Introduction
As a vintage set builder who largely uses eBay to buy cards, I often get very frustrated with not being able to acquire certain cards at market prices. I have a number of “Followed Searches” on eBay (e.g., what used to be “Saved Searches” but apparently the word “followed” test markets better) through which I get daily updates of new listings on eBay of various types of cards. For example, I have an eBay search on the words “1950 Bowman” with “SGC”, because I have a 1950 Bowman baseball card set in which all the cards are SGC graded. I have probably purchased one hundred cards because of this search.
As a vintage set builder who largely uses eBay to buy cards, I often get very frustrated with not being able to acquire certain cards at market prices. I have a number of “Followed Searches” on eBay (e.g., what used to be “Saved Searches” but apparently the word “followed” test markets better) through which I get daily updates of new listings on eBay of various types of cards. For example, I have an eBay search on the words “1950 Bowman” with “SGC”, because I have a 1950 Bowman baseball card set in which all the cards are SGC graded. I have probably purchased one hundred cards because of this search.
One of the aspects of eBay searching that bothers me is that week-after-week or month-after-month, I will
see the same listings that come up repeatedly trying to sell a certain card for
well over 200 percent of its market price.
These listings are almost always fixed price (e.g. Buy It Now) listings, but they can be auction
listings where the starting action price is above the market value of the
card. Some of these listings can be
attributed to the seller not knowing the true market price of the card, but
others I have seen literally for years with the card in question not being sold over
probably fifty different eBay listing periods.
To collectors, these listings are just an annoyance because they create
background noise and waste our time when we are looking at the results of our saved searches or are paging down on eBay after a search.
Since the conversion rate (e.g.,
actual completion rate where somebody buys the card) on overpriced auctions is
very, very low, why do some sellers continue to list cards that are very
overpriced? For cards relisted many
times, it is not seller ignorance of the market price, because an economically
rational seller would adjust his or her price downward after initially
overpricing the card when the listing does not convert into a sale. To understand some of the dynamics of
overpricing, let’s run an experiment.
The Experiment
I went to eBay and looked at
all the listings selling a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9
grade. This card was chosen because it
is an iconic modern rookie card of one of the best players of recent
decades who is a sure-fire Baseball Hall of Fame player. The card also exists in sufficient quantity at PSA 9 grade so that determining an average market price can be based
on many observations (e.g., converted listings). As such, any average price
figure will more likely represent the true value of the card.
While some people might argue that the PSA 10 version of the card should be the standard examined, PSA 10s are less numerous. Also, the sort of mystical way that cards are given PSA 10 grades versus PSA 9 grades likely makes their market less efficient. A Griffey PSA 9 is a good benchmark because such cards are “Mint”, generally look the same and cannot have qualified grades by PSA standards. Therefore, a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade is a standardized card for the most part.
While some people might argue that the PSA 10 version of the card should be the standard examined, PSA 10s are less numerous. Also, the sort of mystical way that cards are given PSA 10 grades versus PSA 9 grades likely makes their market less efficient. A Griffey PSA 9 is a good benchmark because such cards are “Mint”, generally look the same and cannot have qualified grades by PSA standards. Therefore, a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade is a standardized card for the most part.
I examined all listings for
this card that closed on eBay between 9-27-2014 and 10-31-2014, finding these
listings using a number of different search terms related to the card so as to
minimize the chances of missing any listing.
While the time window is sort of arbitrary, it covers over a month of
concluded listings. I also did not use
listings where multiple copies of the card were being sold or the card was
bundled with some other cards. Only PSA
9 listings were counted. Shipping was
included in any prices reported so as to eliminate the effect of various
shipping cost strategies. (footnote 1)
Here’s a description of the
raw data:
Number of completed and
successful auctions: 40
Number of completed and
successful 'Buy It Now' listings: 9
Number of unsuccessful
auctions (e.g., opening price was too high) or unsuccessful 'Buy It Now' Listings: 21
The chart below shows the
results.
Of the 40 successful
auctions, the average price was $42.56. Prices
ranged as low as $36.10 to as high as $51.98 in successful auctions. However, the market for this card seems to be
relatively informed as there is a normal distribution with a vast majority of
the auctions clustering between $40 and $46.
Therefore, most final bids squeeze into this $6.00 price window.
The price of convenience. We
can actually calculate the price of convenience from the data. As shown in the chart, the average successful 'Buy It Now' price was $48.38. Therefore:
$48.38 - $42.56
= $5.82
Thus, the average buyer, who did not want to compete in an auction and thus wait to buy or
possibly be outbid, paid $5.82 for the convenience of getting the card purchased right away. Nine buyers went this route
versus 40 who got the card through auctions and generally paid less. (footnote 2)
Returning to the opening
thesis of this post, the average price of unsuccessful 'Buy It Now' listings (or
auctions where nobody bid on the opening price) was $61.58, which is
approximately 145% of the average final successful auction price. This was also not a trivial amount of the overall listings at 21 unconverted listings. One
seller was even listing the card at $99.99 with free shipping, which is 235% of
what the card is worth at auction.
Therefore, we have established with this analysis that some sellers list cards at way above their price in a range that will not lead to the cards being purchased very frequently. The fact that only 9 of the 30 Buy It Now listings were actually successful indicates that possibly a majority of Buy It Now listings are significantly overpriced, even when one factors in the convenience of not having to participate in an auction.
The Why of Overpricing
Therefore, we have established with this analysis that some sellers list cards at way above their price in a range that will not lead to the cards being purchased very frequently. The fact that only 9 of the 30 Buy It Now listings were actually successful indicates that possibly a majority of Buy It Now listings are significantly overpriced, even when one factors in the convenience of not having to participate in an auction.
The Why of Overpricing
So why do sellers list a card
in a price range where it is very, very unlikely to sell (for example, the 1989
Upper Deck Ken Griffey Jr. #1 in PSA 9 grade at $99.99)? Here are the reasons that come to mind:
1. They are hoping for an
uniformed buyer. This idea has to be the
basis for most of this pricing. While
most buyers of sports cards on eBay tend to know pricing, especially for graded
cards, occasionally somebody’s parent or significant other goes online and
wants to find a gift. You would have to
be a ‘newby’ to buying sports cards to fall for the $99.99 price on a 1989 Upper
Deck Ken Griffey Jr. at PSA 9, but this might happen on rare occasions.
2. There is no seller penalty
on eBay for unconverted listings.
Because eBay gives away so many free listings to sellers, the marginal
cost of listing a card at too high a price is $0.00. Therefore, it does not cost the seller
anything to go fishing for somebody uninformed.
eBay will now even automatically relist unconverted listings for you, so
it does not even take time to relist a very overpriced item.
3. There are no negative
reputation effects for overpricing.
Because eBay buyers only rate converted auctions, sellers who frequently
list 'Buy It Now' items at too high of a price do not receive any reputation
loss. Only if the shipping is priced too
high, could it affect their feedback. As
a result, many of the overpriced listings also come with free shipping.
4. Most eBay sellers are not
business people. Business people rightfully
consider inventory holding costs as part of their business. There is an “opportunity cost” to not selling
inventory, which is that you do not get the cash for the item that can then be
used to buy more inventory to sell.
Since the average seller on eBay is a collector or a small business
person, they often focus excessively on getting the best profit margin for card
without considering the cost of money tied up in inventory.
5. In some cases, a seller
may overprice a card when they are unsure of the market for the card. I have done this myself. This type of seller is less of a nuisance
because they ultimately drop their price upon relisting as they learn the
market. I suggest that such possible temporary
overpricing may even be a good strategy in markets for cards that are thinly
traded (I will have another post down the road on thinly traded card markets).
What to do
Unfortunately, I do not think
buyers can do much about the nuisance of dramatically overpriced cards on
eBay. Why I call the situation a
nuisance is that these listings waste your time as you are looking for cards
and have to scroll paste them.
In a perfect world, eBay
would provide the solution by changing their pricing structure. For example, cutting the final value fees by
25% on auctions that start under $1 with free shipping would be a possible
solution to this problem. This could be
combined with less free listings. A lot
of sellers listing cards would embrace this option because they are already
doing it anyway (e.g., having low starting prices). Others would follow and volume upticks might offset
lower final value fees for eBay. The
relative scarcity of free listings would stop the fishing expeditions with the
high priced 'Buy It Now' auctions.
However, I cannot see eBay accepting
this idea because the number of listings is a key metric they report to Wall
Street. I wish Wall Street would pay more
attention to converted listings.
To do yourself a favor when
you search for a widely available card on eBay, click on the button to display
Auctions only. Ultimately, you will pay less,
on average, using an auction to acquire a card.
Also, your eyes will thank you with less listings to scroll
through since you will not have to look at the Buy It Now listings. If you do want to pay for the convenience
of buying it now, I suggest a quick look at the recent sold listings, which can
be found by clicking on a box in the left hand column as your go down the search
results page. That way, you can get an
idea of how much you are paying for convenience and if a Buy It Now price is
too high.
My advice for sellers who
want to sell cards through Buy It Now auctions is to also examine the recent finished
auction prices. As shown on the data on Ken
Griffey Jr.’s Upper Deck Rookie card, you would want your Buy It Now price to
be at the upper end of the normal distribution of auction prices. There are some auction buyers willing to pay
at the end of the right tail and you can capture those higher than average
prices without having to list your card a dozen different times. The key is to again scan the recent completed
auction results and set your price around the level of the highest converted
auctions. Also, you should realize that
eBay charges generally higher final value fess on Buy It Now listings.
End Note
Like all other posts, please feel free to make comments. I review all comments before they are posted in order to reduce spam and keep things on topic. Also, it may take me a few days to review comments.
Footnotes:
1. I did exclude one successful auction that was an outlier. In this auction the seller claimed that the card was under-graded and should have been a PSA 10 instead of a PSA 9. They also included many high resolution scans to back their claim. This approach seemed to convince some buyers, because the auction closed much higher than other auctions.
2. Two auctions actually went higher than the average Buy It Now price. Such situations are quite possible when bidders become emotionally attached to “winning” an auction. Such emotional attachment only costs a couple of dollars on a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade. However, if one was buying a house at a Sheriff’s auction, such emotional attachment could be more costly.
1. I did exclude one successful auction that was an outlier. In this auction the seller claimed that the card was under-graded and should have been a PSA 10 instead of a PSA 9. They also included many high resolution scans to back their claim. This approach seemed to convince some buyers, because the auction closed much higher than other auctions.
2. Two auctions actually went higher than the average Buy It Now price. Such situations are quite possible when bidders become emotionally attached to “winning” an auction. Such emotional attachment only costs a couple of dollars on a 1989 Upper Deck Ken Griffey Jr. #1 in PSA 9 grade. However, if one was buying a house at a Sheriff’s auction, such emotional attachment could be more costly.
