A how-to guide to online auctions

Never has the term caveat emptor carried as much weight as it does for those venturing into online auctions, and for Australians bidding in overseas auctions you can double that caveat.

As with any form of online commerce, there are some inherent dangers involved in auction transactions. Issues of privacy, security and the lack of direct contact with the seller are always present. Add to those common dangers the particularly volatile and hard-to-regulate nature of auctions and you end up with an area fraught with pitfalls and scams. When you attach an international component to your trading, the pitfalls multiply alarmingly.

Despite all that, online auctions offer many attractions: the chance to get a real steal; the hope of making a rare find; the joy of picking over a global hoard; and the fun of the bidding action. All this from the comfort and convenience of your office or study.

So, how do you go about joining in the action and bidding safely? The first step is to locate viable auction sites, the key word being viable.

The auction marketplace

Together with online investing, auctions are one of the hottest areas of e-commerce, attracting hundreds of eager entrepreneurs hoping to catch the next wave of Internet fads. No more than twelve months ago, auction sites were a rarity; now they’re the Patterson’s curse of the Web, sprouting up all over the place and, for the most part, offering lots of colour but little value.

Most of these sites will fail. That’s because if there’s one thing that counts when creating an auction site, it’s pulling power. Without huge numbers of items on offer and even greater numbers of bidders auction sites don’t work. To attract that kind of traffic in the current frenzied market sites need to be already successful, or market-specific, or ready to start life with a bang. So, apart from the relatively small number of current successes—most notably Ebay, uBid Online and Yahoo! Auctions —most of the new action is going to come from names you already know branching out into auctions. For example, Amazon.com has recently translated its multi-million customer base into a pre-registered pool of eager bidders at Amazon Auctions.

A quick zip around Australian sites will show the same pattern in embryonic form here. There are almost no long-term (that means over 12 months) local auction sites. Almost all the action is displayed in scores of hastily-set-up, near-empty sites, with rumblings from a number of large players, including a localised eBay, about to enter the market. Yahoo!, too, has created what amounts to an Australian subset of its main, US-based auction site.

When picking a site, you’ll save yourself a lot of energy by focussing on the large auction sites with heavy traffic. If you’re trying to track down a specific item, first run a search at BidFind. This site tracks the auctions on over 250 sites and allows you to search by keyword or category. It’s not always up to date, but it’s a good starting point.

Types of auctions

Other factors to take into consideration when choosing a site are the focus of the auction—does it offer general merchandise or is it limited to a category—and the type of auction. There are three main types of online auctions: person-to-person, such as eBay and Amazon, commercial, and real-time Webcasts.

Person-to-person auctions offer the greatest diversity in goods for sale and values. Mostly you’ll find yourself dealing with individuals, although be on the lookout for companies that dump their whole inventory into such auctions at reserve prices that are no less than the normal retail price.

Commercial auctions feature companies selling their products in an auction format. Many companies use such sites to rid themselves of surplus inventory, reconditioned equipment and discontinued items. Others use commercial auctions as an alternative or additional way to move retail items.

Real-time Webcasts are live auctions that are broadcast to the Internet. Participants can bid either from the auction premises or from the Web, although you’ll almost always have to be pre-registered to bid. Sothebys sometimes runs Webcast auctions.

Hallmarks of good sites

Apart from traffic volume and locality, what other things should you look for in an auction site? Here’s a quick checklist:

• A prominent privacy policy guaranteeing that the site will not sell any of your details, will not spam you, and will provide a secure link whenever you must enter credit card details.
• Clearly defined disputes policies and procedures in case a transaction goes awry.
• Ratings systems for buyers and sellers so you can easily identify sellers who have not lived up to their end of the bargain.
• Clearly stated fees and commissions. Most sites don’t charge anything for bidders; for sellers there is often a small fee for listing the item and usually a commission to pay when an item sells. Compare fees at a number of the larger sites first to get an idea of the going rates.
• Support for escrow services, such as Tradenable. These services protect both bidder and seller by acting as an intermediary. The buyer sends the payment plus a small fee directly to the escrow service; once the funds clear the escrow service instructs the seller to ship the goods. When the buyer receives the goods in acceptable condition, the escrow service sends the funds to the seller.
• International payment and shipping options. Most commercial sites will state whether they support international sales. On person-to-person sites it’s usually left up to the buyer whether they’ll ship the item internationally.

Becoming a bidder

Once you’ve chosen a site, you’ll need to register and, usually, provide credit card details. Some sites say they’re open to international trades and yet they only accept US-based credit cards.

Here are some things to keep in mind when bidding:

• Check out the seller’s rating, taking note of any complaints about failure to deliver or inaccurate descriptions.
• Check retail pricing of the same or equivalent items. Not all auctions offer bargains.
• Keep the final price of overseas items firmly in mind. Factor in the exchange rate (Speedbid has a converter), shipping, customs and Australian sales tax.
• Check the item description carefully. Is it new, refurbished, used, damaged? What's the packaging like? If it’s electronic equipment, is it compatible with the Australian power supply? Are all connectors and manuals included with hardware? Is the software designed for your operating system? Will the buyer ship internationally?
• If you buy from overseas, assume that it’s a non-returnable sale. While some companies will be prepared to replace damaged or incorrectly described goods, the cost of international to-ing and fro-ing really makes it a one-way deal.
• Keep in mind the difference between minimum bids and reserve prices. The minimum bid is the opening bid for an auction, which may be as low as a few cents. Many auctions also have a reserve price, which is usually undisclosed and which is much, much higher than the minimum bid. On commercial sites, check the fine print regarding reserves.
• Watch out for things that sound too good to be true. For instance, with the advent of cheap CD writers pirated software is becoming increasingly common. Chances are that the copy of Microsoft Office Professional selling for $9.95 is illegal in some way.
• Look for sellers who will accept escrow services.
• Remember that a bid is a financial commitment. There’s no backing out.
• Set yourself a maximum and stick to it.
• In my own experience as both a seller and a bidder on three different auction sites I’ve found the last two points particularly important to keep in mind. One of the attractions of auctions is that they combine the act of purchasing with the thrill of a duel. Add to this thrill the ease with which you can bid on multiple items concurrently in online auctions and you'll find you’re in a particularly seductive environment. Beware this seduction.

Becoming a seller

Selling at an auction is easy. There are only a few things to keep in mind:

• Write clearly and concisely about your item, making sure you include all relevant details and whether you'll ship internationally.
• Include a photo if possible.
• Set a minimum price that you can live with. Avoid setting a reserve if possible, as many people are turned off by reserve-priced auctions.

© 1999-2001 Rose Vines

 
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