Why a Low Start Price Auction Strategy Works

Liquidation is the rule in retail. Traditional liquidation methods like selling distressed inventory to one or two liquidators will always leave money on the table. Over time, this can add up to millions of dollars lost. The ability to recoup value from every aspect of the business is crucial; this includes liquidation, especially in today’s competitive environment.

When it comes to leveraging an online auction liquidation solution, it’s not one-size-fits-all. Customized strategies must be applied depending on the product being sold, the condition, and expectations of the retailer. One of these strategies is B-Stock’s Low Price Auction Strategy (LPAS) where sellers purposely set a low starting price to entice early and multiple bids from our network of buyers.

B-Stock provides customized strategies for each retailer depending on a few things, including: the product(s) being sold, the condition and quantity of the product, and expectations of the client. We have learned that certain strategies work across different categories and marketplaces. One of these proven strategies includes setting a low opening bid.

By implementing B-Stock’s LPAS, retailers will experience an increase in the number of bidders, the number of bids placed per bidder, and ultimately an increase in selling price. Here’s how:

• A low start price is an easy threshold for buyers to cross and they are more likely to place an opening bid
• When buyers see low start prices, they are more likely to register to bid (which ultimately leads to increased participation)
• LPAS allows the buyer to feel in control of his purchase (a high opening bid tends to reflect the amount the retailer wants to sell the lot for, which can build resentment)
• When a buyer places his first bid, he becomes “emotionally attached” to the lot and will continue bidding to become the winner
• Buyers are more willing to increase bidding in smaller increments: when a lot is going for thousands of dollars and it’s “just $25 more to win” a buyer will go for it

The lower start price strategy works across clients, product categories and lot sizes. Here are two examples.

E-commerce Retailer

After years of starting auction prices based on a percentage of final pricing expectations, the B-Stock team advised a Fortune 500 e-commerce retailer to drop the auction start price to $100. By applying LPAS, the retailer saw an 80% increase in bidders, which lead to a 30% increase in pricing.

Fortune 500 Apparel Retailer

A major apparel retailer that had been selling pallets of merchandise through its B2B liquidation marketplace. When B-Stock advised lowering the auction start prices to $100 (in some cases, that was more than a 90% decrease), the lower start price generated 27 times more first time bidders than the higher start prices. Since implementing LPAS, the client has achieved 33% over target pricing.

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