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Bidding online for the hard-to-find
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December 17, 1999: 7:37 p.m. ET
Online auctions offer bizarre to expensive items … yours for a bid, but buyer beware
By Staff Writer Michele Masterson
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NEW YORK (CNNfn) - Remember actress Lynda Carter? Sarah McMane does - vividly. The Nyack, N.Y., schoolteacher loved the TV show Wonder Woman, so much in fact that she collects all things related to the series. So, when scouring flea markets yielded little, she turned to eBay.
"I grew up in the ‘70’s and loved that show,” said McMane. "Since I can remember, I collected Wonder Woman stuff, but I was getting frustrated at how little the flea markets had or found their prices too high.”
"I decided to try eBay and was amazed at what they had to offer! I even got a Wonder Woman baking tin that bakes cakes, and I’ve never seen that before,” McMane said.
Welcome to the world of online auctions. Almost anything you can conceive of is up for bid, from Pez candy dispensers to 1700s Queen Anne furniture to the occasional human kidney.
This burgeoning sector of electronic commerce is poised for phenomenal growth. In 1998, Web auction sites generated $1.4 billion in consumer-to-consumer sales. By 2003, Forester Research in Cambridge, Mass., places that figure at a staggering $19 billion. It is an industry that has caught the attention of not only rabid Beanie Baby collectors, but also venture capitalists in Silicon Valley and watchers on Wall Street.
Types of auctions
The main market segments in the online auction arena are business-to-consumer and consumer-to-consumer. Currently the customer-to-customer auction sector is more prevalent with sites such as California-based sites eBay (EBAY) and Yahoo! (YHOO) auctions and Seattle, Wash.-based Amazon (AMZN) and a slew of others.
However, retailers are just beginning to catch on to this commerce variation. New York Internet researcher Jupiter Communications (JPTR) estimates that in the business-to-consumer online auction sector, 1.2 million online auction bidders purchased $461 million worth of goods in the U.S. in 1998. The research firm expects this figure will grow to 6.5 million, spending $3.2 billion in 2002.
Source: Gomez Advisors
Consumer-to-consumer auctions
Generally, online auctions echo their offline counterparts: a seller lists an item for sale and bidders place offers until the item is sold to the bidder with the highest price. On the Internet though, bidding is conducted within a limited time frame; after a certain amount of hours or days, bidding is closed, whether an item is sold or not.
There are several different types of online auctions:
- Dutch auctions: geared towards sellers with multiple identical items. Sellers list a starting bid and the quantity of items up for sale. Bidders name a price and the amount they wish to purchase. In the end, all winning bidders pay the same price.
- Reserve auctions: let sellers specify an auction price to guarantee an item doesn’t sell for less than the seller wants. The reserve price is more than the minimum bid price and on some sites it's not disclosed to buyers.
- Reverse auctions allow buyers to list items wanted for purchase and competing sellers bid, offering the lowest price for that item. This is the scenario Priceline (PCLN) employs, offering travelers to "name their own price” for airplane tickets, among other products, and the winning airline is the one offering the cheaper price.
According to Internet analysts, there are now several hundred auction sites online, ranging from one-stop destinations such as eBay, upstart Fairmarket in Woburn, Mass., and Auctions.com, a division of Classified Ventures in Chicago, to offerings by Waltham, Mass.-based Lycos and smaller, niche sites that specialize in items such as coins and automobile parts.
Source: Gomez Advisors
Bidding and selling online
Many auction sites list buying and selling procedures. Here are some basics:
Fees:
- Browsing and bidding, in general, is free.
- Sellers are charged fees to list their items and a cut of their profits go to the auction host site. eBay charges sellers what they term an insertion fee, anywhere from 25 cents to $2, depending on how high an opening bid is. eBay also charges a final sale price fee at the end of an auction, ranging from 1.25 percent to 5 percent of the final sale price.
- Bidders incur costs with shipping charges and if they pay via an escrow service, which is a third-party service that holds payments until the buyer receives the product from the seller.
Most auction sites require users to register, like Yahoo! and Lycos by filling out name, address, e-mail address and a password. The companies say that by registering, a safer environment is created by being able to verify buyers’ and sellers’ identities.
Once registered, bidders can scroll through various product categories until they see something they want to bid on. On eBay, the user then enters a bid amount and hits a "review bid” button. After entering identification and password, users can enter the "place bid” button. That bid is posted online.
Until an auction closes -- sometimes over the course of several days -- bidders are notified through e-mail if they are the highest bidder or another user has outbid them. Once the auction closes, the winning highest bidder has to e-mail the seller within three days in order to claim an item. Usually, once you bid, you buy, if your bid is accepted.
An antiques collector from Pleasantville, N.Y., who did not want to be identified, shared her experience of bidding on eBay:
"It can be very seductive and you can get hooked on it, but I’ve never had a bad experience. The minute my check clears I get the item shipped to me,” she said.
"I used to really watch the bids and check my e-mail constantly to see if I was the highest bidder. Now I just let it go - I put in what I think is a fair price and check my e-mail once the auction closes. That’s it. Otherwise you can get too emotionally involved.”
Selling
Selling involves some more effort and of course fees. Yahoo!, eBay and Amazon auctions require sellers not only to register, but also provide credit card information in order to verify identities, a practice that is catching on with auctions sites.
Sellers fill out product information, such as title of item, description, category listing, shipping policies, length of auction, any opening bid requirements, and can also upload pictures of the product for sale.
Sellers must review information with bidders, usually via e-mail, such as final cost, shipping charges and where payments should be sent. Once the bidder meets the payment terms, the seller should send out the item. eBay reminds sellers that an auction is a binding contract between sellers and winning bidders.
Fraud watch
If you are in more of a flea market mindset rather than a fan of mass-market merchandise, auction sites may be very appealing because you can scroll through thousands of Web pages offering everything from a secret remote control Shakespeare bust to a Cartier Belle Epoque diamond and enamel pocket watch. But before you bid on that 1987 Porsche 924S with only 13,475 miles, arm your self with some online auction safeguards.
The Federal Trade Commission has issued guidelines online auction consumers should follow, such as:
· Pay by credit card: if products are damaged, not what you ordered or never received, you can have the credit card issuer challenge the seller.
· Pay through an escrow account for big-ticket items: setting up an account doesn’t cost much and is well worth it for pricier merchandise.
· Ask the seller about follow-up service: what can you do if you have a problem?
· Avoid impulse bids and purchases
· Ask about return policies
In addition, if you have a fraud complaint, the FTC advises contacting them either by filling out an online complaint form or calling 1-877-FTC-HELP (382-4357). Although the agency does not investigate individual complaints, it will take action against a company if it detects a pattern of illegal activity, a spokeswoman said.
Wonder Woman aficionado McMane also advises buying only those items shown in photos to make sure you know what to expect before you bid.
Researchers Gomez Advisors in Lincoln, Mass., recently released the following top auction sites ranked by surveyed users who rated them by customer confidence.
Source: Gomez Advisors
According to eBay spokesman Kevin Pursglove, eBay offers users some additional safeguard measures. As of September 1999, anyone who wants to be a seller on the site must provide credit card information in order to prove their identity. Sometime next year, the company is launching the Verified eBay User program: working with e-commerce authenticator Equifax Secure Inc. , users can voluntarily submit personal information, such as Social Security number to establish proof of identity. Such as measure adds considerably to the trust factor between seller and buyer, Pursglove said.
Amazon auctions also provide a free, limited warrantee against fraud. An auction item featuring the Amazon.com A-to-Z Guarantee logo covers the buyer for up to $250. If a buyer paid the seller using Amazon’s 1-click technology featuring Amazon payments, which enables credit card transactions, the coverage jumps to $1,000.
Feedback forums allowing buyers to rate sellers are also provided. An authentication and grading resource is also available to get opinions from experts to determine the value of an item up for bid.
Internet research firm Gomez highlights Amazon.com’s auction site’s exceptional customer service, noting that e-mails were promptly answered and that customer service representatives were available 24 hours a day, seven days a week.
All about eBay
eBay , one of the first auction sites online, was launched in 1995 by Pierre Omidyar and business partner Jeff Skoll in San Jose, Calif. According to Omidyar’s biography, the company was borne out of frustration: his fiancée at the time (now wife) was a Pez candy dispenser collector and lamented the lack of trading partners in the San Francisco area.
Omidyar created a Web site where people could find other people with the same interests and decided to use an auction format since it was simple and efficient. The rest is history. Spokesman Pursglove estimates eBay rakes in $8.1 million in gross merchandise daily. And in case you were wondering, the site at last count boasted 2500 Pez candy dispenser-related merchandise on 51 Web pages.
Sue Rothberg, online auction analyst at Internet research firm Gomez Advisors said its research places eBay with a 90 percent market share in the consumer-to-consumer arena.
Gomez estimates sales in that sector will hit $4.5 billion by the end of this year and climb to $9.2 billion next year, reaching $15.5 billion in 2001.
What makes eBay so popular? According to Rothberg, getting online first gave them a huge jump as well as the novelty factor of the unusual items up for bid.
"People really look for bizarre items online,” Rothberg said. "And you don’t need a lot of money to get started.”
"eBay also has a huge advantage in that it is a direct destination site,” said Rothberg. "People go to eBay for auctions and only auctions,” she said, in comparison to the portals, which offer buying and selling as just one of many features.
Yahoo! expands the auction model
Internet portal Yahoo! recently launched Yahoo! Merchant Auctions, which allows businesses -- from single, "power-sellers” or high-volume merchants -- to larger firms, to offer their products to consumers.
Tony Surtees, vice president and general manager of the Commerce Group at Yahoo! said the new business-to-consumer auction feature offers buyers a wide variety of items that extend beyond just the collectible area.
"What we’ve done is look at the whole variable pricing model and apply it more broadly,” said Surtees. "Yahoo! allows sellers and buyers to move from one purchase mode to another, offering them choice and saving time.”
For example, Surtees said, if someone is searching for a particular item offered by one of Yahoo!’s 8500 merchants or in its classifieds and can’t locate it, they can jump over to the auction site to search for it there. The customer registration information is already set up and stored when a user first registers with the portal.
"We’ve watched the marketplace grow and are offering buyers and sellers more sophisticated levels of tools and support and integrate them in one place,” Surtees said.
According to Surtees, Yahoo! auctions has 1.2 million auctions taking place daily.
For sale: one working kidney
While hard-to-find, specialty items are part of the auction site’s appeal, eBay in particular has fallen victim to prank posts and sellers trying to offer illegal items for sale -- such as a human kidney, an unborn baby and even eBay itself -- which only received a top bid of $1.25 for the company.
Items that may run afoul of eBay rules or U.S. laws fall into three categories: prohibited, questionable and potentially infringing. Prohibited items violate U.S. law, such as trying to sell drugs, body parts or firearms.
Questionable auction items that may be in poor taste, such as adult material, and come with their own set of listing rules. For example, videos of TV shows may potentially court copyright and trademark violations. Company spokesman Kevin Pursglove said the auction firm employs several people to monitor postings, but largely depends on other users to report questionable sale items.
Yahoo! auctions offer similar safeguards and allows users to provide feedback through its ratings area, an opinion feedback feature allowing buyers to comment.
However, while the pranks and pitfalls on online auction sites do exist, users can derive a lot of entertainment value and find that matching teacup from Aunt Sally’s china collection. Just make sure you do your homework ahead of time, just as you would in the offline retail world. 
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