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Why Let eBay Have All The Fun?

CAROUSEL - Democratic senatorial candidate, Attorney General Martha Coakley reacts at her primary election night victory event in Boston Tuesday, Dec. 8, 2009. Coakley is running to fill the Senate seat vacated by the late Sen. Edward Kennedy. (AP Photo/Elise Amendola)
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This column was written by Evan Schuman, the editor of StorefrontBacktalk, a site that tracks retail technology, e-commerce and security issues. Retail Realities appears every Friday. Evan can be reached at E-mail and on Twitter.

With the economy putting intense pressure on supplier costs-while also making lower cost merchandise highly attractive-Best Buy is quietly making a push into the secondary market, a strategy that is opening huge possibilities in its CRM analytics. Suddenly, a sold product starts the clock on when it can be profitably bought back.

"The product now doesn't disappear from your mind after it's sold. It actually just begins a different lifecycle," said Larissa Hall, the Best Buy general manager in charge of the consumer end of Best Buy's new venture. "Why let eBay have all the fun? You don't throw away a car when you're done with it. Even a broken DVD player is worth something."

Hall's operation is called Cow Boom, which Best Buy obtained through its late 2008 acquisition of DealTree. Hall said she expects Cow Boom to have about 100 employees, when it's done ramping up. Today, the unit has fewer than 30 dedicated employees, she said.

Best Buy is far from alone among major retailers exploring this space, with Amazon having recently started making official overtures. But Best Buy has some theoretical advantages over the E-Commerce giant.

First of all, there are more than 4,000 Best Buy stores globally (about 1,200 in the U.S.). "We have a presence in just about everyone's neighborhood," Hall said. "You can walk into a Best Buy with a box of stuff."
That, in theory, could address the huge hassle factor. Let's say some consumers know they have three old cell phones in the drawer, an out-of-date printer in the basement and the living room houses a fully functional DVD player (but they just made the switch to Blu-ray and no longer use it).

If the dollars are relatively minimal, many consumers won't bother to wrap up these items in old newspaper and bubble wrap (why make even fewer dollars because the DVD player acquires some new nicks in transit?) and wait in line at the Post Office, especially when they won't likely really know how much money they will get from the sale. After all, if the dollar value drops, the transaction may no longer be worth the effort.

There's also something unnerving about sending possessions out in the mail and then hoping that a check will somehow get back to you weeks later. There's a level of trust in the system that not everyone has.
The way Best Buy is envisioning this resale approach working, Hall said, is that consumers would simply bring in their used merchandise (having been purchased from anywhere) to a nearby Best Buy. No packing necessary. In the store, someone would evaluate the items and make an on-the-spot offer. If it's accepted, the consumer is issued an immediate store credit for the items and relieved of her junk. Within minutes, the used products are put into the Cow Boom system, en route to refurbishment (if necessary) and resale. Presto: A SKU is born. Or perhaps reborn.

This also isn't the first time that Best Buy is tried an unorthodox approach, including their move earlier this year to kick out Visa for some overly greedy contactless payment policies.

But the really interesting part is the IT potential. CRM would now profile not only customers but products, and then try and connect the two. On a product profile, that CRM data might include the point where it will likely be replaced and with what. It would factor in the item's resale value and at what point that price will fall and how quickly.

That pricing will also have to factor in the individual situation of each consumer. "There's a threshold that every person will have. How much is the effort worth?" Hall said. "At any given point, everyone is in the market for something."

By Evan Schuman
Special to CBSNews.com