eBay and the Free Market

When the internet came along it changed everything.  Such a statement is usually hyperbole but in the case of the internet its impact could not be overstated.  I’m sure most people remember their first internet enabled PC.  I do.  I was in the seventh grade and while this was my first PC it wasn’t my first experience with the internet.  My best friend growing up had such a toy for awhile.  His dad was a tech-minded person that always wanted to have the latest and greatest so they had all of that stuff.  I had already seen a good amount of what the internet had to offer a 12 year old boy, and it was mostly porn.  For a kid at that age, having the ability to access adult media was like having a key to the Garden of Eden.  And back then all that was really available were still pictures.  They would be labeled something generic such as “big boobs” or “lesbians” and you’d sit around for a couple of minutes waiting for the thing to load.  And it was awesome.  I can’t imagine what the kids of today must feel with high-speed connections and streaming video.  Talk about sensory overload.

Of course, the internet isn’t just for pornography.  Arguably, one of the internet’s greatest gifts to mankind is that glorious website full of people’s unwanted junk, eBay.  Depending on how you engage eBay, it’s either the greatest thing ever or a necessary evil.  As someone who never sells on eBay and doesn’t have to deal with the myriad of fees and obvious favoritism towards buyers, I love it.  Sure when I lose out on an auction with three seconds to go I utter every curse I can think of at my screen but in the end I always come back.

Since eBay’s obvious successes many have tried to imitate it.  Amazon lets people sell their stuff on its site, though not auction style.  Craig’s List is even more open serving as more of an online classifieds section, just hope the people you meet on there aren’t maniacs.  I don’t think any other sites have done as good a job as eBay though.  The auction format is fantastic as it allows demand to dictate the price.  Unless you’re completely inept when it comes to listing an item you’re going to get a fair price for your it.  Granted, it’s not always apparent at the time and some sellers may even try to manipulate the price of their item by having dummy bidders jack it up.  And even after the auction has run its course, some sellers may feel like they got the short end of the stick, but that’s not really true.

Baseball cards were huge when I was a kid.  My cousins and I would make pilgrimages to the local convenience store for packs of cards.  We would tear through them tossing aside the mediocre players in search of our favorite stars or anything that said “Rookie,” because you never knew who the next big star would be.  At the time, numerous price guides existed that kids would read as gospel.  If the magazine says the card is worth fifty bucks then its worth fifty bucks.  Over the years though, people soon realized that 99% of baseball cards were worthless.  Over-produced and cheap to begin with, the demand was never there.

Most people still have a card mentality when it comes to their wares but really an item is only as valuable as the market dictates.   And in this case, eBay is the market.  If you own a rare piece of music and want to know what it’s worth, don’t consult a price guide just look it up on eBay and see what it’s going for.  That’s what you can expect, give or take, your item to fetch if you were to sell it that day.

Whenever I’m in the market for something of that nature, I like to first do my homework by letting a few auctions go just to gauge an item’s worth.  Sometimes though an item is so rare it becomes difficult to do so.   Just today I was tempted to place a bid on a trinket of sorts I had been eye-balling for years.  Just another piece of music memorabilia.  The problem was the seller started the bidding at $350.  Now, I would expect this particular item to go for a couple hundred, but $350 was on the extreme end.  It had been a long time since I had seen one of these so I really had little to fallback on in terms of pricing and old eBay auctions are only viewable for about 90 days so it’s not like I could go back through their archives to figure it out.  I decided to wait it out and see what happened and, lo and behold, the auction expired with no one placing a bid.  The market had decided that, while this piece is rare and normally in demand, $350 was just an unreasonable price.  The decision to not bid was a wise one on my part.  While I don’t have an item I covet, I also didn’t needlessly pay a premium for said item and if I’m patient I may be rewarded down the line.

Instances like the one described above make me shake my head.  Why would a seller post an item at anything other than zero to kick off their auction?  Well, I know why and it’s because they have a pre-conceived idea of what the item’s worth is and are afraid to sell it for less.  Perhaps the person paid close to what they’re offering it for and are trying to avoid taking a loss, which is inherently foolish.  As someone who collects vinyl I can safely say it’s actually not the greatest investment.  Sure there’s a lot of records out there worth a lot of money but I’m going to let you in on a secret – it almost never appreciates.  If you go out and spend $500 on a rare piece of vinyl today, chances are that five years from now it’s going to be worth about $500 give or take a few bucks for inflation.  Even in today’s crummy economy, most of these items are still selling for what they commanded a few years ago.  So long as the item is kept in good condition, it is unlikely to depreciate but appreciation cannot be expected.  That’s why it’s inherently foolish to make hobby type purchases as investments.  The only instance where something like a record will increase in value is if you do something to increase its value, like getting it autographed for example.

In a perfect world, eBay wouldn’t allow listers to place a starting bid on an item.  It just defeats the purpose.  If a seller truly wants to sell their item that’s what they should do.  Guaranteed, even your most useless piece of junk will get at least one person’s attention who’s willing to buy it for a pittance.  If you’re scared that your item isn’t worth what you think it is then don’t list it.  Or do what everyone else does and gouge people with shipping costs.