jump to navigation

Making An Offer They Can’t Refuse June 2, 2010

Posted by Michael Carney in : auctions , 12comments

 Powered by Max Banner Ads 

You’re listing a product to sell. What price should you ask? How do you decide?

Selling on Trade Me is all about encouraging early bids and creating emotional attachments with the items. Your pricing strategy has a very real influence on whether early bidding is successfully achieved. To understand exactly what pricing strategies are right for you, you first need to understand the psychology of bidding.

THE PSYCHOLOGY OF BIDDING

Scenario 1: The high starting bid
You have a widget for sale. You bought it for $20 and you think it’s worth $40. You list it with a minimum starting bid (same as the reserve) of $39.95.

After a few days you’ve attracted some casual viewers but no bids. Then a widget-lover finds the auction and looks over the listing details. He sees the high starting bid price and wonders to himself:

If his widget-addiction is strong, he’ll make a bid. If your product description is mind-boggling and everything else stacks up, maybe that could tip the balance. Otherwise, no sale.

Scenario 2: The $1 No Reserve Auction
Same widget, different pricing. You still think the widget’s worth $40 but this time you start the auction at $1, No Reserve. Right from the start, you get more traffic — your widget shows up in the Widgets category and also in the $1 No Reserve Category. You attract a few casual viewers who have some interest in your item. Since the price is so low, they’ll place a bid on it if they have any interest at all, or if they think they can resell it and make a quick profit.

That mere act of someone making a bid transforms the fate of your widget. Now it attracts more interest — someone’s bid on it; it must be worthwhile. More people see the widget listing and more bid on it. There’s an increasing perception of the value of the widget (based on bidding behaviour which is really the blind leading the blind).

The bidding gets up to $10 or $15 when those with a merely casual interest stop bidding. Now your widget-lover comes along. When you started the bidding at $39.95, the price was high and he had to try to justify the purchase to himself. Now it’s a low price, obviously a great deal — and a host of others are interested in the widget. But our hero is a widget-loving expert and right away he develops a sense of ownership — ‘I know and understand widgets; this one is mine!’ He bids $20 and becomes top dog, leading the bidding.

Enter Widget Lover #2. He sees the widget, he sees all the bids and maybe recognises the user name of Widget Lover #1. The opponent effect kicks in — a bidding war erupts. Up, up, up goes the price, past $30, past $35, past $40. Widget Lover #1 finally gets the prize, for $49.77.

Why was Widget Lover #1 willing to pay more in this second scenario? Suddenly he really wanted it — but might lose out. The widget’s relative value had changed as a result of the auction itself. It wasn’t just a case of ‘do I really need this widget?’ any more. Now it was serious: ‘I have to win this auction — this is my widget. I’m the widget-lover.’

So how do you tap into the psychology of bidding to increase the potential return on your widget? There are five primary pricing strategies used by sellers at the start of their auctions:

1. STARTING BID = MINIMUM AMOUNT YOU WISH TO RECEIVE FOR THE ITEM
(Often flagged in listing headlines as ‘Start = Reserve’ or ‘S=R’.) This is a fairly straightforward pricing strategy: set the starting price (and the reserve) at the amount you think the item’s worth.

Recommended when

2. STARTING BID = $1, WITH NO RESERVE (HEADLINE SHORTHAND: $1NR)
Simply start the bidding at $1 and set the reserve at $1. [NB: A word of warning with this strategy: be mentally prepared to let your product go for as little as one dollar. Not every auction proceeds according to plan.]

Recommended when

3. LOW STARTING BID + HIGH RESERVE PRICE
You could start your auction at an attractive low price (even as low as $1) with a significant reserve price (say $40) as protection in case bidding is too low.

Recommended when

4. STARTING BID = ENOUGH TO COVER YOUR PURCHASE PRICE AND LISTING FEES
This pricing strategy (where Start also equals Reserve) is a halfway-house between strategies #1 (high minimum bid) and #2 (no minimum bid).

Recommended when

5. STARTING BID = PERCENTAGE OF LISTED VALUE (AND START=RESERVE)
With this strategy you price your starting bid in relation to an existing price guide or published price. For example, you might sell DVDs and start all of your auctions at 60% of recommended retail prices. Or you might sell a collectable item such as stamps or comic books, where price guides and catalogues exist and you can quote them in your listings.

Recommended when

MAKING A FIXED PRICE OFFER
At the end of an auction, the seller has one final opportunity to offer the item at a fixed price. It’s a blunt instrument – price is the only variable under the seller’s control at this stage. If you just want to be rid of the item, offer it at that legendary “price they can’t refuse”.

Otherwise, choose a price that you’d be happy receiving — if someone accepts, it’s a done deal.

Post to Twitter

Making Money Online December 1, 2009

Posted by Michael Carney in : auctions, make money online, trade me, trademe , 3comments

So you’ve decided to get serious about Trade Me and make some real money on the site. But what should you sell – and where can you find goodies at the right price to make a good profit anyway?

WHAT SHOULD YOU SELL ON TRADE ME?
For some, the answer to this question is easy: sell products that you know a lot about – and indeed, are passionate about. That could be anything, from coins of the nineteenth century to slightly used designer clothing. If you know your products well enough to be a little, um, obsessed about them, then you’ve probably already identified what’s a good deal and what’s a ripoff anyway – and often you’ll already know where to buy your specialist products for a really good price.

For others, the choice of what to sell is not so clear-cut. Many of us have passions that don’t easily lend themselves to profitable trading. Collecting the various ‘Thomas the Tank Engine’ models, for example, can be great fun and all-consuming—but the stock easily available to Kiwi collectors may not have a high resale value, at least not on Trade Me.

And that’s the point of this particular article. We’re exploring what it takes to make some reasonable dollars online, not just earn some spare change by selling off those odds and ends cluttering up your garage – or by parting with precious items that you’ve spent half your life collecting.

HOW MUCH DO YOU WANT TO EARN ONLINE?
Before you even choose what products to sell, you need to decide how much money you want to make on Trade Me – and how much time you’re prepared to devote to doing so. When we interviewed some of the top Trade Me sellers for the TRADE ME SUCCESS SECRETS book, they told us they were spending 60-70 hours a week on Trade Me related tasks, and listing 200-300 items a week. That total suggests that they were photographing and listing an average of 3-4 items per hour (not to mention wrapping and despatching perhaps one item per hour, based on selling one in every three or four items listed*).

*Across Trade Me, typically the sell-through rate averages around 25%. In other words, one in four auctions usually close successfully. That response rate is much higher for specific categories, as you’ll see later.

Of course, those top sellers were trading fulltime on the site – your goals may be somewhat more modest. Even so, you need to identify some key metrics before you decide on your product selection.

For example, if you want to earn $500 per week (before tax) from Trade Me, but are only willing to spend 20 hours a week working on auction tasks, then the following maths might apply:

If you’re selling one product for every four listed, then each product sold must also include a listing cost allocation for the three not sold. Those costs (within general auctions) can range from 25 cents to $5 or more per listing, depending on your selection of promotional items, subtitles and other options. So your calculations need to take those into account (x4). And then there’s the success fee of 6.9% per sale item (up to $150). All in all, you could be looking at fees totalling as much as $20 for every four items listed (and one sold).

In other words, in order to clear $25 per successful sale, you may need to earn at least $45 more than your purchase price per item. Clearly you need to choose (and then buy) your products very smartly indeed. You also need to be very careful when deciding which promotional options to choose, to minimise your costs but maximise the appeal of your auctions (for which advice, may we point you to Chapter Eleven of Trade Me Success Secrets).

CHOOSING A PRODUCT 1: THE PRICE RANGE
Continuing with our example, then, if you’re wanting to earn $45 per item, you could perhaps be looking at selling products with a perceived value of (say) $150, which you need to source for around $100 each in order to achieve your desired profit margins. That clearly rules out a wide range of products; but still leaves plenty of scope for the imaginative mind (refer to Chapter Nine of TRADE ME SUCCESS SECRETS for strategies to customise each product and thus improve its perceived value to potential purchasers).

CHOOSING A PRODUCT 2: STUFF THAT ALREADY SELLS ON TRADE ME
Every week, around 1.4 million items are listed on Trade Me. Every week, around 350,000 of those items sell. Trade Me collects and kindly reports on which items are more likely to sell than others, and you’ll find that information (updated monthly) here: http://www.trademe.co.nz/Community/SellThroughRates.aspx .

We’ve been tracking these statistics since Trade Me first started publishing them in late 2005 (just in time for the first edition of TRADE ME SUCCESS SECRETS), which was a great relief – we weren’t looking forward to crunching the numbers ourselves, which would have required looking at some fifty thousand pages (every week).

What we found in 2005 – and it’s a result that remains true today – is that Baby Gear and Mobile Phones are consistently the most sought-after categories on Trade Me. A higher proportion of products in those categories sell on a regular basis than almost anywhere else on the site.

Of course, not everybody can sell Baby Gear and Mobile Phones, certainly not all the time (and the categories would plunge in terms of success rates if everybody tried). So we recommend you look at the monthly sales results by category (through the prism of your price constraints, of course)  and decide if any of those are for you.

CHOOSING A PRODUCT 3: FINDING NEW PRODUCTS AND TRENDS

Even though online auctions can consume your every waking hour, there is, in fact, life outside Trade Me, radical though that notion might be. If you want to identify hot products and categories before they begin to become popular on Trade Me, you need to start your searching elsewhere. Ten suggestions:

1. The Trade
Manufacturers are constantly bringing out new products, as they look for ways to increase their sales and meet the evolving needs of their customers. Don’t wait for these new products to hit the public arena before you hear about them. Talk to industry experts, read trade journals, go to trade fairs and exhibitions.

2. Read
Haunt your local library, bookstore or news-stand. Some of the hottest new global offerings are written up in international news magazines such as Time, Newsweek and Business Week, especially in regular Hot Products issues. For techno-business trends, sample Wired, Fast Company and (locally) Unlimited and Idealog. For more technical products, Popular Science and Popular Mechanics provide inspiration. In the world of fashion, you’ll find the many international editions of titles such as Vogue will spark ideas. Whatever your product category, there’ll undoubtedly be international magazines serving that interest.

3. Watch TV
In particular sample some of the magazine-type shows on CNN and BBC World. You’ll get advance warning of hot trends brewing offshore. If you’re interested in the latest entertainment-related products, check out shows such as E! News Live, Entertainment Tonight and The Late Show with David Letterman.

4. Web Trends
If you’re interested in broader trend analysis, a number of global websites specialise in new trends. Inevitably, many of the trends thus uncovered are still some time away from commercial reality in New Zealand. However, for a sneak peek at some of the opportunities you might be considering for next year, visit (and, where available, sign up for newsletters at):

5. Closer to home: Kiwi ‘what’s hot’ lists
‘What’s Hot and What’s Not’ lists make regular appearances in many local newspapers and magazines. While some of the selected hot items are fleeting at best, bizarre at worst, others will provide the seed of an idea for a profitable product to offer on Trade Me.

6. Any and all magazines
Even weekly magazines such as the New Zealand Woman’s Weekly, Woman’s Day and New Idea are great sources of inspiration for what’s current. Squeezed in between those tantalising tales of celebrities in trouble you’ll find:

7. Mailers and advertising ephemera
Tear down that ‘No Junk Mail’ sign on your letterbox and enter the world of sell, sell, sell! Devour those advertising circulars. Pay particular attention to products that have pride of place on the cover or have a full page inside that’s all about them. Those are products that will sell strongly at retail and — if you can source them at the right price — are potential sales champions for you.

8. Network
Talk to shopkeepers and shop assistants. Ask them what’s hot in their store. Those that have been paying attention can point you towards some best-sellers — and probably some surprises. A word of warning: take any overly passionate endorsements with a grain of salt. These people are in the business of selling and may have you in their sights!

9. Searching online
Once you have an inkling of the type of product you might sell, search online via your search engine of choice. What exactly are you looking for?

10. Number crunching
Many leading New Zealand retailers are public companies, and required to publish regular reports on trading patterns. Read their quarterly, half-yearly and annual reports and review any historical sales data that’s available in those reports (sometimes it’s in the accompanying commentary, explaining anomalous results). Use this information where you can to identify product categories that have been historically popular at certain key periods, eg, Christmas, Mother’s Day, Father’s Day, Valentine’s Day, Easter, etc.

CHOOSING A PRODUCT 4: WHAT ELSE?
Once you’ve identified possible products, you need to identify where to buy them, at a price that enables you make a decent margin. It’s never easy, but it is possible, as some of Trade Me’s top sellers reluctantly revealed when interviewed:

WHERE DO TOP SELLERS GET THEIR PRODUCTS?
We asked contributors to TRADE ME SUCCESS SECRETS where they get their products. They were understandably reticent — in many cases that’s the secret of their success — but we were very persuasive and managed to encourage a number of them to unlock their Book of Secrets, at least a little.

As you can see from these reports from our experienced sellers, you can find resaleable products just about anywhere. If you just want to make a bit of pocket money, you don’t have to worry too much about regular sources of supply. But if you really want to build a sustainable business on Trade Me then you’ll have to put some serious effort into tracking down reliable suppliers, building relationships with those suppliers and (frankly) investing not just time but money.

For those who don’t particularly want to specialise in a single category, some other thoughts:

SOURCES OF SECOND-HAND GOODS FROM THE GENERAL PUBLIC

LOCAL RETAIL OPPORTUNITIES
Trade Me is accessible to anyone with a computer and an Internet connection. As such, it’s a great shopping venue for buyers in more geographically isolated parts of New Zealand. Residents of far-flung outposts can now get access to products normally sold only in the larger metropolitan areas, while still enjoying their more pleasant lifestyles. Astute city-clicker sellers have noted this fact, and have been known to frequent their local retailers, buying discounted and sale items and reselling them online. Inexpensive products can often be found (with a certain amount of rummaging around) at stores such as:

In fact, any retailer who has regular clearance sales should be on your list of potential product sources. If you know of retailers who have sales at a particular time of year (eg, Smith & Caughey’s twice-yearly events) you should add them to your calendar. New store openings are also a good source of bargain buying, but you need to be quick.

FACTORY AND OUTLET STORES
Although some ‘Factory Shops’ sell their wares at prices little different from traditional retail outlets, there are enough genuine factory shops out there to serve as a good source of products. The ideal factory shop will also be one of a kind and physically close to the factory it supports, so that few Kiwis have easy access to its lower prices.
SECOND-HAND DEALERS AND PAWNBROKERS
These classic institutions, which had the resale of second-hand goods pretty much to themselves in the days before eBay and Trade Me, can still be fertile sources of products to resell, although the dealers’ margins can mean it’s not always profitable to list them online. Second-hand dealers range in size and scope from single stores to national chains such as Cash Converters. Pawn shops occupy a lower profile in the retail sector generally, and are more likely to be found in areas bordering poorer households.

OPPORTUNISTIC EVENTS
There are, we are told, only two sure things in life: death and taxes. Estate sales, liquidations and bankruptcies are essentially the side-effects of both certainties, and while we naturally wouldn’t welcome such eventualities, they do tend to create opportunities. Typically, the recipients of deceased estates have little interest in many of the items hoarded by the dear departed, and will tend to dispose of them in bulk without worrying too much about the value of specific items. Similarly, receivers and liquidators are more interested in quitting chattels quickly than in realising optimal resale prices. Watch out for such opportunities: good profits can be made reselling the items individually.

ENDS OF LINE
We live in a disposable world of conspicuous consumption. Products with heaps of life still left in them are consigned to oblivion when new (sometimes only slightly) improved versions are introduced by manufacturers. But what happens to the old products? Where do superseded cellphones go to let their batteries run down? When the latest PlayStation rolls out the door, what happens to all those unused (but redundant) previous-generation consoles?

If you can find the right sources, perhaps some of those retired products could find new homes through your Trade Me listings. We can’t always afford the latest and greatest new product, and you could be performing a valuable public service by providing a new life to these obsolete senior citizens — and making a decent profit at the same time.

TRADE SHOWS AND CONVENTIONS
There’s nothing quite like the last day at a good trade show. Exhausted exhibitors, weary of the whole thing, just want to pack up and go home. But they’d rather not have to lug home all the products they still have on display, so they’re often willing to quit stock at a substantial discount. So if you intend to go to any tradeshow, make sure you leave it till the last day — and preferably the last afternoon. Then get ready to haggle.

RENTAL AND LEASING COMPANIES
Companies that lease out equipment, whether on a short-term or long-term basis, inevitably end up with used but often still serviceable products when the leases expire. They are bound to have existing arrangements in place to dispose of those goods, but will probably listen to a compelling alternative.

UNCLAIMED ITEMS
We’re a forgetful lot. We leave our belongings on trains and buses. We drop stuff into drycleaners or repair shops and never get around to picking them up. We send packages to the wrong addresses. We leave goods in storage. That’s why the companies reserve the right to sell unclaimed goods. To you.

CONFISCATED GOODS AUCTIONS
There’s something vaguely voyeuristic about bidding for goods that have been confiscated by police or customs. We tend to imagine all sorts of sordid tales about the former owners of these innocent household goods. Unfortunately, that morbid fascination also tends to make such auctions very popular, so bidding can be brisk for many items. Our best advice: get a catalogue in advance, if you can, and check out potential resale returns in advance. Failing that, turn up early, identify and inspect the items you could resell. If possible, work with a partner by cellphone to identify the prices such items are currently fetching on Trade Me. Subtract your costs and your margin and that’s your top bid price. Don’t bid beyond that point (sometimes easier said than done, if you happen to fall in love with a particularly choice offering).

CHARITY AUCTIONS
Auctions have always been a popular method of supporting good causes. They have become even more effective with the advent of Trade Me. Products are donated freely, all the dollars raised go towards the designated charities and everyone’s happy. Of course, not all products at the auctions achieve their maximum value. The high-profile offerings capture attention and bids, but some of the products slip through at bargain prices. That’s your cue.

TRADITIONAL AUCTIONS
While Trade Me auctions continue to draw more and more members, they’re not the only game in town. Traditional auctioneers still handle large quantities of goods, and they’re still a great place to pick up unexpected bargains. We recommend looking out for special-interest auctions (eg, those which involve the sale of complete stock and chattels of restaurants, industrial goods suppliers, contractors, etc). Typically, these auctions attract industry insiders looking for the specialist equipment available only at such auctions. The insiders generally have little interest in the everyday chattels common to all businesses — computers, fax machines, copiers, printers, desks, tables, chairs, etc — and such products can be purchased at much lower prices than if they were being sold at general office or computer-equipment auctions.

LOCAL WHOLESALERS
Where can you find genuine local wholesalers who might be willing to deal with you? You have to ask the right people. And that would be who? The local manufacturers who made the products or the local branches of multinational manufacturers for products made offshore. Specifically, you should call them up and ask for the sales department. Simply tell the person in that department that you own a retail business, and you want to sell some of their products. Ask them for a list of their wholesale distributors. They’ll have that information readily available, and should be willing to give it to you.

Next step: call the wholesalers they give you and ask about their terms — discount structure, minimum stock requirements, payment terms, etc. They’ll probably need you to set up an account, and you still have to deal with the issue of whether they will sell to a small home-based Internet business. Many of them won’t, so this research can take a great deal of time, but it is very important to your business that you do it right.

INTERNATIONAL WHOLESALERS
If you thought local wholesalers were tough to track down, just wait until you try to find genuine international wholesalers. The Internet is flooded with millions of people and organisations claiming to be wholesalers — a quick Google gave us 4,560,000 results — so you really will have to put in the hard yards. If you’ve identified a specific product you want to sell, the first steps can be the same as those we’ve suggested for dealing with local wholesalers: call the sales department at the manufacturer and find out their wholesale distributors. The next step, however, would be a lot harder: finding someone who’s willing to (a) deal with small orders; (b) ship stuff all the way over to New Zealand; and (c) overlook the fact that there’s probably someone in New Zealand who already has the distribution rights for this market.
LOCAL ONLINE AUCTION SITES
There are a small number of online auction and classified sites operating in New Zealand in competition to Trade Me. It’s fair to say these sites have been attracting relatively limited numbers of visitors and as a result the bidding on specific items is less frenzied. There may well be products listed on these sites that could be purchased cheaply and then resold on Trade Me.

INTERNATIONAL ONLINE AUCTION SITES
If you can cope with such issues as currency exchange, shipping costs and the higher risk of fraudulent activity, the world’s online auctions are a fertile source of products for you to resell locally. You should inevitably begin with eBay.com of course, and that may well occupy you enough. But eBay has many international offshoots. If you can handle languages other than English (or use the automatic translation options on Google’s browser bar plugin), you might well pick up some useful bargains on non-Anglo sites.

PRODUCT SOURCES ARE EVERYWHERE, BUT…
With a combination of knowledge, experience and imagination you can find potential product sources anywhere. But if it was easy, everyone would do it. It takes as much diligence and determination to turn an idea into a business on Trade Me as it does in any business venture.

PS That’s definitely all we have space and time for in this way-over-length article. If you want more, may we respectfully direct you to TRADE ME SUCCESS SECRETS, which covers the topic in even more detail. The second edition of this best-selling book is of course available for sale at our Trade Me store.

Post to Twitter

Now Tweeting April 22, 2009

Posted by Michael Carney in : Uncategorized , add a comment

If you want our latest micro-thoughts on Trade Me and associated topics, you’ll find us @trademesecrets on Twitter.

Post to Twitter