Thoughts on $1 Reserve Auction Fee

Stamp collectors are blessed with a relatively established market place where values and items have a history so we don't face the same kind of reserve problem.  This is what I was trying to say in my earlier post.

eBay Handling:  Unfortunately, eBay doesn't always exhibit great skill at public relations and relating to their users.  The handling of this issue has raised my eyebrows.  I do think that it is good for both sellers and buyers to de-emphasize the use of reserve auctions.  I do know that the use and abuse of reserve auctions has been the subject of many posts and e-mails to eBay for years!  I do believe that eBay knows what it is talking about when they say that reserve auctions require noticeably higher service levels than the regular auctions.  Reserve auctions have a place but not for low-priced items for which there should be broader interest.  The extra $1 probably doesn't make as much difference on an item which will sell for more than $100.

Seller Arguments:  The argument that the use of reserves protects against eBay site problems doesn't strike me as being much good since eBay has fairly regularly extended affected auctions.  And eBay shouldn't be responsible to sellers when my ISP is unavailable or the Internet is overloaded.

The argument that one has to use a reserve price in such a fashion as to cover the cost of the item only applies to sales where the only way to get bidding activity is to get "flyer" bids to start the process.  This only applies to unestablished, inactive, or immature markets.  One way of looking at this is that these bids are somewhat like shill bids whose function is to show that there really is enthusiasm for this item but not necessarily to raise someone's price.  If the market knows what the item is worth, prices will rise to meet the "market value."  If you don't have the "eyeball" traffic, you won't get the price you expect, either.

I think most everyone agrees that setting a reserve excessively high to find out who is the highest bidder and using that knowledge to negotiate a side deal outside of eBay is not quite right.  eBay has always agreed that contacts after the sale between the parties on a reserve auction that did not meet the reserve are all right.  I'm sure they also have no idea how they would police that activity, either.  Use of the high reserve to get a $2 (now $3) market appraisal is little questionable as well.  It is particularly true when one realizes that such auctions often do not get many fair bids by willing buyers.

Woe to the seller who paid too much for his merchandise.  And, woe, too, to the seller who is trying to buy at retail and sell at a premium.  Woe, too, to the seller who doesn't know what he is buying or selling and is working on the " Greater Fool Theory"  that sooner or later someone will come by and pay more for the item than he did.  Sometimes prices greater than retail are achieved, but one should never expect it.  As we all know, a lot of stamp items get priced above retail and do not sell.  Those that do are not likely to be sold to sophisticated collectors or repeat buyers.

Ken does well, I think, on his "no reserve, 1¢ starting bid" auctions because he has established a spotless reputation and offers good material, well-described in an established market.

Alternatives:  I thought there were two sensible alternatives to the reserve auction $1 fee which were posted here on the stamps board.  Anne suggested that the $1 be considered a prepayment against the eventual commission.  Thus, if the item sold for $25 (with a reserve of $20 against a $5 opening), the fees would be: listing fee $ .25, reserve auction fee $1, balance of commission $ .25.  This fee would result in no change for actual sales.  Matt described this as follows: "Anyway--did anybody propose simply making the $1.00 reserve fee waivable if the reserve is hit? That way the people who are unrealistic, or simply too high, pay the fee but the seller who sets a reasonable reserve for an item that then actually sells is off the hook..."   Another suggestion by Karl was that a commission be charged on bid the item received even if it didn't sell.  In effect, the bidder was paying for the privilege of buying his item back.  In the example, and if the item received a bid of $15 (but less than a $20 reserve) the fees would be: listing fee $ .25, Commission $.75.  If the item got to $20 to meet the reserve the fees would be calculated as usual -- $ .25 listing and $1 commission.  Let's face it, eBay users get a lot of advertising mileage for their listing fees.  The increased relistings associated with the lower success rate of reserve auctions makes them an even cheaper advertisement.

Other Sites:  BTW, I have visited one of the suggested alternative sites earlier today -- "looks just like eBay" -- and found 17 stamp lots offered (including 1 in Philately category) from 5 different sellers with 3 bids in total.  It's a long way from being an advantageous site for stamp sellers.  I have regularly visited other sites and those which are trying to emulate eBay have a long way to go in material quality and traffic, IMO!

Just my ½¢.
jimbo