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Thesis: Due to the fast growing century, people demand for fast and accuracy, internet online auction is filled with tremendous marketing potential to improve the process of business trading n dealing, by saving cost and time.
1. Introduction about success of online auction in the fast growing century.
-Auction method has overcome the inefficiency in trading by traditional markets. -2 type of online auction that is English auction and Dutch auction.
-Online auction include few kind of business model.
-No geographical constraints online auction.
-Move merchandise faster.
-No time constraints can sell around the clock.
-Customer services and support.
-Security online auction has provides safer online.
-Online learning center for online auction knowledge.
-Cost of product different with true value.
-Online auctions may deliver a fake item.
-Unfair negative feedback for sellers.
3. Business Use Auction as Business Strategy
Success of Online Auction.
In this fast growing 21st century internet and technology improve begin to become part of our life. Due to the technology improvement internet has become a place of gathering all the information, business trading and etc. There is more and more business trading over the internet, because it can save time, much more convenience, don’t have to travel to the particular places to collect your order item and etc.
Auctions are one of the oldest trading models. They have been widely used for price setting on special items, such as agricultural commodities, financial instruments, and unique items like art and antiquities. Auction can also accelerate deal completion by increasing the competition among buyers. (http://www.naccq.ac.nz/bacit/0203/2004Lin_OnlineAuctions.htm).
Auction method has overcome the inefficiency in trading by traditional markets and retailing. Because auction focus is much wider in compare to traditional markets and retailing. Auction will attract more competitor and participants; this will result in better prices and improving the trading process. Due to the improvement of the technology now auctions had been brought up to the internet and make it available to more people around the world, those auctions held on internet called online auctions. The online auction business model is one which participants bid for products and services over the internet. The functionality of buying and selling in an auction format is made possible through auction software which regulates the various processes involved. (http://en.wikipedia.org/wiki/Auction_sites). Online auction are most likely same with the traditional trading, but online auctions take advantage of the technology and overcome problem that is face by the traditional auctions trading, for example like; limited buyers and seller, high auction fees and operation costs.
Due to the fast growing speed of the internet, online auction has getting more and more popular and attracting more online auction suppliers are entering into this market. Johnson state that “online auction will grow 25% of America online retail sales in year 2007. Retailers, portals and vendors will work to legitimize the format and attract as many consumers as possible to fuel the growth”. As the result, the will be a wider range of online auctions in the future because getting more and more businesses are looking for more opportunities in online auctions market.
There is 2 type of online auction that is English auction and Dutch auction. English auction the initial price starts low and is bid up by successive bidders. However for Dutch auction, multiple identical items are offered in one auction, with all winning bidders paying the same price. Almost all online auctions use the English auction method.
Online auction are benefit to buyers and seller both parties from information and economic perspectives because product information can be delivered nearly anywhere in the world to attract potential buyers. It also helps reducing the cost of selling product thru online trading. Buyers are able to access and browse products that are located anywhere any place around the world. And because of the large amount of buyers and supplier this will benefit from the competitive market to result in cheaper product or maybe better quality of products.
Online auction also include a few kind of business model like business to business (B2B), business to customer (B2C), and consumer to consumer (C2C). B2B for example like Ace Market, Band-X and etc. B2C for example like Dell, Ubid. C2C like Amazon, eBay, Yahoo! And etc.
Munjal Shah said that “online auction have grown up; serious business are making serious money by leveraging this extremely profitable sales channel”. (http://www.g4tv.com/techtvvault/features/17116/Secrets_of_Auction_Selling_Success.html).
Due to the fast growing century, people demand for fast and accuracy, internet online auction is filled with tremendous marketing potential to improve the process of business trading n dealing, by saving cost and time.
Advantages of Online Auction
Online Auction method had attracted more business to startup in this particular market. This is little example company that is success in online auction, Amazon.com, Bidorbuy, DoveBid, eBay, eBid, Overstock.com, Oztion, Prosper, QXL, SalvageSale Inc, TradeMe, uBid, Yahoo! And etc.
No geographical constraints online auction can reach more customers, a lot more customer, auction make it easy to market your inventory to millions of new customers and reach them right where they’re ready to come shop. Online auction can in touch with customer all around the world without geographical limitations, no matter where you’re located as long as you have the ability to online; you can browse thru and collect information from the net for the item that you want to buy.
Move merchandise faster, because businesses don’t have to spend time on finding customer. Sellers just require dropping down the information about the item for sale, waiting for the right customer to view your inventory. Product information can be delivered much faster from seller to customer.
No time constraints can sell around the clock, means no time limit. Compare to traditional auction, online auction bidders shop day and night, and the virtual store is 24 hour available this allow buyer to search and buy anytime anywhere they like, even seller is not online but the virtual store is always open for buyer. Seller can even make sales even when they are sleeping. Make more on sales, due to the large amount of buyer the competition of price will grow, the bidders battle for right to buy the merchandise they want is 1 of the best way to maximize revenue.
Marketing position also is a reason that online auction is success among the world. With a clear market positioning will help an online auction web site to achieve success because with a clear market positioning, they will know which type of consumers that they need to target for their certain products. Most of the online auction web site are provide a lot of categories and items to the consumers so that the consumers can have a lot of choices when they having their online auction. Some of the specialist online auction web site builds a good reputation for the category focused on, so that the web site becomes the first choice for buying and selling items of the category.
The customer services and support also is one of the reasons that online auction is success. The reasons that online auction provide customer services and support to the consumers because of it will help consumers to overcome their problems and giving them some advices when they face some problems by using the online auction. The customer services and support provide by online auction such as FAQs, online auction web site guides, online help systems are typical customer services. Other than that will be interactive customer services and support: feedback systems, email communications and toll free support calls are basic and critical interactive customer services. The systems that provide the previous trading records of sellers to buyers and vice versa are customer rating and record system, thereby will improve the trust for buyers as well as seller.
Security online auction has provides safer online shopping environment and minimizes risk to consumers. Consumers can have a nice and safety online environment without any disturbances factors. The Escrow service will offers a fast way of trading valuable items through the online auctions, so consumer don’t have to worry that they will be cheated. For the personal information privacy, all the member’s and online auction users’ personal information will be secured and properly managed for authorized purposes use only. Online auction also provide Web site security for an effective encryption mechanism will be adopted by an online auction web site for exchanging information, such as login information, between online auction web sites and users, in order to prevent security problems. With this method member and user don’t have to worry other people will clone their personal account to purchase goods or services thru the online auctions.
Online learning center also provided to educated and provide knowledge to the customers about online auction. So consumers can learn how to purchase a product or get information for the certain products. Besides that, online auction programs or online auction seminars will educate consumers as well as increase brand awareness of potential consumers. So that consumers will increase their brand awareness by choosing the right products
Online community also a success reason, discussion board for a particular topic can attract and group those people who are interested in the topic and form an online community. Chat room will also provide real-time and interactive communication for information exchange between members of the online community. It will help to improve their knowledge and information between members.
Disadvantage of Online Auction
Cost of product may not be the true value of the item itself. An auction will let the highest bidder buy the product. There are instances that the advantage goes to the auction firm and not to the buyer. So there are times that the cost of product that was bought may not be the exact value of price for the particular item.
Some online auctions may deliver a fake item or and item different from the one displayed on the website. There are times that the images and the descriptions that he saw on the site are good enough to convince a person in buying a particular item.
A person may encounter scams that are involved regularly on different online auctions. A person may be bidding for a lower price but then there are cohorts who increase their bids forcing the bidder to bid higher and allowing the person to buy the item at higher cost. It is up to the person if he intends to bid in an online auction. It could be his best alternative in buying product more conveniently without the effort of going around and comparing different prices in various stores. A buyer should always remember the disadvantages that he may encounter in participating in an auction online.
Unfair negative feedback for sellers is also another disadvantage of online auction. Some sellers will make extra effort to please all their customers, however one unreasonable customer that is impossible to please can affect their reputation forever by placing negative feedback on the website. This is why in order to become a regular seller on online auction site can be extremely time consuming, as a seller must go out of their way to meet all their customer demand and requests.
Fraud is another large and seemingly unavoidable disadvantage of online auctioning. Unlike real life auction is much easier for seller to sell. Item they do not possess and collect money from the bidders without ever sending them their items. There have been many report case where people have been charged with fraud after placing non existent items on online auctioning websites. This situation also happen in reverse auction where buyers bid for an item, the seller send them the item believing their money is in the mail. And it is never received. It is much harder to trace a person in the virtual world and as opposed to the real world.
Business Use Auction As Business Strategy
Business used auction to maximize their profit, lowering cost of capital, reach more customer and etc, especially reverse auction as the business strategy. eBay the world’s largest online auction site, is one of the better known example like most auction companies, eBay does not actually sell goods that it owns itself. It merely facilitates the process of listing and displaying goods, bidding o items, and paying for them. It acts as a marketplace for individuals and businesses that use the site to auction off goods and services. eBay is using the business model of C2C whereby they are the host between 2 party trade.
eBay Inc is and American internet company that manages eBay.com, an online shopping website where people and business buy and sell goods and services worldwide. In addition to its original U.S. website eBay has established localized website in several other countries. eBay also owns PayPal, Skype, and other businesses to help do trading businesses. (http://en.wikipedia.org/wiki/EBay). eBay are the biggest player of the online auction they hold total of 69% of online auction revenue. Million of collectibles, appliances, computer, furniture, equipment, vehicles and other miscellaneous item are listed bought and sold daily. Some item are rare and valuable, basically anything can be sold as long as it is not illegal or does not violate the eBay prohibited and restricted item policy. This is 1 of the reason why eBay hold a large amount of customer in online auction business because their item range is huge, a lot if thing can be found even services and intangible also be sold in eBay. These make eBay special against other competitor like Amazon, BidorBuy, eBid and etc.
With the Policy and restriction of eBay this makes their item selling good quality and famous brand. By doing this, people may be more likely to accept and bid on the website because it focuses on good quality and huge item range in particular business. Beside that good services are required to achieve to build brand loyalty also, eBay provide a lot facility like shipment delivery, online paying system PayPal and etc to easier the process of trading, this also attract customer to save up their time and customer don’t have to worry about where then pay and etc. Building brand loyalty, consumer will become familiar with the brand so it is an important strategy to attract potential customers, after a success trading, customer loyalty can be retained.
Reverse auction method also been used by eBay to attract more member to join them. Reverse auction is a type of auction in which the role of the buyer and seller are reversed, with the primary objective to drive purchase prices downward. In an ordinary auction buyers compete to obtain a good or services. However in reverse auction, sellers compete to obtain business. (http://en.wikipedia.org/wiki/Reverse_auction).
Reverse auction used by many purchasing and supply management organizations for spend management, as a part of strategic sourcing and overall supply management activities. In reverse auction a buyer with a market maker to help make the necessary preparation to conduct the reverse auction this will help finding new supplier, providing auction data to buyers to facilitate decision making. (http://en.wikipedia.org/wiki/Reverse_auction). A reverse auction been done with the market maker, on be half of the buyer issues a request for quotation for particular item price. Then several suppliers will log on to the auction site to drop down their quotes of price for that item. These quotes reflect the prices at which they are willing to supply the requested good and services, quoting of price will result in dynamic bidding. The price that buyer obtain in the reverse auction reflect the market which in create at the moment in time when the auction is held. With the comparison of prices by the supplier, buyers get benefit in term of lower prices, better quality and etc.
With the customer loyalty toward eBay, more and more member are joining them larger amount of buyer and seller will create a better competitive market, and this will lead to a market which have better quality of goods and services.
After much on the above, we can identify that the success of online auction business and reverse auction business. Moreover, online business should accommodate and learn the good of success reason of online auction done by eBay. With this collaboration, more online company will be able to improve their profit level and subsequently contribute to the online business and build a better image of online businesses. Better services and higher quality give a better competition to the market; a competitive market will lead to higher improvement in particular field.
- Wikipedia.org, Online Auction 2007, Retrieved: 18 August 2007.
- Naccq.com, Success Factor for Online Auction 2004, Retrieved: 10 August 2007.
- Munjal Shah. Andale.com, Retrieved: 01 June 2000.
- Wikipedia.org, eBay Inc2007,Retrieved: 22 August 2007.
- Wikipedia.org, Reverse Auction 2007, Retrieved: 12 August 2007.
- Johnson, C.A. (2002) “Commentary: The boom in online auctions”. Accessed March 23, 2003.