Wednesday, June 8, 2011

E-Commerce and the Great Online Auction Rip-off

For those that may have thought this blog died with my rant on the banning of imported clove cigarettes, you’re wrong. The cloves didn’t die, they just morphed into “little cigars”; cigarettes with a cigar-paper type outer wrapping. The govt will probably try and find a way to ban them too, further torpedoing the Indonesian small business export economy, but that’s another topic for another time.

The main reason I haven’t been posting is that I’ve been busy, very busy with business. If you’ve read previous posts here from awhile back, you know that my business is online selling. At the time, a site called Bonanzle (rechristened Bonanza) was poised to be my major outlet, replacing the top dog,- eBay. Now I can no longer consider it to be the major outlet for my purposes. For the type of merchandise I deal in – scarce and often rare, antiquarian books, vintage magazines, ephemera, stamps, comics, uncommon vinyl and 78s, photographs, postcards, etc., the auction environment is the best choice for getting top dollar, and not have your stuff sit around doing nothing but look good on display in an e-Store. There are hundreds of sites that do this with fixed price listings. Bonanza is one of them. Now I’m not saying that’s bad; for some, this works out very well. Bonanza has some very positive things going for it- lots of items on display on their front page, no commercial ads, a Google and Bing tie-ins, the ability to import your listings from eBay and Etsy, no listing fees, low final value fees for sellers and no fees to buyers, free picture hosting for up to 4 photos, the list goes on and on. However, as the site has grown, with nearly 3.5 million items listed and over 300,000 users currently ( including buyer members and sellers), there is a greater likelihood for sellers and their items to get “lost in the sauce,” especially if they don’t have the metrics in place for optimization in Google and Bing searches. Also, outside promotion (a lot of work, often accompanied by spending money) and networking is a requirement if a seller is looking to do well on this site.

Most sellers on Bonanza have what I would call a handful of items in their booth- 500 or less. (Even my booth, Windhamearl’s Black Lodge, falls into this category.) These are part-time dilettantes for the most part; people who sell for a little bit of extra cash now and then. I imagine that few of them put in the self-promotion effort required to sustain a business operation on a day to day basis. They may have tried this ‘n that in spurts, but have resigned themselves to occasional sales. The site also tends to have a proliferation of “garage-sale merchandise”. In randomly visiting a booth, I found 6 Danielle Steele HC novels for 4 bucks, a set of 8 vintage animal salt and pepper shakers for $4.76, and an 1893 Harper’s Bazaar magazine in poor condition for $4.76. Seems like a garage sale to me. That’s not to say that there aren’t sellers who have rare and valuable items. There certainly are. I would hazard a guess though that these sellers are not using Bonanza as their primary outlet, and have their fingers in a number of other sales pies. Overall, for a site whose motto is “Everything but the Ordinary,” there sure is a lot of ordinary merchandise there.

So the major thing that Bonanza lacks (for me) is an online auction environment. If there ever were any aspirations of Bonanza entering the online auction trade, I think that ship has sailed now that they are very comfortable with their business model. If you don’t like it, go sell somewhere else. But where? eBay? From a “been there, done that” seller’s standpoint, you probably know that eBay ain’t what it used to be. Not only has eBay’s new policies driven sellers away in droves by de-fanging the feedback system and cowing sellers with their DSR ratings, but now they have also employed new tactics to “fee to death” the small to medium seller. True, for insertion fees, one gets 50 free listings per month (that’s not much except for the merely casual seller), but after that, it’s full charge. eBay keeps this money whether you sell or not. But that’s not where the real money is anyway. eBay makes money on the “add-ons” to insertion fees, listing upgrades (subtitle, bold, listing designer, etc.), picture hosting fees (anything after the first one will cost you), and reserves (the optional price you set that your item can’t be sold under). This is all before “Final Value” fees, or what you have to pay eBay when your item sells. For auctions, it is a flat 9% with an upper limit of $100. In order to decrease eBay’s percentage, your item needs to sell for a good deal more than $1112.00. The average seller isn’t selling high ticket items in the $1200 - $12,000 range. But wait, it gets better!! (For them, not you).

eBay now also charges you a 9% fee on your shipping charge. eBay’s rationale for this according to eBay Selling Experience VP Todd Lutwak (now there’s a name for ya) is "The key takeaway here is, buyers tell us they love free shipping. And we wanted to put a system in place that rewards sellers who offer free and low-cost shipping, and we think that this change aligns the incentives among the selling community." So Todd, what you are saying in essence is, that you’re now going to penalize sellers who charge for shipping by tasking a cut of said shipping charge across the board because your market research shows that buyers luuuvvv free shipping. Do you have any fucking clue that shipping costs sellers money? Wasn’t free the last time I went to the post office. Do you think that by taking a % of the shipping cost you’re going to encourage sellers to hand out free shipping to engender more sales? I seriously doubt it. Where is a seller going to make up that money, in the cost of the item? That’s money back to eBay again. In this same article, Lutwak also said “eBay research suggests that sellers who move from a model of charging shipping & handling to a free-shipping model will find it easier to qualify for eBay Top Rated Seller, making them eligible for a 20% discount on their fees.”

What Toddy-boy isn’t mentioning is that in order to qualify as a Top Rated Seller on eBay, one has to be a PowerSeller with a minimum of 100 transactions and $3,000 in sales from U. S. buyers over a 12 month period, PLUS meet their convoluted DSR standards. So now, a seller has to eat the shipping cost to jump through the eBay system hoops in order to qualify for your blue-ribbon “Top Rated Seller” logo and a fee discount? If this isn’t elitism I don’t know what is. Look, I’ve been a “Top Rated Seller” and a Powerseller on eBay, and that didn’t do jack-squat for my sales, nor for a number of other eBay sellers I’ve spoken with over the course of the last few years. If a buyer cares about anything, it’s your feedback. Most buyers aren’t so stupid as to think they’re getting something for nothing with free shipping. What buyers want is “fair shipping”; a reasonable cost with items shipped in a reasonable amount of time, and packaged well enough so whatever you buy isn’t damaged. Charging $25 for shipping a small item is not reasonable (unless it’s overnight express), any idiot knows that, and who would fool enough to buy from someone who charged that? What you’re doing here my friend is double-dipping. You’re gouging the seller on a cost she has little control over. Then, you’re doing it again with your financial arm, Pay Pal. Pay Pal doesn’t deduct shipping cost, or even sales tax from the fees they charge to receive money. That’s quadruple-dipping. eBay keeps saying that they’re listening to their buyers, but it is obvious they don’t give a flying fuck about their sellers, and that’s why sellers keep leaving in droves. The quality of buyers too has severely depreciated in the categories of merchandise that I sell. Selling on eBay now is a cutthroat business, and the throat that is getting cut is likely your own.

Let’s look at another “Big Dog” for online auctions – Heritage Auctions. This site specializes in Art, Antiques, Rare Books, Comics, Coins, Entertainment Memorabilia, Fine Wines, Jewelry, etc., etc. These guys sell a lot of stuff for a lot of money. They’re the world’s largest collectibles auctioneer and the third largest auction house with over $700 million in annual sales and well over half a billion online bidder members. They are both a Live and Internet auction house; have been around since 1976 and online since 1999 or so. WOW! Right up my alley! With that kind of presence, who would want to buy or sell collectible stuff anywhere else? Well, there is a catch- their fees. A Buyer’s Premium is 15% to 19.5% of the items you win in their actions. Yes, on top of the money you spend on buying stuff there you’re paying Heritage a kickback for the privilege of bidding and winning. Zowza! Plowing through Heritage’s Terms and Condition of Auction agreement might be best done with the aid of a lawyer, but the impression I got is that their Sellers fee is 10%. So Heritage makes at least 25% on everything they sell. Unless you’ve got some really, really valuable stuff to sell, it just isn’t worth it. And if it is that valuable, you might need it appraised in order to get top dollar. Heritage does that too, for a fee of course. They don’t tell you exactly how much that is upfront but they will give you an estimate if you contact them with the information on what you want appraised. Actually, I did see their Standard Appraisal Fee Schedule. Minimum Appraisal Fee on a written appraisal is $500, or $350 per hour per appraiser, plus travel expenses (if necessary) to the tune of $175 an hour after the first hour of travel, plus airfare, hotel, car rental, etc. You really need something or somethings that are very, very valuable in order to afford this. Grandma’s silverware isn’t going to cut it. On the plus side, they will rebate some of your dough if you choose to list items they appraise through Heritage, and informal appraisals (verbal, with no documentation) are free but limited to three items, and you might have to bring it to them in Dallas where they’re located.

Compared to the eBay format, navigating Heritage is awful. It is a pain in the ass to find anything, description information is minimal in most cases and so is the pictorial content- for most items, only one photo. There are also additional complexities. In the Coin category for example, Buy (It) Now items are mixed in with ongoing auctions and Sold items. You have to look closely. Plus, there are current and future Live auctions to consider. This is no casual buyer or seller site. You really need to know what the hell you’re doing before you get involved with Heritage. For most people this is just out of their league. Still, like on eBay, people do a lot of buying and selling there because they are very well-known (high web presence) and attract a lot of people.

After that come a slew of sites that are eBay wannabes – WebStore, eBid, OnlineAuction, bidStart, WeBidz, etc. Most of these are free to list on for basic listings, and charge low (or even no) Final Value fees. On the downside, what they’re not making in fees they make up for in ad revenue, a sure killer of site aesthetics. When auction sites like the aforementioned don’t charge fees and don’t limit what can be listed (within the bounds of standard legality, of course), there ends up being an awful lot of junk listed on them. You might get lucky if you spent enough time there, but who’s got time to spend browsing categories of mostly crap? Yes, there are some dealers putting up rarities and valuables mostly at high starting bid prices because they have nothing to lose if it’s free or uber-cheap to list. Trouble is, very few items on these sites seem to be getting any bids. Searching on some of these sites can be problematic. Also, the majority of them look like eBay clones without the eBay traffic. “Without the eBay traffic,” that’s the key. They are trying to do too much instead of concentrating on certain niches they can build a reputation and following with. It’s like a Dollar Store trying to go head-to-head with Wal-Mart. What is the point of wasting time listing at large general merchandise auction sites that don’t get a whole lot of traffic? None really, except that it’s just another outlet. Remember that you will be tying up merchandise that more than likely won’t get any bids, and if you’re selling unique items, listing them on multiple sites at the same time can be risky business.

So what IS the answer? For my money (or yours, if you’re buying from me), the obvious choice is a small niche-market auction site that caters to the type of merchandise I deal in - antiquarian and scarce books, vintage magazines, ephemera, stamps, comics, pictures, postcards, etc., So what site is that? Well, stay tuned, I’ll tell you in the next post. (Note: as I was composing this post four new bids just came in on items I have listed there.

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