Wanna Buy? What Am I Bid?

You name the product, and chances are, there's a Web site where you can name your price. Here's how to be the smartest bidder in online auctions.

Forget "How much does it cost?" In the fast-growing world of Internet auctions, the real question is "How much are you willing to pay?" Name the product - computers, airline tickets, rare coins - and chances are, there's a Web site where you can name your price. The Internet Auction List counts more than 1,500 auction-related Web sites in more than 40 product categories.

You can think of Web auctions as the world's biggest yard sale - places where millions of buyers and sellers meet in a kind of virtual swap - or as a new distribution outlet where companies with excess inventory can reach eager customers. But the fact is, most Web auctions aren't a great place to save money. The advantage of such auctions is that they give you access to products that are hard to find (like a concert poster from an old Rolling Stones tour) or that aren't available in stores (like overstocked computer inventory, refurbished laser printers, or last year's fancy consumer-electronics equipment).

"An auction is not a negotiation between buyer and seller," says Jay Walker, founder and vice chairman of Priceline.com, an online service with a patented model called "buyer-driven commerce." "It's a competition among buyers."

Most online auctions follow the "Yankee" format, in which bids start at a baseline price. Each item is typically listed on its own page, along with a photo, a description, and a starting bid. Bidding stays open for a preset length of time - anywhere from 30 minutes to 2 weeks. You make a bid by typing one in. Many sites notify you by email when you've been outbid, at which point you can decide whether to raise your offer. And you have to act fast: On many sites, early bids have priority over later bids made at the same price.

Andrew Nelson, a San Francisco-based creator and designer of Web and software entertainment, bought a used Compaq laptop through an online auction service. Kelley Chew, an executive (and a collectibles fanatic) based in Pleasanton, California, used a popular Web auction site to buy a miniature Peter Pan pinball machine. What are you in the market for? Here's Fast Company's guide to online auctions. Our advice? Just name your price!

Computers and Other Gadgets

Like most innovations on the web, the earliest online auctions focused on the needs of technology enthusiasts. Onsale Inc. (www.onsale.com), a pioneer of auctions for high-tech equipment, turned the humdrum task of buying a computer into a virtual sport. To take a short course, visit Onsale's Express Auctions area, where auctions take place seven times each day, between 9 a.m. and 5 p.m., Pacific time. These one-hour sessions keep bidders glued to their computers - whether the item up for sale is a 56K modem from US Robotics or a personal computer from Hewlett-Packard. To fuel the frenzy, items start at a price of $1. And as with all Onsale auctions, if bids are still coming in when the auction is scheduled to end, the session goes into an overtime period called "Going, Going, Gone!"

These short-term, high-adrenaline auctions are not for the faint of heart - or for newbies. Peter Henry, 36, CEO of Lexica Holdings LLC, a technology-consulting firm based in San Francisco, has bought more than 100 computer items through various online auctions over the past 18 months. "Auctions are about convenience and price - if you know what you're doing," he says. "A lot of the difference between a bargain and a burn is buried in the fine print."

One of the biggest fears about buying products through an online auction comes down to this: Can you trust the company behind the site? There is cause for caution. Last year, the National Consumers League's Internet Fraud Watch (www.fraud.org/ifw.htm) received more fraud reports about Web auctions than about anything else. Problems involved nondelivery of purchased items and the suspicion that companies were driving up bids.

There's another problem. Many sites, including Onsale, act as "infomediaries," letting other people or companies sell their wares through the site, and that can lead to confusion about where to turn for help. One sheepish Onsale customer - a 43-year-old video producer in San Mateo, California, whom we'll call G.L. - got a great deal the first time he made a bid: He scored a refurbished Micron Pentium II 266 PC for $1,080 (including shipping). Then he bid on another computer offered through Onsale - and got taken for a ride. He paid just $804 for a Pentium II 333 PC, plus $25 for a one-year warranty. But he soon learned that the company that he had bought it from, CD Masters, had gone out of business — after charging the computer to his credit card. Months later, there's still no computer in sight. G.L.'s credit-card company made good on the $25 he charged for the warranty, but it has yet to decide on the $804 charge. "I don't think I'd do another online auction," G.L. says. "You never know whom you're dealing with."

Bidding on uBid.com (www.ubid.com) is more like dealing with a single company than with an online-auction intermediary. A division of Creative Computers, publisher of the PC Mall and MacMall catalogs, uBid.com takes possession of all merchandise before it's put up for bid. That's important: Not only do you know whom you're dealing with, but any item that you buy will most likely reach you faster than it would through a third-party vendor.

To keep your competitive itch under control, uBid.com also lists a "maximum bid price" next to its description of each item. You can exceed the maximum bid if you'd like, but it serves as a check on overbidding. The maximum bid for a Palm II organizer, for example, was $399 - the same price listed on 3Com's PalmPilot Web site.

Surplus Auction (www.surplusauction.com), a site run by Egghead.com, is strong on brand-name hardware products from IBM, Compaq, and Hewlett-Packard, as well as on software. With its Mega Auctions, in which more than $1 million worth of items are sold each weekend, Surplus Auction brings into the online arena some of what's fun about real-world auctions. Each Mega Auction starts on a Friday and closes on a Monday morning, and offers bulk quantities of low-price products like software and memory chips (for example: 1,500 copies of Corel Office).

Competition for computer equipment is particularly intense, since it involves resellers and company purchase agents.

Kurt Jenkins, 28, an MIS manager for Digital Media Graphix in Knoxville, Tennessee, has bid for bulk supplies of computer equipment on WebAuction (www.webauction.com). "You can't just be out there impulse-buying," he says. "Sometimes I put in a bid for 50% of the value of a product, just to see if I get it - but I never do."

Where's the Fun Stuff?

Online auctions have come a long way in a short time from their original emphasis on selling hardware and software to geeks. Today practically anything that can be legally bought and sold can be (and is) bought and sold through online auctions - from live cattle to goose-down comforters, from Elvis memorabilia to antique clocks. When it comes to fun stuff, the place to start is eBay (www.ebay.com), the world's largest virtual garage sale. Everything on eBay is sold by a member of the site's community of more than 850,000 people. Talk about variety! The eBay site lists close to 700,000 items in more than 1,000 categories - from an autographed Magic Johnson jersey to tens of thousands of Beanie Babies.

Buyers and sellers keep each other honest by using a point system to rank the people with whom they've done business, and it's easy to check these rankings online before you make a bid. Sellers often set a reserve price: If no one bids as high as that amount, the item goes unsold. More than 50% of eBay's items are eventually sold to the highest bidder.

Auction Universe (www.auctionuniverse.com), a person-to-person service owned by Times Mirror Co., offers content from niche magazines, such as Beanie World and White's Guide to Collecting Figures, to help you decide whether what you're bidding on is worth the price. Tim Luke, one of Auction Universe's collectibles specialists and a former auctioneer for Christie's, likes the anonymity of the Web. "The online connection makes it easier to ask a question about a piece," he says. "It's less intimidating than a live auction." The site also caters to true auction addicts with its paging service, which alerts you when you've been outbid.

Klik-klok (www.klik-klok.com), a small company based in Nyack, New York, runs one of the Web's few true "Dutch" auctions. Modeled on Holland's famous flower markets, Dutch auctions are essentially the reverse of Yankee auctions: A set quantity of a certain item is available for a limited amount of time. On Klik-klok, for example, each auction lasts just two minutes. When the clock starts ticking, the item is available at its starting price. Then the price starts dropping - and keeps dropping by a few dollars every 20 seconds or so. You try to hold out for the lowest price on the product that you want until just before all the items are bought by bidders willing to pay slightly more. The advantages of this format are obvious: The longer you play, the more prices go down instead of up - and you know immediately if your bid has "won." There's an auction every three minutes on Klik-klok.

Do-It-Yourself Auctions

There's more to online auctions than buying - there's also selling. Do you have a Nordic Trac that's been gathering dust in a closet since last Christmas? A tea-cup collection that's outgrown your cabinet space? Is your company looking for a new way to part with excess inventory? The Web offers just as many ways to sell products through auction as it does to buy them.

Simply list your items on one of the many person-to-person auction sites, such as eBay, Onsale's Exchange section, or Auction Universe. You may have to pay a small fee (often as low as 25 cents) when you list an item, as well as a commission when you sell it. But the service takes care of all the auction details.

Ron Tipton, 54, owner of Tipton's Coins and Jewelry store in Salem, Oregon, takes slow-moving items from his store and sells them on eBay - to the tune of up to $7,000 per month. Tipton has been so successful that he has considered shutting the doors of his store and going totally virtual. "It's particularly effective for unusual items," he says, since eBay can help you reach buyers with very narrow interests.

If you'd like to draw more attention to your company, check out FairMarket (www.fairmarket.com/programs.asp), a service that lets you create auctions for your business Web site. On the FairMarket site, you design an auction page with your company's look-and-feel, and then create a link between that page and your company Web site. It's a way to maintain control over the auction experience without setting up your own auction site. Meanwhile, if you're really sold on selling through an auction, or if you want to avoid the fees that other sites charge, you can go all the way with your own thing. Two companies - OpenSite Technologies (www.opensite.com), and Moai Technologies (www.moai.com) - offer easy-to-customize tools for do-it-yourself auctions. Your customers aren't likely to confuse you with Sotheby's - but they may make some interesting bids.

Katharine Mieszkowski (katharinem@fastcompany.com), a senior writer at Fast Company, is based in San Francisco.

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