To Reserve or No ... That is the Question
09.04.2020

To bid or not to bid! Perhaps this is a proper retort to the question of whether or not to offer an auction lot (or multiple lots) with reserves.

We suppose it's probably best to explain what reserves are and how AuctionNinja handles reserves.

 

What is a reserve?

A reserve is a minimum bid amount that a seller will accept as a winning bid on an auction lot. A reserve prevents a bidder from winning any given lot for a price lower than what the owner will accept. It's intended to protect the owner of an auction lot from an unfavorable outcome. Many auctioneers and online auction sites hide the reserve price until the reserve is met, at which time they would announce that the reserve was met. Once met, the bid offered by the bidder is a binding agreement between the bidder and the seller.

Conversely, a no-reserve auction is also known as an absolute auction. In this type of auction, the item for sale will be sold at whatever the highest bid, no matter the value of the lot being sold.

How are reserves shown on AuctionNinja?

The developers of the AuctionNinja software platform believe in transparency. As a result, reserves are displayed as "opening bids" on lots with reserves. While, technically opening bids are different from reserves, we believe that this is the most overt way to display important information to our bidders. The bidding public immediately knows the lowest bid required to open bidding on any given lot. The bidding may go much higher than the reserve, depending on bidder interest in the item or, in the case of an unrealistic opening bid, the bidders may not wish to start at the higher opening bid. 

 

What are the pros of holding a reserve/opening bid auction vs. a no-reserve auction?

 

What are the prosand cons of reserves / opening bids?

Pros:

Protects the owner/consignor from an unfavorable auction outcome

 

Cons:

The AuctionNinja Perspective

At AuctionNinja, we believe that auctions are the best way to achieve true market value. By offering absolute auctions (no-reserve auctions), sellers attract a greater number of bidders, who are seeking (what they perceive to be) a bargain. The interesting thing about online auctions is that with more bidders participating in the sale, sellers realize higher prices and higher sell-through rates. Plus, our experience tells us that once someone places a bid on an item, psychologically, they have (more or less) "claimed it" as their own, so the likelihood of that bidder increasing their bid(s) to "keep" that item grows exponentially. Absolute auctions build a bidder excitement that most auctions with reserves will not see.

Ultimately, it's up to the vendor using the AuctionNinja platform to determine whether or not they wish to have reserves (in the form of "opening bid"). If you do choose to have opening bids, we strongly urge you to limit the quanitity of opening bids to only a handful of lots. Bidders looking at sales chock-full of opening bids/reserves will not even consider participating in the sale, which may greatly diminish your bidding pool and ultimately adversly affect your prices realized.


In a future blog, we'll offer a case-study (of sorts) of AuctionNinja vendors who have successfully used the absolute auction format to achieve awesome success and vendors who have successfully used reserve/opening bid auctions. We'll dive into what they did well, what they could do to make their sales better for next time. Until then, happy selling!