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Research Test: Does using eBay Best Offer increase sales?
David Brackin is the managing director of Stuff U Sell, the leading eBay trading assistant in the UK and a regular Tamebay contributor. Today David reports on the results of testing the eBay Best Offer feature to establish how using (or not using) it impacts sell through rates. He also looks at the overall cost of Best Offer and the impact on selling prices.
Does using eBay Best Offer increase sales?
eBay Best Offer is a long-standing and oft-overlooked function which this trial shows gives the seller a way of increasing sell-through rates by nearly 20% at a modest cost of around 5%.
One of the quirks of the eBay marketplace is the ability to invite an offer from a buyer below your asking price—the eBay Best Offer feature has been available for as long as I can remember and at Stuff U Sell we include it on all our fixed price listings. We found that we were overwhelmed with offers at peak period so we use the automated accept / reject pricing – and to prevent buyer gaming we partly randomise this level. We also have a strict unpaid item policy to prevent offer-testing gaming.
Based on our experience we felt that this engagement with a buyer encouraged them to stick with our product instead of another, and reintroduced some of the “bargain-hunting” excitement that was lost when eBay encouraged the move away from the auction format to fixed price. However, until now we had not run a full trial, and following on from our look at Promoted Listings, we felt this feature was well worth a more analytical look.
eBay Best Offer – The Trial
We selected at random a cohort of 1,000 listings from our inventory and removed the eBay Best Offer function. Our remaining listings we labelled as a control group. Auction format and new listings which appeared during the trial were ignored. After a two-week lead-in period, we spent seven weeks with the Best Offer feature removed from the trial cohort and then we restored in for a four further weeks.
We measured the sell-through rate in this group each week and cumulatively and compared with the control group.
eBay Best Offer – The results
The results are clear. You can see in the graph that the listings with eBay Best Offer outsell those without it – we observed 18% more sales over the 7-week trial for the listings with Best Offer.
The weekly graph shows that this quickly restored back to the same rate when the Best Offer function was restored to the experimental cohort, showing that it was the Best Offer feature driving the difference in sales.
eBay Best Offer – Conclusions
Looking back over the past year of our listings, we saw that only around half of those with a Best Offer option actually sold for less than the BIN price, so the cost is relatively modest compared to the acceptance discount – as some buyers will still pay the asking price either out of expediency or possibly ignorance of the function. The net cost to us was around 5% of the asking price. As with Promoted Listings, you will need to know the economics of your own business to assess whether the discount on the price is worth paying for the uplift in sales and experiment to see what the effect is.
Like many of the best features of eBay, it’s been quietly trundling along while many other initiatives have come and gone – and in the meantime it has slowly grown into a good marketing tool. With the pilot of Offer-To-Buyer rolling out to many sellers already, there’s clearly some innovation coming to the basic feature. In this case, you as a seller can send an offer privately to any watchers on your items to offer them a discount or to start a negotiation. This might be suitable for those who feel shy about publishing more widely that they will accept offers, or if you believe that buyers need a little nudge. Once this is live more widely and the rules around it are established we’ll take a closer look at how it works and what effect it has.
If you haven’t already tried Best Offer on your listings, then we think it’s well worth experimenting with if you haven’t already given it a go. If you have tried it, how have you found it affected sales? How would you improve it?
It must depend on what you sell, because I have consistantly tried the best offer feature and I have found it makes very little difference to the number of sales. All you get is ridiculous offers if you dont put on a min price
Many thanks for this research David – Best Offer is something we usually recommend too.
It would be interesting to see what impact a 5% markdown via Promotions Manager has relative to getting there via Best Offer. It’s not clear to me how much the sell-through increase is due to greater buyer engagement vs. elasticity of demand from a price cut. If there’s not much difference, I’d prefer the lower hassle approach of a price promo.
Philip – I’d be very interested to see that too: might get a feel for relative weight of the marketing tools. Obviously markdown requires some previous sales and a period of at the higher level for compliance. Of course there’s no reason not to do both or layer a series of marketing tools on top of one another: all these listings had 1% Promoted Listings (both control and treatment groups) as well as the Best Offer or not.
David Brackin – Thank you for your analysis. Very interesting.
I wonder if you have seen this post on the US eBay Seller Forums, from last week.
To summarize: Most sellers who use Best offer consider the first offer from a Buyer, a point from which to begin a negotiation.
But they expect their minimum auto decline price to be a secret, otherwise it puts the Seller at a disadvantage.
This seller posted that he was getting a rash of buyers making him an offer at essentially a few pennies above his minimum auto decline price. It happened so frequently recently, that he felt that it was unlikely that this was a chance occurrence. Since like you, he randomized those prices.
So he did a little checking and found out that there are several apps available on the web, which can read the code of an eBay listing, and pull minimum auto decline price out of it.
Naturally he feels eBay is being dishonest, by leading Sellers to believe that their minimum auto decline price is a secret. And that eBay’s system should hide this information from the Buyers, especially since most Sellers are not aware that these apps exist.
So it begs the question: How should Sellers react to this information, and how does this affect their strategy for using Best Offer?
What, things not working as sellers would hope? eBay selling or giving data away to 3rd parties – I am shocked. No I’m not. I’m almost out the door. I’ve run my eBay operation down to 25% of what it used to be and that will continue to get smaller. I don’t care about any of their attempts to inflate a balloon full of holes.
Don’t use auto-decline. If you’re going to “auto” it why bother having best offer in the first place. You may as well just set your price at the auto-decline or else you’re being just as dishonest to buyers as eBay is to you by poorly coding their website.