A small announcement from eBay last week. Most people probably didn’t notice it, given the news around Q3 earnings, Skype, and 100 other stories that people were tracking.
Here is the AuctionBytes article:
eBay Moves to Longer Lasting BIN Auctions
Actually, eBay began testing this back in July, but just recently expanded it to quite a few more categories. Here is the original note from Sohil Gilani, the Product Manager who has spent a lot of time over the past two years studying and implementing this change:
Hi everyone, I’m Sohil Gilani with our Buyer Experience team. Over the years, we’ve routinely been asked why the Buy It Now option disappears from a listing when the first bid is placed. Our reason has been concern that it would create a confusing experience for a buyer, who could place a bid on an item, but then have someone Buy It Now (BIN) out from under them before the end of the auction. That said, we’ve done some extensive research that suggests keeping the BIN option available on a listing longer will increase the chance that a buyer wins the item and that it will close at a higher price for the seller. As a result, we’re looking at ways to change how BIN works that balance both buyer and seller needs.
In case it isn’t clear, let me explain the problem:
Ever since eBay launched the ability to add a “Buy It Now” button to an auction, it has disappeared as soon as anyone placed a bid. So, for example, if you were auctioning a cell phone with a starting bid of $0.99 and a Buy-It-Now price of $99.99, a single bid of $1.00 would make the Buy-It-Now price disappear.
The idea is that a buyer has the chance to “snap up” the item for a fixed price set by the seller, or place a bid to try to win it at auction. Usually, the motivation to place a bid is the belief that the bidder will get it for a lower price.
The problem is, once the Buy It Now button disappears, every future potential buyer is deprived of two things:
- The ability to immediately buy the item, without waiting for the auction to end
- The ability to see what the seller thought a fair “fixed price” was for the item
Many people, for a very long time, have asked why eBay makes the BIN button disappear after one bid. Usually, they focus on issue (1). After all, the need to wait for an auction to end is a major disincentive for a potential buyer. eBay is likely losing quite a few buyers to the fact that useful BIN buttons are disappearing. Sellers are also losing the ability to close a sale quickly, for a fair price that they have assigned. Even worse, sellers actually pay eBay a fee to place that BIN button there in the first place.
The problem lies with issue (2). As a former employee, I can’t reveal the actual number, but you would be shocked at how many auctions actually close at a price higher than the original Buy It Now price. This happens for a couple reasons. First, sellers may not be very efficient at setting their own fixed prices – auctions are likely much better at fairly pricing the item. Second, the original bidder who “knocks out” the BIN button is not likely the one who bids above that price. Every future bidder has now lost that information, and as a result, is free to bid whatever they think is fair. Apparently, in a large minority of cases, bidders end up with a price that is higher than the seller expected.
So, eBay has a dilemma:
- If they keep the disappearing BIN button, they are likely losing sales AND velocity (the time it takes to close a sale). They are also encouraging sellers to use a higher starting price (to avoid losing the BIN quickly), use reserve prices (to keep the BIN), or to not use BIN at all (which is a fee-generating feature) – all bad things that hurt the likelihood of a sale.
- If they make the BIN sticky, aka “Persistent BIN”, they might actually decapitate the final selling price on millions of auctions. That would hurt both eBay sellers and eBay itself, since both make money based on the final sales price.
The solution that eBay is testing finally allows eBay to gain some empirical data in real situations on how to best control the way the BIN price disappears.
- Do you let the BIN button stay until a fixed dollar amount?
- Do you let the BIN button stay until a fixed percentage of the final price?
- Are the results different in different categories? For different starting prices?
Well, all I can tell you is that, as an eBay seller, I was tickled pink to see this on my latest cell phone auction this week:
As you can see, I start all my auctions with a starting price of $0.99. Normally, I lose that BIN button very quickly. But in this case, the BIN button stayed, even after a bid of $0.99. In fact, the button stayed until the bidding reached $50.00, giving buyers ample opportunity to buy my phone for fixed price. The difference? Literally 6 days of BIN button goodness were added, since my auction didn’t clear that price until the 7th day.
(Wow, that sounds like a biblical reference. It was evening and it was morning, and the BIN button worked for 6 days and 6 nights, but on the 7th day, the BIN button rested…”)
Anyway, I’m glad to see eBay continuing to push its understanding of one of its most popular formats. And a big congratulations to Sohil for seeing this effort through to live-to-site. Count me as a big fan.
BTW If you are wondering why I bother buying the BIN feature on my auctions, even though it disappears so quickly, it’s a fair question. In my selling experience, adding the BIN button not only increases the chances of my auction selling quickly, I also tend to set it for a higher-than-average price based on my research. The way I see it, a buyer who wants it right now tends to be willing to pay a bit more for the privilege. If not, they can always bid.
Psychohistory 
Thanks for the analysis! This is one of those questions people always ask when they find out I used to work at eBay–now I can just send them here. 🙂 Should be one of eBay’s FAQ. 🙂
Adam,
Thanks for your insight on the “BIN” breakdown. I have a couple of questions for you on this form of sale (BIN). I beleive that I know the answers to the questions, but it is always nice to hear a former employee of eBay speak on his opinions.
If a “BIN” is desired as a way of selling in the marketplace (by eBay), how does this become implemented to sellers in their auctions that are not in favor of using the “BIN”?
How will you motivate sellers to use a “BIN” in their auctions?
Now, we originally took the “BIN” away after the 1st bid on the item to encourage the buyer to go for the “BIN” price before making a lower bid. The buyer knew that if they made a bid, the “BIN” price would no longer be offered and there might be a chance that he would “lose” the item to a higher bidder.
Which leads me to this:
The main concern here is “Our bottom line”. “Our”, is in reference to eBay and of course the sellers. Are we worried that an item could sell for more, but buyers are not always around to snipe the item for a $1 more? I beleive this is a factor. We lost money because we gave the second buyer the mindset of “sniping” his auction at the last second.
Now, why would you allow auctions to start at .99 cents at all, If selling the item quicker is the goal in mind? Why not make all items have a “BIN” and a .99 cents first bid? Yes, this is a solution to a seller that may need a quick sale, but on the back-end we both know that buyers will feel pressured into paying the ‘BIN” price because of fear of losing the item.
Logically speaking, (people) buyers don’t want to lose. This is why we encourage buyers to “Shop Victoriously”.
So this member of the community goes past this item and finds the dealer that is selling similiar items at a starting bid price of .99 cents and places a bid. He is more interested in this item because the seller did not offer a “BIN” price.
Meanwhile another buyer comes by notices the other gentlemans .99 cent bid on an item, that he is interested in as well. He does not make a bid just yet, he’s planning on coming back in 6 days and sniping this item for a great deal. There is no “BIN” on the item, why not wait? Unfortunately, he forgets to place the bid. The 1 and only sole bidder wins the item for .99 cents.
Which brings me to this:
eBay is in the process of raising FVF’s on items sold under $25 with a decrease on the sellers listing fees. We know this doesn’t truly sound encouraging to sellers but it makes us reconsider adding a “BIN” price to ALL our items. Why not? Cost for the item with a “BIN” is similiar to the cost of not adding a “BIN” and we also give added pressure to the buyer to pay more then he maybe once would have without the “BIN”.
Now sellers that once strived on selling items at a .99 cents starting auction price are somewhat guided in the direction on adding “BIN’s” to all their items.
Do you understand where this is going?
Back to my previous questions:
If a “BIN” is desired as a way of selling in the marketplace (by eBay), how does this become implemented to sellers in their auctions that are not in favor of using the “BIN”?
How will you motivate sellers to use a “BIN” in their auctions?
I beleive I answered these questions, but I really would like to hear your side of this. Thank you for your time.
– Kirk Russell
Wow, Kirk. That’s a really long comment.
I think there may be a few jumps in your logic that are problematic. Instead of going line by line, let me see if I can clarify some of the fundamentals here, based on what I’ve seen.
BIN is already wildly successful at eBay. Many, many auctions have it, and a vast majority of the listings on eBay are in a fixed price format, either Core fixed price or Store listing format. So there really is no pressure at eBay to “add” more BIN listings to Auctions per-se – really the bigger issue is how to have them co-exist for buyers.
The Auction BIN format turns out to have been a huge success in this regard. Buyers can get the excitement of an auction, or they can decide to “take the item off the table” with a BIN price.
The problem is, today, the BIN goes away too quickly. Sellers, like me, often work around this problem by having two listings – an Auction listing and a multi-item, fixed-price store listing. In my listing description, I tell buyers they can click and buy the item at a fixed price, right now, in my eBay Store. In effect, I built my own “persistent BIN”.
$0.99 auctions are wonderful. They engage more buyers in more bidding, and even though only one buyer can win, the level of engagement for auction buyers is very very high. Fixed price sales don’t quite have the same magnetic appeal for buyers.
Based on everything I learned at eBay, I almost ALWAYS add a BIN to my auction listings. I just wish, as both a buyer and a seller, that the BIN price would stay around longer. Sellers get an increase in velocity, and I bet, to an extent, ASPs. Buyers get time back – the chance to just end it now, and walk away with the item.
Plus, I think this puts a little more action into the game – do I bid or BIN? Every time I bid, I’m taking a little risk that someone will pay full price and swipe the item from me.
Let’s hope they move this across the site.
Adam
In an effort to reinvigorate growth of the core ebay site, Mr. Donahoe said he would shift ebay’s emphasis from auctions to fixed priced listing, which could make the experience of buying on ebay more like the one customers have come to expect from sites like Amazon.com.
This is not good for the eBay site. What happened to shop victoriously?
You still will win the item, but there is something about truly winning the item that is in every eBay book I have ever read. When a person makes a bid, they consider them item to be their own.
Also, you may not want to post this, but while we’re here…might as well
Do a search on these two search engine’s on “eBay lawsuits”.
Start with Google 1st
Yahoo 2nd
Notice the low numbers on Google and the higher numbers on the yahoo site. Google has 312,000 hits. Yahoo has over 5,000,000. Weird.
Kirk,
I think you are misunderstanding the article. For years, a vast majority of the listings on eBay have been fixed price. However, eBay has maintained a very high degree of focus on auctions, at some points to the detriment of all other formats.
I interpret John’s quotes to mean that eBay will shift away from this disproportionate focus, but I don’t think it means you will ever see an eBay that isn’t primarily about auctions. The behavior you describe about auctions is completely true, and that is one of the reasons auctions are so profitable.
The plain fact is, however, is that on most occasions, most buyers do not want to participate in an auction, especially for common, commodity products. eBay can either choose to ignore that, or they choose to make their buyers and sellers happy. I’m guessing that fate will line up with the latter.
I have absolutely no idea what you are referring to with the Google & Yahoo searches, or why you are referring to it. I can tell you are trying to imply something, but I don’t know what.
Adam
Adam,
I am not a journalist that earns a profit for my thoughts, only a journalist by degree. Yes, it has been some time that I expressed my thoughts online or on any other form of exposure to the masses. I respect your breast approach and furthermore enhance your thoughts on the matters we have discussed.
In retrospect I see the eBay marketplace heading in a direction where manipulation is being implied, we call it marketing by todays corporate standards. Choices are being taken away, making Google and eBay more and more an algorithm. This is my reason for bringing up the “eBay lawsuits” issue. We only witness and perceive what is available. Some see things as more apparent… others do not. Not by choice, but as a path that has a guide.
These same approaches are being taken in the eBay marketplace. If CEO and president Donahue wants to see more “BIN” prices in the marketplace, hes makes changes to the eBay site to make this possible.
Do the sellers and buyers on eBay truly see the changes ( fee decreases and higher FVF’s..) for what eBay states they are? Probably not.
What is being enforced is called “Economics VS Environment”. This is the price set by a seller and the willingness for a buyer to meet the seller at a selling point. This is assuming there are no competitors undershooting the true value of the product ( .99 cent sellers ). If there are sellers that can undershoot the competition, then the marketplace does not feel the pressure on the majority of sellers and therefore reveals a monopolist that has control of the market. This lowers the final sale price of all items throughout the marketplace and therefore will not give a “true value” of what the item is truly worth.
If we decided to eliminate the seller that provided prices that were proving monopolistic effects in the marketplace, we would see as an outcome a rise in “final sale prices” overall.
Now take into perspective everything that was just provided.
How can eBay not allow a monopolistic effect on the marketplace by ridding the .99 cent auction sellers?
Also, why is it fair ( or unfair ) that eBay filter its results in search engines such as Google?
eBay teaming up with Google has taken a monopolistic approach at obtaining a goal in mind: Filter out information that eBay does not want to be seen and make apparent the information that is intended to be seen. In hindsight, eBay is against the .99 cent monopolistic approach on the eBay site, but they continue to take a manipulative monopolistic approach to “fixing” what they want.
– Kirk
Adam,
Also, one other point. I have been on the eBay website for a little over 2.5 years and sold 3500 items. Only 19 negatives for a 99.3% positive feedback. I beleive I have a little experience and some slight knowledge on “changes” that are currently taking place.
A “BIN” on every item with an auction start price of .99 cents that does not disappear after the first bid of .99 cents is what Donahue wants to implement. He thinks he can keep the bids under a certain % of what the “BIN” price is. If bids exceed this amount, then the “BIN” will disappear. This leaves the doors open to auctioners and people that want the option of “buying the item now”.
– Kirk
Hi Kirk,
I’m really confused now. eBay does not, and actually can not, influence the results in Google. That sounds like wild conjecture on your part.
eBay does not want to get rid of $0.99 auctions. I don’t understand any of your analysis that uses that as an assumption.
You are correct, of course, that eBay influences the marketplace. For example, when eBay raises fees, it has an economic impact on what can and can’t be sold on the market.
However, eBay really has no control over the prices of an individual item or product. That’s a real stretch. Calling it monopolistic is a non-sequitur – eBay is not a public service, it’s a private website.
Sorry if I’m missing the point here. I’m trying to understand.
Adam
Kirk,
On your “one more thing”, I do think eBay might want to see more sellers include a BIN price. But that’s not as easy as it seems to do.
In order to do that, eBay would have to:
1) Remove the price on the Auction BIN feature. Today it costs money, which lowers its adoption.
2) They would still only see BIN prices on a fraction of items, because most people do not fill in all available fields. I doubt eBay would ever require it, because that would lower listing volume dramatically. Required fields are a guaranteed way to lower listing volume and listing success rates.
Adam
Thanks for the explanation…
If this pertains to ALL of eBay, then I will spend my money somewhere else!
I have never used the sections where this policy has applied or item in which it was implemented, but the sections that I do use, I have spent quite a bit as a BUYER.
My brother recently placed a bid on an automobile part and his bid was just expunged by another person that wanted to “Buy Iy Now”, only after he had seen someone else wanted the item.
I know for a fact that this will cost the “BUYERS” much more in the long run… and that is why I DO NOT WANT IT!
If it stays, then I’m gone!
Ron
Ron, this is a completely irrational response. If your brother wanted to pay full price, he should have just clicked buy it now. Instead, he took a risk. He bid below the asking price, hoping no one else would outbid him.
Clicking the buy it now was just a way of the other buyer saying – no need to bid, I’ll take it at full price. Your brother has absolutely no right to be upset, except if it turned out that he was willing to pay the full price and is just upset he didn’t get a better deal. It was good for the seller, and good for the winning buyer. As always.
In auctions, the highest bidder wins. The Buy It Now just makes it easier for the “highest bidder” to win immediately.
Adam