3 E"crOMMERCE MECHANISMS:
-~~- 14.3 E"crOMMERCE MECHANISMS:
PART V IMPLEMENTING MSS IN THE E-BuSINESS ERA
ELECTRONIC AUCTIONS "Selling on the Internet can be done from electronic catalogs at their fixed prices. In some stores
you can negotiate catalog prices electronically. Alternatively, you can use auctions where prices are determined dynamically by competitive bidding.
An auction is a market mechanism whereby sellers place offers and buyers make sequential bids. Auctions are characterized by the competitive nature of reaching a final price, They have been an established method of commerce for generations, and are especially suited to deal with products and services for which conventional marketing channels are ineffective or inefficient. Auctions can expedite the disposal of items that need liquidation or a quick sale.
The Internet provides an eficient infrastructure for executing auctions at lower administrative cost, and with many more involved sellers and buyers. Individual consumersand corporations alike can participate in this rapidly growing form of e-commerce. There are several types of auctions, each with its own motives and procedures. Auctions are divided here into two major types: forward auctions, and reverse auctions.
Forward Auctions. Forward auctions are used mainly as a selling channel from one seller to many potential buyers. Usually, items are placed at sites, such as eBay.com. Buyers bid continously, and the highest bidder wins the items. Sellers and buyers can be individuals or businesses,
Reverse Auctions. In reverse auctions, there is one buyer, usually an organization, that wants to buy a product or a service. Suppliers are invited to submit bids. Online bidding is much faster than conventional bidding and usually attracts many more bidders. Normally, the lowest bid wins.
BENEFITS OF AUCTIONS
Auctions. are used in B2C, B2B, C2B, e-government, and C2C commerce, and they are becoming popular in many countries. The benefits for sellers, buyers, and auctioneers are:
Benefits to Sellers Increased revenues from broadening customer base and shortening cycle time. Optimal price setting, determined by the market (more buyers).
Saves on the commission to intermediaries (fees at physical auction are very high
compared to e-auctions). Can liquidate large quantities quickly.
Improved customer relationship and loyalty (in the case of specialized B2B auction
sites and electronic exchanges). Save on administrative expenses. Benefits to Buyers
Increased opportunities tofind unique items and collectibles, Chance to bargain instead of buying at a fixed price. Entertainment. Participation in e-auctions can be entertaining and exciting. Anonymity. With the help of a third party, buyers can remain anonymous.
Convenience. Buyers can bid from anywhere, even with a cell phone; they do not
have to travel to an auction place. Administrative costs are much lower: Procurement time can be shortened dramatically.
Benefits to Auctioneers High "slickness" of the Web site; customers just keep returning to the auction site.
CHAPTER14 ELEGRONIC COMMERCE
Electronic auctions began in the 1980s on private networks, but their use was limited. The Internet has opened many new opportunities for e-auctions, and millions of sellers and buyers now participate. Auctions can be conducted from the seller's site or from a third-party site. For example, eBay, the best-known third-party site, offers hundreds of thousands of different items in several types of auctions. Over 300 other major companies, including Amazon.com and dellauction.com, also offer online auctions.
BARTERING
Related to auctions is electronic bartering, the exchange of goods or services without a monetary transaction. In addition to the individual-to-individual bartering ads that appear in some news groups, bulletin boards, and chat rooms, there are several intermediaries that arrange for corporate bartering (e.g., barterbrokers.com). These intermediaries try to match partners to a barter.
Auctions in B2B are frequently done through a third-party intermediary. A wellknown one is FreeMarkets.com. In DSS in Action 14.1 we show how this company facilitates both forward and reverse auctions.