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Our eBay
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My seller's
profile at eBay (with all customer feedback)
The following article was written for GoTo Auctions (formerly known as AuctionRover). The rights have reverted to the author.
Remember the lemonade-stand game? It taught business basics. Lower your price and you increase demand. Then if you are in a position to fill that demand efficiently, the increased volume of sales could earn you more profit in the long run. But the rate of increase of demand varies. Sometimes a small difference in price might make a big difference in sales. Sometimes lowering the price just lowers your revenue. The object is to balance the variables that are under your control in order to maximize your profit.
You can think of online auctions as an immense game like that. If you have lots of similar merchandise to sell, you can experiment again and again with the variables -- starting price, time frame, messages in description, and use of photos -- to make your auction sales more profitable. Or you can use online auctions as a test market where you learn lessons that you then apply to offline sales.
By studying the results of other similar auctions that others have held, as well as through your own experiments, you can get a quick feel for demand, price, and effectiveness of marketing messages -- valuable information that is very difficult and costly to obtain by traditional methods.
Maybe you think your product should be worth $100. Post it at eBay with a starting price of $1-3 and see how high it goes. Do that not just once, but several weeks in a row, and modify your message, in response to the reactions you are getting. When communicating with buyers about details of payment and delivery, ask them what interested them and why.
Involvement in auction sales can also open your eyes to variables you might otherwise have overlooked. Imagine you had a box with 2000 old bottle caps, and you could see from records of past auctions that you could probably sell them for anywhere from 50 cents to $4 a piece at eBay. Could you do so profitably? In other words, could you streamline your procedures such that you could pay someone $10/hour to do the grunt work and still make a reasonable profit?
One factor is the packaging. Can you create batches of bottle caps that are intriguing to collectors so instead of selling them one at a time, you are selling them a dozen, two dozen, or even three dozen at a time?
Another factor is human interaction and the trust, knowledge, and relationships that can result. Can you interact with the collectors so they get to know and trust you and so you get to know what they are looking for and what they value most and hence what batches will work best?
Another factor is how you present your marketing information -- the words you choose for the description and the accompanying photos.
You can generalize those lessons beyond just bottlecaps or whatever else you might sell in quantity at online auctions. This is a laboratory, where you can learn not just the basics of business but also the dynamics of ecommerce, where -- by one mechanism or another -- dynamic pricing is likely to become the rule rather than the exception. Basically, auctions put large numbers of buyers and sellers in touch with one another and let supply-demand determine price. For commodity consumer goods, the buyer gets a good price and the merchandise moves quickly.
If you run a large business, have your managers clear out their attics and basements and start selling at online auctions, for the lessons they'll learn about business in general and about ecommerce in particular. Have them do this not just for a day, but rather for months -- periodically getting together to brag about their successes and share what they have learned. They are likely to learn the value of feedback and reputation and relationships, that feedback becomes the basis of your community reputation (your online "brand") and has an enormous effect on the number of bids you get and how high the prices go. They will learn that successful ecommerce is not about automated transactions. It is about relationships. And at the same time, they'll get a feel for how auctions work and the market-related information that's available there for free, and when and how to use auction-based experiments for market research.
Other auction articles by Richard Seltzer
Can we help you build an Internet business? Richard Seltzer is an independent Internet writer/speaker/consultant. Click here for details. or send email to seltzer@samizdat.com
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