Pricing Items for Consignment

Successful consignment is about being profitable—for you and your customers.

by Auctiva.com staff writer
- Aug 19, 2008

When it comes to used merchandise, setting the right price to incite lively sales involves at least as much art as science. There's no one-size-fits-all method, particularly in an online auction-style venue like eBay, where the value of an item is determined as much by the whims of bidders as by other more tangible factors.

How then, as an eBay seller, do you price consigned items for a quick and profitable sale? First of all, experts say it's a good idea to set a minimum threshold on the value of items you will list for others—$50 or $100 is generally recommended. After all, when it all shakes out, you need to bring in enough from the sale to cover listing and transaction fees, shipping and insurance costs, and your consignment fee—and still provide a satisfying payout to the seller.

Bear in mind, most of the time, secondhand goods will fetch only one-quarter to one-half of their "new" value, although a rare or collectible item may bring in well more. It pays to be more than a little familiar with the type of merchandise you are dealing in, so you are better able to tell the gems from the junk.

Let the market be your guide

Just as you would with your own auction listings, take the time to carefully research the market for items you agree to sell on consignment. Knowing whether a product is in demand, how much competition is out there for the same or similar items, and what buyers are willing to pay goes a long way toward helping you determine your price target.

Key factors to consider in your pricing strategy include the item's original price or current retail value, whether it's a collector's item, and recent sales of comparable items. For most commodities, you can find pricing data online at comparison shopping sites like Compare.com, Google Product Search (previously known as Froogle), PriceGrabber, Shopping.com and Shopzilla. For niche or specialty merchandise like antiques, automobiles, jewelry and collectibles, price guides may provide a more relevant reference—just make sure the guide is a fairly recent publication, whether it's a book or online, so you're not basing your decisions on out-of-date information.

If you have an eBay Store, eBay makes a certain amount of market data available to you, based on your store subscription level

eBay's advanced search feature can also be a useful guide for analyzing both competing listings and recent sales. Just click on the "advanced search" button, enter a few keywords and check the box for "title and description" to search for current listings of similar items. This will give you a sense of how much supply is out there; how the items stack up to yours; and the starting, asking, and current bid amounts.

After you've surveyed the competition, go back to advanced search and check the box to search "completed listings only" to find out how similar items have fared on eBay over the past two weeks. Sort the completed listings by highest price and look for the numbers in green to see which items had the greatest return. Compare the listings to see what enhancements were used, how the items were described, how the seller charged for shipping, and so on. Then do the same with the items that didn't sell (numbers in red) to get an idea of what didn't work.

Paid research is another option that usually provides a more detailed market analysis, such as which listing enhancements or keywords were most effective at producing a higher selling price. Widely used eBay research tools include Hammertap, and Terapeak. eBay sells similar market research based on up to 90 days of historical data, though it will retire its research product in September 2008. For the time being, subscriptions start at $2.99 for one-time use, and go up to $24.99 per month. If you have an eBay Store, eBay makes a certain amount of this data available to you, based on your store subscription level. Starting Sept. 15, subscribers to eBay's data will receive market research from Terapeak.

Managing expectations

Make sure your seller is sitting down when you announce that you intend to list their rare, hand-carved object d'art, worth thousands of dollars, for a mere 99 cents.

As an experienced eBay merchant, you are more than likely familiar with the auction principle that a lower starting price tends to bring better returns than a higher one. But for the uninitiated, the notion of listing a high-value item for less than a buck may seem a reckless gamble.

Be ready to justify your approach to your seller, who may be understandably nervous about potentially parting with a prized object for a thrift store price

It is a gamble, of course, but hopefully it's a measured one. Whether you typically start auctions at $9.99 or 99 cents, go with what experience—and research—tells you will net the highest selling price for that particular item. But be ready to justify your approach to your seller, who may be understandably nervous about potentially parting with a prized object for a thrift store price.

If the seller absolutely must protect his or her interest, by all means, set a reserve. But explain that the use of reserve price auctions can result in fewer bids, or even no bids. You may want to levy an additional consignment fee for reserve price listings to cover your time and trouble for items that don't sell the first time around—or at all.

Beyond auctions

For some high-value items, an auction-style listing may simply come with more risk than the seller is willing to take. In that case, consider using the fixed-price/Buy It Now format. If you have some wiggle room on price, try using the Best Offer option. Best Offer is available for virtually any category on eBay, but can only be used in conjunction with a fixed-price listing.

Keep in mind also that your eBay Store can be an ideal place to market consigned items because you can set your price and wait for the right buyer to come along. Although store items get less visibility in Best Match searches, listings remain active for 30 days, and the insertion fees are quite a bit lower than for standard seven-day listings. If you have an eBay Store, consider offering "shelf space" to your consignors.

In whatever approach you use, be fair and try to be sensitive to the needs of the seller, but don't be afraid to turn away those with unreasonable demands. Remember, you're in this business to make money—both for yourself and your seller-customers. With the right balance of advance legwork and customer service, consignment sales can be a win-win proposition.


About the Author

Auctiva staff writers constantly monitor trends and best practices of those selling on eBay and elsewhere online. They attend relevant training seminars and trade shows and regularly discuss the market with PowerSellers and other market experts.

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