Why Ebay’s “Buy It Now” option has become more popular than its auctions
On “Auction vs. Fixed-Price: How to Choose an eBay Listing Format” by Aron Hsiao for the balance small business
https://www.thebalancesmb.com/choose-ebay-listing-format-1140527
eBay has evolved from an auction-only selling platform to a site that allows people to “buy it now” in addition to bidding in auctions. For sellers though, it seems the “buy it now” option has become the better strategy for a range of reasons. Auctions are slower, have less visibility, and can get the seller less money than they were hoping for if people don’t bid high enough. The fixed price “buy it now” option allows people to get the product faster (and so is better able to compete with platforms like Amazon), and also gives the seller more control over what the item is actually sold for.
There are a few downsides to fixed price listings not mentioned in the article, however. The seller risks overestimating the value of their product and not being able to sell it, but if this happens, it is easy to re-list it at a lower price or as an auction, so it makes sense to try for a higher price first. The seller also risks selling the item for less money than they could have gotten if people’s values for the item turn out to be higher than their listed price. In fact, with fixed price listings, sellers would usually sell for below the item’s value, since people won’t buy it if the item is priced above its value, leaving the only sellable options for pricing at or below the item’s value.
The beauty of auctions is that sellers can sell items at the highest (or second highest) amount people are willing to pay, according to our lecture on auctions, whereas fixed price listings usually leave sellers coming out behind. So why then have fixed price options become more popular? In reality, the value of an item is measured in not only its price, but also in the speed in which it can be bought. If people aren’t sure they’ll win an auction, they are less likely to spend the time watching, bidding, and waiting to find out. The certainty and speed of the “buy it now” option now adds more to the value of a fixed list item than the value of the same item listed through an auction, and the seller can take advantage of this greater value placed on speed to raise the prices of fixed list items beyond their monetary value and still have them sell, simply because the way they are sold is faster.