Doing your homework

It almost goes without saying that before you bid you should know exactly what you are bidding on and how much it is worth, but it is surprising how many bidders do not follow this simple rule-of-thumb. Too many angry e-mails and negative feedbacks have been traded because a hasty buyer overbid and found out afterwards that they could have gotten it cheaper at their local Wal-Mart… as if that is somehow the seller's fault.

It seems that eBay is increasingly gravitating towards the "instant gratification" buyer, who wants it now and is willing to pay close to - or even above - retail - in order to get it. If you are one of those people, I, along with several million other eBay sellers, would love to meet you.

The rest of us are interested in getting a bargain - if we wanted to pay a premium to get it right away we would be at the nearest store.

One of my cardinal rules about bidding on eBay is simple: Never buy the first item you see. Like London buses, another one (or seven - trust me, I know) will be along soon.

Thomas Jefferson once said "I'm a great believer in luck, and I find the harder I work, the more I have of it". Similarly, I have found that the more research I do the better a bargain I end up with. Patience is the key. In general, the more time and research you invest in researching and watching, the better a bargain you are going to get. However, there is a law of diminishing returns to contend with - beyond a certain point it is not worth waiting any further. Where that point lies depends on how badly you want the item and how much you value your time.

So... what's it worth?

One of the best and most practical definitions of "Free Market Value" is "the amount a willing buyer would pay a willing seller"; there is nowhere that this is more true than eBay. You are competing with (potentially) millions of other bidders for the item, and as long as someone is willing to pay more than you, they will beat you. Those of you who are looking for a $20 iPod will be looking for a very very very long time; as long as someone else is willing to pay more for the item, they will outbid you every time.

Yes, you want a bargain and yes, you want something for nothing (don't we all?), but there are situations where waiting for that elusive bargain is simply not worthwhile. For instance, some years ago a friend of mine was looking to buy a cordless nail gun. He works in the construction business, and this tool would have saved him time - by his estimate it would have saved him at least thirty minutes a day. By my estimate, the item would have paid for its full retail value ($300) in under a year. They were going on eBay for around $250, but he was not willing to pay full retail price or anything close to it. His approach was to put in a lowball bid and hope that nobody else outbid him. His hopes were in vain; for months we searched for bargains, and he kept getting outbid. Eventually he gave up.

When I started on eBay I purchased a program in order to track the auctions that I was interested in bidding on. Although I still use it, it is no longer as necessary, as eBay now provides web-based tools to do the same thing.

• Set up a "watch list" of auctions that might be of interest.
• Setting up predefined searches for items of interest.
• Lists of items awaiting payment, shipping, feedback etc.

All of these tools are available through "My eBay"

If you are new to eBay, try not to get too excited when confronted by lists of 5c CDs, 25c DVDs and $20 iPods. Just remember the following two proverbs:

• It ain't over till it's over - prices tend to zoom up in the last few seconds.
• Anyone can win… unless there is a second entry - if anyone is willing to pay more than you, they will beat you.

In a "Traditional" Auction, a bidder has to make multiple bids in order to outbid all others and win the auction. However, a traditional auction rarely lasts more than a few minutes, while eBay listings can go for as long as ten days. While it is possible to make multiple bids on eBay, it would be silly to expect bidders to have to make bid after bid over that period - not all of us have the opportunity (or the inclination!) to sit in front of a computer, entering bid after bid. With this in mind, the folks at eBay came up with an idea that they call…

Proxy Bidding

This causes much confusion among newcomers to eBay. One of the keys to successful bidding on eBay is to understand how Proxy Bidding works and to use it to your advantage.

Proxy Bidding is actually quite simple. Instead of having you make lots of bids, the system allows you to bid your limit, and will bid the minimum necessary to stay in the game. Naturally if another bid beats your limit then you are out of the running. This means that the winning bid will always beat the second bid by one increment or less. If your max bid is $7 and I bid $12, I will get the item for $7.50.

The best way to understand the concept is to think of Proxy Bidding as your gofer in the auction room. You tell him how high you are prepared to go and he sits in the audience and raises his hand, just like traditional auctions that you see on TV. The practical upshot of all this is that you can tell him your maximum bid and walk away and leave him to get on with it. This is the preferred way of bidding if you don't want to waste time making counterbids.

Bids go up in increments. You have to beat the current high-bid by one whole increment for your bid to count - eBay will not allow you to bid any less. Even so - your will not become the high-bidder unless your bid is higher than the current high-bidder's maximum bid. If that sounds complicated, it isn't once you have made a few bids.

The golden rule of eBay bidding

Bid once, bid max, bid late

1. Bidding once and walking away helps to ensure that you have done your homework and don’t get caught in a bidding war.
2. Bidding the maximum you are willing to pay means that you will NEVER get outbid by someone who paid less than you would have.
3. Bidding Late gives counterbidders less time to react, as well as, again, helping to prevent bidding wars.

The other “commandments” I try to live by – the Silver rules, if you like.

• Use the search feature to build up a list of items you are looking for, and check it every few days.

• Never bid on the first item you see. That is a recipe for heartache when you see a the same thing going cheaper when it is too late to back out.

• Remember that your bid is a contract. Don't bid if you are not going to buy!

• NEVER EVER "FALL IN LOVE" WITH AN ITEM! You are begging to get caught in a bidding war - with an honest eBayer if you are lucky; with a dishonest shill if you aren't.

• Be prepared to lose - if someone is willing to pay more than you, they will win the auction. Don't get upset… in most cases, another one will be along soon.

•  Do not bid on more items than you want to buy! 

• Don't get excited - $20 for an iPod (or whatever) sounds like a steal… but the price will almost always zoom up to the item's real value in the dying seconds of the auction.

• If it sounds too good to be true, it probably is.