Anyone who has ever sold a product on eBay understands that eBay customers expect a ton (and rightfully so, by the way).  We live in a world of instant gratification, and, thus, most buyers want the right product to arrive quickly so they can move on with their lives.  In addition, every eBay buyer I have come across is worried about being "ripped off," "scammed, " or otherwise taken advantage of.  Interestingly enough, however, is that in my experience, those demands and fears actually help me as a seller, propelling me forward into "good behaviors."  John Nash would be proud.  Seriously.

Let me start by explaining that the only reason we (Meranda Sign Supplies) got into the eBay marketplace was to lower our average cost per unit.  In other words, we were selling our product at cost in an effort to spread our fixed costs over more units.  Doing that would increase margins at retail and provide a safety net against the inevitable seasonal cycles of the sign supply business.  And to make it perfectly clear, we put almost no effort into analyzing the target market, estimating demand, stabilizing our supply chain, etc.  We learned those lessons the hard way.

Now, back to those "good behaviors" we were forced into.  Take a customer's desire for "the right product to arrive quickly" as an example.  When I first started listing in 2008, I was blown away by an overwhelming rush of "have you shipped my product yet?" emails.  Even worse, though, was when I received poor feedback because it took more than 48 hours to box and ship an order (72 hours was our retail standard).  My frustration caused me to leave the eBay "scene" for a few months in order to devise a better strategy, one which became: "deliver value quickly and get out of the way."  To do that, we had to:

1. Develop a sustainable supply chain and intimate relationships with our supply base.  We gave our suppliers access to demand numbers (order volumes, not sales figures) so they could see the pace of our customer pull.  In doing this, they alerted us to several cycles in our order behavior that were actually counter-acting what the customer wanted.
2. Increase the number of inventory turns.  eBay customers buy at a franetic pace, and it got to the point where we were turning inventory every three weeks during the summertime.  This, of course, reduced the square footage required to store inventory and improved our return on equity by 23%!
3. Begin to analyze customer demand.  Our forecast for total volume was excellent, but we couldn't seem to get the mix right.  We worked with a couple of University of Florida professors before we got this one right, but man, has it paid off!  No more bullwhip affect.
   

So, as you can see, meeting customer expectation has led our business to higher profitability.  All three of the principles stated above have their origins in LEAN, but for some reason, we couldn't connect the dots before this eBay experience. 

eBay is microeconomics in action!  If you don't beleive me, give it a shot for yourself.  Efficient markets force the business within them to operate smoothly (or die).  We're hoping to the former.