how-does-ebay-bidding-work

How does eBay bidding work?

eBay bidding is a way for buyers to bid on a product whose sale price is decided by auction. The bidding process itself is automated, with eBay acting on the buyer’s behalf.

Understanding the eBay bidding process

eBay was founded in 1995 as AuctionWeb and was one of the first marketplaces of its kind on the internet.

Despite 88% of products now being sold via fixed, buy-it-now prices, buyers must still understand the eBay bidding process to avoid paying too much for an item or indeed missing out on it completely.

When an individual or business wants to sell a product under auction, they start bidding by selecting a starting (or reserve) price.

This price is the minimum amount the seller in question is willing to sell for, and it is worth noting that the seller does not have to disclose the reserve price in the listing.

The seller also chooses the length of the auction, which may span 1, 3, 5, 7, or 10 days.

Buyers then enter a bidding war once the auction is live, and provided the reserve price has been met, the buyer with the highest bid wins the product once the time has elapsed. 

In the final 15 minutes of an auction, when bidding activity tends to peak, buyers can save time and click on the “1-Click Bid” button to bid one increment higher. 

Automatic bidding for buyers

Fundamental to purchasing items in this way is automation.

Essentially, eBay’s system enables the bidder to place a maximum bid for an item which is then adjusted automatically to beat any other bid that is lower than their maximum bid.

This amount is slightly higher than the second-highest bid and the process repeats until the auction price has reached the buyer’s maximum bid.

The automatic bidding process makes it easier for buyers who are no longer required to manually place a new bid every time their previous bid has been exceeded.

Manual bids are only required when the current bid for an item exceeds an individual’s maximum bid. If the buyer is willing to part with more money, they can also increase their maximum bid.

When a buyer places a bid, eBay’s bidding on their behalf is based on a bid increment determined by the product’s current price. Note that bid increments increase as the bid price increases.

For example:

  • For a bid price up to 99 cents, the bid increment is 5 cents.
  • For a bid price between $5 and $24.99, the bid increment is 50 cents.
  • For a bid price between $250 and $499, the bid increment is $5.
  • For a bid price between $500 and $999, the bid increment is $10.
  • For a bid price over $5,000, the bid increment is $100.

Example of eBay’s automatic bidding system

Here is how the above process plays out in a hypothetical example:

Example 1

Suppose that Jack wants to bid on a pair of wireless headphones.

Since the current bid price is $275, Jack’s bid of $300 is adjusted by eBay down to the nearest bid increment for that bid price range.

Thus, Jack’s bid becomes $280, or $275 + $5. 

Example 2

The next day, the bid price for the headphones reaches $400 with Jack and another bidder called Peter the two main players.

When Peter enters a bid price of $420, eBay adjusts Jack’s price to $415 and, since this is his maximum bid, notifies that him he has been outbid on the headphones.

Example 3

At this point, Jack has the option to increase his maximum bid price and make another bid.

But since maximum bid prices are kept private, he has no idea what Peter (or indeed any other bidder) may want to spend on the headphones.

Key takeaways

  • eBay bidding is a way for buyers to bid on a product whose sale price is decided by auction. The bidding process itself is automated with eBay acting on the buyer’s behalf.
  • eBay’s system enables the bidder to place a maximum bid for an item which is then adjusted automatically to beat any other bid that is lower than this maximum amount. The adjustment depends on the bid price increment which is itself correlated with the current bid price of the item in question.
  • The automatic bidding process makes it easier for buyers who no longer have to manually place a new bid every time their previous bid has been surpassed.

Read Next: eBay Business Model, PayPal Business Model.

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