eBay Pricing Strategies for Sellers: Setting a Reserver Price and Other Tactics
When you think about selling on e-Bay, one of the last things that usually comes to mind is pricing strategies. After all, e-Bay is an auction site. You list your item and wait for competitive bidding to drive the price up. Unfortunately, it’s not that simple.
Pricing the items you sell on e-Bay is an important part of the selling process, even on e-Bay. Many sellers don’t give pricing too much consideration and their auctions usually show it. I can’t tell you how many auctions I’ve come across where pricing was the major reason I didn’t bid or make a purchase.
People are looking for bargains, especially on e-Bay. They will bid only on items where they see a value for the price they are willing to pay. Naturally sellers are concerned about getting a fair price, too. Often, they have money invested in the item they are trying to sell. They can’t go below a certain price or they risk losing money.
So, how do pricing strategies work on e-Bay?
There are essentially three types of pricing you need to be concerned with:
- Starting bid
- Reserve price
- But-It-Now price
Each of these methods has important factors to consider.
Starting Bid
Even though each of these can be included in every auction, e-Bay only requires you to set a starting bid. The other two are optional.
You should pay particular attention to the starting bid as this will be an important factor for a buyer. Many auctions don’t get any bids just because the starting bid price is too high.
Sellers are worried that they will lose money on their items if they start the bidding too low. The wrongly believe that they won’t have enough bids to drive the price to the point where they will make a profit on the sale.
What these sellers fail to understand is that auctions – online or offline – are true indicators of the value of a particular item. People are willing to pay only what they believe the item is worth. It doesn’t matter to them what a catalog or a price guide says the item is worth.
There are millions of registered e-Bay users. The chances that an item will close without competitive bidding are pretty slim. That is, of course, if you have an item that people want. If you are trying to sell garbage, then all bets are off.
One of the best ways to let the market decide the value of an item is to set a low starting bid once competitive bidding starts, the true price of the item will become clear.
I sell collectible stamps on e-Bay. I almost always list the starting price at $1, no matter what the catalog tells me the value of the item should be. Since there is such a huge base of stamp collectors on e-Bay, the final price after all bidding is usually close to the catalog values. Sometimes it’s less than the catalog and sometimes it’s more. There are even times I’ve been surprised the bidding gets as high as it does.
I almost never lose money on the transaction. When I do, it’s usually because I’ve paid more for the item at wholesale prices than I should have. I still honor the auction price and chalk up the loss to experience.
The bottom line is that a lower starting price will lead to early and active bidding. Never set your opening price more than $50.00, no matter how much the item is worth. This is a price point that people have difficulty crossing.
Reserve Price
There are times when you absolutely cannot sell an item for less than a certain price. If you use a low starting bid, you need a way to guarantee you will reach that minimum price before you have to sell the item. This is where reserve prices come in.
A reserve price is hidden from buyers and is simply the lowest price you are willing to take. If the bidding fails to reach the reserve price you are not required to complete the sale. Of course, you can sell it at the final bid price if you want, but you are not required to complete the transaction.
Once the bidding reaches the reserve price, then you are obligate to sell the item when the bidding closes.
A low starting bid with a reasonable reserve price is a good strategy for many items. It encourages bidding but guarantees that you’ll get your money out of the transaction. The downside is that many buyers don’t like reserve price auctions. They quickly become frustrated when they repeatedly bid only to learn that “the reserve price hasn’t been met.” After a few encounters like this, they’ll give up and move on.
A reserve price can be a hedge against losing money on the sale, but one thing to keep in mind is that a seller can close an auction at any time for any reason without any negative effects. While I wouldn’t use this as a strategy for every auction, it may save you if the bidding isn’t quite what you expected for an item.
Buy It Now Price
One of the cool features of many e-bay auctions is a “Buy It Now” button. This allows the buyer to purchase a desirable item and stop the bidding process. Many buyers don’t want to bid and wait a week only to find they are outbid at the last moment. The “buy it now” option appeals to this type of buyer.
For the seller, it means getting a sale at an attractive price. Sometimes sellers are willing to pay a little more to guarantee they will get the item rather than wait for the outcome of an auction.
The “buy it now” option can be used for any type of item. It is particularly effective when you are offering multiple identical items at any given time. Set your price somewhere around your reserve price.
Other Pricing Strategies
One of the additional factors that usually contributes to bidding and the final price is shipping costs. Buyers look carefully at shipping and handling costs and factor them into their bid.
You will encourage active bidding if you offer free shipping. Bidders will perceive extra value in your item and they know there are no additional costs other than their bid price. More often than not, offering free shipping will more than pay for the cost of shipping the item.
If you use this strategy in your auctions, make sure you advertise it in the listing. Let people know about it. Consider mentioning it in the title of the auction if you have room.
How to Set the Price
Before you can list your item, you need to have an idea of what your item may be worth. In some cases this is not relevant. If you buy wholesale to sell on e-Bay, you may only need to know what it costs you to obtain and list your merchandise. Your prices will reflect those costs.
If you are selling one-of-a-kind items or collectibles, you will want to have a good idea of the value. Check your local library or book store for pricing guides. These may give you a good idea of what your item may be worth (as well as provide you with important information to include in your listing.) Be careful, however, because some fields use the catalog only as a guideline. In stamp collecting, for example, it’s commonly known that certain stamps sell for much more or much less than the catalog price.
You can check for similar items on e-Bay. By checking completed auctions, you can get a reasonable idea of what people are willing to pay.
For certain collectibles, you can find tons of information by doing a search in Google. You can often find whole communities of dealers and collectors who can help you decide what an item is worth or how much you can sell it for.
Remember, it doesn’t matter what you think your item is worth, it’s really only worth what someone is willing to pay.
