Be a Better Bidder -

How to Bid and Win any Internet Auction

by Daniel Gentile

 

After running figBid for more than a year now the most common question by far is about bidding.  I’ve been buying and selling with internet auctions for close to twenty five years and forgotten how intimidating auction bidding can be.  To the newcomer, the course of bidding can be confusing and seem unfair at times.  The question ‘Why didn’t I win?’ inevitably turns into ‘How did I lose?’ and frustration sets in.  So I set out to write a simple article, How to bid in an online auction.  Oh boy…. Please don’t Google that phrase (I really mean it; Don’t do it).  The amount of misinformation freely available on the internet is mind-boggling and just adds to the frustration.  No worries.  I’ve cut through all the bunk and give you the last article on bidding you’ll ever need.

In this article I’ll explain what an internet auction is and how it works, then quickly go through the different types of internet auctions and bidding.  Next we’ll dive into the bidding process for the auction style that affects us the most and run through an online bidding scenario.  Lastly, we’ll review strategies and other considerations to help make you a savvy bidder.  This won’t be a history lesson.  I promise this will be quick, painless, and will make you a better bidder.  Please take a seat for Internet Auction Bidding 101.

What is an Internet Auction?

An internet, online, e, i, or virtual auction all refer to the same thing; a controlled online scenario where sellers offer goods or services to buyers that compete to purchase through a competitive bidding process.  Traditionally, bidding prices start low and gradually increase to meet market demand and popularity.  The online scenario can be conducted by specialized software on private websites (figBid, eBay), blogs, social media, email, or any other number of electronic methods.  The common factors are the controlled set of rules for joining, selling, bidding, and paying.  The players in any online scenario are business to business, business to consumer, and consumer to consumer.  fiBid embraces all three.

I’ve always enjoyed the idea of internet auctions setting market prices and becoming the real determination of value for goods and services.  Today, internet auctions are used by hundreds of millions of people and businesses worldwide.  That’s an enormous amount of data that’s become an important tool for valuation used by government, business, and the consumer.  I can’t remember the last time someone didn’t say to me, “You know how much that goes for online?” or “Let me look up the price for that.”  Here are the basic internet auction styles where that data is derived:

  • Ordinary, English, Ascending Bid, or Forward type auctions - Most common.  Found on figBid and eBay.  Buyers compete to obtain goods or services by offering (bidding) increasingly higher prices.
  • Sealed-Bid First-Price or Blind Auction - All bids are submitted at the same time and no one knows what the other person has bid.  The highest bid wins.  There are no bidding wars and prices are not driven up by competing bidders.  Boooorrrinng.  Mostly used for contracts, real estate, and other business to business transactions.
  • Vickrey or Sealed-Bid Second-Price Auction - A type of sealed bid where no one knows what the other person has bid.  The highest bidder wins but pays the amount of the second highest bid.  The Vickrey gives participants an incentive to bid true value.  Can be a lot of fun but the true Vickrey auction is not embraced by many.
  • Dutch Auction - A system of descending bids which is opposite of the Ordinary Auction.  Auction price starts high and systematically lowered until a price is accepted.  eBay used to incorrectly use the term Dutch Auction to identify an auction for a group of the same items where the winning bid amount would be paid for each item.
  • Live Online or Simulcast Auction - This is a combination of live and internet auction.  Used by small and large private auction houses for an auction ‘event’.  Bidders will log onto a website and follow or watch the action as it happens live.  Fast paced, lot’s of fun and there’s always a great shot at a good deal.
  • Reverse auction - A type of auction in which the roles of buyer and seller are reversed.  Sellers compete to obtain business from the buyer and prices will typically decrease as the sellers underbid each other.  Mostly used by government and business to business.  Successful auction model for the shipping website uship.
  • Private Auction - Bidders must pay a fee or be invited in order to participate in the auction.
  • Penny or Bidding Fee Auction - Very fast paced and lots of fun.  Participants pay a fee to purchase bids or bid-packs.  Typically, each bid increases the price of the item by a penny or a few cents.  Bidding is extended by seconds each time a new bid is placed.  The item goes to the highest bidder when no one places any new bids.  The highest bidder pays the ending amount of the auction which is usually much lower than retail cost of the item.  Successful model for many penny-auction websites operating today.  Also has a high amount of fraud associated.  But if you have the opportunity to join a reputable site and participate, please do so.  It’s loads of fun!

How does an Ordinary Auction work?

An Ordinary Auction is the easiest to follow and understand.  Similar to a live auction event, a seller lists an item for auction at a pre-determined starting price and set amount of time, usually from 1 to 10 days.  Potential bidders find the listing and compete for the item by placing bids.  The price of the item ascends incrementally according to a Bidding Increment Schedule set by the website.  Here is an example of figBid's Bidding Increment Schedule:

 

Current Price

Bid Increment

$0.01 - $0.99

$0.05

$1.00 - $4.99

$0.25

$5.00 - $24.99

$0.50

$25.00 - $99.99

$1.00

$100.00 - $249.99

$2.50

$250.00 - $499.99

$5.00

$500.00 - $999.99          

$10.00

$1000.00 - $2499.99

$25.00

$2500.00 - $4999.99

$50.00

$5000.00 and up

$100.00

 

In order to win the listing a user must watch the current price throughout the life of the listing and keep entering a bid higher than the other bidders.  Bidders can also place a Proxy BidProxy Bid is a fancy term for, I can’t be there for the whole auction but here is the highest amount I’m willing to pay for the item.  At the end of the pre-determined time limit the item sells to the highest bidder or Proxy Bidder.  Here is a figBid scenario based on an Ordinary Auction.  Please follow along in the action using the Bidding Schedule above.  Run through this scenario a few times and I promise you’ll be a bidding pro.  All names are fictitious and in no way related to real buyers or sellers.  Fig tree variety names are picked at random:

  1. Amy creates a one-day auction listing for Brown Turkey with a starting price of $90.00 and a Reserve price of $150.00.
  2. Eric wants to add Brown Turkey to his collection.  Because of the low opening price, Eric knows there will be a lot of action on this listing.  Eric comes up with a strategy and limps in with a weak starting bid of $90.00.  Eric is the high bidder at $90.00.
  3. Coop sees the Brown Turkey at $90.00 and believes it’s a steal.  Coop bids $105.00 but plans to watch the listing and bid more if necessary.  Eric is losing the bid and Coop is now the high bidder at $91.00.
  4. Rafed logs in; Brown Turkey is his favorite and this looks like a good deal.  Rafed completes his due diligence and thinks this tree is only worth $150.00.  Rafed places his Max Bid for $150.00.  Coop is losing the bid and Rafed is now the high bidder at $107.50.
  5. Harvey just finished potting a few rare varieties and decides to do a little fig shopping.  He sees the Brown Turkey and knows the variety has a fine lineage.  Harvey also thinks the Brown Turkey is worth $150.00 and enters his bid.  The website sees Harvey’s bid for $150.00 and (automatically) Proxy Bids up to $150.00 for Rafed.  Although Harvey’s and Rafed’s bids are the same, Rafed is winning the auction because he bid first.  Amy's Reserve price has been met and the Reserve comes off the listing.  Rafed is still winning the listing and the high bidder at $150.00.
  6. Eric was notified that he was outbid.  Eric sees the action from Coop, Rafed, and Harvey and now knows what he's up against.  Continuing with his strategy, Eric jumps back into the bidding with a Quick Bid.  Eric hits the Quick Bid button on the listing page and the website automatically enters the next highest bid increment for Eric and places his bid of $152.50.  Rafed is losing the auction and Eric is now the highest bidder at $152.50.
  7. Coop has been monitoring the action and is getting antsy because the auction will be ending soon but he has to go out for dinner.  Coop still believes this Brown Turkey is a steal and enters his max bid at $200.00.  Eric was outbid and Coop is winning by 1 bid increment higher than Eric’s Quick Bid of $152.50.  Coop is now winning the auction at $155.00.
  8. Vito needs a gift for a good friend and does a figBid search for Brown Turkey.  He sees Amy’s listing, knows she’s a reliable seller and decides to bid.  Vito is a savvy buyer and has studied the Bidding Increment Schedule.  Vito knows that most bidders at this level will enter round numbers for their max bid.  Vito places his max bid of $205.00 which is two bid increments higher than Coops max bid of $200.00.  Vito’s knowledge of the Bidding Increment Schedule pays off.  The website (automatically) Proxy Bids up to $200.00, Coop’s Max Bid, and not a penny more.  Coop is losing the auction and Vito is now the high bidder at $202.50.
  9. With minutes left in the auction, Rafael finds the Brown Turkey and declares, “Mamma Mia!”  He checks the bidding activity and notices the interest by some heavy hitters and is not deterred.  Rafael decides he wants a piece of the action.  Rafael is also a very savvy bidder and know’s Vito’s bidding style from past auctions.  Rafael places his Max Bid for $255.00.  Vito is losing and Rafael is now winning the auction at $207.50.
  10. Vito sees that Rafael has outbid him and realizes he will have to go to the mattresses.  Based on other bidding wars with Rafael, Vito thinks the most that Rafael will bid is $260.  Vito forgets strategy and decides to sledgehammer a bid in at $265.  Rafael is losing and Vito is now winning the auction at $257.50.
  11. With one minute left in the auction Rafael sees that he is losing to Vito and is cool as a cucumber.  Rafael expected Vito to take the shot and has already studied the course of bidding and knows that Vito has bid more than $260.  Rafael knows this will be like taking candy from a baby and applies the Bid Increment Strategy where he adds 2 1/2 more bid increments, plus a few cents to his valuation.  Rafael calculates and Max Bid's $277.52.  Rafael easily knocks out Vito and is winning the auction at $270.00.
  12. Coop is at the dinner table with his smartphone and hasn’t touched his meal.  He’s been sandbagging the auction this whole time.  Coop is focused and ready to place the winning bid in the last few seconds of the auction’s end.  Coop sees that Rafael is now winning the listing and knows Rafael likes to bid a few bucks extra than the previous high bidder.  Coop sees Rafael’s high bid at $270.00 and the system is asking for a bid of at least $275.00, the next highest bid increment.  Coop does a quick calculation and thinks $277.00 will take the Brown Turkey home.  Coop is watching the listing in earnest, has the dollar amount entered and waiting to drop the hammer.  When the clock counts down to 10 seconds Coop presses Bid, quickly confirms and watches as he loses the auction to Rafael for $277.52.

I’m having a little fun but the scenario above illustrates a few very important bidding conditions:

  • Bid Increments.  Know your Bid Increment Schedule by heart.  Most of the time, the dollar amount for the items you’re used to bidding on remains somewhat constant and bid increments will hardly change.  Knowing the level where a bid increment changes from $0.50 to $1.00, $1.00 to $2.50, and $2.50 to $5.00 is very important and can save you a ton of money.
  • Watching a listing versus bidding the most you are willing to spend on the item.  In my experience, watching a listing rarely works out.  Most auction winners will tell you they win because they’ve bid the most they’re willing to spend on the item.
  • Proxy Bidding.  Easily the most asked about feature and the smartest way to bid.  Almost like a sealed bid; set it and forget it.  No one knows the maximum for your proxy bid.  figBid will NOT bid your full max bid and only bid enough to keep you winning the auction, up to the amount of your max bid and no more.  On any website, bidding the most you’re willing to spend on the item most likely will result in a proxy bid.
  • Bidding the same amount as another bidder is not a tie.  The bidder that bid first is the winner.  Although every auction website displays time in seconds, bids are time-stamped to the hundredths of a second.  The time stamp follows your bid around until the auction ends.
  • Quick Bid.  Unique to figBid and possibly a few other niche auction sites.  It’s a no-hassle button that automatically raises the bid to the next highest bid increment.  It’s a useful tool that saves some time and lets the competition know you’re still around.  If you insist on sandbagging a listing and the timing is right, this feature could give you that winning edge.
  • Bidding with your heart and not your head.  This is deadly and you'll lose most of the time, even if you win.  If you employ no other strategy, please set a price and stick to it.
  • Know your competition.  Bids and bidders are not hidden on figBid.  Browse some ended listings to find the bidding style of your competition.  Our niche category is small and you’ll find yourself bidding against the same people over and over on figBid or eBay.  Get used to their bidding style and the savings will pile up quickly.
  • Bidding action.  Most bidding action takes place in the last few minutes before the auction ends.
  • figBid will notify you by email when you’ve been outbid.  Make sure you’re able to receive notifications from figBid by adding figBid.com to your address book.  Google How to whitelist an email address for more help.

Bidding Tips & Strategies To Give You That Edge

Here are some tips and strategies to study.  Please remember these are only guidelines that will help develop your pro-bidding style.  Mixing and tweaking is encouraged:

  1. Max Bid.  Decide on the maximum amount you want to spend BEFORE you bid and stick to it.  This is the golden rule of bidding in any auction.  Have willpower and stick to this rule even if it means losing an auction for a dollar or less.  Knowing when to throw in the towel makes you a happier bidder and you’ll win more auctions in the long run.
  2. Sandbagging.  Drop one, two, or more weak bids early in the auction then wait.  Keeping your max bid in mind, drop your final strong bid late.  Others keeping watch will assume it’s another weak bid and wait to easily outbid you with an additional weak bid at the last second.
  3. Squatting.  Place a weak bid first but quickly follow each bid placed by other bidders with your own competitive bid.  Scares away competition for a number of reasons, but mostly because other bidders will think you’re camped out.  A large amount of small bids will intimidate even veteran bidders.  This tactic also uses the notion that live bids are scarier than proxy bids and requires marathon sessions in front of the computer.  The strategy works very well but I’d rather have the website proxy bid for me any day of the week.
  4. Wait until the last few seconds to bid.  Most action on any auction is in the last 5% of the auctions lifetime.  Good strategy if you are determined but gets old real fast.  Placing a Max Bid and letting the website Proxy Bid for you works much better.  A better option for this strategy is to check out the listings that are Ending Soon.  You may not get exactly what you want but you’re sure to find deals.
  5. Avoid bidding in round numbers.  Know the bidding schedule for the website you’re using and bid accordingly in oddball amounts.  The formula I use to determine a Max Bid is to come up with a reasonable value, then add 2 or 3 bid increments to that value, then add another half bid increment plus a few cents.  Using my formula in the scenario above; #12, if Coop would have bid $287.52 ($275.00 next bid increment + $10.00 2 more bid increments + $2.50 additional half bid increment + $0.02 a few cents more) he would have triggered Rafaels Proxy Bid and won the listing for $282.52.
  6. Sniping Software.  Sniping Software is a computer program that will drop your bid in the last few seconds of an auction.  Some see this as an unfair advantage, I don’t.  Sniping Software will not win an auction at any cost; you still have to enter a Max Bid.  I don’t know if any is available for figBid, but there are a ton of options for eBay and other auction sites.  Auction Snipers and Auction Squatters are mortal enemies.
  7. Keep an eye on 1-day and 3-day auctions.  Most sellers use 7 and 10-day auctions and most buyers are looking for 7 and 10-day listings.  1 and 3-day auctions are used mostly for for time-sensitive items but a sharp eye will also find bargain items in the mix.
  8. Search for auctions ending on off days.  Peak auction traffic is Sunday and Monday at 8pm (Sellers, please read that again!).  Off-peak is, in my experience, any other day.  Some may argue that the Sunday and Monday rule is old and no longer true.  The reasoning is that eBay began with a 7-day listing and Sunday was their heavy traffic day.  Then came the 3, 5, 10-day etc.  Also added to the mix are mobile devices, sniping software, fixed-price listings, and listing specials.  Take it from me.  Almost 25 years doing this; Auctions on any website experience the highest traffic on Sunday at 8pm, second highest on Monday at 8pm.  Shop ending auctions any other time and you’ll find bargains.  Great strategy for penny-auction sites.
  9. Know the sellers and other bidders.  Sellers have cycles and trends the same as bidders.  Keep a notepad by your desktop and jot a quick note about a seller or bidder.  It’s amazing how you’ll see trends emerge in no-time at all.
  10. Strike while the iron is hot!  Years ago I was bidding in a police auction for lots of gold and silver.  There were more than 200 lots in that auction.  I was among a room full of jewelry and scrap dealers and clearly the rookie when it came to gold and silver.  Every lot on the block was met with a roomful of quick hands.  It was hilarious.  Dealers were waiting with spring-loaded arms to bid on any lot that came up.  There was no possible way the auctioneer could determine who was first.  I did not win a single lot in that auction but realized later that entering the first and highest bid (relative to the market price for gold and silver) netted the best deals.  Using this strategy online today, I bid on lots of silver and win quite often at market price.
  11. Use time-zones to your advantage.  Not a primary tactic but may come in handy when combined with another.  Most auction sites have a worldwide audience (figBid is US-based right now) and finding items ending at off-times can attract a lot less attention and net a bargain.
  12. Keep an eye on the news.  Major sporting and weather events slow down the internet auction traffic.  Also not a primary tactic but a good strategy to keep on hand.

Reserve Auctions

A Reserve is the lowest price a seller is willing to accept for an item.  The auction listing will be clearly marked as ‘Reserve’.  Most buyer’s shy away for fear of paying retail money.  It’s not true.  Sellers that place overvalued Reserve prices on their listings stand out like a sore thumb and very quickly lose potential bidders.  Thoughtful sellers use Reserve price's as a tool to protect the bottom line or weed out weaker competition.  Don't let Reserve prices dissuade you.  Bid as you normally would for any other listing and you'll be pleasantly surprised.  Internet auctions with Reserve prices work in one of two ways:

  • Some auction sites will allow Reserve prices to trigger a full proxy bid.  Using the example above, Amy's Reserve listing would have accepted the bids below the Reserve price of $150 and would have triggered Rafed's full live bid when Rafed placed his Max Bid of $150, even though the next bid increment was $107.50. 
  • Other sites, like figBid, will maintain integrity of the Bidding Schedule and proxy bid just enough to keep a user winning the auction regardless of the Reserve price; The Reserve price will never trigger a full bid amount.  That means, a listing receiving a Proxy bid higher than the Reserve amount could potentially lose the auction if there are no other bidders in the auction.  

Other Internet Auction Considerations

Moving away from strategy, here are some other important considerations and auction components that you should be aware of:

  1. Ask questions.  Internet bidders don’t have the luxury of previewing items in person.  Ask questions and don’t feel bad about it.  Not going to get into due-diligence here, but sellers not willing to answer questions should raise a flag for anyone.
  2. Make an offer.  Don’t be afraid to drop an offer on a listing.  You might catch a seller at just the right time and walk away a happy camper.  It happens to me all the time.  On the flip-side, I’ve accepted low-ball offers only to move the item.  Make the offer.  The worst that happens is the seller declines.
  3. Buy-it-Now or Fixed Price listings.  Just like shopping in a retail environment so nothing to report here.  Use the successful BIN ending prices as a tool for gauging auction prices to help set your Max Bid.
  4. Shill Bidding.  Shill bidding is bidding on your own or other auctions only to create activity and drive up the price.  It’s against the law and easy to pick up on, especially on the smaller websites.  Don’t do it.
  5. Watch-list or Favorite.  Don’t let a high number of Watchers or Favorites scare you.  In fact, a high number of Watchers or Favorites may have the opposite effect of what a seller thinks.  This is not always true but a high number of Watchers or Favorites can scare away potential bidders.  Remember, watchers are not bidders!  And some people just like to watch.  Don’t miss out on the action just because someone is watching.
  6. Buyer’s premiums, fees, and taxes.  Most websites have a Buyer’s premium or other fees.  figBid does not  :)  A buyer’s premium is a fee paid by the auction winner to the auctioneer or website at the end of the auction.  Generally the premium is around 10% but can be higher or lower.  If a deal seems too good to be true, check the Buyer’s Premium and do the math.  Adding a Buyer’s Premium, fees, and taxes to a good auction ending price can sometimes push a listing right into the toilet.

We could go on and on but I promised no fluff.  This is more than enough material to get you into the winner’s circle on a consistent basis.  Use the tips wisely and practice makes perfect.  Thank you for reading to the end and if there’s anything you think should be added to or edited from this article please let me know at danny@figBid.com.  Good luck and happy bidding!