5.17 Auctions

Leaving aside auction sites like eBay, companies generally use auctions to:

1. Dispose of surplus, fire-damaged or liquidated stock.
2. Source materials and suppliers.
3. Extend their customer base.
4. Reorganize their business methods and approaches.

Auction Site Build

Auction sites, and the software supplied to build them, are usually categorized as B2B, B2C or C2C, but otherwise vary enormously. Companies build sites with an "out of the box" package, online with the hosting company, by customizing existing software packages, and/or by employing a web design company specializing in this business.

The questions web-build must answer are:

1. Market: C2C, B2C and/or B2B.
2. Categories: number and structure.
3. Data input: type and if from a database.
4. Geographical restrictions possible.
5. Acceptable displays: text, graphics and/video.
6. Bid types: English, Dutch, sealed bid, reverse, fixed price options, vickrey and/or consignment.
7. Fees: sliding scale, listing, bold name fee, second category, exclusive category, banner display, late payment fee, commission or flat fee.
8. Billing transaction methods accepted, currencies, invoice creation: payment gateways.
9. Email notifications: to bidders, purchaser.
10. Warehousing: goods held in-house or by seller: insurance arrangements.
11. Shipping methods: supplied, set charges or as shipper directs.
12. Guarantees and charges arising, escrow services, fraud protection and warranties.
13. Reports: transaction list, mailing list.
14. Customer account.
15. Complete auction report.
16. User feedback.
17. Security measures.
18. Dispute procedures.
19. Visitor tracking facilities.
20. Ease of build, customization and extension.
21. Scalability.
22. Help sections
23. Terms and conditions

Auction Types

Type

Description

Favoringing

English (eBay)

Public: single item: ascending prices:

highest bid wins

Seller: many buyers bid

against each other

Dutch (Dutch flower

market)

Public: single item: descending prices:

seller lowers price till some purchaser

is willing to buy.

Seller: many buyers bid against

each other

Dutch Internet (Pricefalls)

Public: multiple items: descending price:

as Dutch but buyers can purchase at a set price

or when price falls to their submitted bid.

Seller: several sellers but

many buyers who

bid against each other

Japanese (private auctions)

Public: single item: ascending price:

highest bidder wins at price just above second highest:

no new bidders can join once bidding starts.

Seller: many buyers bid

against each other

Yankee (private auctions)

Public: multiple items: ascending price:

as Japanese but winners pay their actual bid prices.

Seller: many buyers bid

against each other

Reverse (Construction

projects etc.)

Public: single item: descending price:

sellers bid on price: winner is the lowest price.

Buyer: many sellers bid

against each other

Name Your Own Price

(Priceline)

Public: single item: descending price:

sellers bid on price: as reverse but price is

not made public.

Buyer: many sellers bid

against each other

Double (Nasdaq

and stock markets)

Public: multiple items: sale when

buyers and seller agree on price.

No one: both buyers and

seller bid against each other

Vickrey auction (Elance)

Sealed bid: highest bidder wins

at second-highest price: rarely used.

Seller: many buyers bid

against each other

Sealed bid market

(Construction projects

etc.)

Sealed bid: winner chosen by

reputation or quality from lowest bidders.

Buyer: buyer makes

final selection

Running an Auction Site

Creating online auction sites is not for the faint-hearted, and design companies exist to shoulder the burden of planning, building and maintaining the sites. Maintenance services are also provided by auction-hosting companies. Procedures need to be in place to:

1. Deal with bogus bids and timewasters.
2. Vet winning bids by telephone or email.
3. Require bidders to log in with personal details.
4. Run private auctions to accredited bidders.
5. Blacklist offenders.
6. Check suspicious bids.
7. Automatically deny a second highest bid when highest is suspicious.

Auction-building software varies enormously in scope and cost — from simple add-ons that record sales at small charity events to major systems enabling corporations to source materials cheaply and dispose of unwanted stock. A small selection of 'out of the box' programs.

Products

Product

Platform

Auction Types

Currency

Database

AAS

U W

autos

$ £ +

Y

Auction Systems

W

charity auctions

$

N

Beyond Solutions

W

E D V Y

$

Y

C-U-S Systems

CUS

-

$ +

N

Every Auction

W U M

D E R

$ +

Y

Sold II

W U

-

$ £ +

N

B2B Exchanges

Auctions also feature in large Business to Business Exchanges, which are independently owned online marketplaces that connect thousands of buyers and sellers in a real-time environment. Exchanges tend to handle the spot-purchasing of large companies in vertical markets, and offer a variety of auction types, request for quotation, and fixed buy and sell prices. Auctions are an important element of business theory.

Auction Examples

1. Auction.Com. US real estate selected by address, State or zip code.
2. Auction Zip. Finds auctions anywhere in the USA.
3. GSA Auctions. Offers US Government surplus to requirement items under various auction types.
4. Croydon Coin Auctions. Long-established: bid by post, email or online.
5. Grainger. Generally used for spot purchasing of indirect supplies.
6. PowerSourceOnline. Global marketplace for IT & telecom buyers and sellers.
7. Dairy. Dairy supply chain collaboration, dairy transportation, and dairy commodity trading.
8. Ariba Supplier Network. Extended buyer and seller network.
. GoBid. Auctions for charities.

Questions

1. Why do companies use auctions?
2. Describe the main auction types.
3. What facilities does online auction software provide?
4. Why do some companies hand over the running of their auction system to third parties?
5. Compare the features of some popular auction software packages.
6. Describe the activities of three online auctions.

Sources and Further Reading

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