eBay, Vinyl, and the Invisible Hand

[While some collectors may have misgivings about eBay, it is one of the primary secondary markets for art toys.  Sometimes the best recourse for acquring a rare, hard-to-find figure, it is also an indicator of current popularity and value.  Clay C. will periodically cover eBay trends for Vinyl Pulse. Here's his thorough piece about pricing cycles.]

The secondary market in art toys presents some interesting economic illustrations.  Pricing in the primary market is determined by a myriad of factors external to the immediate transaction - repute, retail profit margins, long-term business relationships, etc.  It is in the secondary market that we can sometimes get a clearer view of supply and demand in action.

 

One recent illustration of supply and demand in the secondary toy market is the Tim Biskup Stack Pack.  (This vinyl set was later released by Tim with Munktiki in two different ceramic colorways, and he has said that he intends to do more colors of the ceramic set in the future.  Your author is of the personal opinion that the ceramic versions of the Stack Pack are among the best 3D realizations of Biskup's art yet released.)  The vinyl Stack Pack was the original Stack, and its recent sales in the secondary market are illustrative.  This pattern, this curve, recurs on eBay with all 'commodity collectibles' - all items of which there is a finite supply and a large but still finite pool of interested buyers.  There are always other factors that introduce pricing variations - a particular item's condition/completeness, shipping costs, seller's eBay feedback rating, etc., and no real-world dataset is perfect, but this item's recent history does illustrate a very commonly seen pattern.  It may be useful for toy collectors to be aware of this pattern, its implications for both buyers and sellers, and its potential for abuse.

 

Here are a series of all recent eBay sales of the Biskup Stack Pack - This item was chosen more or less at random -- It has been out for several years and is now pretty much unavailable at retail, so the secondary market is its only market.  The set was released in 2003 as part of the Sony Time Capsule/Art Capsule Project.

 

       Item #                       Closing Date      Closing Price

190069605888                 1/11/07                $161.38

200068750275                 1/21/07                $141.38

200070530435                 1/25/07                $103.50

120081201393                 2/05/05                $116.50

150088658626                 2/11/07                $105.00

120083851538                 2/12/07                $102.50

200081479791                 2/23/07                $64.00

190085904958                 3/01/07                $56.00

 

This is almost a textbook illustration of the cyclical operation of supply and demand in these finite-items / finite-buyer-pool situations.  Demand builds as collectors discover or remember the item and start to hunt for it.  They put it on their eBay 'Watch' lists, etc.  The longer this continues without any becoming available, the larger (and more eager) this buyer pool becomes.  When the first one  is listed for sale after a longish dry spell, there is significant pent-up demand, and the item sells for a very high price.  That high price itself then draws the attention of potential sellers.  Owners of the item see the closing prices and decide "Wow, at that price, they can have it!"  More appear on the market.  Each successive one listed has a smaller group of buyers, as the early buyers are no longer in the market (and some potential buyers may be scared off by the high prices realized in the early sales).  So, the supply goes up as the initially high prices drive more Stack Packs to the market, and the demand goes down as the buyer pool shrinks (by at least one) in each successive sale.  The result is predictable -- the price drops.  It will usually continue to drop to the point where no more of them come to the market, potential sellers having decided that at that low price, it is not worth selling.  A dry spell ensues, and the cycle begins again.

This cycle is predictable and occurs on eBay in many collectible markets, more clearly in other categories with much larger pools of items and buyers than art toys.  The cycle is also becoming shorter and shorter now as one result of eBay's policy changes.  All eBay listings are retained in their databases for 90 days, and in the early days of eBay the items in the database were all  searchable - you could search through all of the last three months' completed sales.  That 'searchable' period has shrunk and shrunk, until now a search of 'completed' items will only turn up items that closed in the last fifteen days.  The information available to both buyers and sellers has thereby been severely reduced.  And, because both sellers and buyers use eBay's completed sales to estimate reasonable prices and bids, this reduction in the available information means that now even a very short spell of time without a particular item becoming available can leave both buyers and sellers who are relying on completed item searches in the dark. 

 

Unfortunately, this very short cycle has also made it absurdly easy for unscrupulous eBay sellers to manipulate pricing.  With very few people (or at least very few eBay ID's - it could be all done by one person), it is a simple matter to create a false data pattern, a spurious sales history showing sales at artificially high prices.  Assume that your edition-of-200 Basekupzik 2004 Fezzelwibit retailed at $20 and has a current fair market price of $60 (in a hypothetical transaction between disinterested parties aware of all relevant pricing data).  Dishonest sellers create a few spurious sales showing that it closed (all among what appear to be unrelated sellers and buyers) at $180-$200 each time, and only then  do they list their item 'for real.'  When the buyer pool searches eBay's completed items and finds a few apparently legitimate Fezzelwibit sales in that $180-$200 range, they understandably assume that is where the free secondary market itself, Adam Smith's Invisible Hand, has set the price.  When 90 days' listings were searchable this sort of scurrilous price manipulation was much tougher, as the likelihood that other, true arm's-length transactions will be found has now been reduced to one-sixth of what it once was.  Put another way, by artificially restricting the searchability of closed sales eBay has made it six times  easier for scoundrels to artificially manipulate price data.  But, eBay makes its money from sellers, not buyers, they earn more from higher closing prices, and they have no moral or legal duty to provide any  free, searchable data on past auctions.  If you are a steady buyer or seller, it may be worth your money to buy the past 90 days' worth of data (plus some other statistical analysis) from eBay's 'Marketplace Research' service - this search data, once free to both buyers and sellers, now costs $25 per month.

 

So - caveat emptor  is a concept even more ancient than the Invisible Hand, but with eBay's changes it is even more critical in the secondary toy market.  If there is an item you want that is only available in the secondary market, do your homework.  If you don't choose to buy eBay's Marketplace Research, it is a good idea to 'watch' the items for at least a few weeks, and retain the closed sales on your watch list for reference when you decide to bid.  Inquire on the various toy fora.  Don't be pressured by any feeling that you will not get another chance, there are very few items at which you won't get a second chance.  As illustrated by the Stack Pack sales above, if an item is suddenly selling for big dollars, it is likely that other potential sellers will see those prices too, more of the item will be driven to the market, and eventually the prices will decline.  If you're a seller, the best time to sell any item is after a period of time when none have come onto the market.  This is especially true where an artist has recently released another popular item, as that will generate new interest in the artist's prior work.

 

I hope this is helpful, and VP is interested in pertinent comments or stories from our readership - post your tales in the Comments to this article, we'll keep an eye on those and pipe in with anything more.

-Clay C.

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