Tag : buy-it-now

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167: 4 Marketing Trends Driving eBay’s Auction Decline

In my 16 years in the auction industry, there’s been a healthy debate as to whether or not eBay has been a positive force in the auction community—and even whether it should be considered part of the auction industry. The company that now sells more than $2 billion in assets per year has also led to multiple discussions as to what the definition of an auction marketer actually is.

ebay Revenue

Those on both sides of the debate, though, have noted that the eBay marketplace isn’t as focused on auctions as it once was. The National Bureau of Economic Research released a white paper that studied the trend of eBay sellers moving away from the auction method, while still leveraging the site’s marketplace. They found that over a span of a decade, auctions fell from 95% to just 15% of eBay’s share of active listings.

eBay Shift Chart

The authors of the study concluded that:

  1. The auction method of price discovery was losing importance because of the robust search capabilities available on the Internet.
  2. Seller margins were dropping significantly, as auction prices had fallen dramatically compared to posted-price sales for similar assets.
  3. Auctions “are favored for used and idiosyncratic items, and by less experienced sellers.”

It’s important to note that eBay wasn’t pushing these trends. They make money on the transaction regardless of method of sale, and they want items to sell for the highest price possible. These trends are adaptations of sellers to the marketplace’s buyers. That’s why these trends should be instructive to all of us who sell things for other people—no matter what method of marketing we use.

We have the most educated buyers of all time.

Buyers can research more about the asset you’re selling than at any time in history. So, it’s important to disclose as much information on our website as possible—and not force buyers to on-site inspections or phone conversations. We need to publish lots of pictures or even videos—and all the documentation and description possible.

We need to give buyers options.

eBay offers four ways to buy: fixed price, reserve auction, absolute auction, and Buy It Now. We need to know what method works best for our various asset categories and their respective marketplaces—and be able to articulate the pros and cons of each to our sellers. Some real estate auctioneers I serve already advertise a Buy It Now-style option on their auctions; and I know of at least one equipment auction company researching that feature on their online bidding platform. Regardless of the method we use, we need to compliment it with robust, targeted, efficient advertising that adds value to that method (something eBay doesn’t do).

We need to retire “Auction is fastest way to get cash for your asset.”

One of the reasons for eBay’s auction decline that wasn’t mentioned in the white paper is the instancy of purchase available on the Internet. Culture has blown past even one-click ordering to the new Dash buttons for buying items. While these obviously wouldn’t serve the asset categories we typically market at auction, we need to understand that auctions aren’t always the fastest way to buy—and thus not always the fastest way to sell.

The marketplace should drive our marketing decisions.

If eBay had determined to remain an online auction company rather than an online marketplace, it would be generating a fraction of the revenue it does each year. Instead, it adapted to buyer trends to benefit its sellers. That wasn’t an altruistic decision, and I’m sure that cost them a lot of time and resources to accomplish. If our companies are to continue and grow in their success, we must adapt to the culture. We have to ask questions like:

  1. What media do our buyers and sellers most consume?
  2. How do they consume that media and each medium’s advertisements?
  3. What do the terms and purchase processes look like where people most often purchase the asset in question?

None of our companies will ever be eBay. (I would guess that most of us don’t even aspire to that.) What works for eBay may not work for most of our firms, but we can learn from the trends that their scale and ubiquity illustrate. If their sellers are adapting to cultural changes, we need to help our sellers do the same.

Stock image purchased from iStockPhoto.com

eBay revenue charted linked to its source.

eBay auction chart acquired from the referenced study“Sales Mechanisms in Online Markets: What Happened to Internet Auctions?” by Liran Einav, Chiara Farronato, Jonathan D. Levin, Neel Sundaresan

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157: 8 Ways to Suggest Price in Auction Advertising

At a recent industry gathering, a group of experienced auction professionals joked that—no matter how much they advertise a sale as an auction—the number one question they get from interested buyers is, “How much?”

“That’s when you have to explain the whole ‘auction’ thing,” one of the auctioneers interjected.

As someone who manages Facebook posts for auction companies, I’ve had to type that explanation multiple times now, too. I was reminded of this discussion when I saw this unique real estate ad.

Hollywood Prices

You’ll notice no mention of square footage, no quantities of bedrooms or baths, no list of amenities. Just the address and the price of each property. Oprah recently bought one of my clients’ auction properties for $28.5 million. Other than that, I’ve never advertised anything like the subjects of this magazine ad. That said, I’ve seen other assets—the kind auctioneers sell everyday—advertised on a smaller scale but in similar fashion.

It shouldn’t come as a surprise that the price of an item is both a selling point and a primary factor in the decision to purchase something. In this interactive Google Trends chart, you’ll notice “price” and “cost” being used more and more by online shoppers.

While some interested buyers are looking for a fixed price (that we can’t give them), many are looking for an estimated range of bidding. If we’re going to require a 10% cash or certified check deposit at real estate auctions, this shouldn’t be a question we avoid. The same holds true for large personal property items, where financing or a large stack of cash comes into play.

Technically, unless we’re offering a “Buy It Now” feature as part of our online options, we really can’t advertise a final sale price. Advertising a price can turn bargain seekers away from our auction or create a bid ceiling that conflicts with our fiduciary responsibility to our sellers.

So, how do we as auction marketers leverage price to sell our assets?

Contrast. We can advertise what is known against the unknown hammer price.

Appraised Value

The buying public may not trust this number. So, I wouldn’t use this price alone; or I would include the appraisal in the documents section of the auction page on your website. Official timber cruise reports are really good to have, where applicable; and I’ve gotten good traction recently when advertising on Facebook to timber buyers using professionally-estimated timber values.

Assessed Value

Educated buyers will know that this number isn’t an appraisal figure, but it will be proportional to the assessed value of other properties they are considering.

Comparables

Many times, sellers choose auction because there aren’t similar assets in their geographic area. If you’ve got recent sales or area statistics you can leverage, do.

Replacement Cost

I’ve only seen this once or twice, but it’s a great idea. This could also be expressed as an “insured for” figure.

Construction Cost

This will apply to few auction properties—either because it isn’t known or the real estate improvements were built too long ago for that figure to matter. For most of the times I’ve sold a partially-finished real estate project, though, this is a figure the buyer wanted to know.

Last List

One of my clients uses this regularly. If an asset market is accustomed to offering more than the listed price, this doesn’t impact the bid ceiling as much as it would in a distressed market. In a distressed market, educated buyers and sellers understand that the last list is higher that what will be paid for the asset.

Last Sold

While it might be history, history gives context. What was the sale price the last time it sold? And when was that?

Minimum Bid

If you know the reserve in advance—and it’s lower than expected market value—use it. I’ve seen auctioneers break this figure down further, showing the minimum bid in terms of cost per square foot or cost per acre. If you’re selling investment property, you can express this in terms of how many months it will take to recover the minimum bid at current lease rates.

The last of these eight price indicators is the only one that wouldn’t be applicable to no-reserve auctions. All eight are data points to discuss with your seller as to their comfort level in using them. As with all auctions, the strategy will change from one asset or geographic market to the next. The more of these you have available, though, the easier it is to explain or defer discussion of your auction day expectations.

Stock image purchased from iStockPhoto.com

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137: 5 Ways to Generate More End User Bidding

There are essentially only two ways to grow your business: get more transactions or get bigger transactions.

For auctioneers, there are two ways to accomplish bigger transactions: book auctions for assets with a higher intrinsic value or create more demand for the assets we already sell.

This is usually the part where a bid caller will interject that an auction inherently creates a higher demand because of the competitive nature of price realization at an auction. I’ve been to enough auctions to know that to be true. At the same time, you and I both know that even this very real dynamic sometimes isn’t enough to achieve reasonable reserves (or decent absolute auction prices). I know this, because—when auction prices don’t match their reasonable estimates—auctioneers turn around and ask me what more we could’ve done to acquire bidders.

Sometimes, the timing is off. By that I mean market conditions don’t match with the seller’s situation or the seller’s schedule. Candidly, there are times when we could have done something more or something better with the advertising budget. Other times, the terms of the auction limit who can bid—attracting the investor class’ cash buyers but not retail consumers.

Consumers outnumber investors. So, if we want more bidders at our auctions to create more demand, it makes sense to pursue end users. Here are several ideas to attract consumers that I’ve seen in the auction industry. Some require significant shifts for the auctioneer, but I’ve heard good results from those who have adopted them.

Implement a “Buy It Now” option.

Buy It Now option

Online retailers now mix retail and auction options.

Buy It Now buttoneBay has been doing this for years and honing how it works. Why? Because consumers often don’t have time to wait for an auction to end. Traditional auctioneers push back against this feature because it bypasses the auction process. Could the item sell higher during the auction process? Sure. Could that purchaser also not participate in the live bidding (and push your other bidders) because their need was satiated by a more prompt option? Yes. Real estate auctioneers advertise “pre-auction offers welcomed” regularly. So, this isn’t a stretch for real estate; and eBay has proven it’s a good fit for personal property. This wouldn’t need to be an option for all items, either. Also, this would make far more sense for online-only auctions where there’s less of a halo effect than at live, on-site auctions. Obviously, special language would need to be crafted in absolute auction contracts unless this is used only in minimum bid/reserve auctions.

Allow item returns.

So much for “as is where is.” This would rock the industry more than a Buy It Now button. That said, I’ve seen it done by an auction company for whom I’ve worked. The returned items get recycled into a subsequent auction, and the consumer gains confidence in their bidding. Return PolicyObviously, this isn’t for every asset category or even every item within an asset category. For those auction companies who could handle the auction terms and logistics, though, this could gain a higher price ceiling for all items on the aggregate—because consumers wouldn’t be hedging their bets.

Order & publish home inspection reports.

Real estate auction firms around the country are already doing this, but they are in the minority. Even if the terms remain “as is where is,” you can raise the price ceiling by letting the consumer know in advance what issues will need to be addressed. Consumers will compensate for the cost of remedying those issues in their bid, but that compensation will probably be smaller than the hedge on a mystery. Also, this disclosure is a good brand strategy to developing trust in the marketplace. I doubt home inspections are cheap. The question—after your own property evaluation—is whether or not it would pay for itself.

Home InspectionAdvertise where consumers congregate.

Auctioneers tend to congregate their advertising where other auctioneers advertise. I understand the defense: “We have to be in that paper, because we don’t want people to think we’re doing less business than our competition.” But what if this contest is being held where end users don’t gather? In past auction polling, one auction company for whom I’ve worked found that the paper with the largest circulation in their market brought the fewest bidders and that an inexpensive regional paper brought a lot of bidders—with a much lower budget hit. Let the other companies waste their advertising budgets, competing in empty arenas. Use Google Analytics, Facebook Insights, auction polling, and other analytical tools to find where consumers hear about you; and spend your money there.

Write advertising copy from a consumer perspective.

The vast majority of auctioneers suck at Facebook marketing and design their print media backwards, too. Their marketing message is out of order, emphasizing what’s important to the auctioneer instead of what’s important to the buyer. Consumers are interested in assets they want, not events you’re hosting. PerspectiveSo, don’t headline with auction information. Some of the most effective auction advertising doesn’t even use the word auction—or uses it only at the bottom of the advertisement. Why? If a consumer doesn’t want an item, they don’t care that there’s an auction event, let alone what date it is. If they do want that item, where they get it is less important for them that the attributes of the item they want.

The difference between wholesale and retail prices should be enough incentive to investigate changes to our workflow, terms, and marketing. Your path to consumer-driven prices might be on very different paths than these five options. That’s okay. What’s important is that we’re interacting with the marketplace, evaluating our processes based on the feedback we gather, and then making changes to our practices to adapt.

Feature image purchased from iStockPhoto.com. Others linked to sources.

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