Companies are doing things on the Web that they never thought possible, including auctions, creating virtual communities, and operating portals. Online auctions have provided many companies with larger profits, due to the relatively easy setup and use of the site for the customer. Also, they can make a profit by charging users to both buy or sell on the site, as well as charging for other features. One site that does such is Haggle.com, which allows for users to purchase bids which are used in auctions that are hosted on their site. This company, along with a few others, have one of the smartest business ideas out there, but where they are getting by with it at is that so many people don't see how much Haggle is actually making on each auction.
One of the most known general consumer auction sites is eBay. Sellers on the site pay various fees, while the buyers only pay the price at the end of the auction as well as shipping. You can purchase almost anything on there, even food. There are many features offered on there, including proxy bidding, which is used when the customer may not be able to be on the whole time the auction is going on and are computer-controlled. As long as the highest bid is below the proxy bid, the computer will continue to place bids until the proxy bid has been met. Also, they offer a feature called "Buy it Now," where a bidder can buy the item up for bid at the reserve price listed on the page for the item up for auction.
Due to the success of eBay, many sites have had a hard time entering the market (this is known as the lock-in effect), but have instead decided to target specific markets.
After the success of ebay, many companies found that it was nearly impossible to compete in the same market. However, many have found success in specialty markets that focus on a particular type of product. One site that does such is Haggle.com, which host auctions on mostly electronics and home supplies. Users purchase bids which are used in auctions that are hosted on their site. This company, along with a few others, have one of the smartest business ideas out there, but where they are getting by with it at is that so many people don't see how much Haggle is actually making on each auction.
Consumer Reverse Auctions & Group Purchasing Sites
Consumer reverse auction sites have not had much success online, and have for the most part all closed down. However, many people view Priceline.com as a form of this site for many reasons. For the most part this site is considered a liquidation broker more than a reverse bid site.
Group purchasing sites are similar to consumer reverse auctions and achieve similar effects, but perform in different ways. The main difference is that on a reverse bid site, the visitor would make a request for a product, which would reply with an offer to supply the product at a particular price. On a group purchasing site, the seller lists the product along with the price of that item, and the buyers place bids for one unit of that item, however the price is not assigned. As the number of bids increase, the price of the item will decrease.
The best products to be sold on group purchasing sites include those that are well-known and non-perishable.
B2B auctions have evolved mainly for the purpose of getting rid of excess materials. There are two methods of distributing these materials are through liquadation brokers and online auctions. There are three B2B auction models, two of which are based on the traditional methods used to distribute excess items. The first model is used by larger businesses, which the company creates their own site to sell the inventroy. In the small-business model, the company works with a third-party Web auction site to sell the inventory similar companies that need it. The third model is similar to a consumer auction in which a business creates a site that is used to auction off the materials.
Another use of B2B auction sites is to list employment opportunities, which are usually temporary positions.
For the most part, reverse auctions have not worked well in B2B transactions due to the fact that many companies want to have long-term relations with their supplier. These type of auctions cause businesses to focus more on price, which can cause a decrease in quality. Also, some suppliers may be so large that they will not participate in reverse auctions. However, some industries that suppliers compete more can profit by this type of auction since they allow for management of the price bidding involved. Some of the characteristics of a business's suply chain can encourage or discourage reverse auctions, which include the following:
- Characteristics that encourage reverse auctions
- Highly competitive suppliers.
- Clealy labeled product features.
- Suppliers that are willing to reduce the profit they earn on a product.
- Suppliers willing to participate in reverse auctions.
- Characteristics that discourage reverse auctions.
- Highly complex product or one whose design is updated frequently.
- Custom products
- Buyers and suppliers who want a long-term relationship between each other.
- High switching cost.
The growth of auction sites has given rise to many services being created for the users of these sites. Some of these services include escrow-services, auction directory and information services, auction software for both buyers and sellers, and auction consignment software.
Auction escrow services will hold the payment to allow bidders to receive their product so they can make sure the item they purchase is the right item. However, the cost of this service can be excessive on some purchases, especially for smaller ones.
Auction directory and information services allow for bidders to find out about new auction sites, as well as find information about the average going prices of items so that the visitors may plan their bidding strategies accordingly.
Auction software covers many types of services. For buyers on auction sites, the main offering is sniping software, which is a program that 'watches' the auction and places bids immediately after the highest bid changes. This is similar to a proxy bid. For sellers, there is software that provides a number of services, such as
- image hosting,
- advertising,
- page design,
- bulk repeatable listings,
- feedback tracking and management,
- report tracking, and
- e-mail management.
Auction consignment services allows for those that do not have the skills or time to still have an auction to sell their items. The person or business in charge of the auction charges a price, usually about 25 to 50 percent of the selling price.
These services are a great example of the effects of the second wave of e-commerce, in which online auction sites have opened up many opportunities that were not available in the first wave.