The Impact of Product Grading: Adding Value to Online eBay Trading

Abstract

Amid the technologies which have caught the attention of business in recent times, the website has been one of the most discussed and debated. In light of the recent dotcom bust, many critics are arguing that websites are less valuable in commercial environments than first thought. eBay however has led the way by offering a platform where millions of items are traded each day. With a diverse community of individuals and small businesses, eBay is enabling trade on a local, national and international basis. This online marketplace is the focus of this study. There has been much discussion of the role of trust in Internet environments and it has been argued that a lack of consumer trust is the primary barrier to the full commercial development of the Internet (McCole and Palmer 2002). This paper reports on a case study of a U.S. organisation called Action Figure Authority (AFA) that grade and case action figures, playsets and other collectable toys. The study conveys that grading items through AFA significantly increases items auction value when traded on eBay and the confidence of potential buyers. In fact depending on the grading of the items, some have been auctioned off for as much as ten times their expected secondary market value. This study finds product grading is an alternative mechanism to creating trust and inducing higher auction prices.