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Live Auctions Online - By Karl Kilguss

Live Auctions Online - A strategic Approach to Successful Bidding
The emergence of live auctions linked to the web are placing more collectors into the bidding frenzy. Or are they?
by Karl F. Kilguss

Note: This article was written in 2007. Since this article was written, eBay and LiveAuctioneers.com have separated. eBay no longer does live auctions in this fashion, however much of what is discussed in terms of bidder strategy holds true for LiveAuctioneers.com.

 

Have you ever bid or considered bidding on a live floor auction over the internet? If so, this article will give you some valuable information you can use immediately. If you are among those who attend many floor auctions and wonder what effect the internet bidding is really having, this article will likewise give you new insights. The year 2006 saw a dramatic increase in the linking of floor auctions to the internet under a live format. Accessibility to a larger audience is what motivates auctioneers to consider this approach. While the system is not perfect yet, it is working. The day when all floor auctions will be linked to live bidding online is coming fast.

 

The feelings throughout the artifact collecting community regarding the role of the internet within the floor arena are mixed. Concerns of floor bidders focus mainly on two issues: 1) potential slow down of the pace; 2) increased competition, and thus prices. It is important for floor bidders to know what is going on when an auction they attend is linked to live internet bidding. Technology advances have now made it possible for someone sitting at home to bid against them. The key is understanding the dynamics of how the internet bidder is communicating with the floor.

 

On one level it doesn't feel "fair" for those who made the trip to attend the auction in person to have to compete with an unknown group of people. However, the reality is the floor bidder has a giant advantage over his or her internet competitor on two major fronts. The first deals with the age-old issue of authenticity itself. Is the allotted artifact(s) authentic? Has any restoration or re-chipping slipped by? The internet bidder is not able to handle the artifact before binding him or herself into a purchase contract. Often they are only viewing a single Image showing one view of the piece on their computer monitor. Confidence is a key factor inhibiting the ability of the internet bidder to be willing to go beyond an often artificially low threshold set for any individual artifact. F3y contrast, the floor bidder has the opportunity to handle the artifacts and thereby raise his or her confidence level appropriately. Secondly, the internet bidder is completely dependent upon the person running the computer at the event for all information on floor activity as well as communicating their bids quickly. As we will discuss later, the slow speed of this communication system puts the internet bidder at a major disadvantage during the actual live bidding process. However, there is a simple strategy for internet bidding which can lessen this floor advantage dramatically.

 

FLOOR AUCTIONS: WHOLESALE OR RETAIL?

 

Floor auctions are historically a wholesale event frequented by dealers looking to purchase inventory. Collectors have also looked to auctions as a way of getting certain artifacts at bargain prices. Often the top collections in the country are liquidated through floor auctions, such as the famous Townsend and Vietzen collections. Larger collections are routinely offered through a series of auctions over the course of a year or more. It may be the case that bidding at these auctions is the only opportunity one might have of obtaining the prized pieces.

 

It is important to quickly emphasize the most distinguishing characteristic of the floor auction from that of its retail counterpart. The basic starting point of all auctions is that they are clearing events. Title to the lots passes to the winning bidder upon the drop of the auctioneers hammer. There are no returns or refunds and all sales are final. It is the ultimate buyer beware scenario. Anyone who has spent much time or money In this hobby quickly realizes the elevated risks we face relative to almost any other category of auction goods. That is precisely why floor auctions contain a basic risk to buying that has almost been eliminated on the retail side of artifact purchasing.

 

Because auction houses are in the clearing business and not the authentication business, generally there are no guarantees of authenticity on the artifacts. On the retail side we would be hard pressed to think of any dealer who would not offer some kind of return guarantee to his purchaser. Through the mechanism of the guarantee, dealers assume the risk as a cost of doing business and spread any resulting losses from purchasing reproduction or re-chipped artifacts across their Inventories. But, for the collector looking for a bargain price by going to an auction, having a small portion of the artifacts purchased later fall authentication could easily elevate the remaining authentic pieces to full retail price and beyond. Thus, the bargain can quickly dissolve. An obvious assumption follows that the collectors who frequent floor auctions will generally be more advanced in both knowledge and experience. This is certainly the case, in a generalized way.

 

Example:        A dealer attends an auction and purchases 20 lots for $10,000.00. The dealer has spent an average of $500 per lot. If two out of the 20 lots turn out not to be resalable because of reproduction or tampering, then the overall cost of the lots is W,000.00 divided by 15, or $555.55. They can further spread that loss across their total inventory. Dealers should also be able to lessen this risk by closely picking the lots in which they feel most confident. After all, dealers are supposed to be professionals and are expected to have a working level of expertise in distinguishing ancient from modern pieces.

 

Conversely, a collector attends the same auction and purchases three lots for $1500. If just one of the three is a loss, the price per lot rises from $500 to $750 per lot. It is likely such a rise in cost for the other two lots elevates them to at or about full retail. Collectors won't generally be bidding on as many lots as a dealer because they are more focused within the type of artifacts they are after. Naturally, the same potential exists for lessening this risk through knowledge and experience, but the risk exposure must necessarily increase as the number of lots purchased decreases.

 

In the example, an important allocation of risk is taking place whenever dealers buy at auctions and then sell to collectors on the retail market. Any loss, due to reproduction and re-chipped artifacts slipping through will fall back on the dealers instead of collectors.  Furthermore, dealers attend auctions to add to their general inventory and will bid on anything they think they can sell for a profit on the retail market. They are not just picking artifacts in which they have a personal preference, but are catering to the diverse preferences of the market at large (this is particularly true In the aggregate). Later, when the dealers offer the artifacts on the retail market the guarantee expectations kick in. In this way, dealers are acting as a buffer between the collecting community and the risks associated with reproduction and re-chipped artifacts. But, when collectors enter the fray of the floor auctions they take on the same risks as the dealers in chasing wholesale prices. Therein lays the basic scenario of floor auctions and how they fit into the wholesale-retail segments of the hobby. From this point on we will focus on the mechanics of integrating floor auctions with the internet and how users can increase their bidding effectiveness for targeted lots.

 

INTERNET BIDDING

 

Ebay Live has a simple auction bidding system in place. The auction host places their catalog online with Ebay Live up to 10 days before the event. Once the items are viewable online, users can request to be approved for bidding. Once a user is approved, he or she can immediately begin placing absentee bids, or just log in on the date and time for the auction and bid live along with the floor. At least that is the theory.

 

Many auctioneers are also using Liveauctioneers.com. Liveauctioneers.com charges the seller to place the catalog on Ebay Live for them and offers technical support along with a myriad of accounting features. These features help make the tracking issues much easier to handle. Whether or not a live auction is using Liveauctioneers.com or not will have no effect on bidders. They are always going through Ebay, but users might notice their approval emails and some of the other correspondence is coming through the Liveauctioneers.com email system. Invoices will also come from Liveauctioneers instead of through the regular Ebay system. It is a good idea for internet bidders to get into the habit of watching their spam folders during and after participating in a live auction. Many browsers will send the emails to a spam folder automatically. You can set you filters to accept them from Liveauctioneers.com, but it may just be easier to keep checking the folder instead.

 

Once the auction catalog has been placed on Ebay Live, users will bump into the lots as they search their collecting preference in the artifacts category. There is also an Ebay Live link for viewing entire catalogs of auctions up to 10 days prior to the event date and time. Once a user finds one of the lots they can easily find the whole catalog by looking at all the seller's listings. Each live auction lot contains an individual description as well as boilerplate language covering the terms of the sale. There is at least one picture of the lot, sometimes more. Users can ask the seller questions in the same way they do with the usual Ebay system.

 

On most Ebay Live events, users will have to be approved to bid prior to the start of the event. Links are available or by simply attempting to place a bid Ebay will prompt the user to apply. Once the user receives an approval email from the seller they can place absentee bids immediately and bid live when the event starts on the date scheduled. The actual seller for a live auction will be either its promoter or the auctioneers themselves. Their contact Information will be listed so users can chose to call if there are further questions.

 

Every live auction has a date and time scheduled for it to begin. Users should remember they are being linked up with an actual floor auction and starting times can easily be delayed, or in some cases begin early. However unlikely, it is always possible that factors like the weather, human error, system error, Ebay server error or Internet connection failure on the floor can delay or cancel an event for the Internet at a moment’s notice. Most of the time the events go off as planned with no hiccups. But, if you tune in on the allotted date and time to find nothing happening, just wait a few minutes and the event is likely to pop up shortly.

 

In February, 2007, Steve Walker and myself, Karl Kilguss, formed K & W Promotions, which held its first auction event In Gallatin, TN on February 24. The floor auction was linked to the Internet through Liveauctioneers.com and the Ebay Live platforms. We went through the full motions of planning a floor auction, assembling lots, reserving an appropriate venue, promoting the event, producing both online and printed catalogs, placing a full preview of Individual lots on Krrowheads.com and loading the catalog on Ebay Live through Liveauctioneers.com. A 30-day guarantee of authenticity was offered on all lots and most already carried one or more COAs. Both the guarantee and heavily-papered lots were intended to further Increase bidder confidence in both quality and authenticity. The theory was this would enable the Internet bidder to raise their confidence levels and Increase the Internet presence.

 

We formulated expectations and predictions about what the Impacts upon the auction would be due to linking with Ebay Live. Many of those expectations proved to be way off the mark. It was truly an eye opening experience to see just how the Internet communicates with the floor in a dynamic live forum. That experience, coupled with the prolific feedback we received from approved bidders, has enabled us to isolate several critical elements within the Ebay Live structure. Identifying these elements and working with them strategically will prove essential for anyone who wishes to utilize online live bidding in the hopes of competing with the floor bidders In a meaningful way. They are as follows: 1) Check and update the Java applets on your computer; 2) Use absentee bidding to your advantage; 3) Use live bidding as a backup.

 

Java Applets

 

Number one is simple to do, but it is remarkable how many users' computers are not properly updated. The usual Ebay platform runs on different Java applets than the Ebay Live side. Without the updates, which are needed in almost every case, an approved bidder will sign on when the event starts only to find the system will not accept their bids. It will look like something is wrong with Ebay Live or that they have been locked out. What is actually happening is that without the Java updates the user's computer cannot open all the windows necessary to link to Ebay Live. Unfortunately, Ebay does not prompt the user at this point to go to the link to check their computer's Java updates. Most people will simply give up here and never place a bid. Below is the link for checking your updates. It runs an automatic scan. You will also be prompted to install a new toolbar, but select NO. Toolbars are used to install tracking programs on your computer and will slow you down considerably. This link can also be found in the Live Auction area of Ebay under "System Setup." If you find your Java Applets are not complete, here is a link to download what you will need. http://www.java.com/

 

 Absentee Bidding

 

Absentee bidding is certainly the least used, most powerful tool available to an Ebay Live bidder. The reason relates to how the Internet communicates with the floor and the Inherent disadvantage for Internet bidders due to time. The bottom line - it is critical to use absentee bidding once you have determined the highest price you are willing to pay for a lot you want to win.

 

Who sees your absentee bid? The answer is no one sees your absentee bid when it is placed through Ebay Live. That is an important point. If Ebay Live transmitted the amount of the absentee bids to the auctioneers, then we would fear the possibility that bids could be artificially raised until that amount is hit. Ebay is aware of this also, so absentee bids are kept hidden.

 

Who executes your absentee bids? Ebay executes all absentee bids placed through Ebay Live in the same way they proxy bid for you on the regular site. The auctioneer's computer operator enters the bids as the lot moves on the floor, and whenever the Internet bid exceeds the floor bid it gets called out. If no one on the floor is bidding then the internet bid is called out right away, but the auctioneer usually waits for the floor activity to slow down before calling out a higher Internet bid and accepting it. Ebay also executes competing online bids in the same manner as it does on the regular format. It just advances the bid over the second highest bid by the next increment only.

 

For example, if there were two absentee Ebay bidders on a lot and the first bid $250 and the second bid $375, the higher bidder would pop up immediately with a bid over the $250 by only the next increment, say to $275. The auctioneer calls out $275 and it is accepted on the floor. If a floor bidder then bids $300, the auctioneer enters $300 on the internet and Ebay automatically increases the absentee bidders bid to $325. The computer operator calls $325 to the floor as an internet bid and enters it once it is accepted by the auctioneer. If the floor again bids to $350, Ebay will automatically execute the absentee bidder to $375. That again gets called out to the floor and entered if accepted. This is the end of the absentee bidders bidding since he bid $375. If a floor or live internet bidder now bids again the absentee bidder will be out.

 

At this point in the article, we are arriving at the critical stage where the internet bidder loses control over the process. Ebay can execute bids in a proxy manner instantaneously, but trying to keep pace with the floor live bidding is almost impossible. Each bid has to go through the steps we just went through. As we will show, unless the floor stalls out quickly the internet bidder gets lost in the fray.

 

Floor Auction Example:

 

Anyone who has attended a floor auction will be familiar with the rapid pace at which bids can accelerate once they get started. The following is a typical banter of an auctioneer for an average lot and probably takes place at the same speed at which you are reading it:

 

Here we have Lot number 207, a very nice Thebes out of Illinois. Who will give $500 to start this off….$500...
Do I hear $400….no one at $400     
I'll take $300 to get her going, give $300 to go             
$200, do I have $200         
We'll go with $100, who will start it off at $100            
OK, $50  and I have $50 now in 10 places, go
$60....
I have $70, now $80?
I have $80, now $90?   (auctioneer singles out the 2 strongest bidders and ping pongs between them)
$100
$110
$120
$130
$140
$150
$160
$170
$150
$190
$200
$225…...he has it over there at $200 will you go $225?
$225 now $250 $250 now $275 $275 now $300
I have $275 go $300, are you in for $300?...



(When the floor stalls here the internet computer operator transmits the floor bid amount to the Internet audience at §275 and the internet crowd sees it as if it is the first bid. It might appear that the lot just opened when if fact it is just about to end.)

 

I have $275 over there I need $300                $300 going once...(we are right about 35 seconds into the bidding now and the lot will likely close in another 3 to 5 seconds)
Sold to bidder #121 for $275.!!!

 

A red blip appears on the computer operator's screen showing an internet bid at $300, but it is already too late. The auctioneer has dropped the hammer.

 

In this typical example, once the floor opened at $50 the bids came in rapidly raising the bid through the increments to $275 in a very short time, too short for the person working the computer on the floor to enter the bids so the internet users can see them. This is why online bidders see many lots appear to sit when they first open and then suddenly get a large bid only to quickly close. They rarely experience any of this bidding frenzy until the computer operator on the floor sees the floor stall and finally enters the $275 bid. Notice that at the moment the bid is experienced by the internet viewer the lot is really just about to close. There is quite literally no time left for an internet bidder to hit the bid button, have the floor operator call out the bid to the floor and get it accepted by the auctioneer before the hammer drops. While this does not happen every time, it happens a lot.

 

Luckily, there is an answer to this timing problem. It lies in the use of absentee bidding. Let's say you were watching the lot in the forgoing example prior to the auction starting. We could also suppose this Thebes is 4" long, made of Harrodsburg Chert, carries Jackson and Davis COAs, Davis graded it a 0-9 and it is consistent with what you see in the picture. You have decided the piece is worth close to $1,000 and that you would easily be willing to pay $750. If you had placed an absentee bid with Ebay Live prior to the auction Ebay would have executed your bid at $300 the very instant the floor computer operator plugged in $275 when the floor stalled. The operator would then have had ample time to call it out and have it accepted. Then, if a floor or Internet bidder continued to bid against you Ebay would Instantly execute your bid at the Increments only. Because Ebay-executed absentee bids appear Instantaneously, you will now be able to compete effectively and will have a much greater chance of winning the point. You don't even have to watch the auction. If you placed all your bids absentee with Ebay before the auction started then you could be on the golf course, fishing or even at an artifacts show when they execute. Later, you can pull up your account and see what you won. At the Collinsville, IL show last March I spoke with several dealers who use the absentee bidding this way when they attend shows in one part of the country while an auction is running elsewhere. Dealers understand how to use absentee bidding on Ebay and they appreciate the fact that no one knows their high bid amounts for any of their lots.

 

Keep in mind; you must have the money ready if you win all your lots. If you are not present you can't budget should you start winning most of your picks. If you are logged in while the auction is running and find you are at your budgeted limit you can still go ahead and cancel your other absentee bids. This is easily done by going into your Ebay account and selecting to look at items you are bidding on. You can select the items for which you want to cancel bids and delete them.

 

Can I use my Sniper account? Sniper programs do not work with Ebay Live because they are driven by clocks. Since there is no way to predict the exact time a lot will open and close sniper programs are of no use. In reality, absentee bidding through Ebay works exactly the same as using a sniper program for the regular Ebay auction format. Instead of the sniper executing your bids, Ebay now does it for you and still no one knows your bid amount or that you are even a bidder until the end. The reason for using the absentee bid process is likewise the same as for using a sniper program. Your goal is to bid as late as possible to close out the ability of other online bidders to react in time to up their bids. It also does not allow other bidders to see you are bidding on the item until it is ending.

 

LIVE BIDDING:

 

If absentee bidding is the key to Ebay Live, then what use is live bidding? The truth is live bidding is best used as the backup to the absentee bid. Maybe you do not want to set your absentee bid at the highest amount you are willing to pay. You might just want to feel it out a little. You can set it a bit lower and then tune in when the lot begins and be ready to bid should your absentee amount get passed by. This will also save some time in communicating because if you see the bid go past your maximum, you can tap your cursor on the bid button immediately to get a bid in fast. Realizing there is no time to ponder your bid amount is valuable knowledge. If you have already decide what your high bid amount is you can bid quickly to that point and drop out if it goes beyond.

 

When connected to a live auction, you will see the lots individually as they come up on the screen. You will also see the highest absentee bid (if there are any) shown as the current bid along with the user's Ebay handle. If the floor exceeds your bid it will show the high bidder is a floor bid. You are the high bidder if, and only if, the red words come up saying you are the high bidder. This is an Important distinction. When a bid is made, Ebay tells you your bid is accepted. This only means they have sent it to the floor operator to next be accepted by the auctioneer. You are not the high bidder until the auctioneer accepts it and enters it into the computer. Only then will the red words pop up stating that you are the high bidder. You have not won the lot until it says you have won.

 

Here exists another interesting problem, which happens regularly. Again, the internet bidder is at the mercy of the ability of the floor computer operator to type quickly and accurately. Let's say you were the high bidder on that Thebes at $275 and the red words came up indicating you are now the high bidder. Then someone on the floor bids $300. The computer operator accidentally types $3,000 by adding an extra "0" by mistake. Maybe he notices the mistake and moves the curser back into the enter bid field and retypes the amount, but now enters $30 instead of $300. The operator feels the stress of time because time is running out. If he does not get that bid entered in time for you to raise your bid and call it back to the floor the auctioneer will drop the hammer and shut you out. If that happens, all you will see is you were the high bidder at $275 and then in a few moments the auction ended at $300. You never got the chance to raise to $325 simply because of a typing error. This is common.

 

That leads us to another Important point. You cannot bid against yourself on Ebay. That is, if you bid more than once in succession you will not be raising your own bid. During the live bidding stage you will only have one bidding option. The only bid you can make is to the next increment by hitting the bid button. You cannot bid $400 when the current bid is $150. Only the next Increment is offered to the users when live bidding. If the button says $125 then that all you can bid. Therefore, if you are trying to make a live bid you can just keep tapping on the bid button until you are registered as the high bidder. If you are then outbid just start tapping the button again until you are confirmed as the high bidder, and so on. This will help remove any excess time loss, but still won't ensure your bid gets in.

 

If you are showing up to a live auction online and have not placed any absentee bids, then you will only be able to bid live, because you now know the disadvantage due to communication time with the floor, your strategy should be to bid immediately when your lot opens. Start tapping the bid button even if you are registered as the high bidder. If you are out bid it will communicate your next bid as fast as possible, much like the absentee bid Ebay executes. Look over the lots and prepare the amount you are going to bid up to and place your bids as fast as possible. If you hesitate, like you could at a floor auction, it will become almost impossible to re-enter the bidding once it moves on.

 

Competing online against a floor auction is fun, but when internet bidders locate lots they really want to win it can also be frustrating. The simple techniques and elements we have covered in this article should help close the gap between the floor and online bidders, but nothing is foolproof. The floor has the advantage of timing and no strategy will completely level the playing field, which should be good news to those who like to attend auctions in person. However, the online bidder has not spent any money on travel or lodging, so padding the maximum bid a little on a few choice lots is also a reasonable strategy. Utilizing the absentee strategy and letting Ebay execute the bids for you accomplish this best giving the online bidder their highest degree of competitiveness. The time saved by not having to enter each increment manually can make all the difference between winning a lot and losing it.



 

 

 

 

 

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