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The Real Deal

Online auction websites have turned many sellers into instant millionaires, and allowed buyers to stumble into rare good buys. But while the possibilities are endless, there are inherent risks in online trading.
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During the mid-90s, online auction websites proliferated and introduced a new dimension to electronic commerce.  With the introduction of eBay, the pioneer online auction website, in 1995, online users were given the chance to find great deals on rare items from around the world. The excitement a buyer experiences while participating in a bidding session is another reason eBay became a household name in the United States.

Anyone can sell virtually anything online as long as the item is not considered illegal. Since the Internet crosses territorial boundaries, what is legal has been a topic of countless debates.

In an unverified report, there had been 500 million transactions held on eBay from 1995 to 2000. PowerSellersUnite.com has a monitoring tool that counts the number of listings in leading online auction websites. It reports that at any given moment, eBay has an estimated 12 million live auctions, OnlineAuction.com has 2 million, Yahoo has 750,000, and Overstock.com has 250,000.

In his book, The Perfect Store, Adam Cohen claims that eBay was a well thought-out company that grew exponentially as a result of a sound business plan and growth map, contrary to the company’s claim that it was put up originally to sell candy dispensers.

Auction websites such as eBay operate like a traditional auction house. It does not have a warehouse for listed goods, instead, the website serves as a venue for sellers to post their wares. The website publishes a list of items the public are free to bid on.

Almost all auction websites use the English Auction System, where the seller determines the initial price of the auctioned item.  The price goes up as more bids are cast, although bidding may stop when the last bid reaches the seller’s minimum acceptable price. Some sites also support the Reverse Auction System, where the buyer posts the items he likes to purchase.  The sellers bid down to gain the right to provide the goods.  The seller with the lowest price bid wins the auction. This system is typically used in business-to-business (B2B) procurement.

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Online auction websites attract more sellers and bidders because of minimal constraints imposed on them.  Items are usually listed for several days and buyers are given ample time to compare the auctioned items, and to decide whether to bid or not.

Online auction sites generate income in a number of ways.  Some sites charge buyers and sellers a fixed or a percentage-based listing fee for being allowed to post items for auction. Charges still apply even if no one bid on a listed item.

With the aid of online payment systems, sellers and buyers from anywhere in the world may participate in the auction.  eBay acquired PayPal in 2002, validating the importance of payment gateways to online stores.

Some sites offer free listings but they charge the seller a closing fee, which applies when a bid is won on the posted item.  Other sites offer fixed membership fees charged monthly or annually. OnlineAuction.com charges a monthly membership fee of $8 for unlimited posting and bidding.

Yahoo! Auctions offers its auction services for free.  They generate profit if the seller uses bundled Yahoo services like Yahoo! Small Business, and price updates for collectors using the Beckett and Sports Card Guaranty services. Other free auction sites are Bidshot.com and Buy&Sell Plus (www.buyandsellplus.com) – both generate profit by extending the auction to mobile phone users – as well as Ebay.ph, a local version of eBay, and eBili.com, both make money from advertisements on their pages.

The Trading Post (www.thetradingpost.ph) is an eBay drop-off store in the Philippines where you “drop” your items for sale. For a service fee, the Trading Post sells the item on eBay in your behalf. The store comes in handy if you don’t have a credit card or a PayPal account.

Almost all auction sites put a feedback mechanism in place as a way to allow the bidding public to police their ranks. Buyers and sellers post their experiences to warn others of fraud, the more common of which are the following:

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Bid fencing.  A buyer may ask several friends to fake a demand on the item you are selling by placing outrageously high prices. Their purpose is to scare away honest bidders. The bid fencers drop the bid at the last hour, leaving you with your unsold item. When this happens, contact the auction site immediately and report the incident. The seller engages in bid fencing when he uses another ID to bid for his own item to spike its price. The seller does this when he knows how badly you want the merchandise.  Buyers should review the seller’s history and ask a previous buyer about his or her selling practices.

Failure to pay.  Either the buyer doesn’t pay or worse, issues you bouncing checks or counterfeit money.  A safer way is to accept payment through bank transfer, while the safest is insisting on cash on delivery.

Switcheroo.  The buyer complains that the iPod you shipped to him was defective.  He ships the item back to you and demands his money back.  Before you do, check the item’s serial numbers or identification marks, because chances are, he switched your iPod with a defective unit to get one over you.

Failed shipping. The buyer claims the items you shipped never arrived and demands that you return his money.  When shipping items, go for reputable couriers that offer shipment tracking.  Avoid shipping through the local post office.
If you’re the buyer, make sure that you pay only when you receive the items because con artists also do their business in online auction sites. Don’t buy from a seller without first checking what other buyers have said about him.

Wrong information.  The seller may intentionally write false descriptions about the item for sale.  Ask questions before placing your bid! When you receive an item whose features were different from what were described, inform the seller immediately and demand your money back.  If he refuses to do so, you should report him to the auction site as soon as possible.

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Hidden fees.  The seller congratulates you in an email that you have won the bidding.  But wait, there’s more!  You have to send an extra P100 for shipping!  Before placing a bid, ask the seller about the final cost in case you win the auction.  Keep a record of all correspondences. 

Too good to be true.  You place a bid on a brand new laptop that is going at a 40-percent discount.  You win it and the seller sends the item to you at once.  You receive a brand new laptop indeed and you think you had a great deal.  Days later, the police come knocking at your door asking about a laptop shipped to your address that was bought with a stolen credit card.  You always have to use your common sense when trading in auction sites. When something is too good to be true, it usually is.

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