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Pros and Cons of Reserve Price Auctions
QUESTION:After 3 months of selling small items and building up my feedback, I am now
ready for the big leagues. I have a long time business associate who runs a
scrap yard and buys and sells used machinery as a sideline. He is not very
computer savvy and when I approached him with the idea of being his trading
assistant on eBay he was all for the idea.
So I spent the afternoon with him the other day taking digital pictures of
the various machines and taking notes on each piece. Afterwards I prepared
a broker's agreement which he just signed. I asked for and got 15%. That
may strike many as too low, but I am comfortable with it, as the items will
go from $2,000 to $20,000.
Now the big question is how to price these items at auction. I have read
here in this website many times a general disfavor of Reserve Price
Auctions. So I came here to ask opinions. The first item I am getting
ready to list, he wants $18,000 for it, I have to add my percentage on top
of that. I am hoping for it to bring around $25,000.
I can list it for $19,900, but if I only get one bidder, that cuts into my
fees. I will be paying the eBay fees. Payment for the item will be in
certified check or bank wire transfer.
ANSWER: My gamble is a few hours of my time and the maximum eBay listing
charge of $4.80. I will get 15% what ever the item sells for, the final
sale price. This guy has bought this stuff very cheap and sometimes puts an
effort into fixing it up, other times sells it as is. He's got alot of junk
that I will list on my website and leave it at that. On certain items it is
definitely worth it.
As for the $18k figure, that is the amount he wants me to add 15% to, that
is the *minimum* he will accept for the item. Yes the owner of the items
takes absolutely no risk. I am doing this to get myself started. I am in
no position to buy these items outright. As far as freight goes, that is
always on the buyer.
I have experience in the used forklift industry and I know what this
particular item is worth, and the price is not out of line. A forklift of
this age, condition and size should bring in the neighborhood of $25k -
$30k. Someone that is going to use a fork truck of this size 8 hours per
day / 5 days per week wants a new or recent model. But someone that needs
this capability several times a week to offload one item, they don't need
new, and will definitely buy an older machine. Industrial trucks hold value
over the years.
On other pieces of equipment this guy has, I will have to research the
individual item to see whether it is worth pursuing. We have known each
other for many years and if I report back to him that his price is too high
on a given item, I am quite confident he will revise accordingly. I trust
his judgment and he trusts mine. There is someone else local here, that he
helped get started in a similar fashion about 15 years ago. I got my
experience in used industrial equipment sales working for that other party.
Today that other party does *very* well.
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