An eBay Primer: Using the Free Market to Your Advantage (as a Buyer)

I opened my eBay account at the same time that I was learning about supply and demand curves in AP Economics. More than a decade has passed since then, but eBay remains one of the best examples I know of the raw forces of a free market system at work. The bottom line in a free market is this: the price at which an item will sell is the price at which a buyer is willing to purchase it. On eBay, however, in order for this principle to apply, there must be at least two buyers bidding on the item in question. Without the competition between at least two buyers, a given item will sell for its asking price--presuming it sells at all. Further complicating matters is the quantity of the item available for purchase. As in the classic supply-demand curve, where demand remains constant, the greater the supply, the lower the price of the good in question, because the greater the supply, the more sellers will compete against one another to attract a buyer for their items. Also, buyers may be willing to let a few auctions go in order to secure the item at a lower price if they can be relatively sure that more auctions featuring that item will be coming down the pipeline. Where the item in question is rare enough that an auction may represent the only opportunity for most buyers to acquire it, all bets are off. If the item is likely to have a dedicated following, a heated bidding will almost inevitably ensue, with the winning bidder paying top dollar for the honor of bringing home such a rare prize. Just as it takes two to tango, it takes at least two to start a bidding war. Nevertheless, I've done my part on more than one occasion, with the most egregious examples stemming from rare - and usually Japan-only - Rockman/Mega Man-related items. I paid roughly 150% MSRP on a Rockman DASH artbook during my first year on eBay, and a year ago, fought (and won) a ferocious bidding war on a garage kit Rockman model that predated (and, in terms of sculpting if not articulation, bested) the mass production model kit from Kotobukiya. I believe I paid roughly double the original price you'd have paid if you were lucky enough to attend the garage model convention at which the kit was sold, but seeing as my max bid was nearly double that amount (because it seemed to be - and to my knowledge has been - the only kit ever sold on eBay), I still enjoyed a considerable consumer surplus. So what can you learn from free market principles, bidding wars, and my Rockman fanaticism?

Know the Market, Play the Market


Whenever you conduct a search for an item, before you even place your first bid on an auction, you should refine the search parameters to show completed items only.  The results you obtain from this refinement will reveal the state of the market for that particular item.

If there have been several completed auctions in addition to several live ones, then the supply of the item in question seems pretty healthy.  If the completed items reveal that one of the sellers of the live auctions has listed the same item repeatedly in the past, then the likelihood that more of that item will be available through that seller also increases.

Determine Your Max Bid Before You Make Your Opening Bid

If a number of the completed items sold for a relatively consistent high bid, then congratulations: You've discovered the current market price for the item, which should serve as a price ceiling for your own maximum bids if you don't intend to overpay.  Often times, though, you'll find a range of high bids that vary according to random factors like the timing of the auction, the number of people who bid on the auction, and the disposition of the auction's high bidders.

If the supply seems a bit tentative, then depending on how badly you want the item, you may need to be prepared to enter a max bid a bit higher than the market price.  And if the item is virtually one-of-a-kind as far as eBay goes, and you absolutely must have it, then be prepared to enter into a bidding war and end up paying top dollar (read: potentially up to as much as you can afford) for the honor of claiming the prize as your own.

Establishing a max bid amount beforehand forces you to assess how badly you want the item in question, as well as how much money you want - or at least can afford - to sink into it in order to make it your own.  It removes the fevered adrenaline rush of raising your bid in the last few seconds of an auction - otherwise known as sniping - and the likelihood that heightened emotions get the better of you and you end up paying so much for an item that you ultimately regret having won it.  There's nothing intrinsically wrong with sniping - in fact, that'll be the topic of a future Primer post - so long as you establish your well-considered bid ceiling beforehand, and stick to it, regardless of what your adrenaline-amped sensibilities might try to convince you to do otherwise.

An eBay Primer: The 3 Most Important Things A Buyer Should Know

This post will be the first in a series intended to provide advice for those looking to buy or sell items on eBay.  I've been using eBay for both purposes for over ten years now, and over the course of thousands of transactions I've never had a negative feedback from a buyer - or have had to give negative feedback to a seller.  eBay is an incredible resource for locating hard-to-find items or for paring down the clutter in your house, and the rules of thumb by which I've learned to operate on eBay can help anyone get on the 'Bay with the least amount of trouble.

1) Feedback Matters

Feedback scores, though far from perfect, is still one of best and most expedient ways to determine whether a seller is trustworthy enough to do business with.  And while any seller with a large score and a feedback percentage better than 98% is usually trustworthy, some of the power sellers who meet eBay's strict criteria earn "Top-Rated" seller status, which is an even stronger indication that they'll do right by you in any given transaction.  Especially when you're starting out, avoid buying items (especially large ticket ones) from sellers with less than 98% positive feedback or only a few feedback points to their name.  Not all of those who fall below 98% or are just starting out are bad sellers or out to swindle you, but those who are will have lower feedback and - possibly - a fresh account to distance themselves from past bad transactions.

eBay's feedback system is a little different than it was back when I started.  Sellers can no longer give buyers anything but positive feedback, and some users believe this creates a power disparity that helps to protect "problem" buyers who don't pay for their items or attempt to defraud the seller.  But the current feedback policy also removes the chilling effect that retaliatory seller feedback could have on a buyer when an item fails to materialize, or shows up markedly different than how it was described at auction.

Sometimes a rare item you desperately want may only be offered by a questionable seller, or the price might be incredible.  At those times, it may be useful to go deeper: look at the negative feedback that lowered the seller's score, or look at the few transactions (if any) they've already completed.  If the negative seems to be an isolated incident, or item they're selling is in line with the things they've sold successfully in the past, determine whether the item is worth the risk.  If it is, and you go for it, and the seller turns out rotten after all, then at least you'll still be covered by the next rule:

2) Know the eBay Buyer Protection Policy

If there's a golden rule to doing buying things on eBay, this is it.  eBay's Buyer Protection Policy is one of the strongest safeguards in place to protect buyers from unscrupulous sellers, but in order to use it, a buyer should be fully versed in its provisions.  It can be tedious and difficult to understand at times, but it's there for your benefit, and the better you understand it, the better it can be there to protect you when a transaction goes south.

One of the most critical provisions: eBay/PayPal only allows you to open a dispute within 45 days of your original payment for the item.  If you wait until the 46th day to open a dispute, then all your rights under the Buyer Protection Policy evaporates into thin air.  So even if your seller is begging you to give him just a few more days to resolve your issues, if the 45th day is looming near, make sure you open your dispute before then.  If the seller comes through shortly thereafter, then you can close the dispute with no harm done; but if he's just trying to make your BPP rights expire, then you'll have headed him off at the pass, and are ready to take the next steps if he doesn't make things right.

3) Search for "Completed Items" to Get a Sense of the Market

In my early years on eBay, I would often find myself getting into ridiculous bidding wars with other buyers that ended up with either them or me paying way more for the item than any rational person should.  The best safeguard against this is to do some research on how much the same item has sold for on eBay in the recent past.  Taking the same search terms but filtering the search to show "Completed Items Only" will show you all of the recent completed listings that match your terms.

You can learn several important things from these search results: How much, on average, does the item go for?  How many of this item have been sold recently (and, by extension, how likely will it be that other listings will offer this item in the future)?  Has this seller sold the same kind of item before (and would he be likely to sell another one shortly after the current listing)?  All of these factors can help you determine what a sensible high bid should be, and in that way avoid overpaying as a result of a frenzied bidding war with no clear price ceiling.