Apparently the beasts are back in charge:
Now we’re beginning to find out that eBay’s seemingly revolutionary core – the online auction – may have been a fad all along. As Business Week reports, eBay’s auctions are “a dying breed.” Buyers and sellers are reverting to the traditional retailing model of fixed prices:
Auctions were once a pillar of e-commerce. People didn’t simply shop on eBay. They hunted, they fought, they sweated, they won. These days, consumers are less enamored of the hassle of auctions, preferring to buy stuff quickly at a fixed price … “If I really want something I’m not going to goof around [in auctions] for a small savings,” says Dave Dribin, a 34-year-old Chicago resident who used to bid on eBay items, but now only buys retail …
At the current pace, this may be the first year that eBay generates more revenue from fixed-price sales than from auctions, analysts say. “The bloom is well off the rose with regard to the online-auction thing,” says Tim Boyd, an analyst with American Technology Research. “Auctions are losing a ton of share, and fixed price has been gaining pretty steadily.”
Hat tip to Andrew Sullivan. Chris Masse sends me more.
Move along; there’s nothing irrational to see here. Auctions take time (to find out whether you won) and have uncertain results. Add in the costs of investigating each seller and item, which costs must be paid once for a fixed-price buy-it-now deal but potentially repeatedly for an auction, and there are a lot of advantages to just buying the damn thing outright.
The interesting question is why the shift? Why now? Why is the equilibrium between auction and fixed-price sales on the eBay platform changing?
My wife says she is done with Ebay after she ships her current round of auctions. Changes made by Ebay a few months ago have tilted the balance of power too far to the buyer. The sellers ability to enforce auction terms and decent behavior via the feedback mechanism has been limited, although buyers are still free to slam sellers whenever they want. This has resulted in buyers trying to renegotiate terms after the auction closes, using the threat of bad feedback as leverage.
Most goods sold on Ebay, like used videogames, have well known and defined marketprices. So the minimum bid is usually so close to the marketprice, that the hassle of an auction isn’t worth it and people prefer to buy at fixed prices. Auction only makes sense on rare items.
Now we’re beginning to find out that eBay’s seemingly revolutionary core…
It seems to me that eBay’s revolutionary core isn’t the auction but the combination of extremely low barrier to entry for vendors, the buyer-seller matching process, the transaction handling, and the rating system.
Also, I doubt that the decline in auctions makes for stickier prices. Even ‘buy it now’ items are sold in small lots and I am sure that vendors constantly check the prices being charged by the competition (which buyers do, obviously).
“you too might reduce your participation in eBay”
Then you would be an idiot since Ebay is one of the best ways of dealing with cost of living increases. I can usually purchase stuff on ebay for at least 30% less than in stores and I don’t have to waste my time driving. For some things the price differences are massive. On Ebay I can get hdmi cables for less than $10 dollars and at FutureShop I would pay about $70.
The article did not say that there is any decrease in participation on Ebay. It only said that the auctions are losing market share relative to fixed price sales.
This makes sense. I use Ebay at least a few times every month and I never ever use auctions because they are time-consuming and have an uncertain outcome.
BTW, there is no price stickiness on Ebay because for the most part almost all the markets for fixed price goods are very close to perfectly competitive.
Auctions solve a certain problem (e.g. an individual buyer or seller may have no idea how valuable, or valueless, something is). The problem isn’t going away.
Ironically, the market formed by eBay may provide much of that previously lacking information. Once I had no idea how much or little [some item] was worth, but after seeing repeated eBay auctions for [said item] I have a much better idea of what price I should expect to be able to buy or sell it for.
Doesn’t auction theory (for a textbook summary, see Michael Baye’s Managerial Economics and Business Strategy, chapter 12) suggest that auctions are simply another mechanism allowing sellers to engage in price discrimination? And, if buyers figure that out, is it surprising that they migrate to fixed-price sellers? It’s only the (false) belief that auctions can, over the long-run, allow buyers in general to pay lower prices that allows them to persist.
Note that this is true mostly in cases in which sellers have multiple, more-or-less identical units of a product for sale. Auctions are likely to continue to flourish (albeit likely in more specialized venues than eBay–there’s a huge, and growing, number of fine art auction sites) for unique items.
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Much of the appeal of online shopping is instant gratification. Having to wait for an auction to end, and being uncertain of the result, cuts into that.
I just discovered that eBay has a third option besides bidding in an auction and “buy it now”: “best offer”. You make an offer and the seller has two days to accept or reject. It splits the difference between bidding in an auction and waiting to see if you’ve won or lost, and paying full pop for the assurance that you’re definitely getting the item right away.
I was interested in an item that the seller has both in her store and up for auction. The reserve was 65% of the Buy It Now price, I offered 85% and got a positive response within an hour.
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