Welcome to the Jungle: The Two Sides of eBay (Part II)

By Frank Fortunato | Posted January 26, 2005

In Part I of Welcome to the Jungle: The Two Sides of eBay, we examined the scope of eBay's market dominance and the realities of running a business on the auction giant's site. This week, we delve deeper into pricing your items to sell, the bidding process, the importance of positive feedback and payment processing.

eBay founder Pierre Omidyar started the site as a means to sell his Pez dispenser collection online. Today, collectibles remain the most popular top-level category on eBay, accounting for 17 percent of all items offered, according to the Auction Software Review.

However, Clothing and Entertainment follow at 11 percent each, with Sports, Home, Jewelry and Watches, Computer and Electronics, Toys and Hobbies and Books all coming in at five percent or higher — much of it new, non-collectible merchandise.

Bear in mind, we're talking percentages of a very large pie. For instance, "Business and Industrial" items garner just one percent of the total items offered on the site, yet, there are over two hundred thousand auctions in this category at any one time.

Given the astronomical number of items up for auction at any given time, however, there are no guarantees your items will sell.

Auctions: The Dark Side of Paradise
The cold reality is that 53 percent of eBay auctions end without a bid and another 23 percent sell with just a single bid. Re-listed items often sell on the second try (not all of eBay's users search at one time), but in the interim, listing fees keep adding up and cut into profits. Further, with 25 million auctions running, sellers need any edge they can get to make their needles visible in this huge haystack.

A good starting point is research. eBay allows searches of past performance sales in all categories. This the best starting point for establishing the pricing prospects for your merchandise. Further, if you are selling a collectible, eBay has no less than 743 separate collector groups or chat rooms.

Under "Buttons and Textiles" for instance, these range from Cutey Pie Threads with one lonesome member, to Button Buddies with 279. By perusing a group you can find what niche collectors are looking for, their complaints, attitudes and needs before marketing auctions to these target buyers. There are also group forums for selling any imaginable (and some unimaginable,) products, as well as marketing strategies, such as the One-Cent Wonder group that glories in starting auctions at one cent. Preliminary research of past sales and within the groups will save time and pay dividends down the road.

Keywords
A majority of buyers find what they are looking for with keyword searches. It's critically important to fill the fifty-five-character heading with the proper keywords to attract niche buyers for your item — as well as attract the potential buyers who do serendipitous searches through all the listings. By default, the eBay search is set to the title headline only, but many buyers will turn off the default and search by auction header and item description. So it's important to pack your product description with as many keywords as possible. For instance: if you're selling a signed Mahalia Jackson program from the Brooklyn Academy of Music, you want to feature the word "Brooklyn" in your header and description, since there are many more Brooklyn collectors than gospel singer or Mahalia Jackson devotees.

The Pricing Quandary: The One Dollar Minimum Versus Retail
There are two schools of thought regarding opening bid pricing on eBay. Many, perhaps a majority of sellers, purposely start an item's bidding at a price far below the item's value in order to attract bidders seeking a bargain, and/or (dream of dreams) start a bidding war on the item. Sellers that know they're offering a desirable item know that it will rise to its price regardless of its starting amount. Of course, the downside is that this might not happen — due to sniping software and other factors, and the seller will find his $200 book selling for $4.99.

Sellers who have been too often burned by this tend to start the minimum bid at or near a price they are willing to accept. This slows down the bidding, but at it least guarantees that you don't lose money on an item that can still be sold for retail in a brick and mortar store or an off-eBay Web site. A good rule of thumb is to rely on experience: start out protecting your sales until you feel certain you know the market, then start the auction low and wait.

Bail Out or Tough It Out?
Watching bids accumulate on your auctions is not unlike watching grass grow. Years ago, bidders would plunge into anything they wanted from the opening bell; however, today eBayers are far more savvy: rather than running up the price with early bids, most wait for the last day, frequently the last few minutes, before bidding.

eBay pretty much allows sellers to cancel bids and auctions at any time. Because so much of the action occurs on the last day, this is not a good idea. The seller is better served by making a firm decision on selling before initiating the sale and sticking with it.

To Reserve or Not to Reserve
The way the reserve auction works is that the item will not be sold unless the hidden reserve price is reached. eBay charges a fee for reserve auctions; the fee is reimbursed only if the item reaches its reserve. Some sellers who offer high-ticket items use the Reserve Price auction while simultaneously starting the sale with a low minimum bid to attract interest. The problem with this is that reserve auctions tend to turn off bidders who want to know they're participating in an absolute sale. Most sellers avoid reserve auctions except with a high-ticket item that they feel will reach its reserve, but want insurance in case it does not.

Find the Right Slot
Selecting the right category to place your auction can make the difference between success and failure. There are hundreds of categories and sub categories on the site; unless the item has a clear-cut slot, such as a new digital camera, or a used BMW, the choices can be perplexing.

Some sellers use several categories on items of crossover interest, but each extra category doubles the listing fee. It 's a good idea to use a hidden counter system that tracks the number of hits on your sale — several hosting services, such as Andale, offer them for free. If you see that your sale is garnering few hits in a certain category, try changing categories. If completely bewildered, run a search for similar items and see where their sellers list them. Auction duration: eBay allows one-, three-, five-, seven- and ten-days auctions. The majority of sales run seven days, followed by the ten-day sale (which incurs a small extra fee). Besides the extra exposure, a ten-day sale lets the seller show an item over two weekends when buyer activity is at its peak. Start ten-day sales between Wednesday and Friday to catch part or all of two weekends.

eBay as a Crapshoot
Only a fraction of eBay's 114 million users surf the site at any one time. The service has its hardcore steady users, but many eBayers surf and buy as time or money allows or in fits and spurts over several weeks or months.

Routinely, items that fail to attract a bid on the first or even a second try will sell, sometimes with multiple bids, in the next listing. (From personal experience auctioning used books on eBay, about 40 percent of re-listed items sell on the second try.) eBay sends a re-listing link with your auction result e-mail and will reimburse the re-listing fee if the item sells.

Before re-listing an item, consider adjusting the price, description or category for the second try, and wait a week or more before re-launching the sale in order to attract 'fresh blood' to the audience.

No Surprises
According to WebTrends, 35 percent of U.S. adults say "surprise costs" will lead them to abandon an online sale. eBay buyers resent high shipping charges; it can make the difference between repeat business and never seeing the buyer again. If possible, state an item's shipping charge on the sale. In any case, it's better to keep shipping at cost and view the "handling" as part of the price of doing business. The goodwill you'll earn makes it well worthwhile.

Make Nice
A combative attitude and negative feedbacks are poison on eBay. High maintenance and distrustful bidders come with the territory. Seller fraud on the site is such that eBay employs eight hundred people to root it out. Buyers and sellers can also use the Feedback Rating System, which lets them rate transactions as "positive," "neutral" or "negative."

Buyers gravitate to sellers with excellent feedback ratings and tend to eschew those with negatives. Most negative feedback is avoidable with good, polite e-mail communication, patience, honest descriptions and timely shipping. Be conservative about handing out negative feedback, as the other party is free to respond in kind.

Even when dealing with buyers who renege on the deal, the seller is better served by claiming a closing fee credit, issuing a bidder "strike" against the offender (three strikes and the user is kicked off eBay,) and either offering the item to the under bidder or re-listing it rather than issuing a negative.

PayPal
In the past, horror stories abounded among sellers who had their funds wrongly frozen, misapplied or lost in PayPal's twilight zone — to the point where a successful class action suit was just concluded against the service. Purchased by eBay several years ago, PayPal has been stabilized, and with 50 million users, it is the benchmark of online payment services.

Considerably more cost efficient than online credit card processing, its convenience makes it the favorite payment method among eBay users. Small-to-medium auction sellers (several to fifty sales a week,) can expect to lose a few sales for not having PayPal. For larger venders with a hundred or more weekly sales, it's a necessity. The service also takes much of the pain out of international sales — which you'll want to consider.

Over There
International buyers are an increasingly large segment of the eBay auction market. Sell internationally. But if you don't offer PayPal, protect yourself by using the "Ship to U.S. only" eBay option. This will put off only few overseas buyers. If a buyer wants what your selling, he will e-mail to ask if you will ship to a foreign destination, or, just as often, ignore or not even read the terms and bid anyway.

In either case, this option gives the seller important leverage: if the buyer refuses the shipping costs and terms, or offers payment that will incur a conversion charge, the seller can cancel the sale without risk of receiving a negative feedback. (eBay removes negative feedbacks placed by international buyers when the sale stated "ship to US only.") International sales require customs forms and usually extra e-mails, but if you turn away from this market, you will be leaving money on the table.

Jump In
This has been intended as a very general guide to entering the eBay market. There are many other nuances to selling on eBay — depending on the product you sell, your goals and the time you can put into the effort — that will become apparent with experience. eBay is not for everyone. If you intend to tippy-toe into eBay as a hobby, avocation, or source for side income, we advise that you begin in the auction format. Try it out and discover if you enjoy this venue before investing the time and effort required for establishing a Store. For large-volume sellers, segueing into eBay Stores is a natural transition that makes good sense once an auction following has been established. So have fun, and make money.

Adapted from ECommerce-Guide.com, part of Internet.com's Small Business Channel.

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