Photo: Miguel Vasconcellos / Orange County Register

The common perception of eBay, the humongous online auction site, is of Aunt Tillie selling her collection of '50s-era Avon bottles and Cousin Jose browsing for a bargain on a laptop computer. More than 5,000 of these folks came to eBay's convention in Anaheim this past June. But in the past year, major companies, like IBM and Sears, have become eBay devotees too. In fact, eBay expects its future growth to be driven not by mom and pop but by big corporations.

Entrepreneurs aren't the losers in this trend. They're the drivers.

In fact, the tale of Dealtree Inc. in Laguna Hills illustrates how entrepreneurs learn from failure and capitalize on gaps in the market that big business wouldn't bother with even if it could spot them.

It's a classic tale of find a need and fill it.

Flash back to February 2001, when Paul Fletcher and Garry Heath were laid off from Aliso Viejo Internet retailer Buy.com.

Like the mice in "Who Moved My Cheese," this pair didn't spend much time mourning their loss. They scurried after the next opportunity.

With experience in the computer industry, e-commerce and supply-chain management, they had already noticed a problem large manufacturers had unloading returned merchandise and obsolete inventory, Fletcher says.

Most manufacturers don't have staff to test returned products for defects, then repackage and resell it, he explains. And Americans don't want 2- to 3- year-old computers and software. The companies often sell it for 10 cents on the dollar in South America.

Why not sell it on eBay?

"E-commerce success is about driving traffic to your site. EBay has 50 million registered users," Fletcher says.

Dealtree isn't the only such eBay auction manager. Fletcher estimates he has 10 competitors.

EBay has 50,000 "PowerSellers," registered users with at least $1,000 in monthly sales, spokesman Kevin Pursglove says.

But most are still tiny operations. The phenomenon of big companies moving onto the auction site surfaced in 2001, he adds.

He ticks off the reasons: "EBay is too big a marketplace to ignore. It easier to use an existing site than start from scratch. It's a great way to reach a large audience at minimal cost and it's just an additional outlet for large retailers and manufacturers."

Easier said than done.

Fletcher estimates it takes about 30 minutes to check out one product, take and post a digital photo, write a compelling description and post it for sale on eBay. The only way to be profitable is to automate the process for large volumes of merchandise.

So Fletcher and Heath narrowed their focus to technology manufacturers that would have more than 800 units to unload every month or so.

"We're not interested in a one-time sale of 50 units," Fletcher says.

They launched the business with off-the-shelf software that could handle 200 auctions while they developed technology to handle thousands of auctions and shipments simultaneously that can expand as the business grows.

Instead of 10 cents on the dollar, Dealtree clients may get as much as 70 cents. Dealtree takes a 20 percent to 35 percent commission and pays all the eBay and credit-card processing fees and shipping.

Dealtree clients aren't too keen about telling the public that they're liquidating old inventory through eBay, but they're pleased with the higher payback and not having to ship carloads to Brazil. Buyers may get a bargain, too. Recent examples include Adobe Photoshop 6.0 for Windows, list price $529, with a bid of $150, and an Emachines desktop computer with 40-gigabyte hard drive, CD burner, Windows XP and 90-day guarantee, list price $769, with a bid of $202.

Dealtree gives a 30-day money-back guarantee and has reduced its returns from 5 percent to 1.5 percent of sales by providing technical assistance after the sale.

Flash forward to the present. Dealtree is shipping 7,000 units a month. Annual sales exceed $4 million.

The founders run a tight ship, mindful of Buy.com's multimillion-dollar losses that led to their layoff. They have modest offices in a warehouse. No Super Bowl commercials. No venture- capital deals. They'll add to the 12-person staff as profits allow.

Most important, Dealtree has been profitable since its first month.