I’ve been trying to add some new stamps to my collection by looking on eBay, and while I am amazed at the range and variety of what’s available for us philatelists, I’m finding it very tedious to have to be logged in and watching for those last few minutes of the auction to ensure someone else doesn’t win at the very last second. Is that just part of buying things on eBay? I also don’t understand how auctions work when they’re selling more than a single item. Can you enlighten an old man on this newfangled stuff?
When eBay began, it was simple, there was one type of auction and you typed in a bid and, essentially, if it ended up the highest bid when the auction ended, you won. No complications, no tricks, and very few people with any sort of automated tools to give them an edge on high-demand auctions.
Things didn’t stay so simple and now there are two types of auctions that eBay refers to as “Auction Style Listings” and Multiple Item. There’s also a Marketplace where you can buy lots of things for a fixed price without ever going through the hassle (and excitement, to be fair) of an auction where you might or might not win. Let me explain how an auction style listing works in this column, and next week I’ll talk about the even more complicated world of multiple item listings.
The most common type of auction on eBay are auction style listings. These are entries where the seller has set a low opening bid and interested eBay buyers submit their maximum bids at some point during the typically 7-day duration of the auction. eBay automatically goes back and forth and raises the price until there’s no contest about who is highest, which becomes the “current high bid”. At the close of the auction, the current high bid becomes the winning bid and that buyer wins the auction.
It’s really important to understand the behind-the-scenes work that eBay does, so let’s really step through a bidding scenario. Let’s say that there’s a sweet unfranked St Helena Tristan Relief Fund stamp from 1961 available and the opening bid (which is set by the seller, remember) is $10. You see it and say “yowza! I’d pay $50 for that stamp. That’s a nice one!” So you type in “$50” and submit it.
Now, is the high bid immediately brought up to $50? No. That’s your secret maximum bid. eBay actually only moves the current high bid up the least amount necessary to figure out the high bidder at this moment. If no-one else has bid yet, you’d have the high bid at $10.50. (I’m assuming a bid increment of $0.50, but it can be higher or lower depending on the auction’s starting price)
The next morning, our friend Klaus from Germany sees the auction and the high bid of a very reasonable $10.50, says “Mein Gott!” and promptly bids $25.
Now is when it gets interesting because eBay will automatically increment both bids to figure out who has the highest. Klaus will end up disappointed because eBay will tell him that he is not the winning bid and that it’s moved up to $25.50. You’re still in the lead, but now you have to pay $15 more than you did before Klaus came along if you ultimately win the auction. And yet, you’ve still got some space in your maximum bid, so if Klaus decides he’ll pay more than $25 and bids $40, you’ll still be the top bidder for the St Helena, but now you’ll owe $40.50.
At this point, Klaus can go crazy and decide that he’ll pay $100 for the stamp (if you bid more than it’s actually worth, you have eBay bidding fever. That’s not good) or walk away. If he did bid $100, then what would the highest bid be at that point? $50.50, the minimum amount above your maximum bid that identifies a clear lead bidder. If you never check again, you’d lose the auction by a mere $0.50.
See how that works? Add a half-dozen additional bidders and it can be complicated to figure out! The key to remember is that when you enter a bid on eBay, it’s always the maximum you are willing to pay, not your actual bid at that moment. In that way, it differs quite a bit from more traditional auctions (like what we see in the movies).
To add to the complexity, regular auction listings can also have a reserve price, which just means that while the seller has set a low opening bid, they won’t actually sell you the item and close the auction unless it reaches that secret limit. With the stamp, perhaps the auction opening bid is $10, but the seller has decided that if it doesn’t bid up to at least $25 she won’t sell. Reserve price auctions can be frustrating, as you might expect, because your earnest bid might not be high enough and even though you’re excited about the item, it can close without any resolution.
There are some nuances, which I’ll talk about in a subsequent blog entry, for for now, suffice to say that if you fully understand how bidding works on eBay you should find that you can win more auctions, even without paying attention to when they end.