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Internet-Only Auctions

Definition Please
Internet-only auctions (sometimes called timed auctions) are auctions that take place completely online. There is no live audience sitting together in a physical place in front of an auctioneer. Bidders bid online against other internet bidders. The internet bidder with the highest bid at the end wins the lot.

Trends
Over the last few years we have watched the increasing success of our customers as they conduct internet-only auctions. During that time we have identified several key factors to succeeding with online auctions. I will expound on those keys in this post. Additionally, any features or capabilities described below are already built into Auction Flex and can be put to use immediately by any of our customers.

Not Necessarily National
Some people believe that the real benefit of internet auctions is the increase in the size of the potential bidder-pool based on the alleviation of geographical limitations. In other words, it’s online so I’m naturally going to have millions of bidders from around the country (or even around the world). I argue that even though this is certainly a possible benefit, it is not a necessary attribute for your online success. We have many customers that conduct internet-only auctions for the bidders in their own backyard. They have trained their existing customer base to bid online in lieu of attending an actual live auction.

If You Build it, They Will Come = FAIL
What would happen if you conducted an auction in a new location and didn’t advertise? Your bidder turnout would be horrible at best. That is exactly what will happen if you conduct an internet-only auction without advertising.  An internet-only auction must be marketed the same as you would market a regular live auction. In fact, if your traditional customer base is accustomed to attending live auctions, I will argue that for your first few internet-only auctions you need to market even MORE than regular.

Preview Too
An internet-only auction can have a preview just the same that a live auction can. Sometimes bidders will go to preview prior to bidding online. Sometimes bidders will see an item online that they want to look at closer prior to bidding. Either way, a preview is a vital tool that adds a layer of honesty and openness to your bidders. Additionally, it saves you from exhaustively describing and picturing each and every item (especially the lower dollar items that may not justify the time/expense).

Show Me the Money
A concern with internet-only auctions is payment, or lack thereof. Feedback from our customers has been that non-payment issues are commensurate with regular live auctions. One step you can take to help with this issue is to require authenticate credit card information before an internet bidder is allowed to bid. Additionally, I recommend that you explicitly state in your terms and conditions that you reserve the right to use the bidder’s credit card for payment in part or in full for any successful bids.

Stagger Close
Assume your catalog has 400 lots in it. We don’t want all 400 lots to close at exactly the same time. Instead, we want each lot to close a little bit after the previous lot. If we set the stagger time to 15 seconds and have lot 1 close at 5:00:00pm, then lot 2 will close at 5:00:15 and lot 3 will close at 5:00:30 and so on. This allows someone interested in multiple lots to have time to bid on those multiple lots. In the case of a 400 lot auction with a 15 second close, the duration of the internet auction will be approximately 100 minutes.

Soft-Close > Sniping
Typical internet-only auctions (think eBay) are susceptible to a practice called sniping. Auction sniping is the practice of a bidder waiting until the very last second to place a winning bid on an item with the hope that other bidders do not have time to raise their bid. The intent of sniping is to win an item below the potential high bid (market value). Using a soft-close in your online auction will eliminate this practice. A lot using a soft-close ending time will automatically have its bidding time extended if a bid is placed in those last few minutes. Assuming a soft-close setting of 3 minutes, if a bidder waits until the very last second to place a bid on lot 5, the bidding on lot 5 is extended for 3 more minutes. This gives other bidders 3 more minutes to re-raise their bid. It is not uncommon for a high-interest lot to extend hours past its original close time because multiple bidders keep bidding and extending the close time on the lot.

Linked Soft-Close
Linked soft-close is an extension of the soft-close functionality. It allows you to link multiple lots together so that when one lot is extended via soft-close, all other linked lots will also be extended. This is especially handy when you have multiple similar items. For example, say you have two tractors in your auction. These two tractors are identical except that one has much lower hours than the other. As a bidder, my preference is to win this lower-hour tractor and so I place a bid on it. Other bidders are also bidding on it and after several rounds of soft-close extensions, the bidding price has exceeded my budget. Here is the good part: Because both tractors are linked together for soft-close, the other higher-hour tractor is still open for bidding (even if no one was bidding on it). So now I am able to start bidding on this second best tractor and I eventually win it. If these two tractors were not linked together, the higher-hour tractor could have already closed.

Tech-Phobic
A common misconception is that internet-only auctions exclude all other bids. This is wrong. Just because you are conducting an internet-only auction doesn’t mean you can’t accept bids manually (in person, phone, faxed, etc.). There are some tech-phobic bidders that will refuse to bid online and that is okay; their money spends just the same. You can accept their bids, enter them into Auction Flex, and Auction Flex has the built-in capability to push these “floor” bids to the internet so that these bids compete with the internet bidders.

Auction Day Labor = Nada
On a live auction day consider the additional staff that has to be brought in; cashiers, clerks, ringmen, runners, etc., etc. Now consider the additional staff required to conduct an internet-only auction on closing day — none. Instead of finding 8 people to come work your auction for 6 hours once every 2 weeks, you can have 1 or 2 people who steadily describe/image lots and help customers with pickups. This can have the drastic affect of stabilizing your labor requirements.

Shipping – The Headache-Maker
If you are conducting internet-only auctions to your backyard bidders, shipping is not a concern. Backyard internet bidders tend to come pick up their merchandise. If you do have to arrange shipping I highly suggest forming a working relationship with two or more shippers so that you don’t have to handle the shipping yourself. In your terms and conditions make it clear that the bidder will deal with the shipping companies directly to arrange for packaging and shipping. Now you are not responsible for packaging, broken merchandise, etc. and that is a beautiful thing. The shipping company will be happy for the business (they’re built for this) and you don’t have to pull your hair out dealing with this issue.

But Live Auctions are So Much Better
As an auctioneer, you will naturally be inclined to perceive an auction without a bid-caller as a travesty of magnanimous proportion. I’m not going to argue the merits of live vs online as the pros and cons list could go on for a very, very long time. The variables that determine what makes a successful internet-only auction are specific to you, your bidders and consignors, and regional variables that only you can answer.

One Size Does NOT Fit All
Some types of auctions just beg to be conducted using an internet-only format. Other auctions have no business being conducted solely on the internet. You should consider internet-only auctions as yet another potential method to use in fulfilling your fiduciary obligation to your consignors to get the best possible price. Additionally, don’t discount the potential that internet-only auctions have to reduce your costs which can, of course, provide you a competitive advantage and/or increase your profits.

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  1. February 9th, 2010 at 13:25 | #1

    I found all this interesting, and fairly accurate, except this:

    … An internet-only auction can have a preview just the same that a live auction can. Sometimes bidders will go to preview prior to bidding online. Sometimes bidders will see an item online that they want to look at closer prior to bidding. Either way, a preview is a vital tool that adds a layer of honesty and openness to your bidders. Additionally, it saves you from exhaustively describing and picturing each and every item (especially the lower dollar items that may not justify the time/expense) …

    Yes, exhaustively describing and picturing does require expense and opens to significant liability. However, if a preview alleviates much of this, then an exhaustive arrangement or organizing, displaying, etc. must take place for a preview to be workable. I’m not sure this trade-off is prudent? If I have to arrange and organize in order to preview, why not then go ahead with a live auction along with the online event? It’s already displayed and ready to go, and there is obviously enough room for people and cars to preview, so enough for a live auction also?

  2. Brandon
    February 9th, 2010 at 15:00 | #2

    Mike – I think there is a difference between setting up a preview for a live auction, and organizing items for cataloging/picturing with the intent of allowing a preview too. Regardless of preview or not, you still have to organize the merchandise so that post-auction pickup is efficient and organized. The other thing is that organizing a preview is a small part of the cost of auction day, so the effort of allowing a preview doesn’t necessarily justify conducting the live auction – though sometimes it certainly does. The reality is that sometimes it makes sense to do a preview, sometimes it doesn’t. Sometimes it makes sense to do an internet-only auction, sometimes it doesn’t. Thanks for the great comments and I added your blog to my blogroll.

  3. February 9th, 2010 at 15:46 | #3

    Brandon, nice job! A great overview. You are right on the mark with the “if you build it” comments. So many auction companies believe online bidding alone will make an auction a success. Without 1. good product, and 2. good marketing, the event will almost always be disappointing.

    We’ve found when shipping that having another company ship is nice, but involves an extra layer of navigation for the buyer. If I buy at Amazon, I don’t then need to contact a shipper to get my order to me. It’s all handled. The idea with online bidding is to make attending an auction or participating easy and convenient. Requiring the buyer to arrange their own shipping is poor customer service.

  4. February 11th, 2010 at 13:30 | #4

    I’ll echo John Schultz’s remarks, great article. The market remarks are right on the money. Sometimes I feel like we market harder for an online event than what we do for a live auction.

    I believe their is a hybrid to the shipper question. We use a 3rd party shipper and stay involved to a point. But the shipper and buyer have the responsibility for the transaction.

    Good Job!!!!!!!!!!!

  5. February 11th, 2010 at 23:50 | #5

    I echo Joe’s comment ..We use a third party for shipping but we stay involved in case there is a problem we want to make sure the shipper takes care of our customer.

    Nice blog.

  6. February 12th, 2010 at 13:02 | #6

    Thanks, Brandon.

  7. February 16th, 2010 at 09:37 | #7

    @Mike Brandly, Auctioneer, CAI, AARE I would also argue that you don’t necessarily need to do much setup for a preview. Simply providing information for any prospective bidders to make an appointment to see a specific item has worked much better for us than specifying a preview time. Bidders MUST have access to inspect merchandise before bidding, but I agree with Mike that it’s a waste of time to arrange all the merchandise.

  8. March 1st, 2010 at 19:17 | #8

    In this article you talked about stagger close – what about stagger open – not all items on the auction block at the same time? Can Auction Flex do this?

  9. Brandon
    March 2nd, 2010 at 19:45 | #9

    Everrett – It would certainly be possible to add this feature, but it is not currently available. Why would you want the lot opening to stagger? One of the benefits of the online format is that bidders don’t have to wait for a lot to come to the block.

  10. July 14th, 2011 at 17:32 | #10

    Linked Soft-Close. I would like to get more information about this. I think it could be helpful to us in the future.

  11. Brandon
    July 18th, 2011 at 09:40 | #11

    Soft Close Grouping – You can group together lots so that if any lot of the group has its bidding extended by a soft close, all the other lots in that group will have their bidding extended too. A great example of this would be a dining room set that includes table, chairs, buffet, china cabinet, server, etc. These items could be lotted as lot#’s 11,12,13,14,15 and set to group soft close. Now, when any lot in the group is extended, all the lots in the group are extended. This has the effect of being an internet-only choice mechanism for the bidders.

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