Determining opening Bids - By Nancy Hix

Determining opening Bids - By Nancy Hix

You want your auctioned items to earn you a profit. Well, some of you want to clean out the garage by listing the stuff on eBay, but admit it—you also want to line your pockets with a little cash. And if you're a high-volume seller or run a small business, the need for profit is even greater. When listing items at online auction, the success of your sales begins with determining the opening bid price. Where you start the bidding is pivotal to whether your items will sell. To follow is a discussion of setting the right opening price so your auctions close with at least one successful bid.

The Object of the Game Is...


Successful online auction selling is all about making more for an item than you paid for it. Not many serious sellers list auctions and hope the items don't sell. The whole object of listing an online auction is to exchange goods for cash. Some auction sellers scarf up treasures at yard sales for a quarter and earn great profits, while business sellers typically purchase goods at or below wholesale to list online. Whether you want to break even or make a profit, the object is the same—to attract successful bids. One way to do that is with a strategic minimum bid amount. This requires a little research.



Know Your Price Floor and Price Ceiling


Your item might sell with only one bid, so think of your minimum bid as your asking price. You don't want to price your items so high that nobody bids on your auctions, but you also don't want to incur losses or you won't be a successful online auction seller. Where you set your opening bid is an important online auction strategy. Two terms to consider here are cost and price:
Cost is the total amount of the expenses you incur to obtain the item, create your auction listing, and sell your item.

Price is the selling price per unit that your customers will pay for it. Researching closed auctions is a great way to determine a competitive price. Doing a completed auction search allows you to see what customers are willing to pay for the same (or similar) item you're selling.

Two other terms define the least amount you can charge without taking a loss and the most you can charge while staying competitive:

Price floor is the lowest amount at which you can offer your product and still cover your cost and expenses. If you set the price at or below cost, you should have a specific intent--like wanting to get rid of something that possibly makes you ill just by looking at it.

Price ceiling is the most that a customer will pay for the item. Think of the price ceiling as the customer's perceived value of the item. Several factors create this perception, including the product's popularity and the quality of the one that you're selling, as well as the comparison your bidders make between you and your competitors.

Now, consider how much you paid for the item. Add in any other expenses, such as your auction site fees, and figure out how much you hope to earn from the listing. This all helps you determine your starting bid. A few circumstances might tip this amount in either direction.









What Are You Selling?


If you're selling common items that show up at online auction every five minutes, check recent closings. If you see a consistent average winning bid amount, you safely can set your starting bid as low as you want and incur a lower insertion fee. As long as you include a photo of the actual item you're selling, the odds favor that your auction will bid up as high as the others will—maybe higher if you do a great job with your auction description.
If you're listing an item that's not all that common, you need to consider a few factors when you set your minimum bid. For instance:

Is it valuable?
If you have a rarity that for enthusiasts represents a sip from the Holy E-Grail, start the bidding wherever you want and run the auction for seven days. If the item carries a high secondary market value and its seekers hunt for it online, write a good title and description, and start the bidding low. Then work the room a little. Announce your auction at the collector forums and don't be bashful about contacting folks whom you know might be interested. (When I listed rare artist prototypes for charity auctions, my starting bids of $1 drew a few astonished stares, but the bidding usually exceeded $500 within the first 24 hours. I nudged this along by emailing the auction URL to several collectors whom I knew would place high bids.)

Did you pay a lot for the item?
If you pulled it out of your attic or rescued it from the neighbor's trash, then you probably don't have a lot invested in it. To draw bids you should price the item competitively. If you paid a tidy sum for it, then factor that into your price floor.

Are your potential customers watching?
If you start your bidding at a penny and nobody knows that your item is up for sale, you might lose out unless you actively promote your listing. If you know you can coax your deep-pocketed bidders to your auction, then you're OK to start with a lower amount. If you're not sure, then you'll need to consider your price floor and the item's current value. Set the minimum bid somewhere in the middle.







Anticipate One Bid


Always assume that your minimum bid—the amount at which your auction starts—will prove to be the winning bid when the auction closes. In other words, count on drawing only one bid. This mirrors the phrase "expect the least and you won't be disappointed" because the bidding might go higher than that one bid. Don't assume that a bidding war will drive the price wildly high. Great if it does, but it won't always happen. Depending on your expected outcome of the sale, set your minimum bid far enough above your price floor to generate some profit and make the whole effort worth your time. Expect some variation in the results.
AW member Freddy57 offered this perspective in a Message Center thread: "I sell computer parts that are in high demand. I start my auctions at $1 and watch them climb. It's more fun for the bidders that way and it creates more excitement for everyone. Once in a while I end up crying while I ship something that sold for much less than I paid for it, but then sometimes I'm laughing as something goes out for much more that I thought it should. It kind of evens out that way."

Since your listings often appear right along with those of your competitors, bidders usually descend on the best value at the greatest bargain. It's your right to entice them.

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