General auction/Ebay question

I'm the first to admit sometimes I'm a bit slow or I can't see the obvious; "takes some people longer".

Generally in auction theory which also applies to Ebay listings, what is the purpose of the invisible "Reserve"? I understand a seller wanting to set a reserve to ensure that an item sells for at least what the seller would want to get for the item, but how is that different than a seller setting a minimum bid that all can see?

I'm watching a non-razor related Ebay auction listing. The retail value of this item is well over $2,000. There has been low bid after low bid and with 4 days left, the top bid is at approx $725 and........the reserve is not met. But, no one but the seller has any idea what the reserve is. That's the part I don't understand. Is this done in the off chance that a bidder is curious enough to continue to bid just to see what the dang minimum is whereas otherwise no one would probably bid that high and the item wouldn't sell? From a buyer's perspective, just tell me the minimum you'd take for it and if that's higher than I'd pay, I wouldn't bid and wouldn't waste your time or mine.

As you can see, I'm confused.

Chris L

I've wondered the same thing. Some sellers will even mention in the description that they won't tell you what the reserve is so don't even ask. What really amuses me is the sellers who post,"Serious bidders only" as if they could somehow enforce that. :)

Chris

You can always use the contact seller option and see if the seller will tell you the reserve. Some will and some won't for some reason.
The idea behind not starting the auction with the reserve price is that it can run off potential buyers so they just set the price low to attract bidders and set the reserve.
What it comes right down to above those reasons is some sellers just aren't very bright when it comes to dealing with buyers! In fact I've seen the same razor up for over two months straight and it still hasn't sold because it's to high whatever his reserve is.

Whew, I'm not the only one then. Thanks Jimmy.

It'd be different if it was a poker game and we'd be keeping our hands to ourselves, but generally I don't like playing games when it comes to money.

Chris L

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Originally Posted by Gunner777

Chris

You can always use the contact seller option and see if the seller will tell you the reserve. Some will and some won't for some reason.
The idea behind not starting the auction with the reserve price is that it can run off potential buyers so they just set the price low to attract bidders and set the reserve.
What it comes right down to above those reasons is some sellers just aren't very bright when it comes to dealing with buyers!

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I guess I didn't see this auction from the very beginning so I didn't know whether the seller set a starting bid at maybe $100 but yet maybe his invisible reserve is $1,500? I see what you're saying as to the possible logic for those who use it. It still seems like game playing to me but again, maybe I'm not understanding it from a seller's perspective since I'd be a potential buyer in this auction.

Chris L

Lately on high dollar items, bicycles and such, I've used the fixed price auction with the buy it now at more than I want along with the best offer feature. You can set the best offer to automatically decline bids below your minimum or automatically accept at or above your minimum acceptable price.

You know the buy it know option is something I like. Simple and straight forward but I think greed gets in there and some sellers think a bidding war will start and they can make a killing.

I like the BIN both as a buyer and as a seller. What do you mean about a bidding war though? With BIN if one person goes for it, it's done.

Chris L

When I was a kid, I used to go the monthly "horse and tack" auction in the next county over.

They did the same thing there. People would be selling a saddle, or a horse, or whatever else, and the bidding would start at nothing, but they'd have a reserve price set.

I actually talked tot he auctioneer once about it. He said that the reason behind it, is that let's say you have a saddle that you want to sell for not less than $300. If you start the bidding at $300, people will think hard about whether or not they want to bid.

However, if you start the bidding at $15, everybody will bid. People will get into little bidding wars, and frequently you'll end up making WAY more off the auction than you ever would have starting at $300.


Ebay used to be just like that. When I first started buying and selling on ebay, people didn't trust the auto bid system so they'd manually get into little bidding wars, and it was great fun. Sadly, in the last few years it's gotten to the point where winning an auction is rarely about who is willing to pay the most, but frequently about who can get their bid in with the fewest seconds left in the auction.

Thanks for that info, Steve. See I could see that angle for a live auction; I've been to a few myself. A good auctioneer tries to whip up the energy of the crowd, always building on the increased waves of bidding fervor. It's in real time and there's an immediacy and energy the auctioneer can use to the betterment of the seller.

For a seven day Ebay auction, IMO as a buyer an invisible reserve is an irritation.

BTW, in my area, rural Minnesota, auctions happen all the time including real estate auctions. Unless it's an "absolute auction" meaning, no matter what, the property will be sold that day at auction (essentially a property auction with no reserve), you get the same outcomes as a lot of these really high invisible reserve Ebay auctions. No one meets the reserve and in the end it's a big waste of time for the potential buyers AND the seller. It happens more often than not right now where I live. The bad economy probably has something to do with it. I think property sellers could do better at the auctions I speak of if they came right out with a minimum bid.

Chris L

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Originally Posted by ChrisL

For a seven day Ebay auction, IMO as a buyer an invisible reserve is an irritation.

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With the way auctions are done on ebay these days, I agree with you 99%. However, when ebay was still a relatively new thing, people treated it a lot more like they treat live auctions.

The reason I say 99%, is that a very low starting bid still get's your listing into a few more people's watch lists.

Very true they were closer to a real auction. The big problem now is the competing sniping programs which I think reduces what an item will sell for. Good for the buyer bad for a seller.
As far as bidding wars they still happen. That last 20 minutes or so and two people go at it bidding time after time. Not a very smart way to win and get a good price but they still do it fairly often.
I don't remember the razor but a few months ago there was one of those and the ending bid was almost $2000 I kid you not!!!

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Originally Posted by Gunner777

I don't remember the razor but a few months ago there was one of those and the ending bid was almost $2000 I kid you not!!!

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What stinks, is that even that doesn't help the seller, because most of the time some idiot posts a ridiculous snipe bid and ends up winning and auction for 10 times what it's worth because somebody else did the same thing, they end up not paying and the thing just get's relisted.

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Originally Posted by VeeDubb65

Sadly, in the last few years it's gotten to the point where winning an auction is rarely about who is willing to pay the most, but frequently about who can get their bid in with the fewest seconds left in the auction.

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All sniping does is to convert every auction into a blind auction. The highest bidder always wins.

Back on topic, I've seen auctions with hidden reserves, but the reserve value is buried in the description text. A very odd tactic. :thinking:

There could be some value to it I think.
I did a reserver price listing few months ago. It was a very nice razor and I didn't want to sell it for less than a given amount, but in case I didn't end up selling it I wanted to know what the ebay market things the value for that razor is.
I got 5-6 bidders (I think mostly members) and at the end it sold for the reserve price, everybody else stopped at about 10% less.

Also if somebody comes close enough to my reserve I could change my mind and take just a bit less for it.

But yes it is mostly playing games.

That's right they get caught up in the moment then don't pay when the price goes way high. EBay isn't the fun place it started out as.

Short answer: Its cheaper to put a reserve than a large starting bid. Or at least it was, and if its not still cheaper, then old habits die hard.

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Originally Posted by ChrisL

No one meets the reserve and in the end it's a big waste of time for the potential buyers AND the seller.
Chris L

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But if they weren't willing to pay the reserve anyway, it still wouldn't have sold. Having a reserve also forces the buyer to put in their absolute maximum bid or else not meet the reserve. Sometimes the max is larger than the reserve and the reserve was pointless. Other times, no one *that week* saw the item and didn't bid. Sometimes the seller is just crazy and theres no use worrying about those crazy cooks. Sometimes the buyer is willing to pay just above the reserve and no one else is, so the buyer gets it and the seller gets his minimum bid.

In the end, the buyer is either going to meet the minimum bid and win the item, or he/she is not and the item will not sell. The advantage of a reserve price on ebay is twofold. And I'm a little surprised some of you don't know this.

1) MOST IMPORTANTLY, ebay used to give the seller back the reserve price fee. Yes, it is/was actually cheaper to set a reserve rather than put up a minimum bid.

2) It may start a bidding war.

But #1 is probably the reason most sellers do it. Pretty sure the policy is still active. You save a few bucks per $100 or so.

It's all psychological just as VeeDub says about his horse auctions.

If you have a retail $2000 item that you want $1500 for, and say that $1500 is on the high side of a fair price, people will just pass on it. Everyone wants a deal. Knowing up front what the price is turns people off. The same reason people try to use ebay in the first place to buy everything vice just buying it new from a vendor. Hoping to get a deal.

If you start such an item at $0.99, you'll get a couple bids of a few hundred bucks, wishful thinking, driving the price into a territory that sounds like a good deal. Then, the next guy might say "geez, I WOULD pay $1500, so I'll put in $1500 max bid, but I sure hope it goes for less so I get a good deal" The same guy would have seen a $1500 starting bid and probably said, nah, forget it, that's no deal.

A low starting price sems to attract more bidders than starting at the minumum you "hope" to get. On most things I just set a low start knowing the final sale will be at an acceptable number.

On some high value items, say something I really would want $200/$300 for I may start at $75 t0 $90 but set a reserve at the minumum I would commit to sell at, say $225. The auction may end with that reserve being met, if not I am not obligated to sell but I always have the option of a 'second chance" offer in case I'm willing to take whatever the high bid is. This is for items I would like to sell but if they don't it is no big deal.

With bidding many guys would never throw out the $200 opening bid to win that same item, but may easily go over $200 if it started at a low $99 instead and they thought they might win for less.

Usually though when I list on ebay I'm putting 6 or 8 things up and really would be happy selling half of them so price them at what I want, rather than at what I am positive they will sell for.

Tony

The one thing that has been implemented by PayPal/EBay is this holding funds to the seller for up to thirty days if you haven't sold at least 100 items.
You sell an item and are expected to send it to the buyer and wait for your money until the buyer leaves positive feedback or thirty days passes. Now we all know what's going on the longer EBay/PayPal holds our money the more interest they make on the banked funds. It's a real racket!

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Originally Posted by JimmyHAD

What really amuses me is the sellers who post,"Serious bidders only" as if they could somehow enforce that. :)

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I try not to smile when I bid on those. If I catch myself smiling, I log out, sign back in and try to make it through with a straight face.

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Originally Posted by Pyment

I try not to smile when I bid on those. If I catch myself smiling, I log out, sign back in and try to make it through with a straight face.

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LOL. Luckily your post didn't require serious posters only, otherwise I would have had to log back on, reread your post and try to respond without laughing while typing :rofl2:

Well after hearing why sellers set reserves I'm curious enough about it that I'm going to try an experiment and utilize a reserve on some current and upcoming Ebay listings. I'm curious to see how such a practice would impact a listing vs. a listing that would have a minimum bid.

Chris L

Chris one thing I do know is that a high reserve that people can see will kill an auction!

That makes sense to me. We all want a deal. That's the truth!

Chris L

Chris send email to seller and ask about reserve most of them will let you know what is it. some actually wright at the end of the listing how much reserve is.

There are two issues with ebay:
1. As far as I know, If I put in a max of $50, and the reserve is $40, but someone else only goes up to $10, I won't hit the reserve ever will I cus autobid would only put me at $10.50. I've never been in a situation where I could afford the reserve so I dunno if ebay's software accounts for this.
2. In a live auction, the auction ends x seconds after the last bid, not at a certain time. So if I REALLY wanted something, and I said $50, then someone said $51, and I was like of course I can manage $52! I would have an opportunity to do that. So yes I see why it helps with gambling, but if two people put in max's a dollar apart (or even a penny- bidding $20.01 instead of $20), its unfair. My .02.

I've actually seen an auction site that does this. It extends the auction a minute after each bid, up to an hour, to take care of snipers.

One advantage to the hidden reserve process may be this.
Let's say I'm a seller and I have an item up for auction. I'm not really sure of its value, but I'm positive it's not worth $5000. So I set that as my hidden reserve price. The auction runs out and I notice four or five bidders hovering around the $1500 point. Now that I have a good idea of the market value, I can relist the item with a visible reserve of say $1450 and possibly get an above market price for the item. Just a thought.

Edit: This just occured to me. After the first auction times out, I as the seller have the opportunity to research the top few bidders. Are three of the four bidding/buying similar items like crazy? Are they buying them and then relisting them at higher prices? Are the refurbishing them first? Is one or more of the buyers (based on his or her bids on similar items) kinda clueless about the item I'm selling? There may be other reasons that I'm missing here.

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Originally Posted by Tolduonce

One advantage to the hidden reserve process may be this.
Let's say I'm a seller and I have an item up for auction. I'm not really sure of its value, but I'm positive it's not worth $5000. So I set that as my hidden reserve price. The auction runs out and I notice four or five bidders hovering around the $1500 point. Now that I have a good idea of the market value, I can relist the item with a visible reserve of say $1450 and possibly get an above market price for the item. Just a thought.

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This is a good point. Ebay also allows for "second chance" where the seller has the option to sell the item below reserve to the highest bidder as a private buy it now for the high bid price after the auction ends.