eBay’s $75 million Milo buy: Another reason e-commerce is set to boom

E-commerce giant eBay is close to announcing it has purchased local shopping search engine Milo for $75 million, according to a report by Business Insider.

That report appears to confirm what a source familiar with eBay’s plans told VentureBeat. According to our source, eBay plans to spend $75 million on a startup that specializes in tracking inventory in local stores — Milo.com’s specialty.

While the price tag might seem disappointing in light of earlier hype about Milo, the purchase makes sense for eBay, which needs to rejuvenate its core marketplace business. Originally driven by auctions, eBay’s marketplace has lost its identity as it moved to fix-price listings and suffered from lackluster technology and design.

What eBay.com excelled at was moving units at the beginning and end of a product’s life: early on, when there’s scarcity — think Beanie Babies or the Nintendo Wii video-game console; and at the end, when it needs to be heavily discounted to be moved. It also continues to work well for one-of-a-kind items like collectibles. In short, eBay’s network of buyers and sellers works best when the marketplace needs to discover the right price.

But scarce or discounted goods are a tiny part of retailing. Think of those overpriced Nintendo Wiis: People were taking advantage of local shortages by buying regular-priced consoles where there was an excess, and then reselling them on eBay to people where local stores had run out of stock. That’s really a question of inventory.

Those profits could, in theory, be captured by the operators of local stores if they had a better way of linking up the real-time contents of their shelves with interested buyers — and eBay.com’s still-sizable audience combined with Milo’s technology might accomplish that.

In short, there’s a ton of commerce that has yet to feel the friction-removing touch of the Internet. And eBay’s rumored Milo purchase would just be a start.

Update: In an email, Milo founder Jack Abraham at first declined to comment on what he characterized as “rumors and speculation.” He then tweeted a confirmation. Well played, Abraham, well played.