EVERYONE knows the best place to bag a bargain is the Internet. Low overheads and next-to-nothing start-up costs mean e-commerce companies can beat their high street rivals almost every time.

Until recently the Internet was exclusively for new goods, particularly electronics and computer gear, but things are changing - and fast.

In 1997 a thirtysomething French-born computer programmer called Pierre Omidyar stepped nervously into a conference room somewhere in Silicon Valley, California.

Despite the air conditioned breeze, Omidyar was nervous. He was about to make a case for starting the world's biggest flea market, to be called Ebay. The men sitting listening were venture capitalists. If the idea was to work he needed their money.

Things didn't start well. When asked he confessed that he hadn't produced a PowerPoint presentation, in fact, he didn't even have a laptop.

Once one was found, he couldn't log on to his fledgling Ebay site because the company server had gone down (again).

Despite that near disastrous start Omidyar's presentation was still powerful enough to make those powerful men cough up $6.7m - the money he needed to make Ebay the powerhouse it is today.

Forget about Amazon (which, until very recently, had never made any money) Ebay is the world's most profitable dot com company. Last year it had 38 million customers and turned over $9.4 billion.

If the company continues growing at the same rate it will have raced ahead of big US retailers like JC Penney and Kmart within three more years.

The reasons for Ebay's success are so simple as to make one wonder why it took someone so long. It has no cost of goods (remember it's a giant on-line car boot sale), no inventory (all transactions are conducted peer-to-peer), hardly any marketing spend and the only real capital expenditure is making sure the servers are big enough not to break down.

For those who haven't logged on to the Ebay site let me explain.

The world's biggest flea market offers all the fun of a car boot sale without the bleary-eyed Sunday mornings, muddy fields and searching through piles of Trout & Fishing magazine to find what you're looking for.

What's more the range is truly enormous.

Video games, consoles, PC equipment, hi-fi, records, tapes, CDs, rare film memorabilia, comics, books, clothes - the list could take up the rest of this article and it still wouldn't be comprehensive. Famously someone once sold a Gulfstream jet via Ebay for $4.9m.

Ebay does police material that is bought and sold. Certain material (such as video game copying devices like the Doctor V64) are prohibited. Anyone found to be selling such material can be kicked out of the Ebay community.

Likewise the thousands of on-line buyers help police the service - rooting out sellers who fail to come up with the goods by leaving rude messages for everyone else to see. If things get really nasty Ebay has a safety arm which helps unhappy customers file serious complaints or even insurance claims.

The original site was set up by Omidyar who wanted to help his wife extend her collection of Pez candy dispensers (you know, the ones with a Mickey Mouse head that dispenses a sweet when a button is pressed).

Ebay now brings together more than 20 million buyers and sellers every month.

When you bid on an item that interests you it isn't from Ebay, but from a private individual using the Ebay service to advertise. The site simply hosts the auction.

If your bid succeeds then you have to send the seller their cash before they send you your item by return post. Some more experienced Ebayers offer a money-back guarantee if you aren't satisfied.

Sellers have to pay Ebay a commission that varies depending on the price of the articles they wish to advertise. It pays to check your facts before setting up an auction as most sellers build the Ebay cut into their reserve price for really expensive items. Buyers are expected to pay the postage costs over and above the price agreed at the end of an auction.

The system works well. I managed to buy a working vintage Roberts radio for less than twenty quid - a modern day replica would have cost me more than £100.

The item arrived well packed within three days of me sending off my cheque. As far as buying goes, Ebay is as simple as any other form of e-commerce and a lot more fun.

If you fancy a dabble why not surf along to www.ebay.co.uk and take a look for yourself?