Learning Objectives 1. Define the various types of auctions Chapter 11 and list their characteristics. 2. Describe the processes involved in conducting forward and reverse Auctions auctions. 3. Describe the benefits and limitations of auctions. © Prentice Hall 2004 2 Learning Objectives (cont.) Learning Objectives (cont.) 4. Describe some unique auction models. 8. Describe auction deployment and 5. Describe the various services that support auction implementation issues. 6. Describe the hazards of e-auction 9. Analyze future directions of fraud and discuss possible mobile auctions. countermeasures. 7. Describe bartering and negotiating. © Prentice Hall 2004 3 © Prentice Hall 2004 4 E-Bay: E-Bay (cont.) World’s Largest Auction Site The Opportunity The Solution eBay is one of the most profitable Online auction house with millions e-businesses of unique auctions in progress and over 500,000 new items added each Pam Omidyar—collector of Pez day dispensers had the idea to trade The initial business model of eBay them over the Internet was to provide an electronic Her husband came up with the infrastructure for conducting mostly e-business auction concept C2C auctions entirely managed by technology © Prentice Hall 2004 5 © Prentice Hall 2004 6 1 E-Bay (cont.) E-Bay (cont.) On eBay, people can buy and sell The auction process: just about anything seller fills in the appropriate The company collects a registration information submission fee upfront posts a description of the item for And a commission as a sale specifying a minimum opening percentage of the sale amount bid © Prentice Hall 2004 7 © Prentice Hall 2004 8 E-Bay (cont.) E-Bay (cont.) If a successful bid is made, the seller In 2001, eBay started to auction fine and the buyer negotiate art in collaboration with: the payment method icollector.com of the United shipping details Kingdom; and warranty Sotheby’s (sothebys.com) other particulars Due to lack of profit eBay and Sotheby’s discontinued separate online auctions eBay is the interface through which and began placing emphasis on sellers and buyers can conduct promoting Sotheby’s live auctions business through eBay’s Live Auctions technology © Prentice Hall 2004 9 © Prentice Hall 2004 10 E-Bay (cont.) E-Bay (cont.) eBay operates globally Some eBay sites (eBay Motors) Buyers from more than 150 other concentrate on specialty items countries participate Trading can be done from anywhere, eBay operates a business exchange in at any time which SMEs can buy and sell new and Wireless trading is possible used merchandise in B2B or B2C modes © Prentice Hall 2004 11 © Prentice Hall 2004 12 2 E-Bay (cont.) E-Bay (cont.) eBay Seller Payment Protection (2002) Other specialty sites offers: half.com, the famous discount e- tailer credit card chargeback protection PayPal.com, the P2P payment guaranteed electronic checks company secure processing eBay Stores are rented to individuals privacy protection and companies eBay started e-tailing at fixed prices sell from catalogs conduct auctions © Prentice Hall 2004 13 © Prentice Hall 2004 14 E-Bay (cont.) E-Bay (cont.) In 2002, eBay introduced the Business The Results Marketplace (ebaybusiness.com) Brought a limited-access off-line business model to the desktops of consumers All business-related listings on eBay worldwide by using the Internet into one destination Consistently generates a profit and Makes it easier for small businesses promotes a sense of community to find the equipment and supplies 50 million registered users by fall 2002 they need Transacted over $14.7 billion in sales in 2002 © Prentice Hall 2004 15 © Prentice Hall 2004 16 Fundamentals of Dynamic E-Bay (cont.) Pricing and Auctions What we can learn… Auction: Market mechanism by which eBay demonstrates the success of a buyers make bids and sellers place company that implemented an EC offers; characterized by the business model that took off very competitive and dynamic nature by rapidly which the final price is reached some of the ideas of auctioning auctions can be an online-only Electronic auctions (e-auctions): e-commerce channel or they can be a Auctions conducted online supplementary channel © Prentice Hall 2004 17 © Prentice Hall 2004 18 3 Fundamentals of Dynamic Types of Auctions Pricing and Auctions (cont.) The flexibility offered by online auction One buyer, one seller trading may offer innovative market use negotiation, bargaining, or bartering processes Major manufacturers and e-tailers use auctions to sell products and services Dynamic pricing: Prices that are determined based on supply and demand relationships at any given time © Prentice Hall 2004 19 © Prentice Hall 2004 20 Types of Auctions (cont.) Types of Auctions (cont.) One seller, many potential buyers Vickrey auction: Sealed-bid auction in Forward auction: An auction in which the item is awarded to the highest bidder, but at the second-highest price which a seller offers a product to that was bid (in the case of selling items) many potential buyers Sealed-bid auction: Auction in which each bidder bids only once; a silent auction, in which bidders do not know who is placing bids or what the prices are © Prentice Hall 2004 21 © Prentice Hall 2004 22 Types of Auctions (cont.) Types of Auctions (cont.) One buyer, many potential sellers B2B reverse auctions Reverse auction: Auction in which Gaining popularity as an online the buyer places an item for bid mechanism for selling and especially (tender) on a request for quote (RFQ) for buying goods and services system, potential suppliers bid on C2C reverse auctions the job, with price reducing Mostly forward auctions, but sequentially, and the lowest bid increasingly reverse auctions are wins; used mainly in B2B and G2B e- being used in C2C commerce © Prentice Hall 2004 23 © Prentice Hall 2004 24 4 Types of Auctions (cont.) Types of Auctions (cont.) ”name-your-own-price” model: Auction Many sellers, many buyers model in which would-be buyers Buyers and their bidding prices are specify the price (and other terms) matched with sellers and their they are willing to pay to any willing asking prices based on the seller; a C2B model, pioneered by quantities on both sides and the Priceline.com dynamic interaction between the buyers and sellers Stocks Commodities © Prentice Hall 2004 25 © Prentice Hall 2004 26 Benefits of E-Auctions Benefits of E-Auctions (cont.) Benefits to sellers Benefits to buyers Increased revenues Opportunities to find unique items Optimal price setting and collectibles Removal of expensive Chance to pay less intermediaries Entertainment Better customer relationships Anonymity Liquidation Lower transaction costs Convenience Lower administrative cost © Prentice Hall 2004 27 © Prentice Hall 2004 28 Benefits of E-Auctions (cont.) Limitations of E-Auctions Benefits to e-auctioneers Possibility of fraud Long cycle time Higher repeat purchases Limited Monitoring time A stickier Web site participation Equipment for Expansion of the auction business Security buyers Auction software © Prentice Hall 2004 29 © Prentice Hall 2004 30 5 Strategic Uses of Auctions “Name-Your-Own-Price” and Pricing Mechanisms C2B Model Dynamic pricing allows buyers and Priceline.com pioneered this model sellers to be able to adjust pricing Enables consumers to achieve strategies and optimize product significant savings by naming their inventory levels very quickly own price for goods and services Suppliers quickly flush excess inventory and liquidate idle assets Buyers obtain the power to procure goods and services at the prices they desire © Prentice Hall 2004 31 © Prentice Hall 2004 32 “Name-Your-Own-Price” “Name-Your-Own-Price” C2B Model (cont.) C2B Model (cont.) Limitation Priceline.com has offered multiple When a buyer names their own price products and services: for airline tickets, they are not told travel services what airline they are going to fly personal finance services with, how many stops are involved, automotive service that offers new or what time of the day the flight cars for sale will depart until the buyer accepts the offer and pays credit cards long-distance calling © Prentice Hall 2004 33 © Prentice Hall 2004 34 Auction Process and Auction Process and Software Support Software Support (cont.) Phase 1: Searching and comparing Phase 2: Getting started at an auction Finding when and where an item will Registration and profiles be auctioned Listing and promoting (software) Auction aggregators and notification Advertisement Wizard Auction aggregators: Companies that use Auction Assistant software agents to visit Web auction sites, Auctiva Mr. Poster find information, and deliver it to users Pricing Browsing site categories Basic and advanced searching © Prentice Hall 2004 35 © Prentice Hall 2004 36 6 Auction Process and Auction Process and Software Support (cont.) Software Support (cont.) Phase 3: The actual bidding Phase 3 (cont.) Bid watching and multiple bids Proxy bids Sniping Proxy bidding: Use of a software system to place bids on behalf of buyers; when Entering a bid during the very last another bidder places a bid, the seconds of an auction and outbidding the software (the proxy) will automatically highest bidder (in the case of selling raise the bid to the next level until it items) reaches the predetermined maximum price © Prentice Hall 2004 37 © Prentice Hall 2004 38 Auction Process and Auction Process and Software Support (cont.) Software Support (cont.) Phase 4: Post-auction follow-up Phase 4 (cont.) Post-auction notifications User communication Bidding notifications Chat groups End-of-auction