Smoke and Mirrors

Everyone knows eBay provides both auctions and Store formats on the main eBay.com site. What you don’t see a lot of folks talk about (by this I mean the general mediasphere) is other types of pricing/buying formats available to sellers out there who are using eBay.

Here are a few of them:

1 - Best Offer

Best offer allows sellers to advertise one price, but decide to accept sales at lower prices. This is particularly useful in categories where there is a lot of haggling naturally. Autos and Jewelry come to mind. Business & Industrial is another. Categories with high ASPs. Also categories which rely on MAP pricing. One hopes that eBay continues to innovate in this arena and offer things like counter offers, and counter-counter-offers.

Also, some categories seem to have artificially low limits on the # of offers you can make. Keep raising these — it only helps sales for sellers. Are there downsides to allowing more offers? Maybe ASP erosion (and thus fee erosion) is what eBay is concerned about. Are there any fraud, privacy, or spam concerns with this? None that I can think of anyway.

I write more about this one here.

2 - Second Chance Offer

This format allows sellers to offer the underbidders of a product a crack at buying the product at the price they bid. When eBay introduced this, they only allowed sellers to offer to the highest underbidder. In future iterations. That was a big step. This format continues to be extremely popular with sellers. Certainly spammers and phishers target these e-mails, but most sellers I talk to love the ability to do things like offer a ton of second chance offers to top bidders immediately when the auction closes.

3 - Ending your item early & selling to current highest bidder

eBay allows you to end an auction right now and just “give it” to the highest bidder. Most of the time sellers end an item when it’s a mistake, but during a hot selling season like Q4 sellers tell me that sometimes they end auctions to increase velocity if they are happy with the price they’re getting.

4 - Lowering reserve price

Sellers are allowed to lower their reserve price to encourage the item to sell. The problem with this is that you can’t lower it to the value of the current high bidder — only one bid increment above that bidder.

Why can you end an item and sell to the current highest bidder, but not lower your reserve price to the value of the current highest bidder? This doesn’t make a ton of sense to me, but sometimes I miss the overt reasons for these things.

Really reserve prices have been not recommended on eBay for a long time, but the utility of reserve prices continues to fade. It’s well documented that putting a reserve on your auction inhibits bidding. For a normal, middle of the road seller, I can’t think of a reason that you wouldn’t want to take Best Offers (if your category offer it) currently use reserves.

Some future areas for innovation: how about combining these concepts in interesting ways?

• Like I mentioned before, allow sellers to lower reserve prices to the value of the current high bidder, not one increment above.
• Consider abolishing the reserve concept altogether and just replacing it with Best Offer. Reserves decrease velocity. At least Best Offers give you the best of both worlds: a high price, with an option of selling it lower.
• Relax restrictions on the # of best offers that buyers can leave in a category.
• What if you could accept best offers on auctions, and if those best offers were the bids being placed? This would allow sellers to set thresholds to end the auction at anytime if they were willing to sacrifice velocity for final price. (Which is really the tradeoff you’re making a seller with an “offer” type format).
• When you end an auction, you can give it to the highest bidder. Why not have a way to give it to any/all bidders (including underbidders) at their current bids?

Just some thoughts. Some of these ideas are just meant to stimulate some discussion. Further thought could easily reveal holes in some or all of them.

This entry was posted on Monday, January 9th, 2006 at 10:29 pm and is filed under Commerce. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.