Isn't it unbelievable that some people have the audacity to
partake in the evil act of Shill Bidding, solely for the
devious self-serving purpose of raising the prices on their
own products that they are auctioning off online?
To fully understand the concept of shill bidding, you need
to take a step back and ensure that you comprehend the
business of auctions - and for the purpose of this article,
online auctions specifically.
An auction website is a platform which is best explained as
being a virtual shopping channel that enables sellers to
sell their products to autonomous buyers. Many are of the
perception that the auction websites themselves are
responsible for the sales process, including stock control,
shipping of items and receipt of payment. This is a
misconception. While an auction website is a place of
trade, the process is very different to an e-tailer (i.e.
online retailer) in that the stock that is sold via online
auctions are sourced, sold and shipped solely by the seller
who is making use of the online auction tool to facilitate
the sale. Now that you know exactly what an online auction
website is, let's move on to the next bit of auction jargon
that we spoke of earlier, namely 'Shill Bidding'.
Quite simply put, Shill Bidding is when sellers place bids
(whether blatantly or under a disguise) on their own
listings with the intent to raise the bid price in the hope
that other bidders would feel forced to bid for that item
at a higher price, thereby artificially inflating the
perceive market value or desirably of the product that is
on auction.
Often a family member or roommate may bid on the seller's
item because they really want to win the item. The reality
however, is that these bidders are in a situation where
they are usually able to communicate directly with the
seller, thereby creating a unique scenario that is unfair
to other bidders that do not have direct contact with the
seller. For this reason it is regarded as unfair practice
for these bidders to bid on the seller's item in the
traditional auction-style listing. Should a family member
or friend genuinely be interested in purchasing the
product, the seller should resort to listing the item as a
straight-forward sale with a fixed price (usually called
something like a 'Buy Now' on the online marketplace).
This removes the risk of misleading other potential buyers
about the market value of the product, as the price is
specified and can therefore not be inflated at any point in
time.
By now you may feel a little overwhelmed by the terminology
that has been thrown around in this article. In the
interest of ensuring that there is absolutely no confusion,
let's take two steps back and clarify exactly what an
'auction' is. An auction is when an item is listed for
sale (more specifically, for bid) with a set starting price
and in some cases have a reserve price where the buyer is
required to place bids according to the bid increment set
in the auction. Before we get ahead of ourselves, let me
clarify that a bid increment is the value by which each bid
placed increases during the auction, and a reserve price is
the minimum price that a seller is willing to accept for an
item. A sale will therefore only be concluded when the
reserve price is met (the reserve price is set at the
seller's discretion and it is usually not a prerequisite
for all auctions).
Now that we have clarified the relevant auction 'lingo' you
can appreciate why most condemn the act of Shill Bidding.
It is regarded by most online auction website owners as a
deceitful and underhanded tactic used mostly by conniving
scam artists. Each auction website will have their own set
of terms and conditions, however most reputable online
auction websites have a strict policy against this sort of
behaviour and would usually blacklist any seller from using
the site in future. In some countries, shill bidders have
been criminally prosecuted for Shill Bidding where such
prosecutions have resulted in both misdemeanor and felony
convictions and large penalties including fines and
restitution of damages.
Online marketplaces rely heavily on the integrity and
reputation that is reflected in its community in order to
become and remain successful. Shill Bidding can destroy
the credibility of such marketplaces very quickly. Not
only does it damage the trustworthiness of the website
itself, it completely distorts the bidding process and
hurts the buyer.
Online auctions are certainly not doom and gloom. In fact,
one of the beauties of selling products in an auction is
that you allow the market to determine the true value of a
product, based on the demand and desirability of that
particular item, rather than dictating to the marketplace
what the price should be. Very often this price exceeds
the seller's expectations - as what the seller may have
regarded as trash may very well be considered a treasure to
the buyer, who will quite happily pay an above market price
for the simple purpose of becoming the new owner of that
rare find.
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bidorbuy is South Africa's largest online shopping
marketplace. Visit http://www.bidorbuy.co.za for more
information.
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