Sunday, August 13, 2006

Auctions - Part Two: Internet Sites

Internet Auctions

All of the rules for live auctions regarding bidding limits, evaluation, etc. apply to online auctions as well (see Auctions - Part One: Live Auctions.

The big difference between in-person, live auctions and online auctions is that you don’t interact with either the merchandise or the seller in a face-to-face manner. You must rely on a description and pictures to judge the item. Also you must rely on the reputation of the auction service and the sellers rating to determine trust. Of course, once you’ve conducted successful and satisfactory transactions with a given seller, this trust factor can be significantly enhanced.

I recommend that you limit your item quests to those things that can be easily evaluated without touching them or seeing them actually work, at least in initial dealings with a particular seller. Also, limit the amount of money you commit to online auction purchases until you get comfortable with the process and sellers.

As far as ratings are concerned, be sure to examine the seller’s satisfaction rating and what other buyers have to say about them. The seller doesn’t have to have a 100% positive rating or all glowing reviews (but that certainly helps). However, their rating should be above 95% and the buyer comments should lead one to feel that the seller delivers products that are accurately represented and in a timely manner. Also, once you’ve completed a purchase transaction yourself and received the goods, be sure to provide your own rating and comments for the seller involved.

Auction Process
Unlike live in-person auctions, online auctions typically last from 3 to 10 days. The current high bid, or starting bid if no bids have been made, will be displayed along with the amount of time (days, hours and minutes) until the end of the auction. There is no “going, going, gone”, it will just terminate at the specified time. When looking at the ending time, be sure to confirm the time zone. The time zone is indicated for the auction company, not the seller and thus would be the same for all auctions. If say the time zone is Pacific and you live in the East, then there will be a three-hour difference in clock times. Be sure to also check the time remaining, which will be the same worldwide.

Making a Bid
If you want to bid on an item, you will first probably have to register with the particular auction company if you hadn’t done so already. This process is usually not overly complicated or time consuming, but you should allow adequate time.

When making a bid, the item screen will indicate what the minimum bid will be. If the item has not received any bids, then the minimum bid will be the starting bid. The bidding issues are similar to those for live auctions in that you don’t want to bid more than you are willing and able to pay for any given item.

Unlike live auctions, your actual bid may be much higher than the bid that is registered. This is called proxy bidding which is offered by many online auctions. Before attempting this however, check the auction site for how your bid will be handled. Proxy bidding generally works something like this:

1. An item has a current bid of $10.00 with a minimum increase bid of $11.00.
2. You determine that you would pay up to $17.50 for the item and enter a proxy bid of $17.50.
3. The item is updated with you as the new high bidder and a current high bid of $11.00 with a new minimum increase to $12.00.

If no one else bids on the item, it’s yours for $11.00 even though you were willing to go up to $17.50. However, if other bidders enter bids, your proxy bid will be increased all the way to $17.50 if necessary to keep you as the high bidder. If someone exceeds your $17.50 limit, then they become the new high bidder. Your proxy bid is kept secret so that other bidders won’t know what your limit is. On the other hand if the person you are initially bidding against also had a proxy bid of say $15.00, then your initial bid would have appeared as $16.00 right away. If the other person had a proxy bid of say $20.00 (i.e. above yours), then they would still be the high bidder at say $18.50 (assuming $1.00 minimum increments).

While proxy bidding may seem confusing at first, it is really a nice system. It is easier to be able to keep within your budget because you set your maximum bid upfront instead of risking being caught up in the heat of real time bidding. If your proxy bid is out-bid by another buyer, you can still up your proxy before the auction ends, but I advise against it. It is best to set your initial proxy bid based upon your available budget and the value of the item up for bid.

A reserve price is the minimum price that the seller will accept for a given item. By default, this price is the starting bid price, but it may be higher. Reserve bids higher than the starting bid are not actually shown (just like your proxy bid is not divulged). However, you will see something like “reserve not met” if the current bid is less than the reserve amount. Once the reserve price has been attained, you will see an indication such as “reserve has been met”. At the end of the auction if the high bid is less than the reserve, the item is not sold.

Reserves can be frustrating to the buyer, but are a fact of life for some online as well as live auction events. Also, for proxy bidders, if your proxy bid is not equal to or higher than the reserve, the bid entered will only be enough to be either the minimum bid if you are the first bidder, or just enough to beat out the current high bidder.

I’m told that the rationale behind using reserves is to get the bidding started at a lower price and allow the bidding action to drive the price up. Where an initial higher bid minimum might have kept bidders for entering any bids at all.

Buyer’s Premium: Most of the big online auctions don’t have a buyer’s premium, but you should always check the details for any items of interest. Some specialty auction houses may use such a premium.

Shipping issues: Unlike live in-person auctions, you will have to have the item sent to you through the mail. This shipping and handling fee will be added onto the winning bid price. Be sure to check the item description for the shipping methods and cost involved. If in doubt as to the specific cost, send a question to the seller including your city and state or just your zip code (don’t send them your complete address until after you’ve won the item). Don’t assume that just because the item is small e.g. a coin that the shipping and handling cost will be trivial. Be sure to factor the shipping costs into the total amount you are willing to pay for a given item.

Sales Tax issues: If you and the seller reside within the same state, you may have to pay sales tax! This fact should be stated within the item description. If in doubt, contact the seller prior to making a bid. Again, factor in the sales tax amount into the total you are willing to pay.

Completing the Sale and Issues
As you zero in on items of interest there are tasks that you need to pay attention to as you bid and complete the purchase of an auction item.

Questions and Concerns: If you have questions or concerns about a given item up for auction you should email the seller. The particular auction service will have a mechanism to allow this, usually on the screen with the items description there will be some kind of button or link phrase that you click on to bring up a screen for typing in a message. If you need to ask a question, you should do this at least two days before the end of the auction, the sooner the better. This will allow the seller time to see your message and to respond back to you before the auction is over.

Auction site guidelines: Before starting to bid on items at a given site, be sure to review the user agreement. While most of the rules and regulations are common sense ways of doing business between reputable sellers and buyers, there may be issues that you are unaware of.

Warning signs: Other than having a terrible user satisfaction rating, there are other things to look out for when dealing with sellers and buyers in online auctions such as:

The item in question is being offered at an unusually low price such as a new laptop computer for $100. Especially when multiple items are involved.
The seller has only a couple of ratings or no ratings, but is selling a high priced item.
The seller sends you a message indicating a desire to try and sell the item outside of the auction environment.

You are the actual seller and the buyer wants to pay with a check or money order in an amount more than the final price plus shipping and wants you to include the change along with the item.

This is only a partial list. Be alert to information provided by the various online auction services, news articles, personal experiences and just common sense.

Phishing dangers: It is very common to get hit with phishing emails attempting to get you to update your online auction personal data such as user id, passwords, credit card information, etc. As with any other phishing attempt, just don’t do it. Less common, is getting a pop-up window while signed onto an online auction service requesting similar information. Again just don’t do it. In both instances, I suggest that you report these types of activities via the auction services published complaint process.

Stay within your budget: Remember you need to stay within your budget just as with all other expenditures. Not only get a good deal or obtain that “once in a lifetime” item, but don’t blow your budget in the process. Use proxy bidding to predetermine your maximum affordable bid on any given item. Then check back at the end of the auction to see if you won. Of course you can check back during the course of the auction, but don’t be tempted to raise your proxy. Otherwise, enjoy. Bidding online can open up literally the whole world for obtaining or selling those treasures!

Making a payment online: Paying for your item online tends to speed up the delivery process. A popular online payment option is PAYPAL® at . This service is used by hundreds of thousands of people to make online payments and is very popular on big auction sites such as eBAY®. To sign up for such a service typically requires the connection of a checking account and credit card for withdrawal of the actual payment. Many sellers prefer PAYPAL® payment from an associated checking account rather than a credit card (saving to them in the form of reduced fees). If using such a service to make online payments, be sure to record each payment into your checking account or credit card ledger just as with any other purchase.

As always - Have Fun!


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