Online auctions are great places for entrepreneurs and bargain shoppers alike. Online auction sites are like giant flea markets; they provide a forum for buyers and sellers to find or sell just about anything.

There are many ways to approach online auctions. For many, selling items on Internet auctions sites is a hobby and a good way to supplement their income. For others, it is a job and way of life. For buyers, it’s a great way to find good deals on rare, unusual collectibles or everyday items.

Most auction bidders are looking for bargains, hard-to-find items, or things they collect. The average purchase is $100 or less, but some people spend much more. Many buyers pay by sending a check, cashier’s check, or money order directly to the seller.

“That’s fine if everything goes smoothly, but if there is a problem, by the time you discover it your money is gone,” said Susan Grant, IFW director.

Some auction sites have “feedback forums” where buyers can post messages about their experiences with sellers, but only half of the bidders surveyed said they always check that information. Few bother to contact other sources of information about complaints against sellers such as consumer agencies or Better Business Bureaus.

The most common problem for buyers is late delivery. Other problems they experience include receiving items that are different than promised, items arriving in damaged condition, and never getting the items at all. Sellers also report problems such as late payment, non-payment, buyers changing their minds, checks bouncing, and buyers using stolen credit cards.

“Whenever you pay in advance for something or ship an item before you’ve been paid, there is some risk,” Grant cautioned. One way to reduce the risk is to use credit cards for payment, as an increasing number of online auction buyers are doing. That enables sellers to get their money faster and avoid bad checks (stolen credit cards only accounted for one percent of sellers’ problems). Buyers can dispute the charges if the merchandise was misrepresented or never delivered. Even small-time sellers can arrange to receive credit card payment through programs offered on some auction sites.

Another option is to use an escrow service, which holds the buyer’s payment and forwards it to the seller when the buyer has received and approved the item by the agreed-upon time. Either buyer or seller can pay the small fee involved. Unfortunately, the survey showed that many people aren’t familiar with escrow services.

Are the items on the Top 10 Pulse the best selling items on auctions? It is important to keep in mind that those items on the Pulse are those that receive the most number of searches. The number of searches is different from the number of items sold. Items that have the most searches are not necessarily the most profitable items to sell on auctions.

Some of the products that put the most amount of money in sellers' pockets do not even show up on the Top 10 Pulse.

Studying the auctions Pulse is a good way to study buying trends, but it isn't necessarily the best way to find lucrative niches. For example, the No. 1 keyword on the Pulse in the category of audiobooks is "harry potter." Some quick research shows harry potter audiobooks are currently selling for an average price of $32 with a sell-through rate of about 70%. That's a good niche since the statistics tell you that if you sell in this niche, your average product will go for about $32 and 70% of the items you list will sell.

Here is another niche that is highly profitable. The keywords "attacking anxiety" cannot be found anywhere in the Pulse, but products with those keywords sell for an average price of $134 with a sell-through rate of 68%. That's a pretty good niche don't you think? And it is nowhere to be found on the Pulse. There are many other secret niches just like this that contain excellent products you can sell on auctions but don't show up anywhere on the Pulse.

How do you find secret auctions niches in which to sell lucrative products? The best way is to research completed items. What is the average price per item, and what is the sell-through rate?

The average sell-through rate of all items sold on auctions is about 33%. That means that if you are selling average products, one out of three will sell.

The problem with listing average-selling products is that the fees can eat up your profit, and this is what many auctions sellers have been complaining about for some time. Conversely, those sellers who are making money and profiting on the site are those who are selling popular products in hot, lucrative niches.

Are items on the Top 10 Pulse the best selling items on auctions? Sometimes you can find profitable niches to sell in, but many secret niches cannot be found on the Pulse.

Will eBay Fee Hikes Recharge Growth--or Drive Away More Merchants?

BUSINESS WEEK.....Posted by: Rob Hof on July 19

A lot of people, especially eBay sellers, assume that the online marketplace raises fees largely to extract more money. But the bigger reason is usually an attempt to alter seller behavior—to change what kinds of products they list, for how long, and so on, to keep the marketplace humming for both buyers and sellers. Same deal today, when eBay announced it’s hikinglisting and sales fees by an average of 6% on items merchants list in their eBay Stores. Apparently, the moves eBay made in the second quarter to promote auction listings over Store listings in search results didn’t do the trick, which put a damper on U.S. revenue growth.

No doubt, a lot of merchants will scream bloody murder. Big whoop. The thing to watch for real insight into whether this will help recharge eBay’s growth—which ain’t badbut not good enoughfor investors—isn’t how loud merchants yell. It’s what they end up doing.

Will they dump listings of commonly available, often overpriced merchandise piling up in their eBay Stores, as eBay hopes, thereby improving the appeal of overall eBay inventory? Or will they get fed up and list those items on their own Web sites or on Google Base or somewhere else?

When I talked briefly this afternoon with eBay CEO Meg Whitman following the second-quarter earnings call, she sounded confident. She thinks the pricing moves will cull out sucky merchandise—my term, not hers—as early as the middle of the current quarter. “Some stuff will simply disappear” rather than get listed in eBay auctions, she said, because it’s simply commodity merchandise at standard prices that you can find a thousand other places.

I get the clear sense that as eBay expands its other marketplace and ad venues, from its international classifieds sites to Shopping.com to the new eBay Express site, it’s no longer trying to make eBay.com the place for all kinds of merchandise. That way, she hopes the fun experience of bidding on eBay for unusual items won’t get further “diluted.”

I think that’s probably a wise strategy. As Whitman herself has noted, brands are like quick-drying cement. eBay’s core brand appeal is set, and it isn’t, as Whitman points out, interminable listings of Mariah Carey’s latest CD. The big question is whether the pricing move will also spur bidders to return and buy more stuff. We’ll know before three months are up whether eBay’s latest gamble pays off.