Slashdot Mirror
The Science of eBay
PreacherTom writes "Professors of marketing, economics, management, and psychology have published dozens of papers to try to explain how and why eBay users buy and sell online. At the same time, there is no shortage of people offering helpful hints online. Kerry Miller takes a novel approach, offering 10 tips to maximize your profit that are based on a summary of these scientific analyses, rather than just 'educated' guessing."
Most of the tips are common sense or obvious to people who have used eBay a few times, to both buy and sell.
I don't know about anyone else, but I've about had it with eBay. It hasn't improved in the last five years and they slowly nickle and dime you to death. I'd love an article on The Science of Leaving eBay: ten reasonable alternatives.
-Grey
Silver Clipboard: Time Management Tips
1. Set the starting price low (except for items you expect little interest in). Low starting prices stimulate auction traffic and get early bidders psychologically invested in the auction, leading to more completed sales and higher final prices. Professor Gillian Ku from London Business School and professors Adam Galinsky and J. Keith Murnighan from Northwestern found that Nikon cameras with starting prices of $0.01 resulted in significantly higher final prices than the average price for completed camera auctions.
An auction for a kitchen sink with a starting price of $225 ended without a single bidder. When re-auctioned with a starting price of $75, the sink sold for $275. The exception to the start-low rule: If you're selling an idiosyncratic item you don't think a lot of people will bid on, set a price closer to the item's actual value.
2. Use reserve prices with caution, especially for low-priced items. When using a low minimum bid, nervous sellers sometimes set secret reserve prices to make sure their item doesn't sell for less than the item's true value. Using reserves is a risky strategy for sellers, say professors at Stanford and the University of Arizona, because it reduces the probability that the auction will end in a sale.
In an experiment using Pokémon trading cards, they found that secret-reserve auctions on average resulted in fewer serious bidders per auction and lower final sale prices. However, other research suggests that for auctions of higher-priced goods (over $25), secret reserves might actually push revenues higher when the auctions end in a successful sale.
3. Use photos in your listings. Listings with photos receive much more traffic than listings without photos. Generally speaking, more traffic to your listing--especially on the first day of an auction--results in more active bidders, and the more bidders competing for an item, the higher the sale price. In one study at Stanford, researchers found that an extra bidder results in an 11.4% increase in auction revenue among all auctions, and a 5.5% increase for auctions in which there are least two bidders.
4. Don't flood the market. If you're selling multiples of an item, space them out, rather then selling them all at once, says Ku--that's simple supply and demand at work.
5. Spell-check. Misspellings decrease the amount of traffic an auction receives. Ku, Galinsky, and Murnighan found that Michael Jordan shirts listed "Micheal" went unsold almost twice as often as those that were spelled correctly. When sold, the misspelled brand names resulted in lower final sale prices.
6. Hype it up. Ku and Murnighan suggest that inserting blatant puffery like "This shirt is hot!! A must-have for the summer!!" into low-starting-price auctions could stimulate interest better than more straightforward listings, and possibly even raise final sale prices. Researchers at Stanford found that auctions which mention the high retail price in an item description sell for 7% more on average.
7. Hold longer auctions. Researchers from the University of Arizona and the University of Michigan found that longer auctions tend to fetch higher prices. While three-day and five-day auctions yield approximately the same prices, seven-day auctions are about 24% higher, and 10-day auctions 42% higher on average.
8. Don't end auctions during "eBay happy hour." Though it might seem counterintuitive, a University of Pennsylvania researcher found that auctions ending during peak hours on eBay are actually 9.6% less likely to result in a sale. The reason? More competition. About 35% of auctions end between 5 p.m. and 8:59 p.m., when 25% of bids are placed.
9. Charge for shipping--but not too much. Bidders don't pay much attention to shipping costs when placing bids, say professors at UC Berkeley and Hong Kong University of Science and Technology. CDs listed with a starting price of one cent with $3.99 shipping averaged 21% higher final sale prices than CDs set with an opening price of $4 and no shipping charge. B
Religion for nerds. Stuff that really matters
You always have to wonder why business professors -- if they know so much about how to read the market -- aren't out there making a fortune instead of making less as a professor.
Apology to Ubuntu forum.
7. Hold longer auctions. Researchers from the University of Arizona and the University of Michigan found that longer auctions tend to fetch higher prices. While three-day and five-day auctions yield approximately the same prices, seven-day auctions are about 24% higher, and 10-day auctions 42% higher on average.
I disagree with this statement. In my experience, the length of the auction, especially when the item is widespread, makes little difference in final sale price. This is easy to tell if you're a seller on eBay... just watch your counter when you put up a long auction. Buyers usually compete close to the auction's close. It doesn't matter if your auction is listed for 10 days if no one sees it until the 10th day. The only point to having a long auction is if your item is rare or odd, so people will eventually stumble across it. I believe the research numbers may be skewed here because sellers will list items of more importance for longer periods of time because it has ore value, contrary to items that have less valuable. Just my opinion.
For most items it is cheaper to get them elsewhere. Especially once the shipping and customs charges are added. Ebay is only worthwhile for hard to find items, IMHO.
Religion for nerds. Stuff that really matters
Why? Because everytime something is hyped it is over-hyped and I'm ALWAYS disappointed in what I get: whether it's movies, food, clothes, etc...
Hype is marketing obfuscation.
Buy low. Sell high.
That'll be $1 for the advice and $11.95 for shipping.
No C.O.D's
It's funny that many of the auction that I have seen on eBay actually close higher then if you had bought it at a retail store.
In bad times, people sell stuff. In good times they buy. Either way eBay is making $$$.
Same reason alcohol is great: drink to forget (bad times), drink to celebrate (good times).
Not exactly rocket science there. People use Ebay because auctions are fun. Only those who use it a lot realize just how poorly it is executed.
Originally from this Usenet posting.
Updated:
Don't post stuff in lots. Auction stuff off separately because you'll have a hard time finding someone who wants all of it, but you will get bombarded with annoying emails from people interested only in one or two items who want you to break up the lot. Instead, list everything the same day, mention in each item description that you've got other items that complement this item, and create a link to all your current auctions (assume people won't think to click on the official eBay "View seller's other auctions" link).
Having nice, large photos of everything will encourage a higher final value. People like to know what they're buying.
Having detailed descriptions will cut down on having to answer the same question a hundred times from prospective bidders.
Make the auctions run for at least 5 days, so patient people who like to search and zero in on low-priced items they need will be able to put you in their watch list-- more watchers in the beginning means more people competing with each other and driving up the price at the end.
Time the start of the auctions so they end on a Sunday evening, but before 8pm-- when people are almost certain to be home but aren't yet glued to the TV. (But definitely don't end it the night of the Super Bowl!)
I have used the above tips for years, with great success.
~Philly
shipping $12.99
I can scientifically predict that another book on how to be an eBay mega-seller will be hitting local bookstores in the near future.
Tip Number 11 - Have a friend shill for you to drive up the price.
Many of the tips have corollaries for buyers. For example, if you're a buyer, search for misspellings, as the closing prices tend to be lower. I can see the big caveat to bidding on an auction with a reserve--you could end up the high bidder, but not a winner. Bidding on reserve auctions might work better for a buyer who needs a large quantity of a particular product--so losing one individual auction wouldn't be terribly frustrating.
Sent from my iPhone
That really should be obvious. But a lot of sellers just don't seem to understand that blatant dishonesty works against them. I recently did a "buy it now" bid for an MP3 player that was listed at $1 for the player itself and $30 for "shipping". Fine, I thought, $31, shipping included — not a bad price for an MP3 player. What I failed to notice (because eBay doesn't list insurance charges prominently) was a mandatory $41 insurance charge. Sent an email to the seller asking how it could cost more than an item was worth to insure it, but all I got back was boilerplate email about how there's more to shipping costs than postage.
I finally decided to take the negative feedback hit from refusing to pay. (EBay was nice enough about lifting my nonpayment "first strike" when I explained the issues.) The item's still there, only the seller has realized that a bogus insurance charge is not a strong sellng point. So now it's listed at $1 with $71 for "shipping"! Some people just don't have a clue.
You always have to wonder why business professors -- if they know so much about how to read the market -- aren't out there making a fortune instead of making less as a professor.
Business programs are very different than scientific and engineering programs. I have BS and MS degrees in Computer Science. The MS degree was from a school near JPL, lots of part-time consulting gigs for profs and students. Now I'm working on an MBA. The relationship with industry is far more intimate with the business school. Prior to business school I believed in the "those who teach" line as well, now I know that the kernel of truth in that joke distorts the true big picture.
In my marketing class some of the cases we studied were anonymized consulting projects the prof had run. These were projects intitiated by execs at big oil, big movie studio, etc. And no, I'm not at some big name ivy league school. State university, well regarded but not one of the big names.
Several of the profs are semi-retired and having fun teaching after making millions. One is on his third career. 20 years in the Marines, 10 years with the company he founded, now teaching and consulting. Most of the professors do consulting for industry. They are hired to study organization problems, marketing/sale problems, etc. MBA and PhD candiates are often some of the grunts for these projects.
Networking. I did not fully realize the importance of networking before business school, but for business it is essential. Teaching is an amazing networking tool. You are generating hundreds of managers and execs who will be inclined to come back to the prof with their problems.
I can comment on that one. I generally avoid auctions with reserve prices. Usually the reserve is too high, and I hate the stupid mystery of how much the item is actually being auctioned for. If the seller doesn't want to sell the item for less than XX dollars, just make that the minimum price. There are generally other sellers who have the same item and will be more direct about their expectations, and I like that.
I call bullshit on that. Many people pay attention to shipping, and changes made in the last year to eBay's page display and search results make it harder to con people with inflated shipping charges becuase they are now shown much more prominantly in the auction.
your needs are simple and you're going to make more money than you know what to do with either way, the person who delights in research is going to be content with a university position.
I'm sorry, but you seem to have used the phrases "university position" and "more money than you know what to do with" in the same sentence. We are forced to view your comment through special Steve Jobs Reality Distortion Field Effect Glasses to check for credibility. These glasses will be available at Mac stores soon, packaged as the new iSmackMyHeadInDisbelief.
Don't disappoint your bird dog. Go to the range.
You're selling 2 cents for $12.95? I realise that the metal content makes them worth more than face value, but this is ridiculous.
Only professors could publish dozens of articles on something this damn simple. I'm so glad I left academia and got a life and spend my career doing something useful.
Run and catch, run and catch, the lamb is caught in the blackberry patch.
I'm not sure why there's any need to overcomplicate this. eBay works *because* there are morons out there with way too much money.
Just make any ordinary item something *sound* special in some way, and start the pricing out with a number ending in ".95", and they jump on it like fleas. I've managed to sell numerous used items time and time again at above retail prices, because of this.
Remember kids, it's not lying if it can't be proven wrong.
8==8 Bones 8==8
it's because ebays fee structure, charges a percentage of the closing price, not the total bill (including shipping).
so if you sold an item for $100 with $5 shipping, ebay would bill you for their share of $100.
If you sold the same item for $1 with $104 shipping, ebay would bill you for their share of $1.
Buying electronics on ebay is more trouble than it's worth, because of this. The margins in that category are so slim, that the only people who can make any money, are the ones who have excessive shipping.
------ Work is so much easier when you don't
in your posts you mention that it costs too much as a buyer, to buy things seperately. That means, that the seller is taking more of your money.
There are quite a few people who make a living buying lots, breaking them up, and flipping them on ebay. It's similar to buying a brand new car, vs. paying $200 for a washer fluid bottle, $80 for a badge, $50 for the mounting bracket for the badge, etc.. when the car is in an accident, and needs to be repaired.
------ Work is so much easier when you don't
I'll think about it next time I have something to sell
"This PowerMac 6500 power supply unit is hot!! A must-have for the summer!!"
Besides that, everything listed there is pretty obvious, except maybe the 8, which says not to make the auction end during the peak hour.
You just got troll'd!
I take it you didn't actually go to ebay in the last five years either. Ebay Express is a huge advancement - I wish more sites used the same search interface.
11. Make sure the legalese on your auction is at least 10 to 20 times longer than the actual description of your item...
I took a personal finance class at a local community college and the professor (who also teaches two investing classes) is a professional financial consustant, both for individuals and for companies or other organizations (pension funds, etc). He seems to be very well off. He said he taught these classes (only a couple of nights a week) because he would always learn something new from the students (cool new websites or whatever), and because he got a great deal on health insurance for doing it! He's a total money geek - heck, maybe he even reads Slashdot.
The reason people don't leave ebay is because there are no visible alternatives. eBay works because it is the ONLY option you have. If the market had a competitor with even 10% of the users it would probably be enough to turn the tides against eBay. You just need to fracture the audience enough and eBay's main selling feature will vanish. They're probably the most exposed company out there.
What about adding a video?! Every report I've seen says that adding a video is a gold mine, especially since it's not that common yet since eBay hasn't mass-marketed their "default" provider of video, Auction Video. I've only tried it once, on an iPod I went and bought at the store, and that sold for more than retail with over 2,000 page views. Flash video is getting easier to post (although that level of streaming still at this point justifies using a service like eBay's Auction Video above.)
--Colin Jensen
colinandbethany.com
I pay a lot of attention to shipping prices. I'm sick of seeing "powersellers" who claim that it costs $95 to ship a USB thumb drive via the lowest and cheapest possible method, and then have the gall to charge $5 "required insurance" for a shipping method that includes insurance, or for a method where the actual insurance for the value of the item is only $1. I often send these people nasty comments. They're pricks and more of what ruins ebay. Ebay when asked about their policies which these types of listings violates, regurgitates bullshit form letters about how much they love and trust their powersellers to set appropriate fees. Its amazing they can let go of their ankles long enough to send out the form letters.
the REAL science of eBay is buying 1 pound of potassium nitrate for like $7 and mixing it with a pound of powdered sugar and burning a hole in your friend's road on the 4th of July...not that I'd know or anything.
now stop reading and go play Dance Dance Revolution!
Looks like they just read my post from the previous EBay thread.
-M
There has to be a bubble that will burst for eBay sometime. It truly is just an online junk sale.
55% off a perfectly good, 2 month old IBM Thinkpad Z60t, with warrantee, makes eBay a "junk sale"?
eBay can be great if you use it well.
6 years ago I looked at my income and expenses. I lived in a rented house, I had about 100k in shares and savings.
I earned about 80 k (my pay has gone up about 5k per year)
Now I own my own small house (no mortgage) and have about 600k in shares. Mostly blue-chips, tho to be fair I've probably made almost as much from telecoms and gold-mines as blue-chips.
If any intelligent self-directed person without other responsibilities cannot duplicate that performance then in my opinion they are complacent.
"If any intelligent self-directed person without other responsibilities cannot duplicate that performance then in my opinion they are complacent." Or have other priorities, which is fine, but is still their decision.