Genco’s new eBay mantra: Start low, sell high

As sellers become smarter about using online auctions, they continue to refine their approaches to maximize returns. Liquidator Genco Distribution Systems recently found a correlation between the starting price of an auction and the winning bid.

Pittsburgh, PA-based Genco, which sells surplus goods at eBay, used to start all bids at 30-35% of the original cost of the item. The average auction generated five or six bids and the average selling price was around $60, says Pete Rector, senior vice president. About four months ago, Genco dropped the starting price on all auctions to $9.99. “Bids have gone up and so has the average closing value,” Rector says. The average winning bid is now $75-$80. “We’re seeing pretty close to 50% of the original cost of the product,” he says.

Rector says Genco settled on the $9.99 price simply by experimenting. “We didn’t want it so low that we risked selling a $900 computer for $1.49, but we wanted it low enough to attract bids,” he says. “We have enough merchandise that we could just go out and experiment with it.”

That a lower starting price creates a higher closing price is part of the phenomenon of consumers getting caught up in the frenzy of bidding. The prospect of a low price draws them into the auction, and once they’re invested in the item, they continue bidding. “It’s like baiting a hook,” Rector says. “You get more with a bite-sized chunk of good bait than you do with a side of beef.”

Genco uses channels besides eBay for liquidation, sometimes splitting a lot so that some items are sold direct to the consumer on eBay, some are sold in pallets to re-sellers and others are sold by truckloads to buyers who re-sell the merchandise again, often to overseas markets.