How eBay Auctions Work

Of all these different types of transactions, the most unfamiliar to many users is the online auction. In fact, some new users get quite anxious about placing bids or trying to sell an item via online auction. Never fear; participating in an online auction is a piece of cake, something hundreds of millions of other users have done before you. That means you don't have to reinvent any wheels; the procedures you follow are well established and well documented.

Let's start with the basics. An eBay online auction is an Internet-based version of a traditional live auctionyou know, the type where a fast-talking auctioneer stands in the front of the room, trying to coax potential buyers into bidding just a little bit more for the piece of merchandise up for bid. The big difference is that there's no fast-talking auctioneer online; instead, the bidding process is executed by special auction software on the eBay site. In addition, your fellow bidders aren't in the same room with youin fact, they might be located anywhere in the world. Anyone anywhere can be a bidder, as long as they have Internet access.

note

Before you can list an item for sale or place a bid on an item, you first have to register with eBay. There's no fee to register, although eBay does charge the seller a small insertion fee (sometimes called a listing fee) to list an item for sale, and another small transaction fee when the item is sold. eBay doesn't charge any fees to buyers.

We'll get into the detailed steps involved with buying and selling later in this book; for now, let's walk through the general operation of a typical eBay auction:

1.	You begin (as either a buyer or a seller) by registering with eBay.
2.	The seller creates a listing for a particular item and launches the auction on the eBay site. (eBay charges anywhere from $0.20 to $4.80 to list an item.) In the item listing, the seller specifies the length of the auction (1, 3, 5, 7, or 10 days) and the minimum bid he or she will accept for that item.
3.	A potential buyer searching for a particular type of item (or just browsing through all the merchandise listed in a specific category) reads the item listing and decides to make a bid. The bidder specifies the maximum amount he or she is willing to pay; this amount has to be equal to or above the seller's minimum bid, or higher than any other existing bids from previous bidders.
4.	eBay's built-in bidding software automatically places a bid for the bidder that bests the current bid by a specified amount. That is, the software bids only the minimum amount necessary to create a high bid, up to but never going over the maximum amount specified by the bidder. (In fact, the bidder's maximum bid is never revealed.) For example, let's say that the current bid on an item is $25. A bidder is willing to pay up to $40 for the item, and enters a maximum bid of $40. eBay's bidding software places a bid for the new bidder in the amount of $26higher than the current $25 bid, but less than the specified maximum bid of $40. If there are no other bids, this bidder will win the auction with a $26 bid. Other potential buyers, however, can place additional bids; unless their maximum bids are more than the current bidder's $40 maximum, they are informed (by email) that they have been outbidand the first bidder's current bid is automatically raised to match the new bids (up to the specified maximum bid price). Note eBay is kind of like a newspaper that runs classified adseBay isn't the actual seller, and isn't even really a "middleman." All eBay does is facilitate the transaction, and therefore it can't be held responsible for anything that goes wrong with any particular auction or sale. When you buy an item, you buy it from the individual who put it up for saleyou don't pay anything to eBay.
5.	At the conclusion of an auction, eBay informs the high bidder of his or her winning bid, and the seller sends the winning bidder an invoice.
6.	The winning bidder arranges payment for the item he or she just won. Payment can be immediate (via credit card), or the buyer can send a check or money order through the mailwhichever methods the seller offers.
7.	When the seller receives the buyer's payment, he then ships the merchandise directly to the buyer.
8.	Concurrent with the close of the auction, eBay bills the seller for a small percentage (starting at 5.25%) of the final bid price. This selling fee is directly billed to the seller's credit card.

That's how it works, in general. For more detailed instructions on how to bid in an eBay auction, see Chapter 8, "Bidding in Online Auctions." For more detailed instructions on how to place an item for sale on eBay, see Chapter 15, "Selling Items via Online Auction."