Online Auctions Selling Basics
by Linda Stacy
May, 2003

The information in this article was presented at the InternetBasedMoms.com first anniversary event. The seminar covered some general information about online auctions - types of auctions, how to get started selling (what to sell, how to price it, and writing descriptions), and what to do after the auction closes. A few questions and comments that came up during the seminar are included here.

Millions of potential buyers visit the online auction sites every day. On average there are 12 million items listed on eBay in 18,000 categories from Pez to Automobiles and Real Estate. In 2002 eBay's 27 million active members participated in transactions totaling over $4 billion dollars. Yahoo is the 2nd largest auction site, generating about 1/8 of the traffic of eBay. Other "players" include Amazon.com auctions and Ubid.com and there many other smaller auction sites.

To get started, all auction sites require some sort of registration and many require a credit card or some other form of identification. To sell on eBay you will need to provide valid credit card information or become "id verified" (which requires that you provide some personal information and pay a $5 fee). In addition, you may want to use an online payment system like PayPal or C2It.

General auction basics

A standard or English auction is one items for sale to the highest bidder. In a Dutch auction there are multiple identical items for sale with all winners paying the lowest successful bid

Buy it now with auction - the item can be purchased for the BIN price until a bid has been placed

Buy it now without auction - the BIN and starting price are the same so the first bidder will buy the item

Reserve price auctions - the seller sets a minimum price that is unknown to bidders - most bidders do not like reserve price auctions. Use them only when your item is so rare that you don't know the actual value, but want to make sure you get a return on your investment.

Proxy bidding - allows bidders to set their maximum bid and the system places only the bids necessary to maintain your status as high bidder up to that max.

Start Selling

If you haven't purchased anything on auction, I highly recommend doing so before you start selling. Purchasing will give you a good sense of how the whole system works and will get your positive feedback started.

Next, sell a couple of things you have around the house. You can test it out before investing any money to get a feel for the work involved and whether or not you'll enjoy auction selling.

Now comes one of the most often asked questions about selling on eBay: what should you sell?

I recommend selling items that interest you and items about which you can build expertise. Your knowledge and excitement about the products will be evident in your descriptions and you'll be more successful.

Other things to consider when deciding what to sell:

• What is the profit margin? If you are going to make $1 per sale your sales volume will have to be much greater than if you are making $50 per sale. Consider how many sales you'll need to reach your income goal and whether you can realistically run that many auctions.
• How much competition is there in relationship to the number of buyers? Searching closed auctions will give you a sense of whether the auctions are over saturated with any particular item or category.
• Will you have a steady supply?
  While rare or unusual items do well on auction, you don't want something so rare that no one know what it is.
• Is the item easy to ship?
• Do you have room to store the items you'll need to have on hand for auctions?
• Is there likely to be an ongoing market for the items or are you able to keep up with knowing what is going to be "hot" next

1. The headline - You'll want to be sure to include words in your auction title that will spark interest, but they must include words that potential buyers will be typing into the auction's search function. For example, "The cutest little outfit" may sound good, but the search terms that someone would likely be using would be "boy's size 5 shorts." A better title would be "Boy's size 5 short set like new, blue" Space is limited, so get in as much important information as you can.
2. The description - When writing your descriptions, your goal should be to have the buyer's questions all answered. While buyers can and will email you with questions, it's far better to have them want the item right while they are looking at it - you want them to bid right away. You are really writing a combination of an ad and a list of all the features and flaws.
3. You will want at least one picture of the item. In most cases, an auction photograph should show only the actual item that is being auctioned. It should fill the entire frame, be well lit, and in focus. It is preferable to show the item from at least two angles. Any particularly interesting features should be shown in a close-up shot, as should any more than minor flaw.
4. Price - To find out what your item is worth, search the closed and sold auctions for the same or similar items. There are also books and websites that can help you determine the value of collectibles and other items, but the bottom line is your items are only worth what they are selling for at the time.
   If the market for your item is depressed you may want to hang on to it and hope the value increases in time.The lower the starting bid, the more likely you are to get that first bidder and to get multiple bidders. But don't start so low that you'll lose money if the item sells for that first bid (unless of course you are a gambler and willing to accept the losses).

Shipping costs

Most of the time the buyer pays shipping and you should indicate that in your auction. You can charge a flat shipping and handling fee which should be stated in your auction or you can charge exact shipping which will be determined after the auction closes and you get the buyers zip code.

Another often asked question is "when is the best time to end an auction?" According to surveys conducted by AuctionBytes.com sellers believe Sunday evening is the best time to end auctions. An older report on web traffic found that the weekend was the most popular time for web browsing.
Consider your target audience and end your auctions when they are most likely to be online. If you are targeting stay-at-home moms, you might do better ending your auctions weekday mornings. College students are probably online late night, but not on Saturday night. Experiment to see when you get the most bids and higher ending prices.

After the sale

Most auction sites have a system that automatically sends an email to the winner bidder and the seller at the close of the auction. The standard is that the buyer and seller should contact each other within 3 days. Most people prefer and expect to be contacted within a day. eBay has a checkout feature that allows the exchange of information without emailing each other. However you choose to communicate with your buyer, be prompt, clear, concise, and courteous. Many problems can be avoided with effective communication.

Shipping - Pack your items carefully in clean, preferably new materials. I enclose everything in plastic bags in case the box becomes wet or damaged. Most sellers offer insurance as an option, stating that uninsured packages are the buyer's responsibility. Whether or not that holds up is debated. You will need to determine a policy that you are comfortable with which I recommend at least includes required insurance for items over a certain price.

Feedback - I prefer to leave feedback for the buyer as soon as their payment is received and the item has shipped. I feel that by paying they have completed their end of the bargain and I can close out the transaction. If no problems occur, I'm then done with that sale and don't have to keep track of it any longer. Other sellers wait until the buyer has received the item and indicated their satisfaction. It's a matter of personal preference.

If problems occur - The vast majority of transactions occur without incident, but to my mind, the way a seller handles a problem really speaks to their professionalism and quality of customer service. Always weigh the risk of the loss of money for one sale against the risk of losing more sales over negative feedback. But it's a fine line between "the customer's always right" and being taken advantage of.

A note about auction safety - While online auctions account for the majority of Internet fraud complaints, in my opinion, they are still relatively safe. Many of the problems that occur are the result of misunderstanding due to poor communication. There is less risk to a seller since you don't ship the item until after you receive payment, but you should still take steps to protect yourself.

• Make sure you understand and follow the auction site's terms of use and guidelines.
• Accurately describe your items and your terms of sale.
• If you sell collectibles, make sure you know your source so that you aren't at risk for selling counterfeit items.
• Keep records of where you purchase your merchandise.
• Keep a copy of the descriptions and photos at least until the buyer has indicated their satisfaction with the transaction, and in some cases for some period of time after.
• When needed, most auction sites provide some sort of complaint resolution service. Always try to negotiate an equitable resolution with the other party and then use the systems in place when you can't resolve it yourself.

About me page - Many auction sites have a page that is linked from your auctions where you can add information about your products, your customer service and shipping policies, and about yourself. While you usually can't link to your website in your auctions, you usually can on your About me page. It's a great marketing tool.

The best way to get started is to just get started. Online auctions are fun and with a little knowledge and practice can be very profitable. If you are going to go into business selling, be sure and check with your local authorities for any licensing you many need and for your sales tax and income tax obligations. The keys to success are providing quality merchandise at a fair price, staying organized, and providing great customer service.

Sources and resources:

Some of the questions and comments that came up during the seminar