posted on March 5, 2008 06:46:21 PM new
Something that has bothered me for a long time... is eBay's format of Reserve Auctions.
Traditional auctions I have been to don't bother to announce an item has a reserve. You bid it up, and if the last bid doesn't meet the reserve the item goes unsold.
Ebay on the other hand uses the red "Reserve Not Yet Met". As sellers, we know how a Reserve can scare off many bidders, even if it is a low reserve. They run from reserve auctions as if it was plagued with disease... until someone gets gutsy enough to give a real bid price higher than 99 cents.
This creates a few problems for sellers, but also for ebay. If ebay's goal is to make money from sellers who successfully sell an auction, then wouldn't it make sense to make reserve auctions unannounced?
I have done several auctions in the past. Example:
1) The first week will start with a 99 cent opening bid, reserve at $100.00, BIN at $150.00. Bids may trickle in, but usually no more than a few unless the item is highly sought after. As the auction approaches the end, bids often cease as people think the reserve is too high. Sometimes I sell it above reserve, sometimes not.
2) I list the item, start the bidding at say $49.99, no reserve, no buy it now. This guarantees my opening bid at $49.99 or it goes unsold. Auctions then seem to attract more bidders, though the $49.99 opening bid sometimes takes most of the term of auction to get a bid. Last day- the bids come in, and in the last few minutes possibly the auction hits well over the original Buy It Now.
3) Opening Bid starts at 99 cents, no reserve, no BIN... bidding frenzy begins, sometimes it jumps quickly, sometimes it trickles in, sometimes I get burned in the final price, sometimes I sell it for far more than my original BIN.
Wouldn't it make sense for eBay to eliminate the announced "Reserve Has Not Been Met" altogether? It just seems like more bidders would participate in the auction not knowing if there is a reserve or not. It would also save us from the "what is your reserve" questions. What is the difference to a bidder who bids and loses out to another bidder, vs. a bidder who bids and in the end finds out the seller has a reserve that wasn't met? either way, the same outcome happens... disappointment in losing. However, Ebay could give an option for the highest bidder to make a final offer to purchase the item if the reserve is not met... or to purchase the item for the reserve price within 12-24 hours or something like that.
Maybe I'm crazy, but it seems like this would spawn more bids, higher bids, and a much higher sell through rate for Reserve Auctions. It would also throw a bone to us sellers who feel we have been shunned or screwed by ebay's recent policies and fee changes.
[ edited by shagmidmod on Mar 5, 2008 06:51 PM ]
posted on March 5, 2008 08:02:24 PM new
In the early years of eBay, when I was a buyer, not seller, I almost abandoned the site entirely due to the excessive use of reserve prices. I'm glad that eBay makes potential buyers aware of reserve-price auctions, I'm surprised that eBay still permits them - IMHO they are a detriment to the community.
posted on March 6, 2008 04:33:01 AM new
I'm with Pixi on this. Online, there simply isn't a need for reserve auctions. The seller simply needs to start the auction at the price they are willing to take for the item.
Then it ends up being very much like the in person auction. If no one bids, it don't sell.
posted on March 6, 2008 05:34:43 AM new
Gosh Shaggy , most states have auction laws that require an auctioneer to announce if an item has a reserve before bidding starts.
Granted, many auctioneers ignore this law and just shill the bid to cover their reserve. No one else is the wiser because they thought the item sold to someone in the back of the room but getting caught in doing business in this matter can cause an auctioneer to lose their license.
On ebay, I have never seen the logic behind using a reserve listing. It costs as much to list with a reserve as it would cost to just start the listing at a price you feel comfortable accepting.
posted on March 6, 2008 07:00:54 AM new
The reason eBAy "can't do it right" is because their on-line auctions are NOT RUN THE SAME WAY AS LIVE AUCTIONS. In the real world, an auctioneer can move the sale along, and if they do not get a reasonable opening bid (in their opinion), pass the item and go on to the next. In my many, many years of attending live auctions, I have yet to see an auctioneer stand in front of an audience for seven days waiting for a 9.95 opening bid on an item.
There are many ways of selling things, and all can have their places because none of us are completely rational about our purchasing methods and decisions. And yes, that includes people who make pronouncements such as "I never bid if there is a reserve", "I never bid if the seller's name has an odd number of letters", etc. etc.
posted on March 6, 2008 07:41:09 AM new
What I meant to say was that in a live auction... the auctioneer announces there is a reserve, but you don't know if the reserve was met or not until the auction has ended. On ebay, you know the reserve was not met until it is met and then you never knew there was a reserve in the first place if you didn't see the auction when it read "reserve not met".
It used to make more sense to list auctions with a reserve rather than start the bidding at your reserve price because of the listing fees, particularly for higher priced items. If you sell high dollar items, reserves tend to be more common place and if you have regular buyers that are familiar with your reserves and the reserve is reasonable, you are more likely to meet your reserves regularly.
One day, I am going to have two similar items and list them together to experiment with bidder psychology. One I will list with a 99 cent opening bid with reserve and the other I will list with the opening bid equal to the reserve and see what happens. If I have a third item I should simply list that at a 99 cent opening bid with no reserve and let the bidders duke it out. It has to be the right item that will be popular enough to get bids on all 3 items... like an ipod that is all but guaranteed to sell.
posted on March 6, 2008 07:45:49 AM new
Shagmidmod,
If you ever get a chance to do that experiment, please let us know how it turns out. Most of the academic research (that I'm familiar with) indicates that option 3 will return the highest, but most of what I've seen has been done with low-cost items (lower value than an iPod).
posted on March 6, 2008 08:43:08 AM new
Of course eBay bidders would like .99 start, no reserve, free shipping. They would also like other bidders prohibited from bidding on items they are interested in. Unfortunately for them, it is not my responsibility to provide for their fantasy.
One reason I will miss the bidder identity showing is that it was often amusing to see what bidding activity people indulged in. Multiple miniscule bids on items that will clearly sell for a high price. And the fact that they never win an auction doesn't seem to influence their behavior.
But it is not just eBayers; the real world is like this as well.
posted on March 6, 2008 08:54:25 AM new
The following is an...
OFFICIAL RALPHIE J. DAWG CONTRARIAN VIEW:
RESERVE prices ARE necessary for a simple psychological reason:
If you have an EXPENSIVE item (just for EXAMPLE: $400), and you TRY to START the bidding at, say $399.99, chances are, very few bidders will even look, much less bid, on yer auction...TIS A SAD FACT, BUT A TRUE FACT...
HOWEVER, if you start that SAME auction at, say $74.99, with a RESERVE price of $399.99, you will get OODLES & OOODLES MORE LOOKS + BIDS!
TIS SAD FACT BUT A TRUE FACT...
WE rarely use RESERVE prices, but when we DO, we ALWAYS state the RESERVE PRICE right in the AUCTION DESCRIPTION, always remembering that the goal is to SELL the item, and not head-firetruck potential buyers...
VIRTUALLY ALL of our RESERVE auctions in the past have been siccessful...
posted on March 6, 2008 08:56:44 AM new
"WE rarely use RESERVE prices, but when we DO, we ALWAYS state the RESERVE PRICE right in the AUCTION DESCRIPTION"
posted on March 6, 2008 11:51:31 PM new
I can't beleive the big scary RESERVE AUCTION is once again(and again and again) a topic. It's allowed by ebay because it is a legitmate auction tool. It doesn't(or shouldn't ) make you bid any higher than you normally would. If you can't meet the reserve it simply means that someone else has placed a higher value on it than you did...EXACTLY like getting outbid! NO different.
Tom, as usual is right...high opening bids scare away bidders. However, if you have a high reserve then having a .99 opening bid on it is deceptive....my reserve auction opening bids are representative of the reserve which I never disclose...it's no one's business but mine.
posted on March 7, 2008 12:35:16 AM new
eBay auctions are sometimes much like a lottery or game of chance. Sometimes you win but most times you lose. However "the house" or casino (a.k.a. eBay) always wins!
Our strategy with high-value collectible items (of known market value) is to list them as a slightly discounted BIN with Best Offers. Sure we'll get stupid low ball offers but we often get realistic offers as the listing gets close to ending.
If we have several of the same collectible to move, we'll often post a 99¢ auction to gauge interest at that time of year and current market conditions. If it achieves a good price with strong bidding we'll send Second Chance offers or contact collectors on our mailing list to see if they want one.
posted on March 7, 2008 05:59:37 AM new
I totally agree with Shagmidmod and Mingotree. I have a question for others.
What is the difference between a reserve price and getting outbid? Or a reserve price and a high opening bid? Either way, you make a bid and win or lose.
posted on March 7, 2008 06:26:39 AM new
The difference is that when you are outbid, another bidder is "putting his money where his mouth is". This can more accurately helps set the price in the auction market place in the eyes of other bidders, probably because they feel the market was not interfered with. One reason for using an auction method of sale is for the competitive aspect; if bidders consider the reserve as another bidder they feel at a disadvantage, because if the reserve bidder "wins", i.e., item doesn't sell, there is minimal impact on seller. This is why many auction houses are careful about accepting reserve lots, and in some cases, if you consign an item with, for example, a 5000 reserve, and actual bidding only hits 2500, you will be charged a fee as if it sold at 2500.
posted on March 7, 2008 08:19:11 AM new
"if you consign an item with, for example, a 5000 reserve, and actual bidding only hits 2500, you will be charged a fee as if it sold at 2500"
That is close to what I offered to a consignor a few days ago. She has a set of china and stemware that she wants us to sell. I gave her an estimate range of $249-299 on the china set if we sell it in our store. That range is up to her. If I post it on ebay, I gave her an estimate auction price of $199-299. I also told I only charge to list items on ebay if they sell (I have rarely had this work against me). However, if she chooses to use a reserve, I will charge her $10.00 to place the reserve and won't list it if the reserve is higher than $250. I want a guaranteed sell, and want my consignors to know that I stand behind my estimates, but not if they think they can over value it and foot me with the bill and time.
posted on March 7, 2008 08:24:02 AM new
""The difference is that when you are outbid, another bidder is "putting his money where his mouth is". """
If I'm outbid I'm outbid....what do I care about other bidders????? Or marketplace values? Or the seller?
"""One reason for using an auction method of sale is for the competitive aspect; if bidders consider the reserve as another bidder they feel at a disadvantage, because if the reserve bidder "wins", i.e., item doesn't sell, there is minimal impact on seller. """
I just don't understand that statement.
"If bidders consider the reserve as another bidder they feel at a disadvantage"
So...they feel they should be the only bidder????
They feel they should get every item for .99 ?
They feel no one should have more money than they do???????
posted on March 7, 2008 08:50:52 AM new
"""""The difference is that when you are outbid, another bidder is "putting his money where his mouth is". """
If I'm outbid I'm outbid....what do I care about other bidders????? Or marketplace values? Or the seller?"""
If we are to accept this as a reasonable premise, then what is wrong with a seller participating in shill bidding? After all, you were willing to bid your maximum anyway, so what does it matter if the other bidder didn't exist or had no obligation or intent to pay?
posted on March 7, 2008 09:04:11 AM new
"""If we are to accept this as a reasonable premise, then what is wrong with a seller participating in shill bidding?"""
You're comparing apples and oranges.
Shill bidding is naughty! Reserve auctions are perfectly legal.
If I bid the highest I want to pay for something and that's what I win it for , no, I guess it doesn't matter if the other "bidders" were shill bidders since there's nothing I can do about it anyway. I probably wouldn't know it was shill bidding which is why THAT'S illegal.
posted on March 7, 2008 10:01:50 AM new
""I know shill bidding is illegal. But according to your reasoning, why should it be? """
Uh, because it's hidden...as opposed to a reserve auction where the seller says this is a reserve auction...meaning there's a fixed point at which they will or won't sell.
Personally, the more bidders are afraid of reserve auctions....the more I win !
posted on March 7, 2008 10:57:34 AM new
..Uh, because it's hidden.....
No, the reason it is not allowed in the auction world is that it is deceptive, in that the shill bidder is not actually entering into a contract the way the real bidders are. While the real bidders may not be forced to pay more than they are WILLING to pay, the shill bidder can ensure that they are paying more than they NEEDED to pay.
If you win an item at your maximum bid, and then find out the only competing bids had no intention of actually buying the item, you wouldn't feel a little bit put out?
Getting back to where this started, bidder (or any other consumer activity) is not always (or even often) totally rational. And the effect of reserves on eBay auctions is another example. Nothing wrong with reserves, high starting bids, etc., but the undeniable fact is that they often deter bidders. Maybe the solution is to get more rational bidders.
posted on March 7, 2008 11:08:43 AM new
This has to do with allaying the fears of those who are afraid of reserve auctions.
If you're going to pick nits....
Include the entire sentence....
"""Uh, because it's hidden (deceptive)...AS OPPOSED TO a reserve auction where the seller says this is a reserve auction"""
"""If you win an item at your maximum bid, and then find out the only competing bids had no intention of actually buying the item, you wouldn't feel a little bit put out?""""
THAT could be said about ANY auction....and what does it have to do with reserve auctions?
posted on March 7, 2008 12:34:49 PM new
""""and what does it have to do with reserve auctions?""""
Nothing, and I didn't mean to imply it did - perhaps I shouldn't have broken the paragraph.
I had originally worded my reply better, but hit backup and lost it, and left something out when I retyped. The bidding is not hidden in a shill auction; that is why it can be effective for sellers, since real bidders believe they are in an open and fair competition. The deception occurs because other bidders do not know that the shill is not under contract to buy the item. With reserves (or any other condition of sale), bidders know up front.
posted on March 8, 2008 03:03:53 PM new
If you have an item that is worth a certain amount of money and you are afraid there will only be one bidder or not enough interest to achieve your "goal" as calculated by your estimate of valuation, then you need to protect yourself by either using a reserve or starting the auction at an amount you can live with.
I personally prefer starting the auction at a higher amount. I don't need to play the game of bidders who know that the item is valuable trying to "steal" a valuable piece. If you like it and you want it and you can afford what it has sold for in the past, then be prepared to pay the starting appropriate price. I do not need a gaggle of interest and many bidders, just that my item sells for what I think it is worth based on past sales and my expertise.
Also, Ebay no longer refunds reserve fees if the item meets or exceeds the reserve.
