Mom-and-Pops, All Grown Up

"The traditional pain-points that you see with [online sellers] very much mirror the pain-points of a traditional business," said Garriss, who runs an Internet-based shoe business, Gotham City Online. "I think there's a pretty big failure rate of businesses on eBay, but they don't account for them."

About 56 percent of all small businesses with employees fail within four years, according to the Small Business Administration. Comparable figures do not exist for Internet businesses, and eBay does not disclose failure rates of its sellers, but experts say success is as elusive online as offline.

"EBay makes it vastly easier to set up your business, but beyond that, normal business rules apply," said Bill Frischling, Canty's husband, who left his job at AOL in 2004 to join his wife at Dyscern. "And we've seen other businesses implode, ramping up to a point they couldn't manage."

One veteran online seller of movies and music, Glacier Bay DVD, staffed up rapidly after starting on eBay in April 2002. Within two years, it was selling $480,000 worth of goods at auction each month, according to founder Randy Smythe. But shortly after hitting its peak, Glacier Bay DVD fell into the red and eventually became "NARU" on eBay, meaning "not a registered user." Smythe said his business was squeezed by new competition and steady increases in eBay's listing fees.

"I didn't pay enough attention to what was going on," he said.

In order to survive without outside help, especially as eBay draws in many new sellers every year, veteran dealers say they must learn the art of serial reinvention -- a hallmark of many successful businesses. Success with online auctions often requires finding new ways to stay ahead of rivals and boost profits, altering inventory to match demand, say, or handling more volume while keeping costs down.

"You have to constantly look for new opportunities and new things," said Paul Dholakia, an associate professor at Rice University who studies user behavior on eBay.

Susan Gearing has repeatedly revamped her business. Before starting on eBay, she researched completed auctions for three months, mining the data for things people tended to look for. Not just "potholders," for example, but specifically "frog potholders," and "toile potholders." She started sewing potholders at a cost of about $1 a piece and auctioning them for prices ranging from $7 to $15. After discovering pillows sold for more, she switched to auctioning pillows and increased her monthly sales to $2,500 to $3,000. Next, she noted fabric could be sold in large volume at high margins -- roughly double its wholesale price -- so she ventured into that area. She also bought a machine that embroiders cloth, which helped her fetch even more at auction.

"You have to have the heart of an entrepreneur," Gearing said. "If you don't keep growing, you're dead."

The real efficiencies came after she and her husband selected software to help them manage their auctions, packages and postage, and Bill Gearing found a vendor to set up and maintain the Web site they started a year ago to provide another sales channel.

Automating processes has been even more challenging for Dyscern, a bigger business with bigger ambitions.

Initially, Canty herself fixed and tested each used gadget she sold and stood in line at the post office to mail shipments. As Dyscern added different kinds of electronics, it required new capabilities for fixing and testing. Digital cameras in particular were a challenge, because they were more complex and customers required more support, Canty said.