The Lowdown On Online Auctions

Regina Lewis of AOL May 2001
It's spring cleaning and yard s-le season, and the best bargains can be found on your computer, at online auction Web sites. Regina Lewis, AOL's online adviser, shares some information on The Saturday Early Show.

The overall trend of demand-driven pricing seems to be here to stay and certainly is a driving force in e-commerce. Online auction revenue is expected to top $19 billion in next two years. There are more than 1,000 auction sites on the Web, including specialty sites with everything from postcards to classic cars. eBay is the biggest player, with 80 percent marketshare. They have 22 million registered users and about 5 million auctions at play each day in 5,000 different categories.

Items up for sale at one time or another are as varied as an autographed "Charlie's Angels" doll, vintage jewelry, old toys, and electronics sold by companies that have excess inventory. There's certainly something for everybody.

Once you decide you want to buy something at an online auction, start browsing. You can browse by category (like "dolls") or if you want something more specific, you can use the search tool to type in what you want. Say: "Charlie's Angels doll". And then you get a list of items, ranked by how much time is left in the auction.

Once you've been registered, you can start bidding on items. If you are the highest bidder at the end of the auction, you win.

How does the bid process work?

The easiest way to explain it is from the seller's side. Let's say you want to sell something. You write a description; just like classified ads, the better the description, the better the sale. Also, pictures are very helpful; you can add a photo to your posting for free. Use a digital camera, or go to your local photo shop or Kinko's and have them take a picture and put on a disk -- then upload it to eBay. Also, the use of bold text has been shown to increase sales by as much as 35 percent.

To start your auction, you fill out a form, which includes the description of your item and how many days you'd like the auction to run (3-10 days). Put in the starting bid. You can also add a reserve price -- a secret minimum price you'd like the item to be sold for. Then the auction begins.

Now, if you're a buyer, you enter the highest price you'd like to pay. Through a process of "proxy bidding", eBay will continue to move up your bid for you if someone competes with you. That way, you don't have to keep checking back every two minutes. You'll get the item for the lowest possible price, but not higher than the amount you'd most like to pay.

Experts say the best thing to do is to look for auctions that are ending within hours, minutes, or even seconds. That way, you can bid on an item, and have less chance of someone outbidding you at the last moment.

The payment exchange is left up to the buyer and seller. As is the case offline, you pay first, then you get the item. Whenever possible, use a credit card, because iwill afford you the built-in protections the credit card company provides. If for any reason you don't get the item, you then have the credit card company on your side and you work through them.

There are also payment services like Billpoint or Paypal that allow individuals to exchange money. The buyer enters a credit card and the seller receives payment.

For high-price point items (like jewelry or cars), consider using an online escrow service. A third party receives the item and the payment and serves as a broker for the transaction, making sure the item matches the way it was merchandised. The third party then gives the money to the seller and the item to the bidder.

Should you worry about getting ripped off? Online auctions represent capitalism in one of its purest forms. It's really self-policing. Your reputation as a buyer and seller counts. Buyers and sellers are rated through something called "feedback." If you don't deliver on what you promised, you'll get called on it and you won't last long on online auction sites. If you're buying, always check the Merchant Feedback area which will post other consumers' reviews on dealings with a particular vendor.

What's the most common mistake? Probably jumping in too fast. Browse first. Begin by spending some time on a major auction site and start to familiarize yourself with the offerings.

America Online has a step-by-step tutorial on getting started at AOL Keyword: eBay Guide. You can also go directly to the site at

There are also many books about online auctions. "In my own experience and speaking with lots of online auction fans," says Lewis, "to see it is to understand the phenomenon and to try it is to be hooked. You almost can't check it out without having your interested piqued."

She suggests starting with a low price-point purchase to ease it into it and really understand firsthand how it works. If you're like millions of others, you'll be back again and again.

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