What Starting Price Should I Set for My eBay Item? An Introduction to eBay Pricing Strategies.

12 May

The price you decide to start your eBay auction at will greatly affect the number of views, bids, and most importantly the final selling price of your item.  There are a variety of price point strategies sellers use to try to get the highest price possible.   When selling at auction, you can set your starting price well below what you determine the value of the item is, set it at the minimum price you are willing to accept for the item, set a low starting price with a reserve, or set a low starting price with a “Buy It Now” attached.   The best strategy to employ will depend on a number of factors including what kind of items you sell, how comfortable you are selling on eBay,  how much you’re willing to pay in fees, and whether or not you want to guarantee the item will sell.

Do Your Due Diligence By Searching Completed Listings

The most important aspect of setting a starting price is finding out what the item has sold for in the past.  Chances are that whatever you’re selling has been sold on eBay before, and if it hasn’t, then there are similar items out there.  If you are unsure of how to check completed listings, check my Item Title Guide for complete instructions or on eBay.  You can find out what the seller’s starting price was by clicking “Show” after “Listing and payment details.”

This shows you the starting price as well as the duration of the listing and what day and time the listing ended.  These are also important details to take into consideration and I’ll be discussing them in a future article.  Take note of the amount of bids and scroll down to the end of the listing and see if there is a visitor counter.  This will give you an indication of how popular the item is with bidders.

Start Low, Sell High

Items with low starting prices will almost always receive more views and bids than auctions with high starting prices.  Buyers on eBay are looking for a bargain and a low starting bid will attract the most bargain hunters as well as serious bidders looking to win the auction.  Buyers are also more likely to “watch” your item if the current price is low, because the item is still in their price range and they’re willing to bid.  The goal is to get as many different bidders as possible bidding on your item.  There have been numerous studies done on the psychology of auctions.  When bidders are bidding against each other, they want to “win” the auction by bidding higher and higher amounts.  The bidders’ emotions get the best of them and they are willing to bid more than they were planning to so they aren’t “losers.”  This is why it’s important to get more casual bidders bidding as well.  More often than not, a bidder who is only casually interested in an item can drive the price up substantially.  In addition, items with low starting prices receive more bids than those with higher prices.  This makes the item seem more valuable and in-demand than higher priced items that have not yet received a bid.  When bidders see an item without a bid, they assume that there is something wrong with the item or other people don’t want it.  No one wants something no one else wants, which makes it harder to sell an item with a higher starting price.  A low starting price also helps guarantee the item will sell.  If you want to be rid of whatever you’re selling or need the cash, your best bet is to start the item at a lower price.  Your item will be much more likely to sell and you won’t have to keep paying eBay fees to relist the item.

The key to deciding if you want to set a low starting bid is figuring out if the item is in high demand.  In order for the price to increase significantly, there must be a number of bidders competing to purchase the item.  When you searched for completed listings did you notice a lot of listings?  When you search active listings are there a lot of items listed and a lot of bids on those items?  Are the prices near what you were expecting to be able to get for the item?   If the answer is yes, then you have an item that is likely to receive a lot of interested buyers and you have a better chance of them getting into a bidding war that will drive the price higher.  If you’re selling antiques, collectibles, or something else that might not draw the same kind of attention, you probably don’t want to start the listing at such a low price.  The problem with starting items at low prices is that they can also end at low prices if you don’t get enough interested bidders.  If you only end up with one interested bidder, they may have entered a maximum bid much higher than the item sold for, but because no one challenged them they got the item for the lowest price possible.  This is one of the worst things that can happen to a seller on eBay, so figuring out what the demand is on the item you’re selling is of the utmost importance.

If you decide to set your starting price well below the value of the item, I suggest setting it at 99 cents rather than a higher minimum.  EBay Insertion Fees are based on the starting price of the auction.  If you expect your item to receive a lot of bids and the price to increase significantly then there is no reason to set a higher price.  You’ll end up paying more in fees, fewer bidders will click the listing, and your high priced item will look odd sitting at $25 with no bids.

Start Your Listing at the Lowest Price at Which You’re Willing to Part With it

The second common pricing strategy is to set the price at or around the minimum price you are willing to accept for the item.  This guarantees that your item will sell for the minimum amount you are willing to receive or it will end without a sale and you’ll have the opportunity to relist it or reevaluate your price point.  This method is best for new sellers who may not be familiar with all of the tools necessary to bring in a lot of interested bidders.  It also works well for sellers who aren’t sure how many bidders will be interested in the item.  If your listing lacks pictures or a clear description then you may also want to raise your starting price as fewer buyers will be interested in a poorly constructed listing.  If you have doubts about your listing or description, you may not want to risk bidders passing over your item, even if it’s otherwise popular.  If this is the case, keep reading AuctionCope ^_^  Finally, eBay is largely “hit or miss,” even when you think you’re doing everything right.  Even if your listing generates a ton of interest, the bidders might not be there when it comes time for the auction to end.  For this reason, setting a higher minimum price is a smart choice if you aren’t willing to risk putting the price in the bidders’ hands.

The downside of this pricing strategy is that bidders are less likely to bid on the item, which means they probably won’t be present at the crucial last minute of bidding.  On average, auctions that start at low starting prices end higher than those auctions that start with a higher starting price.  Nonetheless, getting $100 for your item instead of $110 is better than the auction ending at 99 cents because you only received one bid due to some mistake in the listing.

When Should I Include a Reserve Price?

The third common auction strategy is to list with a low starting price, but include a higher reserve price <a href=” http://pages.ebay.com/help/sell/reserve.html”>Reserve Price</a>.  The reserve price represents the lowest price at which you’re willing to sell an item.  If an item has a reserve price, it shows up in a buyer’s search results in red next to the current price.  When entering a bid, potential bidders will see that there is a reserve price, but that price will not be shown.  Once the reserve price is met, there will be no indication in the listing that there ever was a reserve included in the listing.  If the reserve price is not met, you are under no obligation to sell the item for the lower price.  When should a reserve be used?  Never.  The only reason reserve auctions exist on eBay is because they’re a cash cow.  First, your insertion fee is based on the reserve price, not on what you start the auction at.  If you’re selling your Xbox 360 with a reserve price of $200 and a starting price of 99 cents, you pay the fee as though the starting price is $200.  Second, there is an additional fee of $2 for reserves under $200 and 1% of the selling price of the item for reserves above $2, up to a $50 fee.  You used to get the reserve fee back if your item sold, but that is no longer the case.  Third, if your item doesn’t sell for the reserve price, eBay will charge you to list the item again.  Fourth, a high reserve means a higher final value fee for eBay.  See a pattern here?  Reserve price auctions are ridiculously expensive, and only get more expensive as you’re forced to relist the item because no one was interested in bidding.  Bidders aren’t interested in bidding on items with a reserve price because there’s no guarantee that the item will sell for the price they’ve entered, even if they’re the highest bidder.  Bidders don’t want to waste their time bidding on an auction with a mysterious reserve price when there are likely a great number of items they can bid on for much less.  EBay will try to convince you that an item with a high reserve and a low starting price is more attractive to bidders than one with a high starting price.  Don’t be fooled.  EBay bidders aren’t interested in the hassle of dealing with reserve price auctions.  The only reason reserve price is still an option is because it nets eBay so much revenue.

Should I Add a Buy It Now to My Auction?

The “Buy It Now” feature on eBay is handy in a number of situations.  If you have the minimum feedback requirement of 5 and accept Paypal, or 10 and don’t accept Paypal, you can choose to include a Buy It Now price on your auction.  This gives buyers the opportunity to purchase an item immediately without risking the price going higher than the Buy It Now or having to wait for a long auction to end.  The downside of the Buy It Now is that it’s visible to buyers for an uncertain amount of time.  In the past, the Buy It Now price disappeared immediately after a bid was placed.  EBay since changed that policy because too often a bidder would bid the lowest amount possible in order to remove the Buy It Now and have the opportunity to get the item for much less.  Now, once an item is bid up to about half of the Buy It Now price, the Buy It Now usually disappears.  If the current price doesn’t approach the Buy It Now price, the Buy It now disappears a couple of hours before the auction ends.  This isn’t always true though, as sometimes the Buy It Now option will remain even after the item is bid up near the Buy It Now price and sometimes it disappears long before an auction is due to end.

Buy It Now fees are relatively inexpensive, maxing out at 25 cents for Buy It Nows over $50.  There are a few Buy It Now strategies sellers use and several things to consider when setting a Buy It Now Price.  First, you have to decide if you want to set a Buy It Now price that a bidder is likely to use or if you want to set the Buy It Now price much higher in order to make bidders think that the item is worth more.  Let’s say you’re selling an Xbox 360 and a fair price for it based on your research is $200.  If you have a Buy It Now price of $200, bidders who see that price are not going to bid more than $200 and will likely bid significantly less in order to get a “bargain.”  This means that if no one takes you up on your Buy It Now price that the price you ultimately get for the Xbox will be less than the Buy It Now price.  If the Buy It Now price disappears early on in the listing, then you have a better chance of receiving $200 or more for the Xbox, but you’ve wasted the Buy It Now fee.  If you list the Xbox with a Buy It Now of $400, you’re not likely to get anyone to purchase it for that price, but it may entice bidders who see it to bid more, thinking that $200 is a great deal compared to the $400 original asking price.  On the other hand, a price that is too absurd will make bidders think you’re crazy and potentially less likely to bid.  The third way I don’t recommend.  Some sellers will list with a starting price of $199 and a $200 Buy It Now.  They do this in order to get their listing in search results of buyers who list only auctions and only Buy It Now listings.  I don’t recommend doing this because bidders who are looking for auctions with low prices aren’t going to be interested in bidding a high amount.  Bidders looking for a Buy It Now of $200 might be interested, but you may as well have sold the item as a Fixed Price listing instead.  The final value fees may be higher for Fixed Price listings, but relisting fees add up too when your item doesn’t sell for the high auction or Buy It Now price.  Plus, if you have more than one Xbox 360 you can use a multiple quantity listing in order to get <a href=”http://www.auctioncope.com/guide/19″>Higher Best Match Results</a>.

When selling popular items, listing with a 99 cent starting price and a moderately high Buy It Now is usually your best bet.  This combination will get the most bidders interested in your item and give you an opportunity to sell the item for a premium price.  If you’re unsure of whether or not a lot of bidders will be interested in your item or otherwise concerned about what the final price of the auction will be, it may be wise to start the auction around the lowest price you’re willing to accept for the item.  Reserve price auctions are too expensive and make bidders much less likely to click your listing, let alone bid.  It’s wiser as well as cheaper to start the auction bidding at what you would have set as the reserve price.  Do your research and pay attention to what successful sellers on eBay are doing and you should be able to emulate their success.

One Response to “What Starting Price Should I Set for My eBay Item? An Introduction to eBay Pricing Strategies.”

  1. Mary 25. Sep, 2011 at 11:13 pm #

    Thanks so much. I recently got rid of a book that was supposed to be all about “power-selling” on Ebay. It was outdated & unhelpful. This is very helpful.

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