| Auctions on the Internet
The word auction came from auctio (Latin) - I raise,
although auctions
don’t always require somebody to raise their stakes or bids. An auction
is a way to sell deficit things, based on competition. This is
the
best market. The seller wants to earn the maximum amount of
money
for his product, while the buyer wants to pay the minimum. An auction
offers
the easiest way to establish a cost for an item. The unique thing about
it is that the buyers, not the vendor, establish the cost. On the other
hand the vendor makes the rules of the auction.
The things in an auction can be about anything: land,
cattle, wine,
flowers, fish, automobiles, building contracts, shares. On the eBay
auctions you were once able to trade for a date with a woman.
Another characteristic of an auction is that the owner
of the auction
doesn’t own the item(s). He acts as an intermediary between the vendor
and the buyer. Often the buyer knows more about the item than the
vendor.
Online auctions, unlike real ones, last a very long time
(usually from
3 – 10 days), that’s why buyers don’t have to sit in front of the
computer
while the auction is taking place. This largely widens the global
amount
of participants. There are many thousands of online stores but of 300+
auctions.
4 types of auctions exist: Direct
(English), Dutch, Yankee
and Reverse. Which is the best? Vendors and sellers have different
points
of view.
Often auctions are used to prevent corruption. For example, auctions
on municipal contracts.
But do auctions have drawbacks?
-
Yes, sometimes it happens that the winner has to
pay much more than
the product costs. But even then auctions are profitable and quickly
growing
kind of electronic business.
Direct Auction
This sort of auction is the most widespread.
Direct auctions
are characterized by known products and bidding with a price raise.
Unique
items are sold in this way, for example, used items collectables, wine
and lots of other things. Auctions start off from minimal prices. The
buyers
in turn raise the price to greater amounts. The bidding ends when the
auction
time runs out, which is established by the vendor (from 1 to 14 days).
The item is given to the one who gave the maximal amount. The bidding
doesn’t
always ends with an item being sold. If a reserved price is established
(the minimal price for which the vendor wants to sell the item) but not
reached, the item is not sold. And nevertheless, during such auctions,
venturesome buyers raise the price very high. Usually the buyer pays
less
than the maximum price, which they raised, because the increase of the
price occurs in small stages.
www.ebay.com
Reverse Auctions
In reverse auctions, the buyer requests a
needed item(s), while
the sellers compete, offering the best prices and conditions. It’s
possible
to actualize the idea of a club of buyers!
eWanted.com
Dutch Auctions
This is a wholesale auction, in which the
vendor can put up
many different items at once. Of course, this enables the buyers to bid
for more than one item. All the winners pay the minimal of the winning
prices. It differs from the Yankee auctions, in which the winner pays
the
sum that he called.
For example, the vendor is selling 5 cellular phones. 5 buyers bid
on the phones, one each. The biggest of the winning bids was $105, and
the smallest was $85. All five will receive a cellular phone for $85
each,
even though the highest price was $105.
How do winners get picked out if there are more bidders than there
are items for sale? That depends on how many items each buyer wants to
acquire. For example, the vendor has put up 5 similar items for sale.
Buyer
A bids $10 for one item, buyer B bids $7 per item for three of the
items,
buyer C bids $5 for three and buyer D bids $4 for three items. On this
occasion buyer A will get one item for $5, buyer B three for $5, buyer
C one for $5 and buyer D will not receive anything. In this way the
winners
received “rights to buy” but paid a price close to a market
consensus.
On Dutch auctions you cannot put up reserve prices.
www.ubid.com
Yankee Auctions
The main thing in the third type of auction is
concealed bids
from other contestants (contrary to English and Dutch) and the winner
has
to pay the price that he named. Usually each contestant bids only once,
that’s why preparation for such an auction is important.
Closed auctions consist of two phases – the period of bidding and the
phases of distinguishing the winner, when the bids are revealed and a
winner
is distinguished (sometimes a winner is not selected).
If there is only one item, everything is clear. There is only one
winner.
But if the lot consists of several items, the winner is not only the
person
who named the most but also the people who named less than that.
Because
not all winners pay the same price, such an auction is called
‘discriminatory’.
On ‘discriminatory’ auctions (more than one items in
the lot) bids,
given blindly, are sorted biggest to smallest, the items are also
sorted
in this way until it ends. The main thing is that the winners pay
different
amounts for the lot.
VIP Auctions
Only selected few are allowed to participate.
Bids are accepted
in the duration of a certain period of time, and participants cannot
see
the how many and how large other participants have called. The
participant
is only allowed to call one bid.
Auctions also differ by:
1) Business type:
- b2b – business to business - when a business auctions
something away to
another business(es) (http://www.freemarkets.com)
-
b2c – business to consumer – when a business auctions something away to
a person (http://www.ubid.com)
-
c2c – consumer to consumer – trading for private individuals (http://www.ebay.com)
2) Time of trade
- weeks
- days
- minutes
4) Size of market
- for the whole world
- for a country
- for a city (state, region)
- for members only
- for chosen participants (VIP)
5) Category
- antiques, art, souvenirs
- computers, audio-video, household appliances, books etc.
- secondhand or used items
- grain, textile, equipment
- remainders, unsold stocks
- services and commissions
etc.
6) Follow up of deals
- auction participates in the process of evaluation,
delivery, payment, payment
of taxes etc.
-
auction does not participate in the deal and only acts as a medium
between
the two sides
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