Terminologies of Online Auction Bidding
What does it mean to sell in “Standard Auction“?
When we talk about online auction bidding, Standard Auction (SA) plays a vital role. The standard auction is the traditional model that has evolved into the virtual model. Its the marketplace for sellers to list their products get the maximum bids and buyers to bid their highest price to win the auction. The seller and buyer are legally bound for the transaction once the final bid is locked. There are many advantages to selling online like a huge number of bidders from different locations can participate, less fees than the traditional auction, don’t have to hire an agent.
What does it mean to sell in “Penny Auction“?
The buyers place their online auction bidding from the starting price but they are charged for each bid they place by the auction website. Each time a bid is placed it affects in the increment of cost of goods by a penny or 1%. The most beneficial feature is, it is very time-bound i.e. 00:10 or 00:20 seconds so the bidder have to watch their clocks ticking. The last bidder is the winner of the auction. The auctioneer makes money in two ways fees (penny) for each bid and the final price at which the goods are sold. The bidders have to buy enough credits in advance before starting the bid. Example: A Macbook was sold on Quibids for $426.65 (Woohh!) but the total number of bids counted were 42665 with 1% increment in cost.
Dos & Don’ts of Penny Auction in Online Auction Bidding:
1. Get the maximum number of bidders by continuously promoting on social media – Twitter, Facebook, etc
2. Start your online auction and bidding during the evening and night hours (9:00 pm to 9:00 am) as its a free time for maximum bidders, using weekends & holidays is beneficial.
3. Aim for getting new bidders to participate as this will create competition against aggressive/power bidders. Some websites restrict wins per person.
4. When you advertise and promote always use words & numbers that will attract bidders but don’t mislead or over exaggerate.
5. Always record your winning stories of astonishing prices at which goods are sold that can be promoted later as one in the above example.
What does it mean to sell by “Listing”?
A “Listing” is a detailed description of the goods that gives complete information about the product that is being sold. In other words, it’s a “Brochure” of your product. It is easier for bidders to view the information in a brochure than a very long boring sales letter. Its an agreement in good faith that you are offering to sell the goods as per terms of the brochure described explicitly. Once a listed seller is obligated to sell the goods to the bidder who wins the auction.
Do’s & Don’ts of Listing in Online Auction Bidding:
1. Include your brief About Seller, Photographs of your store (if any), etc.
2. Give Testimonial & Accreditation links that your business has achieved.
3. Go through the policies of Prohibited and restricted goods before listing e.g. Tobacco & alcohol.
4. Check rules for different categories of your product e.g. Adult Only section – For age & above 18+.
5. Avoid using text, images, and videos that are subject to copyrights (i.e original works of authorship). E.g. Taking images from web magazine “Celebrity wearing aviator shades” using it for your purpose to sell shades is a violation of copyrights.
6. Avoid inaccurate and misleading claims while creating your brochure. E.g. Mentioning as an authorized distributor if you are not.
What does it mean to sell at “Fair Market Value” (FMV) ?
FMV is price at which goods/property would sell for in open market its is an estimated guesswork. The buyer and seller both involved in the transaction have reasonable knowledge about the facts and figures in relation to the goods/property. There is no undue pressure from market to carry out transaction. The FMV can determine selling price or cost of similar items, condition of the goods/property, & replacement costs.
What does it mean to sell with “Starting Price” ?
When a bidder considering the baseline price gives the first call its known as the Starting Price of the auction. Following the first call other bidders immediately start to bid their counteroffers. The bidding increases the starting price until it reaches to a highest price considered by the seller sufficient to sell goods/property.
Dos & Don’ts of Starting Price in Online Auction Bidding:
1. According to research its always beneficial to start with lowest starting price. This encourages and attract bidders who really want to or might not want buy the goods/property but still place their bids.
2. High starting price might make you loose bidders in terms of numbers, as only few of them will start bidding on high price. The #No of bids has psychological effect that will shows how many people are interested in winning the product. The more no of bids (Traffic) the more is popularity of auction.
3. As a thumb rule the baseline of starting price can be set as 40%-50% lower than FMV.
What does it means to sell with “Reserve Price” ?
Reserve Price (RP) is minimum price level set by the seller for which he will be happy to sell his goods/property. Selling w/o RP is similar to jumping off the cliff without a parachute. Seller is bound to sell when RP is met or is surpassed by the bidders. RP maybe secret or known to bidders depending upon the auctioned goods or property. Seller can lower or remove RP but cannot raise it during ongoing auction.
Do’s & Don’ts of Reserve Price in Online Auction Bidding:
1.Study the market carefully to set First – RP & Second – RP (alternative) or else it will be intended that you are here to burn bidders pocket, piss-off bidders or don’t want to sell the goods/property at all.
2. Always keep the Starting Price lower than RP to attract bidders.
3. Calculating Second – RP in advance is better to use in situation where the bidding stalls and is lower than First – RP. This gives the highest bidder a Second Chance Offer to place his maximum bid.
4. When your RP is met in bidding you can remove to it in order to avoid any indication to buyers about its status e.g. “Reserved Met”.
5. If you find huge difference between RP and Highest Bid you should always walk away from the auction.
What does it mean to sell by “Make an Offer” ?
One of the best feature in online auction. A seller may decide only to give Buy-it-Now & Make Offer for his goods. You have choice to accept or reject the offers from bidders. Price Negotiation is what this feature provides with the bidders. The seller can give a counteroffer based on his reserve price if the buyer is seeking lower prices of goods. Once the seller accepts the offer, buyer is obliged to pay the seller.
Dos & Don’ts of Make an Offer in Online Auction Bidding:
1. This feature gives sellers to interact with bidders hence keep a check if the prices are not lowered than reserve price in negotiation process.
2. Sellers should not use time delay as factor for negotiation as it can be perceived as fraud or fake goods offered. Accept or Reject offers frequently.
3. Some online auction site offer Automatic Rejection, sellers can choose this option for saving their efforts.
What does it mean to sell with “Minimum Bid Increments” (MBI) ?
As the name suggests its minimum increase in percentage is mandatory for the next bidder to raise or go beyond Reserve Price. MBI depends upon the value of goods.
Dos & Don’ts of Minimum Bid Increments in Online Auction Bidding:
1. For premium goods MBI should be around 10% of FMV. (e.g FMV – $70 the MBI is $7)
2. For lower value goods it should be around 4-5% FMV in order to get more number of bids on the item.
What does it mean to sell with “Auction Sniping” ?
In an time-bound auction (penny auction), the bid is placed at very last seconds of end auction to exceed the current highest bid which dramatically increases bidders chance to win. This is often considered as controversial practice because it involves Automated Software which place bids on behalf of the bidder. These services are legal and are available online – GIXEN & goSnipe. Many auction sites have forbidden the use of automatic bidders, so even if bidders win they cannot checkout & claim their winnings. While its upto sellers to list their goods on sniping auction website we don’t recommended it because it looses the whole fun & excitement of people bidding in the game!
Shill avoidance – It is a part of Snipping. A seller uses another account for auction sniping to raise bid to the maximum, this practice is highly unethical. The biggest loop hole is the seller might anticipate higher bid from the original bidders to increase the price but the original bidder may choose not to do so; in this case the seller has to sell the goods to himself plus the auction website charges for doing so.
What does it mean to sell with “Fixed Price Auction” (FPA) ?
In FPA no bidding is allowed and the goods are already set with final price, there is no scope for negotiation or bargain as well as there is no time limit for seller to keep their listing of goods. There will be difference in fees seller will encounter, hence seller has to check with the support team of the auction website.
What does it mean to sell with “Pay-it-Now or Buy-it-Now” (BIN) ?
The seller sets BIN price equal to or more than reserve price. The seller keeps this option to give away to a person who wants to pay directly for the goods without going into bidding program. There might be multiple offers from bidders for BIN and seller has the right to accept or reject these offers. BIN disappears if the normal auction has hit the Reserve Price.
1. It is advisable to keep BIN price 20%-30% higher than Starting Price. The bidders will see less difference between BIN and Starting Price which will result in saving their bidding time and getting goods instantly.
2. BIN is powerful way to kill competition by starting auction simultaneously for similar goods and keeping BIN for lesser price than your competition. (E.g. Apple iPhone 5s – 16GB)
3. Other strategy to use BIN option is during final hours of closing of auction this increases the possibility of selling if your auction has got many bidders already. (Example: Setting BIN – $300 above Reserve price is $200 and then dropping the BIN every 4 hours – $290-$280-$275-$269-$249-$230..)
What does it mean to sell under “Caveat Emptor” ?
Caveat Emptor is a Latin word which means “Let the buyer beware.” It is generally used in real estate auctions, and in a practical sense it means the buyer is aware of all the risks or defects associated with the product and there is no misleading, fraud or deception on the part of the seller. That seller should not with hold any information and should disclose details about the product to the buyer. Example: “A” is car seller and “B” is buyer, “A” gives all the information except that car had 2 owners. This is considered as unlawful.
Dos & Don’ts –
1. Sellers must publish all the necessary information about history of owners of the goods auctioned.
2. Always mention if any third party has ownership/ title of the goods that are being sold.
3. Minor defects, no warranties, specific conditions are critical and should be disclosed.
4. Avoid holding back information due to ignorance/fear this always end-up in lawsuit.
What does it mean to sell with “Shipping & Handling” ?
Shipping Charges: Is cost of transportation of goods from Seller to Buyer’s Doorsteps. This may or may not include local taxes. Seller has to determine if to include or separately add the cost to the goods.
Shipping Options: Buyer is given minimum 2 option to choose from cargo movers (e.g.Fedex, UPS, DHL) and also 2 minimum options for Faster Delivery in terms of Transit Days.
Dos & Don’ts –
1. Its beneficial to include Shipping & Handling costs in the price of goods to provide the golden worlds “FREE”
2. Use good packaging material or another alternative is packaging services provided by the cargo movers at resonable cost.
3. Avoid using FREE International Shipping as there varied shipping charges & customs fees + taxes involved which you are not aware about.
4. Always ensure you provide the Shipment Tracking #No to the buyer immediately for tracking.
What does it mean to be a “Top Rated Seller/ Super Sellers” ?
A seller is always recommended suspended by the bidders and they are judged on grounds of clear communication of photos, specifications & descriptions, condition and ensuring exact same goods are delivered, good quality and price, local as well as global shipping services, easy money back option and warranties. Only continuous success to achieve all above factors will ensure sellers to become “Top Rated Seller/ Super Sellers.”
These were a few a basic terms which every online auctioneer should be well-versed with. Anything that I have missed? Drop a comment and let me know.