What
is a Reserve Price Auction?
by
32bituse
When
a seller uses the reserve price option, they set a
reserve price, which is the lowest price at which
a seller is obligated to sell an item.
The seller specifies the reserve price when he or
she lists an item, which is an amount over the minimum
bid. Then when the auction begins, it will start at
the minimum bid amount that the seller also chooses.
During a Reserve Price Auction, a notice will be displayed
on the listing page next to the item's current price.
eBay will never disclose a seller's reserve price
to bidders. When a bidder's maximum bid is equal to
or greater than the reserve price, the item's current
price is raised to the reserve price. At this time,
the item information will indicate that the reserve
price has been met. The bidder is also notified that
his or her bid met the reserve.
Please note: Reserve Price Auctions are not available
for Dutch Auctions.
Reasons
why sellers use reserves -
There
are many possible motivations for setting a reserve
price on an auction, all are perfectly valid, but
some are not really in the best interest of making
the sale and promoting the trust of your potential
bidders. I will cover a few of what I consider the
more common reasons, and add more as I find them.
- The most basic reason - You need
to get at least a certain amount for your item,
but you want to set a lower opening price, in the
hopes of attracting more potential bidders to your
page
This is the father of all of the other reasons.
You will see that the following concepts are really
just more specific interpretations of this basic
idea.
- Your item may tend to attract only
a few bids, but you wish to set a low enough opening
bid to attract viewers to your auction. Some items
simply won't get lots of bids, and if an item MAY
only get one or two bids, then in order for the
seller to have a chance of achieving a reasonable
closing price, while still getting potential bidder
to come to the page, a reserve may be just the right
tool.
- You wish to protect yourself against
possible eBay outages, yet still put an opening
bid out that is low enough to attract potential
bidders to your page. eBay is not perfect... Sunday
nights (for example) have historically been a nightmare
of eBay downtime. If your item tends to attract
last minute bidders, then an eBay outage could cost
you LOTS of money at the closing moments. A reserve
can help protect you against that.
- You want to test the waters, and
see what your item will generate for a high bid,
so you set a REALLY high reserve, that will not
likely be met. Then you can relist, and presumably
use the information you gained to adjust your pricing
tactics. I personally consider this to be a "bad"
reason for using the reserve. It is this type of
reasoning, in my opinion that has generated the
most ill will against the reserve auction.
The problem (in my opinion) with using the reserve
as a research tool is that (again, in my opinion)
you learn NOTHING that you can use. Every day, the
dynamics change on eBay. The simple fact that you
had a "too high reserve" on your item at that listing
will affect your bids on the next listing. The people
who bid on your item last time had their own reasons
for bidding the amount they did, and the next time
you list it they may feel differently about it's
value, or they may have already bought elsewhere,
or they may be on vacation. The next time you list,
there may be 500 of the exact same item up for bid,
started at the exact same time, or there may be
none.
In my opinion, the only actual, consistent result
of using the reserve specifically for research,
is that a few more bidders look upon the reserve
with a more skeptical eye, next time they see one.
I guess another way of looking at it is that bidders
are here to buy stuff, and they could care less
what questions you want/need answered. I know I
would be less likely to go back to a seller, if
I felt s/he had used my time to conduct research.
I would probably be a little more sympathetic to
the idea of this kind of research, if I felt that
it served ANY positive purpose at all, but I just
cant bring myself to accept that there is any useful
data to be had from it.
An eBay widgit is worth exactly what it's final
bid is equal to at the second the auction closes,
and the dynamics that produced that value will never
hold true again. The same or similar value may be
achieved again, and often is, but the circumstances
that led to it will be different.
In MY opinion, the most basic purpose
of the reserve (regardless of your internal reasons
for using it) is to get bidders to your page.
Getting bidder to your page is really what eBay is all
about, from a sellers persepective. It is the first
step in selling your item, and as such, is rather key
to the whole process. The potential problem in getting
bidders to your page is that the average bidder (understandably)
has a desire to buy at the best price, all other factors
being equal (color, size, condition, etc). So, if your
item has a higher opening bid, because you have a certain
investment you wish to recover, or, more simply, you
just WANT to sell for at least $x.xx, then your item
will often go to the bottom of the list for potential
bidders to click on first. Conclusion - If bidders are
going to other auctions first, then that is that much
more potential that they will BID on those other auctions
first. Thus, your goal becomes "How do I get bidders
to MY page FIRST?", and, one possible answer is to use
the reserve.
The key to making the reserve work FOR you is to
use it responsibly. Be realistic in your pricing.
If an item tends to sell on eBay for $100.00, then
using a reserve of $120 for an equivalent item "because
that's how much you WANT" will work against you, especially
if you sell in a market that tends to have a smaller
bidder pool. People will quickly mark you down as
a seller to avoid, due to your unrealistic expectations.
don't use the reserve to "test the market". While
it may be tempting, you are hurting yourself in the
long run, because, again, people may avoid your auctions
in the future. Setting a reserve that is outside a
realistic window for what similar items tend to sell
for on eBay also adds to the conviction of bidders
who already don't like reserve price auctions.
Arguments against the reserve -
The following are reasons
I see and hear often from people who do not like reserve
price auctions.
Many people believe that if they see a
reserve on an auction that that automatically means
the seller has set the reserve at an amount equal to
the "retail price" of the item, or that they are using
the "test the waters" reason noted above. Well, the
fact is, yes, some sellers ARE doing just that. In my
opinion, however it is not in your best interest as
a bidder to just make that assumption, because you might
be cheating yourself out of a potentially good bargin,
for a good quality "whatever it is". Not all sellers
are irresponsible when using the reserve, and, in my
own experience, I have rarely bid on a reserve item
and not met the reserve, since, when I bid, I am responsible
about bidding the most I am willing to pay for an item,
and I very rarely try to get an item for an unreasonably
low price. Look at it this way, if an item tends to
sell for a certain amount on eBay, then, why shouldn't
the seller, within reason, be allowed to try to get
that amount (or near it)? The people who give this reason
for not liking reserve auctions are those who generally
wish ONLY to pay bargain basement prices for their widgits.
Note - there is NOTHING wrong with only wanting to get
something for a "steal", but just because "you" want
a bargain, it does not obligate "me" to take that risk.
If a steal is what you want, you will probably find
it... eventually... but don't fault "me" for wanting
to get a fair price for my stuff "now".
- "Reserves are a waste
of my valuable time..."
I feel rather strongly about this one,
so, my apologies in advance ... Time spent on eBay is
not "valuable time". If you are spending "valuable time"
bidding on eBay stuff, then you need to adjust your
priorities. Valuable time is the time you spend earning
money to put a roof over your head, clothes on your
back, and food at your table. Valuable time is what
you spend with your children, spouse, pets, friends...
A common ending to the above argument is "...bidding
over and over again to find the reserve." This
is not a flaw in the concept of the reserve. This reveals
a flaw in the BIDDER'S method of making bids. It is
not the fault of the "reserve" that the bidder is bidding
multiple times, since the same situation would hold
true if this person was bidding against another user's
proxy. As a bidder, you do not need to bid over and
over again for ANY reason. A better method of bidding,
which can actually save you money in the long run, is
to take some time and THINK about what the most you
would be willing to pay for the item, and then, only
once, bid that amount. If you make the reserve, fine,
if not, then move on.
- "Sellers are playing
games with me by using the reserve"
Well... yes, I suppose they are... But,
remember that YOU (the bidder) are playing games with
them, so, quite frankly, turnabout is fair play. The
game YOU are playing is that you KNOW what the darn
widgit is worth, but, in spite of that, if a seller
were to set the opening price for the auction at somewhere
near what the item is worth, then YOU put him at the
bottom of the list. That is YOUR game, and his game
is the reserve. Another
common misconception -
Another common misconception is that if a bidder bids
his MAX price and does not meet the sellers reserve,
then the seller "is asking too much". That is not
always a fair assessment. It is fair to say the seller
is asking more than that one bidder is willing to
pay, but that does NOT mean the seller is wrong in
his assessment of the items value.Many bidders do
not take into account that the item they are bidding
on may be (and, often is), worth more than they are
willing to pay... to someone else. Since the concept
of worth is very subjective, especially for items
that are no longer available from retail, this is
a difficult concept to defend, but, I believe that
it can be summed up by the following -
Just because you arent willing to pay more
than $x.xx for something, it does NOT automatically
mean that the item is not WORTH more than $x.xx, and,
again, the seller should be allowed the opportunity
to try and get what he/she thinks the item is worth.
The flip side of this coin is that if the seller consistently
finds his items not selling, due to reserves not met,
then there is clearly an educational need on the part
of the seller, and subsequent price adjustments should
follow.
"Solutions" to the reserve -
The only "solution" that I see
offered by those bidders who don't like reserve auctions
is "Just set the opening bid at the minimum you want
for the item"
This is not a true solution, since it does not take
into account a basic bidding psychology, that of the
"bargain hunter".
People tend to want a deal. This is not wrong or unethical,
it is simply a fact of life. As such, this fact will
tend to cause people to gravitate towards the lowest
price for something. If sellers could count on bidders
always being willing to bid up each item to it's greatest
potential price, then there would be no need for a reserve.
Since this does not happen, the average seller is faced
with three choices -
- Set a low opener and no reserve,
and pray for the bidders to come
- Set an opener at the minimum they
wish to get... and pray for the bidders to come
- Set a low opening bid, a reasonable
reserve, and at least get a good flow of potential
bidders to your page, while not risking a huge loss
if the bidder pool is not as active this week.
All three of those chioices have their
place in the eBay world, but, if you NEED to get a certain
amount before it is worth selling your item, then the
use of the reserve can be a valuable tool to protect
your interest, and, at the same time still get hits
on your auction page.
How to react when you see
a reserve auction -
One common reaction is to hit
the back button and go to the next auction. If that
is what you wish to do, that is your business, but I
would like to propose some alternative actions.
- READ the auction, and see if the
seller has stated the reserve price. This is not
uncommon, especially for those sellers using the
reserve just to protect against potential eBay outages.
- Email the seller and ASK the reserve.
It only takes a moment to do this, and it provides
you with an opportunity to guage the sellers response,
and see if you would like to do business with him.
- Simply place your bid... If you
think about it, just placing your bid will give
you an idea of whether or not his reserve agrees
with your opinion of the item's worth. IF you don't
meet the reserve, after bidding the max you are
willing to pay, just chalk it up to a disagreement
between you and the seller about how much the item
is worth, and move on. The added benefit of bidding
on a reserve auction, is that if you don't meet
the reserve, you are FREE to bid on other items,
without worrying whether or not someone will retract
a bid and leave you stuck winning more than one
of the same item.
The way I usually handle a reserve auction
is that I simply pretend that the reserve does not exist.
I read at the auction, research the seller, make a decision
on how much I am willing to pay for the item, and then,
as late as possible in the auction, I BID that amount.
If I win, fine, if not, fine. I move on. |
