RESERVE BIDS...What's that?

Online auction websites are trending among people. This sudden increase in popularity is due to the ease with which people can participate in the auction without thinking about the geographical barriers. As everything is regulated online, there is no need for the bidder to go to the venue for participating in the auction. If you are a beginner, then you might have come across the term - reserve bids. So what is it? 

If you do not have proper knowledge of the term and why it is used, then you have come to the right place.

What Do You Mean By A Reserve Bid In An Online Auction? 

Well, reserve bids are common to almost all types of auction. It refers to the reserve price or rate of the product, which is generally the minimum product price that a seller can accept as the winning bid. For instance, if the minimum price of the product set by the sellers is $12 then the bidder is required to place their bids above $12 and not below it. Any rate which is below $12 would not be accepted as the winning bid by the seller. In an alternative sense, the reserve bid is also considered as the highest price the winning bidder is willing to pay. 

The reserve price is used by the sellers in order to prevent the bidders from participating, who are offering a price lower than what the owner will accept. Moreover, if such bidders are allowed to participate, they would be prevented from winning the auction. Besides the term reserve bids, you must also know about the walk-away point. It refers to the situation when the winners (buyers) and sellers are not ready to negotiate over the price. Generally, the auction price of any product is kept lower than the reserve bid. Why is it so? 

Well, it is a strategic step taken to encourage the bidders to participate in the online auction. But keep in mind, as a bidder, you cannot bid lower than the reserve bid. 

Who Has The Right To Reserve The Bid In An Online Auction?

Generally, the seller of the product has the complete right to set the bid for the product. The reserve bid is used by the sellers if the bidding value or the winning bid does not reach the threshold value of the product. It is done in order to ensure that the seller does not face any loss by selling the product through an online auction.  

It is essential for every seller to reserve a bid, but they should understand that it should be done at the right point. The reserve bid should not be too high or too low. If the reserve bid is too high, the potential bidders will not be willing to participate. And if it is too low, then you as a seller would have to face loss.

How A Reserve Price Of The Product Is Set? 

While setting the minimum price, have you ever thought about how low can you set the reserve price of the product? Well, this is a subtle online auction strategy that is used by the seller to cover up his profit margin. This strategy will also be used to attract bidders and encourage them to participate in the bidding or online auction. Moreover, this will help in driving up the price of the product’s real value. 

However, you must ensure that you should use a reserve only when it is absolutely necessary because some bidders pass up reserve auctions.

While setting the received price, there are certain rules that a seller needs to follow. 

#1 To make use of this strategy in the highest yielding way, a seller should keep the reserve price a secret. The reserve bid should not be revealed if the actual selling bid of the product is kept high. Only the seller and the backend team knows about the value of the received bid.

#2 According to the experts of the online auction, sellers should set higher reserve prices when objects are auctioned to many potential bidders.

Summary: So here you have all the information provided which you should know about the sellers, the strategy behind placing the reserve bid, and how it is useful for the bidders. If you are a beginner, then you must have the knowledge of reserve bids and how they have an impact on the winning bid.