Online Auctions

The solutions vendors who have sprung up to help retailers make the move to major auction sites offer soup to nuts services. At the core, they start by automating the listing process with tools and templates that let retailers list multiple items, trimming 50% or more off the time it would take them to post the products individually on the auction sites. Auctionworks.com Inc., for example, an Atlanta-based online auction solutions provider, is equipped to set up a general template for all of a retailer’s auctions based on the retailer’s preferences.

Marketers use the template to list the products they want to sell at auction and then launch the auction to the various auction sites with the touch of a button. Without the template and software interface, different auction sites would require listers to know different applications. Since sellers can relaunch the same auction multiple times, they can build that into their marketing strategy and still save time; for instance, breaking up multiple-item lots into single-item auctions that close at different times during the week to drive up pricing.

When auction prices rise as more bidders compete, retailers recoup more of the merchandise’s value than if they tried to sell it at a clearance price. In the fast-developing world of photography equipment, for instance, new models are very quickly replaced by newer ones. That leaves Ritz Camera Centers Inc.’s Ritzcamera.com with sale merchandise to move. Ritzcamera.com has held auctions on eBay since January on the Auctionworks platform, and used FairMarket before that. “It’s been more profitable for us than any other channel,” says Ritzcamera.com auction manager Mike Harper. In fact, auctions’ ability to
drive sale merchandise exceeds even that of Ritz Camera’s 20 outlet stores.

Harper won’t say what his margins are at auction, but the experience of Watsonville, Calif.-based West Marine shows what auctions can do. A specialty retailer of boating gear and apparel, West Marine sells through its stores, catalog and web site.

Working with ChannelAdvisor, the retailer initially tested the waters, so to speak, by offering a few items on eBay, gradually adding more as response proved positive. Refurbished GPS navigational devices, for example, had been languishing on West Marine’s store shelves, even at 80% off the original retail price. At West Marine’s auctions on eBay, however, the devices attracted enough shopper interest to generate several bids per item, driving sale prices up. “They found that they sold for 30% higher in the auction format on eBay than any other liquidation method they’d tried,” says ChannelAdvisor’s Wingo. “Now that they’ve added auctions on eBay, it’s effectively their outlet.”

Retailers who want to maintain some sort of price consistency among channels and still list on eBay can do so with two options that are essentially fixed-price offerings. EBay stores, which rolled out this summer, offers retailers storefronts on eBay, where sellers can offer items for fixed prices alongside their auctions. And scattered through a merchant’s other auction listings is the “buy it now” icon, an offering that lets buyers skip the bidding process and “win” the listed product immediately if they’re willing to plunk down their cash at a higher fixed price set by the seller.

EBay charges sellers from 30 cents to $3.30 per item to list on eBay auctions, depending on the amount of the opening bid or the seller’s reserve price on the item. For fixed price listings in eBay stores, sellers pay 5 cents on each listing, whether it’s a single item or a lot of 1,000 items. For both auction and e-store listings, eBay charges a “final value fee” of 1.25% to 5% of every sale. EBay charges the same listing and transaction fees to major retailers and manufacturers that it does to individual sellers. And though eBay says 20,000 sellers now have stores on the site, the company doesn’t break out how many of them are individuals vs. major retailers and manufacturers, although a company spokesman confirms growing use of the site by commercial sellers.

ChannelAdvisor powers both storefronts and other auctions on eBay for several retailers and manufacturers including IBM Corp., which sells approximately $1 million in equipment on eBay every month, says Wingo. ChannelAdvisor’s work with IBM illustrates the growing role tech vendors are playing in connecting commercial sellers with the major online auction sites. “We do the branding for IBM on eBay,” says Wingo. “It looks a lot cleaner and more professional than individual sellers’ listings on eBay, and we use words like ‘authorized’ and ‘certified’ to make it clear this is not a power seller with a bunch of stuff off a truck. We also set up their storefront. If IBM had done this manually, they would have had to hire five or 10 people.”

The auction solutions vendors are selling more than just technology to retailers eager to tap into online auction sites. “You develop a lot of knowledge with experience in the auction space,” says Jordan. “It seems like it would be easy to put an item up for auction online, but there are questions - How many items should I list? What should the starting price be? What’s the best way to market it? The answers aren’t clear to someone who’s new to the auction space.”

If retailers are finding new customers at major auction sites, the solutions vendors that get them there are finding new business in the retailer market. Typically, solutions vendors get a percentage of each successful sale. Services such as photography, support and consulting are extra.

“The focus is now on bigger retailers,” says Alec Peters, founder and CEO of Auctionworks, of the shifting auction marketplace. And if the recent growth at tech vendors already targeting this market is any indication, that’s a trend that is just gathering steam, and one that could be a big win for retailers ready to get on board.

mary@verticalwebmedia.com

When you want to sell something at auction, you post it to an auction site and let people start bidding, right?

Wrong, say the auction experts who are building businesses on advising retailers how to sell at auction. Pricing strategy, in fact, is critical to moving goods at classic auctions.

The power of bidding to drive up prices, well-known in the offline world, applies online as well. Items listed at close to retail on an auction site will gather dust with no takers. But frequently, the same items initially listed at far below retail price will eventually be bid up to retail or near-retail price, thanks to what Larry Jordan, vice president of marketing at AuctionWatch calls “the winning mentality.”

“When sellers list items at a lower value, for instance starting at a dollar, they often see the price rise to market value because buyers perceive it as a bargain, “ he says. “They’re competing with other people and they want to win, even if it costs them a few extra dollars. But if an item is listed at retail price at the beginning, sometimes it doesn’t sell at auction all because shoppers don’t see it as a bargain. “

For that reason, Scott Wingo, CEO of ChannelAdvisor Corp., routinely advises his clients to include at least one very low priced item in their auctions, just to generate that kind of interest and spark momentum.

Besides simply getting the bidding started, it’s important for an item to have an opening price low enough to attract bids for another reason: Bids attract other bids. Research earlier this year showed that online auction bidders were more likely to place bids on items that already had bids than they were on items that did not have bids.

Paul Dholakia, assistant professor of marketing in the University at Buffalo School of Management, analyzed bids placed for thousands of items in different product categories on eBay over a three-week period. He found that consumers gravitated toward items that have one or more existing bids, while ignoring comparable or even superior unbid-for items.

Dholakia says that bidders often succumb to a form of online peer pressure when choosing items to bid on. The behavior occurs, Dholakia explains, because online bidders are unable to thoroughly evaluate an item as they would at an off-line auction or retail environment; nor are they able to assess the trustworthiness of a seller face-to-face. So, lacking key informational cues about an item, online bidders are more prone to be influenced by the behavior of other bidders: They perceive existing bids to be evidence of an item’s quality, making it worthy of their own bid, Dholakia contends.

Dholakia believes that the cluttered design of online auction sites also contributes to the herd behavior. “Most online auctions overwhelm bidders with hundreds of choices in a relatively unorganized setting,” he says, “so consumers use existing bids as a criterion for screening items and navigating an auction site.”