Usually, auctioned items start at a very low price that’s not acceptable for the owner. To protect the owner from such a poor outcome for the auction, the reserve price is used. In simple words, the meaning of the reserve price is the minimum price that the seller is willing to accept for their item.
For example, if an item is being auctioned at a starting price of $1,000, the owner can set the reserve price at his lowest acceptable price. We’ll assume the lowest acceptable price for this item to be $1200. If the item being sold didn’t get a bid of $1200 or higher, the auction house will not sell it.
By setting a reserve price, the owner protects themselves from having to sell their item at a low price. At the same time, the probability of them selling their item at a much higher price still exists. Now that you’re familiar with the meaning of the reserve price, it’s time to consider the advantage and disadvantage of using it.
Reserve Price: Advantages and Disadvantages
When it comes to the reserve price technique, there are upsides and downsides. It’s true that the upsides outweigh the downside. However, knowing those beforehand can help you utilize this technique for maximum benefit.
In addition to that, knowing both the advantages and disadvantages of the reserve price technique can help you decide whether it’s suitable for the item that you’re selling or not. The following are the major advantage and disadvantage of setting a reserve price.
Selling only when you get a fair price.
This is the main advantage of reserve prices and the reason why this technique was invented in the first place. When selling an expensive item, leaving yourself completely under the mercy of bidders is probably not a very smart idea.
If the bids are low for any reason, you could end up with a price that’s much lower than what your item is actually worth. There are many variables that could affect the outcome of an auction. Protecting yourself with a reserve price is something that you should definitely do. Considering the outcome possibilities when no reserve price is set, this is a major advantage.
Having to re-list your item at the auction house/listing website.
Having to re-list your item with an auction house or listing website is something that could be a disadvantage to the reserve price. However, this is more associated with setting an unrealistic reserve price than it’s associated with the technique itself.
If you set an unrealistic reserve price that results in your product not being sold, you might have to re-list it. In most auction houses, this will result in having to pay more fees. In addition to that, products that are re-listed aren’t usually well-received by bidders. Giving the impression of “this is an item that nobody wanted the first time so we’re trying again” isn’t probably the best thing.
Bidders might be reluctant to bid on that item and you could end up getting a lower price than the one you got the first time. Taking your time when setting your reserve price can help you reap the benefits while reducing this risk to a minimum.
Reserve Price Considerations
Despite the simple meaning of reserve price, setting it can be tricky. When it comes to the reserve price, you must set it just right. If you set the price too low, you could miss on selling the item for a higher price. On the other hand, if you set it too high, you might not sell it at all.
To get the most out of the reserve price technique, you should always consider the following points.
Set a flexible reserve price with the auction house.
When you set a reserve price for one of your items, you might end up with a bid that is slightly lower than that. If you don’t arrange with the auction house in advance, the item might end up not being sold. In that case, you’ll have to re-list the item and hope for another bidder who will give you the price that you want.
In some cases, if you end up with a bid that’s slightly lower than your reserve price, it’s better to sell the item. Having to re-list the item again means additional fees as well as the risk of the item not being well received by bidders
You can always talk to the auction house staff to ensure some level of reserve price flexibility before the auction starts.
How urgently do you need to sell?
Whether you need to sell the item urgently or not is an important point to consider when setting the reserve price. If you need to sell your item fast, you can set a lower reserve price to make sure that happens.
However, if you’re not in a hurry and the item that you’re selling can be sold for a higher price, you don’t have to sacrifice price for speed. Taking your time and aiming for a higher price is probably the best strategy in this situation.
How can Sniffie help?
Getting the reserve price right requires some extensive market research. Doing this manually will take lots of time and the results are often not that accurate. Depending on the item that you’re selling, setting a poor reserve price can make you lose lots of money.
As Sniffie helps you analyze different prices of similar products, you’ll be able to calculate the price of the item that you’re selling much more accurately. Not only will using a tool like Sniffie make the process easier, it’ll also help you sell your item at a much better price.
How to use reserve price
- Conduct research on the price of similar items.
- Find out the expected price for the item that you’re selling.
- Set your reserve price.
- Used in auctions and listing websites -like eBay- to set a minimum price for the item being sold that potential buyers are not aware of.
- Give price research the required time.
- Make sure your reserve price isn’t too low.
- Set your reserve price as the lowest price you’re comfortable with, not the price you’re hoping to get.