This is basic economics. In the first place, you don’t want to sell in a market niche where there is a glut of identical or similar products. Prices—and profits—will be low, and the competition will be dibilating for you. So ideally, as explained in eBay Business the Smart Way Second Edition, you will want to sell in a niche that’s big enough to be profitable but small enough to discourage competion.

That doesn’t mean that you won’t be able to achieve a high volume of sales. If you have little competition, a high volume of sales might become the cornerstone of of your retailing effort. The question becomes, How do I achieve a high volume of sales without anyone knowing about it?

You might ask, What difference does it make if anyone knows about it? Well first, if potential buyers perceive that there’s a lot of inventory up for auction, they won’t be willing to pay as high a price as they would if they perceived that few items were available. Indeed, they may wait to buy until the price goes down just because there are lots of auctions and the perception is that some auctions may not receive bids. The more you sell openly in public, the lower the price will be. Second, a huge number of visible sales may attract competitors who think a large market exists. Neither of these situations is desirable.

So, the goal becomes to sell as much as possible but create the perception that the product is in limited supply. The first step in this strategy is to refrain from using a Dutch auction. Clearly Dutch auctions will draw attention to the fact that you have a large supply of the product on hand.

The second step is to use a combination of normal auctions and auctions with a Buy-It-Now fixed price. You can also use the secondchance offer effectively.

Classic Case

The classic case of effective sales management took place offline in the last decade and was engineered by Ty, Inc., with its marketing of Beanie Babies. Each “model” of Beanie Baby was marketed in a unique production quantity and later “retired.” This created a different supply and demand ratio for each model. As a result, some Beanie Babies grew to be worth $25 and some $2,500 on the secondary market. But Ty retailers sold most all of them originally between $5 and $15. Ty retailers sold millions and millions not because Beanie Babies were better than any other stuffed animallike toy, but because Ty managed the sales in such a way as to make Beanie Babies a collector ’s item. The resulting collector frenzy lasted for several years and probably would have lasted longer except that a flood of counterfeit Beanie Babies from China disrupted Ty ’s carefully orchestrated sales.

Combination Auctions

How do you keep your sales high without the illusion of too much inventory being on the market? You use fixed-price (Buy-It-Now) auctions. Unlike a normal auction, which last at least a few days, a fixed-price purchase is instant—as soon as a buyer materializes. And you can replace it instantly with another fixed-price auction. Consequently, without the illusion of flooding the market with auctions, you can generate high sales. The trick is to keep the right balance of normal auctions and fixed-price auctions simultaneously to keep sales high and visibility low.

Second-Chance Offers

eBay instituted the second-chance offer program to protect sellers against nonpaying buyers. If your highest bidder doesn’t complete the transaction, you can offer the item to the runner-up bidder. In fact, eBay has extended the program to cover multiple runner-up bidders. And you pay no listing fees to take advantage of these extra sales. In other words, you can sell multiple identical items from one auction without anyone except eBay being the wiser.

Management

To manage sales, you need to use the combination auctions, secondchance offers, and any other techniques you can dream up to sell in volume without creating visibility. It pays to have a good auction mangement service that can faciliate or automate such sales schemes to save you the management work.

Even Without Visibility

Even without visibility you can still saturate the market for your product. You need to find the balance point between your supply and the demand.

Remember that sales management is appropriate for a product. It makes good sense. However, when you have several products or dozens of products, the management tasks can grow to be burdensome. Nonetheless, you need to tend the sales, and it’s unlikely that you will be able to do so well without help from specialized software.

Cost-Effectiveness Review

The cost-effectiveness of this technique to a large degree depends on your use of an auction management service. If software can help you do what has to be done for sales management, this technique can prove worthwhile. If you have to tend it all yourself, it will take a lot of time. Regardless, sales management is a necessary part of marketing.