Origin of the Buy It Now format.
About a month ago, I read an article that argued it was better to sell through eBay's "Buy It Now" format than through the time-proven auction format. The writer made a number of well-reasoned and compelling arguments, so I decided to find confirmation.
It appears that many people accept the mantra that auction format sales have been dropping and that one day, eBay is liable to abandon the auction format entirely. That conclusion sounds a little odd to, especially once you analyze real data.
I read one article advancing that point of view, only to discover the writer had jumped to conclusions based on a single eBay promotion. Please understand that eBay is constantly running promotions of one type or another. The problem with chasing promotions to save a few dollars is that sellers can suddenly find their listings lost among hundreds of other new listings. They saved pennies on listing fees only to encounter more competition.
I found another article with the headline, Why does nobody ever bid on eBay anymore? Huhhh? Sorry to disappoint, but they are bidding.
Is the auction format REALLY dying?
When I first started looking into various rumors on January 2, the ratio of "Buy It Now" (BIN) listings to auctions was about 9:1. As I write this, (January 23, 2016), 89.3% of all items are listed in the BIN format versus 10.7% for auctions.
There IS a big difference, but...
I managed to capture as much information as possible concerning past listings and sales although eBay does not make it easy. While the available data was imperfect, it appeared that eBay usually allows users to look back over 90 days of Completed Listings. Those are listings that ended, regardless of whether items were sold or not.
During that previous 90-day period, 6,678 sales closed. 58% were BINs and 42% were auctions.
WAIT A MINUTE!
When sellers decide to list items in the auction format, they also have the option of adding a "Buy It Now" button, as long as the listing price is above the start price of their auctions. If items receive auction bids, BIN options disappear and listings revert to auction-only formats. In the event buyers click the "Buy It Now" button, sales results are listed as BIN sales, not auctions. When that happens, results might get skewed a bit toward BIN, but I doubt that accounts for any measurable difference.
The REAL reason why BINS outnumber auctions
Sellers with store presences (including me) tend to offer BIN items on a "Good Till Cancelled" basis. In other words, we list items once and they stay on eBay until we remove them or someone buys. Ideally, we will decrease prices over time because we don't want to maintain inventory forever. Unfortunately, many sellers NEVER lower prices.
The default period for auctions is 7 days. BIN sellers, however, have the option of listing items for 30 days and can even choose the "Good Till Cancelled" option. With the "Good Till Cancelled" option, offerings automatically re-list every month. Since the insertion fees are the same, most BIN sellers seem to choose longer durations for their BIN listings.
However, these different listing periods inadvertently create the very problem eBay has said it wants to correct: the perceived drop-off in the percentage of auction listings over time. Here's why.
All unsold auction items fall off eBay once auctions end in 7 to 10 days. BINs, however, tend to stay on the eBay site for 30 days and longer. Possibly indefinitely! Consequently, the percentage of unsold BINs is ever-increasing. Once we examine eBay listing rules, we realize that BINs will always outnumber auctions.
Can we confirm this theory?
We need to physically navigate through several pages in order to count BIN and auction listings that started in the previous week. It takes a while to do that, but we can see that as of today (January 23, 2016), sellers started 532 new Buy It Now listings versus 493 auctions. The ratio for the past week turns out to be 52% BINs and 48% auctions. Note that this 52:48 ratio is much closer to the 58:42 ratio we saw earlier in the 90-day collection of completed sales.
At this point, the data is suggesting to me that:
- "Buy It Now" listings might help items sell faster during the impulsive Christmas buying season. During that period, many buyers should probably not wait 7 to 10 days only to learn that they failed to win an auction item.
Now the story gets more interesting.
- BIN listings outnumbered auctions but auctions clearly outsold BINs.
While I was not terribly surprised, I did not expect that level of disparity.
- Quite obviously, auctions sell better than "Buy It Now" listings, not worse as regularly reported on the web.
What happens when we look at dollars instead of the numbers of listings sold?
Digging deeper into the data, it appears that BIN listings not only sold lower percentages than auctions, they also netted lower prices. While average ask prices for BINs and start prices for auctions are identical, BIN sales averaged 15% (!) lower than average auction sales. ($20.58 for BINs versus $24.05 for auctions.)
- Again, the data clearly indicates the auction format is a better choice overall.
Finally, let's look at total sales by price band.
- Auctions clearly outsold BINs in every price band except for the $10 to $24.99 category. In all higher price bands, auction listings netted much more money.
At this point, I'd really like to ask many more questions. Unfortunately, I would need much more data than eBay is willing to divulge. I do, however, believe we can draw a few conclusions consistent with the data we already have.
At this moment, there are 4,593 BIN listings compared to 548 auction listings of railroad certificates on eBay. Of the 4,593 BIN listings online right now, around 760 were posted in the last ten days. By subtraction, that means about 3,833 "Buy It Now" items have been listed for longer than 10 days. Obviously some BIN items have been listed for over 10 months. I suspect many have been listed for over a year or more.
If these sellers want to move their inventory, they'd better start dropping their prices!
In fact if we compare the value of listings created in the last week, I would expect to see many more BIN sales. Moreover:
- the substantial underperformance in sales suggests deep troubles with the BIN format.
While the eBay auction format seems to be selling around 48% of its lots, I personally think it should be even higher. All we need to do is notice the difference between eBay prices and prices garnered in formal auctions. Thankfully for the auction houses, eBay sellers seldom offer the same kinds of collectibles. Yes, we can blame a lot on disinterest across the entire collectors' market. No doubt in my mind about that.
Unrealistic expectations of value
Now I am not saying sellers should start running eBay auctions with 99-cent start prices. That's stupid. I'm merely saying to start auctions and BINs at reasonable prices.
I also suggest potential sellers discover what buyers have been paying in the recent past. Simply click the check box labeled "Sold listings" on the left hand side of the screen.
In conclusion, please remember that every article you read on the web needs to pass the smell test. Don't believe everything you read.