jumped on the consumer auction bandwagon (e.g., uBid, Bidz.com, and the auction sites for Yahoo and Amazon), so have alternatives to PayPal emerged (Escrow.com, SquareTrade.com) to facilitate transactions between strangers.

Another opportunity in the secondhand market is the auction facilitator, also known as the dropshop. Because eBay allows buyers to rate sellers’ reliability, a seller with more experience and a better reputation will fetch a higher price than an inexperienced seller. So if you just want to sell the skis taking up space in the back of the garage, you’re more likely to get a good price if you take them to an eBay veteran whom buyers have already vetted.

Leasing rather than buying anything, whether new or secondhand, is another growing trend. Just as Blockbuster revolutionized the video rental business, Netflix made it one step simpler for customers to rent their favorite movies by eliminating due dates and letting subscribers return the movies by mail in prepaid envelopes. And Netflix increasingly has its own imitators in other product categories: You can now lease the latest designer handbag from a new company called Bag Borrow or Steal.

Other businesses will rise to serve the ancillary needs generated by these transactions. Among those Nissanoff cites are insurance companies to guarantee the products exchanged, personal services such as closet organizers and shopping assistants, storage and shipping companies, and restoration services to fix the stuff that isn’t quite up to sellable standards.

Nissanoff concludes that, “as we as consumers act to minimize the costs and maximize the benefits of our acquisitions, we’ll all live better and more cheaply than we did before-the simple result of a more efficient world.” -Cynthia G. Wagner

Source: Future Shop: How the New Auction Culture Will Revolutionize the Way We Buy, Sell, and Get the Things We Really Want by Daniel Nissanoff. Penguin Press. 2006. 246 pages. $24.95. Order online from www.wfs.org/bkshelf.htm.

Copyright World Future Society Mar/Apr 2006