Friday, February 04, 2011

I believe

Well folks, it's no lie: eBay works. I've just sold three items over the past 72 hours, and in all three cases, the items were purchased at the Buy It Now price as opposed to the minimum bid.

This is further evidence for my theory that eBay isn't really an auction site at all: it doesn't work like a normal auction, and only superficially resembles a silent auction. In a normal English-style auction, bidding begins right away, and people have to lay down bids from the first moment the auctioneer starts crying the wares. On eBay, if an item is up for bidding for a period of seven days, what most potential buyers do is bide their time, waiting until the final hour of the final day to place a bid.

Either that, or they decide to forgo bidding altogether and just buy the item at its Buy It Now price, a fixed price that's substantially higher than the minimum bid. In my case, what this means is that (1) a $3 item has sold for $5; (2) a $5 item has sold for $7, and (3) a $15 item has sold for $24. While it would have been nice to see these items driven up to insane prices-- say, $500 each (ha ha!)-- through long and drawn-out bidding wars, the sad fact is that bidding wars can't happen on eBay because everyone waits until the last damn minute, precisely to avoid having the prices driven up.

There needs to be some sort of rule about this, but I can't imagine what it would be. The site has no right to twist anyone's arm: Bid, damn you! What sane person would shop at a place that didn't allow you to walk back out of the store without purchasing anything? That would be a bit like living in one of those countries where citizens are required to vote under penalty of law-- a scary prospect.

I keep hoping that some newer, better auction paradigm will come along. Wikipedia has a good list of different auction styles; perhaps some method more suited to online browsing can be found. In the meantime, though, I'm happy that eBay has proved to be a pretty good way to sell my wares. It's not working out so well with my proposed Skype courses (no nibbles as of yet), but that may have more to do with my poor marketing skills than with any eBay-related problems. For personal goods, though, it's been eye-opening to see just how many buyers are out there on eBay. So I guess I'll keep on selling.



Charles said...

Apologies for having dashed your dreams of an insane bidding war.

Although the idea of bidding doesn't really appeal to me too much, it seems that the only way to have actual bidding wars would be to replicate a live auction experience. The reason why people bid on items at auctions rather than waiting until the very end is because there is no set "end," per se. On eBay, everyone knows when the auction is going to end, so it doesn't really make any sense to bid early.

Since bidding in a live auction ends at the discretion of the auctioneer and not at some set time, if you want to have a chance at an item you need to bid early. There's no waiting until the very last second because no one knows exactly when that last second might be--and there could always be another second after that. If I am very shrewd and experienced, I may be able to judge by the flow of the bidding and the expression on the auctioneer's face that he is about to drop the gavel. So at the very last moment I place my bid. But all that does is start the flow again--the auctioneer is not going to continue his action and award the item to me, he's going to wait to see if someone else will make a higher bid.

In the end, while there is a certain strategy in terms of the timing of bidding at live auctions, it generally comes down to who is willing to spend the most money on a given item. You also have to keep in mind that live auctions generally feature more than one item, and bidders may war with each other in an attempt to get people to bid higher on certain items in order to have a better chance at other items.

Bottom line is that if you want to have a real auction, it needs to be mediated, and it probably also needs to be in real time to maintain a flow of bidding.

Just my two cents, at least.

(Out of curiosity, what happens if bidding on an item ends on eBay and there are no bids?)

Kevin Kim said...

Good points. It's enough to make me wonder whether it might be interesting to use some sort of chat-room format to simulate a live auction. Live online poker games are hosted worldwide 24/7, so why not auctions? There'd obviously have to be a rigorous screening and registration process to weed out the pranksters (an issue in itself, as we'd run up against privacy/phishing concerns), but I think such a format is feasible... and for all I know, it's in use already.

What happens to a bid-less item when time is up? The clock ticks down to zero and I receive a "We're sorry, but your item didn't sell; why not relist it?" email. EBay keeps the money from the listing fee, so even if I lose, they still win. And when I relist the item, there'll be another listing fee, so eBay wins yet again.

It seems that the key to succeeding at eBay is to sell regularly and often so that your earnings begin to significantly outstrip your losses from all the various fees. EBay charges both a listing fee (which can pile up if you decide to include special doodads in your listing, like subtitles or extra photos hosted on the eBay site) and a "final value" fee (if your item sells); PayPal takes roughly 6% of any given transaction, and you have to remember that part of the money in your PayPal account is actually for shipping, which the buyer paid for, so it doesn't really count as part of your earnings.

Example: I list an item for $35, plus $10 shipping. Because I've included a few extra features, my listing fee is 80 cents (the standard fee varies; it's usually 25-50 cents). The item sells, so the final value fee is $3.50 (10% of the sale). EBay charges me $4.30 for the item, piling that charge with any other charges there might be for other items I've sold on eBay; all those charges will be lumped together and debited from my PayPal account once per month.

Meanwhile, my $35 plus $10 shipping is sent to my PayPal account, but PayPal shaves off 6%, so I get only $42.30. I print a shipping label for $10, which is automatically deducted from PayPal, leaving me with $32.30 in PayPal and that shadowy $4.30 in the background, to be deducted later in the month. Total earnings for the $35 item I sold: $28.00.

If we look at this negatively, then it's disappointing in terms of anticipated income: I had wanted $35 for the item and got only $28. But more positively, if the item is something that had been sitting around for years, then it's almost as if I had gained $28 from nothing.

Kevin Kim said...

Correction: some listing fees can exceed a dollar. Which sucks.

Charles said...

Sucks about all the fees, but I suppose they have to make money somehow, right?

You know, this just occurred to me: in the interest of making eBay more like a live auction, what if the seller determined when the bidding would end? This would mimic a live auction in that you wouldn't have that bidding deadline. Getting that first bid might be a challenge on some items, but if buyers never know when the bidding will end, they will be more tempted to start the process. Once that first bid is up, others will be more tempted to get in a bid before the seller decides that he/she has gotten a good deal.

There is a problem with this, though: what if the seller just never closes the bidding, hoping to get a higher bid? One way to solve that would be to have a time limit, but it would be a certain amount of time with no bids after the last bid. However, once a new bid is placed, the clock renews. A time limit of anywhere from 24 to 72 hours sounds reasonable. The shorter the time limit, the more furious the bidding is likely to be.

This would be great, but unfortunately it's a bit of a losing proposition for eBay. Namely, listings would never just expire--you would keep listings up until you got at least one bid (otherwise we're back to the original scheme). So, I don't know if it would be logical for eBay to adopt such a system, but I think it would go a long way toward making the site more like a live auction than a last-minute clickfest.

Kevin Kim said...

EBay offers several different formats for buying and selling. You've gotten me curious about what those other formats are, so I'll have to check and see whether something like your idea is already in place. If not, I may submit it as a suggestion to them, with due credit to you, of course.

John said...

"That would be a bit like living in one of those countries where citizens are required to vote under penalty of law-- a scary prospect."

Yes, sort of like living in a country that compels you to buy health insurance whether you want it or not...

Kevin Kim said...

No argument from me on that point.

Charles said...

Well, do let us know what you find. I have absolutely zero interest in eBay itself, but I find the concepts and thought experiments fascinating.