How to Bid on Ebay

So, I keep losing everything I bid on, on Ebay, and it's getting frustrating! I see something I want, bid on it, and someone else always outbids me! Lately, I've been bidding on Red Heart yarn. A lot of people have new yarn that they're selling and even some yarn they've found in estate sales. They range from one yarn to tons of yarn. I always ask to make sure it comes from a pet free, smoke free home, and that it doesn't smell musty or like perfume. Once I've got all those questions answered, I place my bid. I even use the automatic bid thing where you can set your max bid and it will adjust the bids for you. Somehow, someone always outbids me.

I priced super saver yarn, and the cheapest I can find is for $3.88 at Walmart. I always try bidding first, for $2 per yarn, but I was willing to go up to $3 per yarn. Yesterday, I really wanted this great looking variegated yarn to make eyeglass cases and dishcloths, so I went up to $3.50 per yarn. I was still outbid! I include the shipping price in my calculations because if I just drove to Walmart for the yarn, I would pay $3.88, so I don't want to pay more than that. So, I take the shipping price and subtract it from $3.50 and that's my maximum bid.

So, I'm wondering if that's where I'm going wrong? Do people include the shipping in their max bidding calculations or not?

Does anyone have any tips on how to win a bid on Ebay?