Why is “Buy It Now” killing auction houses? We need to look deeper at the concept of auctions vs. the concept of a marketplace.
Auctions are driven by engagement, while marketplaces are driven by transactions. On one end of the spectrum, $1/No Reserve auctions are definitely engaging, but they’re too risky for sellers. While it would be great if everything was listed that way, it just not going to happen. On the other end of the spectrum, “Buy It Now” is a retail price. Let’s look at these closer, as well as Reserve Pricing:
$1/No Reserve = Good likelihood of selling as the price and structure of this type of offering will promote engagement, however, it’s too risky for most sellers.
Buy It Now = This is a ‘Marketplace’, a retail price, and does not promote engagement. No engagement, less likelihood of a sale.
Reserve Pricing = Some sort of accountability is a must, otherwise the inventory is likely to be priced unrealistically, subsequently diluting the value of the auction house, and the value to all participants involved.
So that you understand, please realize that I have nothing against a “Buy It Now” option (I indicated so in the comment section here), however I feel that for an auction house to prosper, it should focus on what auctions are all about: Engagement. If the main activity and message of the auction house to it’s sellers is to add a “Buy It Now” option, literally “retail pricing”, is it still an auction house, or does it then become a marketplace?
The concept of an auction is not about locating simply one ready, willing, and able buyer. It is about two or more interested parties, who by competing, set the market value for an item at any given time. That market value in many instances is higher than what could have been a retail price. We see that time and again in auction houses where items are far exceeding pre-sale estimates.
Here at Bido, we feel that many auction houses discourage engagement, just for the sake of making transactions, or worse, to merely collect listing fees. What is wrong with this you may ask? Let’s take an example here:
Domain: XYZ.COM
Buy It Now Price: $1,000
While priced, the likelihood of sale isn’t as high, as it is a retail price, and there are other competing retail items.- (”If sells” scenario) Buyer sees listing, and clicks to purchase. One less domain in inventory, buyer walks away. Cycle ends.
Compare that with an engaging auction:
Domain: XYZ.COM
Starting bid: $100, No reserve
The likelihood to sell is extremely high if retail value is as above ($1,000), as potential buyers are looking for deals and steals.
Final price: Potentially well above the “Buy It Now” example as seen above, because of engaged bidders and heated bidding wars.- Many buyers participate in the hope of picking up a deal, however only one buyer wins. The rest are still there, engaged, and ready to explore other items.
You see, it is for your own benefit, the customer, that auction houses promote engagement. I fully understand some sellers want a “Buy It Now” option and I believe auction houses should provide that option, but certainly do not encourage it beyond a more suitable price of engagement.
There’s more to the story, like the “Why”, as in “Why do auction houses promote the Buy It Now so heavily”? It’s a little more complex, but in short (for now), it works well for them, but not so much for their customers.
Have a great day,
Sahar
I think the point about an auction vs a marketplace is extremely valid and I started thinking about it a couple weeks ago when you brought it up. Trust the market, trust the audience or don’t do auctions.
An auction only works for the seller when either a considerable number of bidders or a select group of highly motivated buyers are participating. Yes BIN is a retail environment but one that many buyers and sellers prefer. I came home Sunday from the beach and had a BIN sale followed up by another a couple of hours later. They were both mid-$XXX sales but not bad for a holiday weekend!