Problem with "No Reserve Auction"
There’s one really big problem with putting on and promoting a sale as a “no reserve auction” with starting bid prices high enough that a reserve is not necessary.
You are openly admitting that most of the bids at the lower end of your other sales are a waste of time and that you are open about the fact that you run your customers up in your other online sales.
Secondly, by saying you are making the auction service's job easier by not having a reserve, you are implying that the auction service is assisting sellers in running prices up on the other sales even though there is not a published reserve.
- By Jeff
CommentsJeff Schroeder wrote:
I'd let some of the comments that came in through if their source could be verified but since they can't, I won't.
Tony Austin wrote:
Every auction including sale barn livestock, antiques, cars, equipment, and even eBay that utilize an auctioneer or auction type service have a reserve or floor price on the item being sold. I have a five part info-mmercial posted on the home page of austincattle.com were I explain my marketing and business practices in great detail. My last 2 cattle sales have been private treaty phone bid auctions and I have started and promoted all cattle at a live floor price. Some were as low as $3500 and tag 55 in the Moylan offering had a base price of $50,000 if you think that all of the starting prices or opening bids on online livestock auctions are live money and are not sold without the assistance of an online auctioneer running the price to the sellers acceptable floor bid than you are living in a cave. As previously stated this auctioneering practice happens in all auction settings not just livestock. In fact I have made it a point in every sale offering this season private treaty or online to start my cattle at a live bid figure so that no one's time is wasted such as typing this response to such a unfounded point of view. We proudly sale 2000 dollar steers and on occasion a 30,000 dollar plus animal and offer cattle for every budget. I have had recent intention of advertising my blog updates on this site but if the administration of this site has a personal agenda with cattle professionals AKA steer jocks I will advertise elsewhere as well as recommend other places to my colleges. This is Tony Austin 817-304-0507 (source verified) you had your say be damn sure and post this so people can have mine as well as the other comments previously sent in. I'm a big boy and can take the good with the bad let's see em all.
Jeff Schroeder wrote:
Tony, first, just for the record, we don’t really push advertising. You join a rather illustrious list of people who were ‘about to buy advertising’ with us until they decided not to on moral grounds or because I’m a despicable ass hole.
Secondly, the three comments I deleted were disparaging toward yourself (one of them might have just been a self-deprecating humorous one by you, if so, sorry, it was deleted because there was no e-mail), hence the reason I deleted them. We don’t put stuff like what was said up unless somebody takes credit for it. Your last comment, since it was obviously from you, was approved within 30-seconds. I have no problem whatsoever with people disagreeing with me.
Lastly, the most common concern I’ve heard people have with online sales is they never know who they are bidding against and are afraid they're being run. If people are openly admitting to having reserves on the sales, that only confirms the suspicions. And yes, a starting bid is the same thing as a reserve.
If your buyers know you are running them and they’re okay with it, more power to you.
I sent only one comment and you posted it. Thank you for doing that. For the record if people are concerned who there bidding against they should assume its the auctioneer and if they dont keep bidding to the seller's floor the wont own the item anyway so why does it matter who they are bidding against??? Personally I dont want a $2500 buyer bidding on a calf opening at 1500 that has to bring 7500 plus. That's why I open bids with live $$
Doak Lambert wrote:
Being an auctioneer myself, I couldn't help but weigh in on this discussion. It may simply be a matter of semantics, but according to the state laws in Texas and enforced by the Texas Department of Licensing and Regulation, the proper term to use for an auction without reserve is "absolute". If a seller advertises an auction as "absolute", that means that the item must sell to the highest bidder, regardless of price. If it is a live auction that is advertised as "absolute", the auctioneer must drop down and find a starting bid, regardless of how low that bid may be, accept bids for a reasonable amount of time and then declare the item as sold once the bidding has ceased to the highest bidder, regardless of price. If the value of the item is $100 and all the auctioneer had bid was $5, he is obligated by law to sell it for $5.
Now, with that said, these laws and regulations apply only to live auctions where a live auctioneer is actually calling bids behind a microphone. There is no regulation at this time of on-line auctions as evidence by the eBay model which allows sellers to do the same thing discussed here, which is set a minimum starting bid for their items with no regulation regarding how high the minimum acceptable bid may be. To Jeff's point, an item selling under those conditions does not fall within the definition of an "absolute" or "no reserve" auction.
We have an online auction service, but we never advertise them as "absolute" or "no reserve" unless they truly are "absolute". We've tested several different methods for starting bids, all the way from starting at $99 to starting just under the reserve amount. I can't say that we have come to any conclusions as to the best method yet. Our software, however, is like eBay in that it states that the seller's reserve has not been met until it reaches the seller's floor price. I think when this technology first came out, people in the cattle business had an aversion to this, but now, I think they are getting used to it as they realize producers can't stay in business if they sell their cattle at a price point less than the cost of production or less than what they need to make a profit. We've been getting about 50% sales conversion using this method.
One last comment for food for thought - in our live auctions of registered cattle, I'd say 90% that go through the ring are sold absolute even though they are not advertised that way. I also do a classic car auction every year where the cars are all sold absolute. Once the buyers know and trust that the item being sold is going to sell to the highest bidder, something magic usually happens and all interested parties end up bidding their conscience and the item brings it's full market value. Nobody is holding back. I've seen it happen hundreds of times where two or more bidders, who know the item is going to trade hands, lock up and get in a bidding war and end up driving the price way beyond it's reasonable value. It doesn't always work that way, but if the seller has the stomach for it, absolute auctions usually work out to his advantage.
Jeff Schroeder wrote:
Excellent, excellent info Doak. Thanks for replying.