The Four Types of Ebay Auctions
September 30th 2006 00:19
Ebay has four basic types of auctions, three of which date back to the beginning of Ebay.
First, your normal run-of-the-mill auction. The rules are pretty easy to understand. The seller sets a starting bid and then bids increase in increments. When you bid, you set a maximum bid, so any bidder who wants to outbid you has got to bid at least the increment above your maximum. Example: if the high bidder’s maximum on a baseball card is $10, with an increment of ten cents, I must bid at least $10.10. Also, if I set my maximum bid as $20, and no one bids above the $10.10, I will only pay the $10.10, because that’s the winning bid.
The second auction is what’s called a reserve auction. A reserve auction works just like a normal auction, except the seller has set an undisclosed price, below which he’s not required to sell the item. If I set a reserve of $50 and the highest bid I receive is $49.50, I don’t have to sell the item. Reserve auctions thrive on the psychology of an auction. The plan is to start out very low to get bidders and as your auction attracts bids the price will go up until you get your reserve price, or even better.
Reserve auctions are not popular. First, they’re annoying for bidder. If you’re smart and you’re bidding on something, you’re putting money aside you’re not going to use anywhere else to pay for it. So, you’ve got money tied up in an auction trying to hit (or come close enough to) a magical number and you don’t even know what it is.
For the seller, it’s a challenge because oftentimes they don’t hit their reserve, which will lead them either to re-list, or to take a lower price. My father ran a reserve auction for a couple music instruments and it took him around three auctions to sell them.
What’s reduced the number of reserve auctions? The “Buy It Now” option. It’s beneficial to both buyer and seller in several ways. If you click a “Buy It Now” option, you’ve just bought an item, without waiting for an auction to finish. You click the item, pay for it, and it’ll be shipped.
This is beneficial to the seller because he can simply ask what he wants without playing games. It also allows him to ship earlier. Ebay will also let them do a hybrid auction where there’s a “Buy It Now” price and a bid, so people can choose whether to take the sure fire deal or gamble in an auction.
For the buyer, it’s that simplicity of being able to shop for things they want and buy it, while also avoiding the competitive pressures of normal auction buying. It’s even good for Ebay, as they clear inventory faster.
The final type of auction is the Dutch (or Multiple Item) Auction. These are most common with collectibles . There’s a minimum bid and then you can bid for a quantity of an item at a price. So if you bid $5 for 8 items, you’ll end up paying $40 for the 8 items. The higher your bid, the more likely you are to succeed. If ten items are available and you bid seven dollars for three items and someone else bid six dollars for eight items, you’ll get your three items and the other person can take seven items, or decline to take the seven items as they didn’t get the quantity they bid for.
Now that we understand Ebay Auctions, next week we’ll turn to rules for surviving E-bay bidding.
First, your normal run-of-the-mill auction. The rules are pretty easy to understand. The seller sets a starting bid and then bids increase in increments. When you bid, you set a maximum bid, so any bidder who wants to outbid you has got to bid at least the increment above your maximum. Example: if the high bidder’s maximum on a baseball card is $10, with an increment of ten cents, I must bid at least $10.10. Also, if I set my maximum bid as $20, and no one bids above the $10.10, I will only pay the $10.10, because that’s the winning bid.
The second auction is what’s called a reserve auction. A reserve auction works just like a normal auction, except the seller has set an undisclosed price, below which he’s not required to sell the item. If I set a reserve of $50 and the highest bid I receive is $49.50, I don’t have to sell the item. Reserve auctions thrive on the psychology of an auction. The plan is to start out very low to get bidders and as your auction attracts bids the price will go up until you get your reserve price, or even better.
Reserve auctions are not popular. First, they’re annoying for bidder. If you’re smart and you’re bidding on something, you’re putting money aside you’re not going to use anywhere else to pay for it. So, you’ve got money tied up in an auction trying to hit (or come close enough to) a magical number and you don’t even know what it is.
For the seller, it’s a challenge because oftentimes they don’t hit their reserve, which will lead them either to re-list, or to take a lower price. My father ran a reserve auction for a couple music instruments and it took him around three auctions to sell them.
What’s reduced the number of reserve auctions? The “Buy It Now” option. It’s beneficial to both buyer and seller in several ways. If you click a “Buy It Now” option, you’ve just bought an item, without waiting for an auction to finish. You click the item, pay for it, and it’ll be shipped.
This is beneficial to the seller because he can simply ask what he wants without playing games. It also allows him to ship earlier. Ebay will also let them do a hybrid auction where there’s a “Buy It Now” price and a bid, so people can choose whether to take the sure fire deal or gamble in an auction.
For the buyer, it’s that simplicity of being able to shop for things they want and buy it, while also avoiding the competitive pressures of normal auction buying. It’s even good for Ebay, as they clear inventory faster.
The final type of auction is the Dutch (or Multiple Item) Auction. These are most common with collectibles . There’s a minimum bid and then you can bid for a quantity of an item at a price. So if you bid $5 for 8 items, you’ll end up paying $40 for the 8 items. The higher your bid, the more likely you are to succeed. If ten items are available and you bid seven dollars for three items and someone else bid six dollars for eight items, you’ll get your three items and the other person can take seven items, or decline to take the seven items as they didn’t get the quantity they bid for.
Now that we understand Ebay Auctions, next week we’ll turn to rules for surviving E-bay bidding.
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Comment by Sisi
P.S Great post dude, looking forward to your next one. I had no idea there were rules to survive eBay. I just go with the flow
Comment by AdamG
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