Sunday, May 19, 2013

How does bidding on eBay work?

eCommerce existed before eBay did, so selling online wasn’t what made eBay so successful. What did was the fact that anyone could sell and buy, even small items, and the auction process, which allowed buyers to obtain items at prices that were usually a lot lesser than market-prices.

The question is, how can one bid on items when the sale is far away? The answer is computerized bidding, which eBay refers to as “proxy bidding”. The idea about proxy bidding is that you set the highest price you’re willing to pay, and trust eBay’s computers to take care of the rest. In a regular real-world auction, the auction manager raises the price slowly, in increments, until it surpasses the 2nd highest bidder…and with eBay, a computer does the same thing. When two or more buyers compete for an item, the computer sets the price to be one increment higher than the maximum price set by the 2nd high bidder. Lets see an example:

1)    Bidder no. 1 starts off and sets his maximum price for something at $60
2)    Bidder no. 2 comes in later and sets his maximum price for something at $120
3)    Bidder no. 3 arrives last, and sets his maximum price for something at $220

The auction starts off at $1 for our example. When the 1st bidder starts, he offers $60, but since he’s the first, the price is “set” at the starting price of $1. When bidder 2 shows up, the computer will bump the price up to $61…which puts it a little above what #1 was willing to pay, but a lot less than no. 2.

When Bidder 3 shows up, the computer will bump the price all the way up to $121…which pushes bidder 2 out, and makes #3 be the “winner”. However, the auction doesn’t end…it could still last a few more days.

Whenever a bidder’s offer gets surpassed, eBay alerts them via Email, and they could increase their bid. For example, Bidder 2 can increase his bid to $200. At that point, bidder 3’s offer still surpasses that, so the computer bumps it up to $201…and he’s still losing, but bidder 3 will have to pay more than #2 was willing to initially.

This “game” could go on until the auction ends (at the time it was initially set to end…which is usually 1 week exactly after it was started). The existing bidders can still make more offers, based on what kind of time they have to play around. Sometimes, they use “sniping”…which we will cover in a future post.

Want to learn more? Read more articles on my blog, or better yet, attend my public class on eBay buying. Click here to find more details and about the next class dates

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