The Internet's Most Popular

Internet auctions started as a hobby for a few computer people in the San Francisco area to have a “virtual swap meet” and get rid of some things they had, and find some things they wanted. In just ten years, this fun little idea has become a multi-billion-dollar enterprise and a global phenomenon, and amazingly, presents one of the best low-risk opportunities in history to start or grow a business! The potential is unlimited and still growing.

Online auctions generate very high revenues for sellers and often, good deals for buyers, and the transaction costs are usually reasonable (we’ll help you keep them down a little later). The best part about this is that the marketplace is open to everyone. You can read this report today and be selling your old junk on eBay for profit tonight…but selling your old junk is only the beginning.

Recently, online auctions have been in the news for less optimistic reasons like scams and fraud. For the same reasons eBay enables speed, anonymity and a global marketplace to honest buyers and sellers, it also provides opportunities for the behavior of less honest members of the community, in particular, credit card scams in certain Third World locations. However, there are many millions of auctions every day, and like the majority of any community, the vast majority of these auctions are run fairly and more importantly, they are making the sellers a tremendous amount of money. Where there is opportunity there is risk. We’ll help you understand both, to maximize one and avoid the other.

Let’s get started!

How do online auctions work?

An online auction is just like any traditional auction, fundamentally. Someone (a “seller”) offers something either at a set price, a minimum price, or on open bidding. Others (“bidders”) make offers on the item by stating what they will pay. Upon successful completion there will generally be a “highest bidder,” who has now become the “buyer.” There is one main difference between eBay and a traditional auction like you might have seen at Christie’s or Sotheby’s: eBay facilitates the auction but never takes possession of the goods, and makes no specific warranties about the item’s quality, the seller or buyer’s honesty, nor does it play any direct role in payments relating to buyer’s and seller’s, but rather, takes fees from buyers whether items are sold, paid for, delivered, or not, and essentially operates as a very complex bulletin board, not a true auction house in most cases.

It is the responsibility of the person hosting the auction to deliver the item to the successful winner, while the winner needs to ensure he makes the payment and receives the shipment on time and in the expected condition. Payment is through a variety of possible methods including checks, money orders, electronic transfer systems, credit cards, wires, and more. Generally the seller in an auction will state what kind of payment is acceptable, and the potential buyer can decide whether to bid with that, and sometimes other, restrictions in mind.

To make it more likely that buyers and sellers will provide quality service to each other and honest goods, a fundamental aspect of eBay and most of its copycat sites is called “feedback.” Feedback is basically a rating system that allows buyers and sellers to see what other buyers and sellers thought about doing business with a particular person/entity in the community.

What’s for sale? Pretty much everything except those categories eBay chooses to limit or ban (such as firearms, certain adult materials, and so on). Auctions are of many types and styles, ranging from items literally priced at 1 cent, to items worth millions of dollars, which will usually involve escrow payments and other special terms. In later sections we’ll look more closely at the kinds of auctions there are today.