If you are new to the Internet you may have never heard about ebay auctions. When I first heard of the concept some three or so years ago I laughed at the idea. I thought it was a silly, stupid idea that didn't have a chance on the Internet. Just plain stupid.

I had forgotten about that when a good friend and Train Buff told me about it around a year ago. I went to the site (www.ebay.com) and could not believe what I saw. Especially the statistics. I was just there, and here is a copy of their statistics as of today:

1,295,216 items for sale in 1,096 categories! Over 38 million items for sale on ebay since inception! Over 142 million bids made since inception! Over 600 million page views per month!

Can you believe those numbers? I didn't at first, but then after going deeper and deeper into their pages I realized, this was one of the most profitable concepts I had ever heard of. I sure had missed the boat some two years prior!

I was so impressed with the concept last year that I decided to start my own on-line auction house. I had a name and everything. The only thing that I lacked after fooling around with it for a couple of weeks was know how and initiative. And besides I thought to myself, this would take away from my current occupation, namely trains. So I decided after looking into it very thoroughly, that it was just more than I could handle.

But others obviously thought it was a good idea and there are a number of other on-line auction houses. None can even come close to ebay's success.

Shortly after I learned about ebay I tried a few auctions myself. I think I tried five auctions and all were successful except for one. Well actually at that time three sold for less than I would have expected, but one sold for more than I had it listed on my pages!

OK, so why am I telling you about this place called ebay. One might think that since I buy and sell trains, and trains are heavily represented on ebay that maybe just the fact that I mention ebay could sway people away from my pages! That could be, but at the same time there are some drawbacks to ebay.

The most obvious drawback to ebay is fraudulent sellers. Since ebay specifies that the buyer must send the seller payment before it is shipped (unless otherwise agreed upon), there has been and there is a distinct potential for massive corruption in the system. When you have over 1,000,000 auctions going on at the same time it is very difficult if not impossible to monitor what is going on in your domain.

However to address this problem ebay very cleverly came up with a merit/demerit type system where they encourage successful buyers or sellers to give each other compliments after successful transactions occur. At this time there are people on that system with literally thousands of positive comments that others can read.

On the other had what is to stop a person to purposely over a six month period of time to build up their merits to the point of enormous creditability, then strike.

And by striking, I mean start hundreds of fictitious auctions in ebay, where they say they own 10 computers in one auction, 10 736's in another auction, an automobile in another auction, etc, etc. But guess what. They don't own anything that they are auctioning. And of course the hundreds or thousands of auctions go very well. And then they receive the checks credit cards, money orders, cash, etc. over the next two weeks or month. And then like that, they disappear, never to be seen or heard from again.

Ironically in the Erie Sunday Times there was an article by a person who was predicting things for the coming year I believe. This is how it went:

Going Once Going Twice...
'More than a few indignant souls will try to hold Internet auction houses responsible for shady dealings that transpire in the booming consumer-to-consumer auction spaces. Sad stories about outrageous rip-offs in the virtual flea markets will become routine. The auction companies will argue successfully in court that they just provide a platform for transactions and have no responsibility for the actions of fraudulent sellers. The Federal Trade Commissions will take the issue under consideration and eventually conclude there is no practical way for the federal government to regulate user-to user trade.'

I guess I wasn't the first one to come up with my theory.

My guess is that fraud in the auction houses will become much more of a problem as time goes on. So if you are doing business in the auction houses, please be very careful who you are doing business with.

Over the past couple of months I have been trying to gauge how much auction houses will affect my business. There are two sides to this.

First of course is the seller on ebay. Since I purchase mainly large collections, this probably won't be that big of a factor. Who has the time to list item after item in an on-line auction house which is very time consuming. Of course then you have to hope for a successful bid on each auction, then wait for payment, then package and ship each and every item you sell probably to different individuals.

I think auctions are for a certain type of person who can commit to this type process. I have a funny feeling that many of the sellers are actually dealers or weekend warriors who are now making some of their income through auctions. And it probably wouldn't be a bad idea for them to claim it on their income taxes, as you never know who you are buying from, and there is a definite paper trail that the IRS will probably be very interested in at least eventually. It is possible that frequent dealers on ebay for instance could be red flagged by the IRS as notoriety of the auctions houses becomes more well known. I wouldn't want to be audited knowing that the IRS maybe had access to my ebay auctions. Especially if I didn't claim that income! And did you know that if you can't prove what your cost basis was for each item you sold, that your gross sales on the item would automatically become the net sale?

Sorry, I am not trying to scare anyone, but this is reality. I guess I am just saying be careful in the auction houses. And no matter what you are doing, play by the rules. I was audited once without a problem. That is the only way you want an audit to turn out!

There is also a phenomenon called snipers on ebay. These are higher bids that come in the last couple of seconds of an auction. I've seen people complain about them on the rec.models.railroad news group. There were people that were very upset because there bid was high for such a long time of the auction, and then at the very last couple of seconds of the auction someone bid and ‘stole' the auction from them.

The only thing I can say about that is it is ‘hogwash'. All is fair in love and war, and as long as it is within the time limits, it is fair. And why didn't they bid higher to prevent this from happening?

The second side is the buyer on ebay. You can get good deals on ebay. However unlike a year or so ago, selling prices are raising just due to the large volume of people competing. I've had several customers comment that they are finding many items on my site that are priced lower than resulting auctions.

And of course having something new thrown at you, you tend to try to even things out. I can't really compete with a price that is not established until the hammer goes down. But I am making every effort to keep my prices as low and fair as possible, and I think that will be the only way that I can compete with ebay. So don't go hog wild on ebay because the bottom line is you may just find it somewhere else lower after you have committed. In essence ebay is a check against price gouging which is great!

Another concern especially when the subject is trains is grading. Make sure, since you are sending payment before receiving the item that you agree on the individual's grading standards. Paying for an Excellent GG-1, and receiving one in Good condition is not especially a good value! Make certain that you have a return privilege. I don't think that is the norm on ebay.

Well those are my opinions and concerns about Auction Houses. This is by far the most innovating marketing concept to come about in this new electric age. But you as the consumer have to be very careful, because although the Auction Houses themselves have the brains and the software to drive the system, if you make a mistake, you are the one who pays, not them.

I would love to get your opinion on this subject as well. So I am going to have a little survey below for you to fill out. It will just take a minute, and if you have the time, I would sincerely appreciate your participation.

I hope you have learned something. Now please, teach me something! The results to this survey will appear in the ‘What's New At Train City' (which appears just below the first page of this topic). It will appear within two or three weeks.

[Survey has already been completed, so it is not available. Please see the next article for the results.]

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Revised 1/3/99