Evan Schuman's StorefrontBacktalk

eBay is pushing ahead with its local inventory search efforts. These include a deal with Intuit’s QuickBooks POS package to feed SMB retail inventory data directly into eBay’s engine with a plug-in, through eBay’s Milo acquisition. eBay seems to have opted to attack the easiest part of the local inventory problem, hoping that the exponentially harder part—getting tens of millions of small retailers to computerize their inventory in at least a semi-rational form—will somehow work itself out.

This is both good news and mediocre news. It’s good news in that major players are at least trying to tackle some of the toughest issues facing retailing today. (The other most challenging retail tech issue today—mastering social media content and marrying it with CRM data—is also being tackled this month, by Wal-Mart. Not unlike eBay’s pragmatic challenges with local inventory, Wal-Mart is discovering that there’s a reason social media data efforts are feared by so many in IT. It’s genuinely difficult stuff.)

The local inventory effort is also good news in that it will ultimately be solved by a series of baby steps, and eBay’s latest move certainly counts as a good one. But it’s bad news in that it points out the reason for the challenge. Unless someone wants to pay millions of small retailers large bribes to automate their inventory, many simply won’t. The people who make the “closed for inventory” signs have a good living ahead of them.

The reason is that many small local retailers do not believe—for good reason—that having their current inventory available on eBay, Google, Bing or Yahoo will bring in much additional revenue. If a huge percentage of retailers do indeed post their inventory, it will be a huge step forward and it will deliver a lot more revenue to the small retail community; consumers will begin to have confidence that such searches will be useful. But incrementally? These SMBs rely so heavily on local foot traffic (walk-ins) and community word-of-mouth, plus maybe some local media ads and signage, that eBay searches are simply not envisioned.

It’s the chicken-and-egg nightmare. The first retailers (and that might be the first few thousand retailers) are going to see virtually no immediate return on their investment. Yes, the fact that they have digitized their inventory will help them in non-sales ways, such as better supplier management. Still, that’s not the benefit they are being sold.

More chicken-and-egg. The efforts of many engines—beyond eBay’s Milo, Google Local and TheFind have been aggressive—can’t go far until the data is there. That data comes from two places: major chains and SMB retailers. The SMBs don’t have it and the major chains have been slow to post current live inventory data for anything much beyond their own sites. The problems of local-inventory search are well known, and the many improvements with the key local search inventory vendors can be meaningless. Indeed, recent real-time inventory blowups—such as what Best Buy experienced this month and Target’s problems from Black Friday—make the case quite well.

So why are SMB retailers so hesitant to computerize their inventories? What’s holding back Sally’s Seashell Emporium? It gets worse. Some SMB retailers—the ones most motivated to get visibility for what they sell—already have Web sites that list what they offer for sale, although usually not with a live inventory feed. There’s no special benefit to those retailers in maintaining a detailed, perfectly tuned inventory for eBay. The product mix rarely changes. And when it does, it changes incrementally.

Those retailers are the low-hanging fruit for eBay’s inventory idea and there’s even less benefit for them than for retailers that are less technically sophisticated. And those harder-to-reach retailers, the ones not currently available to search engines, are the ones least likely to have time and cash for creating and maintaining a live inventory system. Sure, they track their inventory—it gets counted in, it gets sold and, when the shelf is empty, it gets filled again. But unless there’s major slippage, keeping track of a few dozen of this item or that product down to the last unit just isn’t that useful.

When the choice is between reconciling what the database says and what’s actually in inventory, and either selling more products or getting more pressing work done (inventory will wait—suppliers and the tax man won’t), inventory will always fall to the bottom of the list. And once the database is out of sync with the actual product count, it’s useless.

Besides, spending money on data entry for a complex database doesn’t make much sense if a small-business owner can get even more useful inventory information by walking through the stock room and noticing which shelves and boxes are almost empty.

Despite all of this, eBay should be applauded. This process will take a lot of years and the changing of a lot of minds, but it has to start here. It might require serious investment from eBay and others to offer SMB retailers a financial incentive to automate. As CIO Confucius once said, “A trip of a 1,000 Web sites begins with a single SKU.” Or something like that.