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Online Auctions Market
Due to technological advances and the public becoming both more internet savvy and leading more demanding lives, online auctions have also become popular and more and more online auction suppliers are entering this market ( Online Auctioning 2004 ). As a result, more and more businesses are looking for more opportunities in this online auction market and businesses use auctions to wish to sell and gain back a valuable price in terms of higher profits. Therefore, nowadays internet is widely available to the public and online auction can be easily done through the internet thus there are various factors contributing the success of online auctions and the impact of online auctions as well.
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 ( Lin, O & Joyce, D. 2004 ). Besides that, auctions can also accelerate deal completion by increasing the competition among buyers ( Lin, O & Joyce, D. 2004 ).
They overcome some of the inefficiency in trading in traditional markets and retailing. Traditional markets and retailing focus on only a small group of people, normally local people, and the high marked price may attract few buyers ( Lin, O & Joyce, D. 2004 ). Indeed, more competitors and participants can result in better prices and improving the trading process ( Lin, O & Joyce, D. 2004 ).
Modern technologies enable auctions to be held on the internet and make them available to most people in the world ( Lin, O & Joyce, D. 2004 ). Those auctions held on the internet are called “online auctions”. Online auctions have been in existence for several years and it is a relatively new concept that was initiated in the mid nineteen nineties ( Online Auctioning 2004 ).
Furthermore, online auctions enables buyers to access goods and services anywhere auctions are conducted. People can sell almost anything including clothes, musical instruments, collectable items and mobile phones and much more. Hence, online auctions are becoming important selling and buying channels for many companies and individuals.
Apart from that, there have several types of auctions, each with its own goals and procedures ( Dave King et al. 2006, p.95 ). Forward auction is an auction in which a seller offers a product to many potential buyers ( Dave King et al. 2006, p.95 ). Forward auctions also simply called auctions because forward auctions are the most common and traditional form ( Dave King et al. 2006, p.95 ).
Moreover, there are four major types of forward auctions which are English and Yankee auctions, in which bidding prices increase as the auction progresses, and Dutch and free – fall auctions, in which bidding prices decline as the auction progresses ( Dave King et al. 2006, p.95 ). In addition, sealed – bid auctions are other types of forward auctions. This is an auction in which each bidder bids only once, it is a silent auction, in which bidders do not know who is placing bids or what the prices are ( Dave King et al. 2006, p.95 ). Another type of forwards auction is Vickrey auction.
This is an auction in which the highest bidder wins but pays only the second – highest bid ( Dave King et al. 2006, p.95 ). A second type of auctions is reverse auction. Reverse auction is effective when there is one buyer and many potential sellers ( Dave King et al. 2006, p.95 ). This is an auction in which the buyer places an item for bid on a request for quote ( RFQ ) system, then the potential suppliers bid on the job with the price reducing sequentially, finally the winner is the one with the lowest bid ( Dave King et al. 2006, p.96).
Lastly, when there are many sellers and many buyers, buyers and their bidding prices are matched with sellers and their asking prices based on the quantities on both sides ( Dave King et al. 2006, p.96 ). In this case, buyers and sellers may be individuals or business. Such auctions, which are usually done in exchanges, are called double auctions ( Dave King et al. 2006, p.96 ).
Online auctions are much the same as traditional auctions, for instance with respect to auction rules. However, online auctions take advantage of technologies and overcome problems of traditional auctions. Thus, currently online auctioning is an extremely popular way to shop and to sell goods to a world-wide market and the reasons for the success of online auctions will be further discuss as such below.
The first reasons contributing to the success of online auctions is it can benefit sellers in several ways. Sellers may be able to get a better deal via online transaction as it is less costly to set up an online auction. Seller also can do their business in term of selling their product at home without going out to rent premises which takes cost. Besides that, sellers’ office and home is together therefore it’s easy for them. Some how they sell their product in an acceptable cost and this will attract those purchasers while they saved up their usage of unnecessary cost like hiring employee and others that relate on saving cost.
Moreover, online auctions is a convenience way for sellers and saves up their time because they just distribute their products and services on the internet and purchaser can see it anytime. And the sellers will not need to take time to travel to the destination for the auction where it takes place. In the actual auction market, the sellers will need to set up a premise and hire men power for the auction to take place, accordingly online auction will save up sellers’ time.
Apart from that, business must be done in an efficient way in getting those wanted product by purchaser. Therefore, sellers have the intention of knowing purchaser on what the needed and this will make the business goes easily. Sellers use auction to help them to sell off their product by letting purchaser to bid as higher price that they can afford too.
Example selling of antique products like in China, there is 100years of vase or any other product that related in it will also help business to gain more profit as it is voted as limited edition and cannot be get else where. In this situation, this will rise up buyers’ ability to purchase it and bid at a higher price that will have more benefit to the seller profit. In the process of selling, those products can be sold world wide as majority of public can access in the internet anywhere, anytime to bid. While bidding the price will get higher and higher and it return much greater profits to the sellers.
Another reasons for its success is that online auctioning is simply can give purchaser get the product anywhere as their wish because it is distributes on the internet and they do not need to go elsewhere finding it. Buyers and sellers are all around the globe. In this way, sellers use online auction to help them to promote their product and gauge new products starting from a valuable price.
In this case, sellers can do experiment by putting one of the products up for auction and see how many people bid on it then seller might even be able to track how many people look at the auction without making a bid. If it shows good response from the auction, it can be a good indication that it should be added the product to its inventory.
Besides that, promoting products and services through online can let more and various people knowing the products and services and it can be attracting like when the bidding goes higher and purchasers will be more interesting on the products and services. In this process more and more people will be coming to bid on this product or services distribute by the sellers at the same time sellers are also beginning to realize that auctions can be a great way to promote a business and test products.
Auction using web is to match up buyers and sellers around the globe. Online auction is also a resource helping them to grow up sellers business. Sellers must get something to sell, getting more people to look at their auctions, building trust among customers, maximizing the amount purchaser pay and lastly provide amazing customers service that builds repeat business. There are several sellers and by using auction on the internet it’s like competing towards each other, importantly is that the product must be reliable and in a good condition then they can sell it out easily.
Now, it seems like everyone is participating in online auctions in which sellers have a better customer relationship. This relationship builds up by sellers and buyers have more chances and time to interact with each other, thus creating a sense of community and loyalty. Besides that, by making use of information gathered on customer interests, sellers can improve the overall experiences of buyers and can deliver more personalized content, therefore, online auctions can enhancing customers relationship ( Dave King et al. 2006, p.99 ).
Benefits to buyer are the second reasons for the success of online auctions. Online auctioning is important, as it is an example of how technology is becoming more and more important in everyday life ( Online Auctioning 2004 ). As people become busier with their lives and have more pressures from their careers and less free time, they are able to buy things at auctions online in the space of seconds rather than taking extra time to attend real life auctions in which can sometimes take hours.
In this way, with a few clicks on the mouse the bidder may be able to browse a wide selection of products on auction and the bidding can be done at anywhere, anytime. Thus, this service offers convenient in many ways. The bidders and seller will not need to take time to travel to the destination for the auction where it takes place. Some how, when they successfully bid the stuff and the auction do provide free delivery and it is also convenient towards the bidders from not going the location to get their wanted product. Besides products online auction also have services.
Auction is also done through world wide so any one that interested they can easily access on it and everyone in the world can purchase it. In this case, buyers who shop online are also not limited by global time differences and can online when it is convenient for them.
Nowadays public usually goes for online auction this is because online auction do provide easy payment such as using credit card. The transaction can be very fast and reliable as bidders need thing to be done in an efficient way and trustable. Credit card is undoubtedly the dominant method of payment used to online auctions ( Online Auctioning 2004 ). As the popularity of online auctions grows, many sellers have increased their credit card security on their websites. Sellers use encryption technology to make credit card information more secure and provide the padlock or unbroken key and symbols in the status bar at the bottom of the screen ( Online Auctioning 2004 ).
These symbols indicate to customers that they are entering their credit card number in a secure environment ( Online Auctioning 2004 ). Even credit card merchants have realized the importance that customers place in credit card security ( Online Auctioning 2004 ). For instance, Visa and MasterCard have introduced a new concept called Verified by Visa and MasterCard Secure Code, which require buyers to enter their password along with their credit card details ( Online Auctioning 2004 ).
At the end, this service benefits not only customers by providing them with added confidence and security, but it also greatly benefits to sellers as well, because customers will be more willing to divulge credit card information. Besides payment using credit card there is also another easy payment called e gold, e silver and e platinum, as this system circulated electronically and backed by gold bullion in allocated storage.
In addition, another benefit to buyer of auctioning online is that it is easier to find information and records containing details of the previous history of the seller. This way, if someone has a tendency for selling a product, taking the money, then not sending the item to the buyer, it will be posted on the online auctioning site and people will know to be wary of that seller. This has resulted in buyers being more cautious and can easier to present in the auctioning world.
A further point is online auction is no geographical constraints as sellers and bidders can participate from anywhere that has internet access. This means buyers are able to access and browse products that are located anywhere in the world without geographical limitations. This makes them more accessible and reduces the cost of just attending an auction.
Furthermore, online auctioning is a relatively new phenomenon that is simply a community of people buying, selling and exchanging items on websites through the internet ( Online Auctioning 2004 ). In this process, bidders can get the limited stuff or something different from outside where they consume and also have the opportunities to find unique items and collectibles in which all those items are hard to find in certain areas or at certain times are auctioned regularly on the internet such as stamps, coins, Barbie dolls and much more. In this way, online auctioning can satisfy and fulfill bidders’ needs and wants and they will go for it.
Another of the reasons for online auction success is that it enables to benefit electronic auctioneers ( Dave King et al. 2006, p.100 ). Online auctioning provides the higher repeat purchase for electronic auctioneers such as eBay ( Dave King et al. 2006, p.100 ). According to Jupiter Communication conducted a study in 1998 indicated that eBay tend to garner higher repeat – purchase rates than the Amazon.com ( Subramaniam 2000 ). eBay is the world's largest online auction site, is one of the well known websites ( Online Auctioning 2004 ).
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 on items, and paying for them. It acts as a marketplace for individuals and businesses that use the site to auction off goods and services. In the process, seller must pays eBay a listing fee and, in case of a sale, a final value fee will pay by the sellers as well at the same time eBay can gain higher repeat purchase ( Dave King et al. 2006, p.100 ).
A further point is online auctioning can increase popularity in electronic auctioneers ( Dave King et al. 2006, p.100 ). eBay is the most popular online auctioning site, with its beginnings as a modest antique flea market trying to find a way to reach a gap in the exchange of antiques between different geographical locations ( Online Auctioning 2004 ).
Today it sells much more than antiques, from DVD players to sports memorabilia to clothes and accessories ( Online Auctioning 2004 ). Increasingly, eBay, also due to its increasing size has branched out to own separate eBay companies within most technologically advanced countries, allowing for the transfer of goods to be more convenient and easier to access ( Online Auctioning 2004 ).
With the ease of a computer and the internet to become widely available in recent years, online auctions have also become popular and more and more peoples are entering this market resulted impacts of the online auctions. The impacts include online auctions as a coordination mechanism, online auctions as a social mechanism to determine a price, online auctions as a highly visible distribution mechanism.
First of all, online auctions are used increasingly as an efficient coordination mechanism for establishing equilibrium in price. For example are auctions for the allocation of telecommunications bandwidth ( Dave King et al. 2006, p.98 ).
Moreover, online auctions as social mechanism to determine a price. Its creates a marketplace that attracts potential buyers by offering many of some special items at a single place and time in order to attract considerable attention ( Dave King et al. 2006, p.98 ). The special items include an item are unique or rare items, or for items that may be offered randomly or at long intervals ( Dave King et al. 2006, p.98 ).
In this case, online auctions provide the requisite exposure of purchase and sale orders, and hence liquidity of the market in which an optimal price can be determined ( Dave King et al. 2006, p.98 ). Typical examples are auctions of fine arts or rare items, as well as auctions of communications frequencies, web banners, and advertising space ( Dave King et al. 2006, p.98 ).
Other than that, online auctioning has impacted as a highly visible distribution mechanism. In this case, a supplier auctions off a limited number of items by using the auction primarily as a mechanism to gain attention and to attract those customers who are bargain hunters ( Dave King et al. 2006, p.98 ). For instance, airline – seat auctions by Cathay Pacific and American Airlines included in this category ( Dave King et al. 2006, p.98 ).
As a conclusion, 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. Whereas online auctioning is a relatively new concept that was initiated in the mid nineteen nineties and it enables buyers to access goods and services anywhere auctions are conducted. And there have several types of auctions, each with its own goals and procedures.
Forward auction is an auction in which a seller offers a product to many potential buyers. Reverse auction is effective when there is one buyer and many potential sellers. Double auction take place when there are many sellers and many buyers, buyers and their bidding prices are matched with sellers and their asking prices based on the quantities on both sides. Currently online auctioning is an extremely popular way to shop and to sell goods to a world-wide market and the reasons for the success of online auctions included benefits to sellers, buyers and electronic auctioneers as well. Sellers may be able to get a better deal via online transaction as it is less costly to set up an online auction, online auctions can help sellers saving money while the stock can be put at home and no need to rent premises outside and also hiring employee is unnecessary too.
Online auctions are a convenience way for sellers and saves up their time for no need to waste their time travel to the auctions hall for transactions at the same time its also can increase revenues by letting purchaser to bid as higher price that they can afford and sellers will gain greater profits. Besides that, sellers use online auction to help them to promote their product and test products starting from a valuable price in order to make known public about their products. Participating in online auction can let sellers have more chances to interact with buyers in order to create goodwill and positive feelings as well as improve customers’ relationship and loyalty. Benefits to buyer are become the second reasons for the success of online auctions.
Through the internet and it is convenience for the buyer to bid on online auction, free delivery and also not limited by global time differences. Providing buyers with added confidence and security and easy payments by the sellers also are one of the factors for online auction can obtain successes. Easier to find information and records containing details of the previous history of the seller and let the buyers feel secure when participate in online auctioning world. This is one of the reasons for online auctioning grows nowadays. Buyers can participate in online auctions without any geographical limitations at the same time they may have opportunity to find unique products.
Moreover, eBay has gathered higher – repeat purchase through online auctions as well as increase their growing popularity. Impact of the online auctions included online auctions are used increasingly as an efficient coordination mechanism for establishing equilibrium in price, online auctions provide the requisite exposure of purchase and sale orders, and hence liquidity of the market in which an optimal price can be determined and also as a highly visible distribution mechanism in order to gain attention to customer.
Lastly, as the world becomes increasingly reliant on technology and the world-wide-web, it is almost certain that online auctioning will continue to grow significantly and become even more technologically advanced. Nevertheless, all in all online auction has offered great advantages in terms of finance, cost and convenience and it success will further flower with years to come.
- Dave King, Dennis Viehland, Efraim Turban, Jae Kyu Lee, Jae Lee, ELECTRONIC COMMERCE 2006: A MANAGERIAL PERSPECTIVE, fourth edition, 2006, Publisher by Prentice Hall Pearson Education, Inc., Upper Saddle River, New Jersey.
- Lin, O & Joyce, D.(2004, November), Critical Success Factors for Online Auction WebSites. Bulletin of Applied Computing and Information Technology Vol. 2, Issue 3. ISSN 1176-4120, viewed on 10 November 2007, http://www.naccq.ac.nz/bacit/0203/2004Lin_OnlineAuctions.htm.
- Online Auctioning – Advantages, 24 November 2004, viewed on 10 November 2007, http://wiki.media-culture.org.au/index.php/Online_Auctioning_-_Advantages.