Lot composition is one of the most important tasks an affiliate performs. It can make or break an auction. The goal when constructing auction lots is to make them appeal to as many bidders as possible. Competitive bidding drives auction success.
It’s important for affiliates to have a well thought out lot composition plan in every consignment agreement. The seller should initial he understands and agrees to the plan. Sellers may have very definite ideas on how their assets are presented on an auction. It is the responsibility of the affiliate to educate their sellers on lot composition. If an agreement can’t be reached, the affiliate would save themselves a lot of time and anxiety by refusing to take the consignment.
The following auction tactics are almost guaranteed to sink an auction.
High Starting Bids
While there may seem to be some logic to a high starting bid price (using the starting price as a reserve); this thought process is flawed. High starting prices almost always negatively impact the final sale price of an item.
The reason bidders are attracted to auctions is they believe they’ll be able to pick up an asset well below market value --- which they will, unless there are a number of other bidders thinking the same thing. Auctions are a numbers game. The more bidders placing bids on an asset, the higher the winning bid will be. The best way to attract a lot of bidders (besides good quality pictures and complete descriptions) is to start the bidding as low as possible (remember it doesn’t matter where the bidding starts, it’s where it ends that matters!) When someone places a bid, they begin developing a sense of ownership of the asset, which is absolutely essential to driving bids as the auction gets closer to ending.
Low Value Lots
Affiliates are taking both short and long term risks when they publish low value lots.
- If your average lot value is below $30 and your auction value is below $3,000, it’s a fair bet the auction will cost you more than you’ll make. Your time is too valuable to waste. Consider the amount of labor involved in every auction conducted --- photos, descriptions, staffing inspections and removals, taking bidder phone calls, processing invoices, paying your consigners/sales taxes/BP). You put the same amount of labor into photographing and describing a $50 lot as you do a $2/$5/$10 lot. If your commission rate is 25% --- a $50 lot will yield $12.50 in commission, whereas a $10 lot will yield you $2.50 in commission. You can spend 3-5 minutes per lot at $12.50 (12 lots an hour = $144); at $2.50 the math doesn’t work (12 lots an hour = $30).
- Serious bidders don’t waste time bidding on a lot valued at $10. Bidders interested in low value lots tend to be extremely cost conscious – they often want to pick up stuff cheap so they can resell it at a flea market for a profit.
- Reputation is everything in the online auction world. An affiliate’s reputation is not only tied to their integrity, it is tied to the assets they sell. Getting pigeon-holed as an affiliate who sells low value lots, will make it more difficult to develop relationships with sellers who have higher value assets to sell….sellers look at previously conducted auctions to determine an affiliate’s asset niche and the type of bidder’s the affiliate attracts.
- Winning bidders of low value lots/invoices are 4X more likely to be NO SHOWS….70% of the NO SHOW invoices in 2016 are for lots that totaled less than $25. 80% of the NO SHOW invoices were for lots that totaled less than $50.
K-BID is not equally effective for all asset types. Historically, we don’t do well with:
- Furniture (unless it’s really unique and valuable)
- Collectibles – coins do fine, but almost nothing else
- Electronics – unless they are new
The asset types we have a high degree of success selling are:
- Vehicles/trailers/recreational equipment
- Lawn Equipment/tools
- Industrial/Construction Equipment
K-BID’s bidder registrations average 2,500 per month. As our registered bidder base has grown, there definitely has been some increase in the appeal of certain assets that previously have not sold well on K-BID.com. However, it’s a good bet we’ll never be particularly strong in the 4 asset types listed above.