Leveraging success

It's all about the search. The experience. The community. The click.

Michelle Lever manages a $2 billion toy business—a figure many find shocking, particularly given the fact that the entire U.S. toy industry registers only about $20 billion in sales. Lever is the toy category manager for eBay. So, does that mean eBay accounts for 10 percent of the toy business? Hardly.

“Usually, when I talk to toy folks [that figure is] pretty surprising to them,” Lever says. “A lot of eBay's business is in the trade of goods not at regular retail but at second hand.”

She notes about 60 percent of that $2 billion business is in collectibles. Another 25 percent is in what's usually considered hobby—particularly R/C and trains. “Then the [remaining] 15 percent is more comparable to the $20 billion traditional toy industry—kids' toys,” she says.

Even by that highly qualified, somewhat arguable standard, it still amounts to a $300 million business. And, it's fair to say that a substantially greater amount might be considered in the primary toy business, from the R/C segment alone—although admittedly most everyone's numbers start getting a little fuzzy at that point.

To be sure, eBay is not a retailer. It owns no inventory. It has no stores, at least in the traditional sense. The $2 billion is the gross value of the merchandise traded by third party sellers and buyers in which eBay acts as a trading platform for 181 million registered users worldwide.

With $4.6 billion in net revenues last year, the company registered a healthy 31.7 percent operating margin with quarterly year-over-year growth of 42 percent in revenues and 36 percent in profits. Net income was nearly $1.1 billion. It had cash on hand of $2.1 billion and no debt. Find another business with those kinds of ratios.

“People kind of think of eBay as, 'Wow, this guy in his garage sitting there collecting stuff—and there certainly are a ton of people doing that,” Lever says. “But there are also very sophisticated retailers and some folks who have land-based stores who sell parts of their merchandise online. And there are some folks who make a business of getting hold of hot products or products in short supply and making a profit on those on eBay. There are all sorts of different combinations of people and products being sold in the toys category.”

Since Lever joined eBay just over four years ago, and probably before, the company's growth rate has been double digit in toys, although the category is still considered mature and trails the company's growth overall. Continuing to drive the business and sustaining that growth is the challenge. The toy team's mission is to find new ways to enhance the buyer experience and cater to their needs. The team routinely looks to tag trends and watch merchandise assortments.

“We kept thinking to ourselves, how can we cater to folks who are shopping for kids' toys? Folks who might shop at a Toysrus.com, for example,” she says.

Their most recent initiative is the Toy Finder. Launched last October after only six months' planning, Toy Finder helps consumers navigate an array of first-line product.

And though it's not a retailer, eBay is still informed and guided by many traditional retail concepts. There are no shelves and there is no store but Lever and her team are still challenged to stay sharp and timely on assortments. Above all, they must consider their customer base. “We're always considering different consumer segments,” Lever explains. “What is an action figure buyer looking for versus a mom? How would they shop in other places for those products?” she says.

And, if access to data is a power point in retail, it is an overpowering force in eBay's business model. “We have data on sellers and buyers,” Lever explains. “The combination of the sell-side data and the buy-side data is very powerful, because you really have the whole picture—the whole retail cycle, if you will, in our data.”

The goal is to pull more people in, help them click through faster and more efficiently, and offer services to help buyers and sellers transact more effectively.

“We want to balance the needs of our current users while, at the same time, capturing new users with different needs,” she says.

Truly a toy industry veteran with experience on both the manufacturing, retail and dot-com sides of the business, Michelle Lever's background is particularly suited to her role as toy category manager at eBay.

After receiving her MBA from Thunderbird, the Garvin School of International Management, and a marketing stint with Royal Carribean Tours, Lever landed in Mexico City in the mid-'90s to work with Hasbro on preschool toys and bringing non-Hasbro products into Latin America. Two years later she was pulled away by Mattel, for brand management of boys' toys, and then joined its international business. After a spot at a small dot-com start-up, she jumped to Toysrus.com, where she became director of marketing until TRU opened its online office on the left coast. She stayed for two years until TRU corporate decided the dot-com business was better outsourced—to Amazon.com. “That really changed the nature of the business,” Lever says, “And that's when I went to join eBay.”

eBay's style is to routinely cross-train its executives, so when Jim Migdal, the former toy category manager was rotated to another project, Lever stepped into his spot, guiding a toy business that grows bigger every day.