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The following article was written for GoTo Auctions (formerly known as AuctionRover). The rights have reverted to the author.
Setting the right starting price is a balancing act. And the factors involved depend on your style of selling.
If you are simply trying to get rid of the items:
-- to clear out space in the attic, or
-- to recycle merchandise that is no longer useful to you, and that you want to throw it out because it would be a waste,
then set the starting price at a penny and see what happens. As long as the buyer pays for shipping, you have nothing to lose but your time. And you've already made a commitment to yourself that this activity is worth your time.
If, on the other hand, you are a professional and sell many similar items at online auctions, you are likely to focus on the average end price rather than the end price for any single item. Your aim is to attract bids. Low starting prices help to get bidding started. And what you lose on one item may be picked up from higher end prices on other items. You'll lose some, and hopefully your win more. In this case, you should base your starting price on your direct personal experience -- check your records and experiment to find the optimal level. Also, take a good look at your counters, to see if the ratio of visitors to bidders varies with different starting prices.
If you are a regular, but not professional seller, your challenge is more difficult. You probably have limited inventory, so you can't experiment for weeks or months to arrive at an optimum starting price. You know that reserve prices greatly reduce the number of bids, so you'd prefer to avoid that route. But you know that your starting price may well end up being the selling price, so you have to be prepared for that eventuality. You may want to set a low starting price to encourage bids, but you can't afford to go so low that you'd feel awful if that's what the item actually sold for.
If you are in this kind of bind, you might want to try a couple of special programs at Amazon.com: First Bidder Discount and Take-It Price.
By offering a 10% discount to the first bidder, you encourage people who see your auction and are interested to hurry up and bid, rather than waiting and seeing. Of course, you could make offers of that kind in the description to your auctions at any auction site. But at Amazon buyers expect it and understand it without lengthy explanation -- it's a standard feature. And also, Amazon handles all the accounting and notifications for you automatically, and discounts your fees accordingly.
At Amazon, you can also set a Take-It Price. If anyone bids that amount -- which is posted with your auction listing -- the auction ends right there and you accept that selling price. Amazon suggests that you set the Take-It Price at a level that you think is the highest you could hope for. As long as the bidding stays lower than that point, the auction proceeds as normal. But the first person to bid that much wins, immediately. If there's some serious interest in your item and bidding approaches that point, chances are that someone will take the leap and snap up the item for that price, beating their competitors.
A few details to remember: you can't use Take-It Prices in Dutch Auctions; the Take-It Price has to be higher than the reserve price; and if you offer both First Bidder Discount and Take-It Price, first bidder receive no discount if they bid the Take-It Price.
In any case, you should consider the cut off points for insertion fees when setting starting prices. For instance, at eBay for a starting price of $.01 to $9.99 you pay .25; $10 to $24.99 you pay .50; $25 to 49.00 you pay $1; and $50 and up you pay 2.00. So never have a starting price of $10, $25 or $50 -- instead go with $9.99, $24.99 and $49.99. (Why throw money away? Even if it is just quarters, they add up fast if you run a lot of auctions.)
For unique items that you only have one of and that you believe have significant value, you may want set a reserve price. With a reserve price, you can set the starting price extremely low -- down to a penny -- and you still might not get many bidders. It's a gamble. Can you afford to sell the item for less? Can you afford to take the time to experiment with one reserve price and then another and another, and then maybe eventually dropping the reserve before the item eventually sells?
Remember that without a reserve, the starting price could be your ending price, so if you want to make a profit, you need to understand your costs. The total cost of an auction to you equals the cost of acquiring the item; plus the time and hassle of creating the auction, communicating with the winner, record keeping, and shipping; plus any auction fees.
It probably takes you a minimum of half an hour to do everything associated with a given auction, even if you are running a dozen similar auctions at the same time, with similar descriptions and shipping procedures that are routine for you. If the auction is unique, figure an hour. As a rule of thumb, don't pay yourself less than $10/hour. That means that for items that essentially cost you nothing (clearing out the attic), you should be aiming for an average sale price of no less than $5 per item. Adjust that estimate based on your actual experience, and try to arrive a starting prices that will get you at least that much on average.
To reduce your per unit costs, and hence enable you to have lower per-item starting prices and hence more successful auctions, consider grouping your items in lots. It will probably take you just as long to process and manage an auction for a lot of six as it would for a single item. Just be sure that you can provide a good clear image of all the items in the lot with a single reasonable size (easy to load) photo, and that all those items will fit conveniently in a standard size envelope or box.
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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