eBay, which has become one of the darlings of Wall Street as investors flock to Internet-based companies, has a market value of close to $26 billion. Founded in 1995, the company specializes in sales of lower-priced collectibles and mass-market items in more than 1,500 categories, such as toys, dolls, novelties, coins, stamps and glassware. The eBay Web site, which has more than 2.1 million registered users, relies mostly on sellers' descriptions of their goods and photographs -- a practice that leaves it vulnerable to incidents of fraud.
In contrast, Butterfield & Butterfield, founded in 1865, runs traditional auctions and has a team of more than 50 specialists who can authenticate and appraise items in areas such as fine art, furniture, decorative art, books and jewelry. Wine represented about $5.5 million of its sales last year. The privately held firm had planned its own initial public stock offering, which would have valued the company between $62 million and $75 million, but has cancelled due to the eBay deal.
eBay officials hope that the purchase of a well-established auction house will boost the company's credibility as it expands into sales of items in the $500 to $5,000 range. The Web site can capitalize on Butterfield's experts and its relationships with dealers, auction houses and buyers throughout the world. The move comes at a time when Sotheby's and Christies -- the two largest auction houses in the United States -- have announced they will be running online auctions. In addition, Amazon.com, the giant Internet-based bookseller, has entered the online auction arena.
"A number of things will unravel over next few days as to how they are intending to incorporate cyber-auctions into our traditional model of sales," said Levi Morgan, a spokesman for Butterfield. He pointed out that the auction house has previously been involved in simulcast auctions, in which bidders can go to the nearest venue and participate in an auction in another city. "In theory, we could be incorporating online bidding into some of those sales."
The two companies have not yet unveiled any plans for wine sales -- an area full of complications due to the myriad of state laws pertaining to the shipping and sale of alcoholic beverages. Sotheby's and Christies, which are big players in the field of fine wine auctions, have not proceeded with any plans for online wine sales.
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