ONLINE AUCTION

Online auctions are popular. People like the thrill of the chase, the satisfaction of capturing their quarry, and the pleasure of achieving a bargain (or a profit).

An online auction can be a dynamic and profitable business. And almost any type of merchandise can be sold via an auction format, whether you’re liquidating inventory, selling memorabilia, antiques, books, computers and their peripherals, or just bringing buyers and sellers together.

There are a couple of popular online auction models. The first is where the e-business owner physically controls the product being sold. As such, the e-commerce site accepts all payments for the goods. Successful bidders will usually use the same payment methods as used on the typical e-commerce site: credit card, debit card, personal check, cashier’s check, money order, or escrow service. There are many good examples of this type of auction site including CollectorAuctions.com, Biddingtons.com, and Southebys.com.

The other model is a website that enables person-to-person auction activity. eBay is the most popular of this type of online auction business model. Individual sellers and/or small businesses auction their items directly to the consumer. With this model, the seller — not the website owner — has responsibility for the merchandise, payment for said merchandise, and shipment to the purchaser.

AUCTION FORMATS

Some of the more popular online auction formats include the following. But note that although these five formats operate as set out herein, they do not always carry the same moniker as used in this list.

English or Regular Auction — With this auction format, the seller can start the bidding at a certain price and have each bid be incremented at a set rate. For example, if the seller had a camera that he or she wanted to sell for around $50, that seller would state a starting bid of $40, and then have each additional bid go up by $5. So the first person to bid would have to bid $40 and the second would bid $45 and the third would bid $50 and so on.

Reserve Price Auction — This auction format allows the seller to set a minimum price for which he/she is willing to sell the item. This “lowest price” is called the “reserve price.” In a reserve price auction the bidders know there’s a reserve price, but not the actual price reserved. In order to win the auction, a bidder must 1) meet or exceed the reserve price, and 2) have the highest bid. If no bidders meet the reserve price, the seller is under no obligation to sell the item to the highest bidder.

Private Auction — Strictly hush, hush, this auction format protects a buyer’s privacy. Unlike other auction formats, bidders’ email addresses will not show up on the item or bidding history screens. When the auction is over, only the seller and the highest bidder know who bought the item.

Dutch Auction — This auction format is often times used when the seller has many identical items to sell. With the Dutch auction format, the seller 1) lists a minimum price (or starting bid) for one item, and 2) the number of items for sale. Bidders specify both a bid price and the quantity they want to buy. All winning bidders pay the same price per item — which is the lowest successful bid (which might actually be less than what the bidder bid). If there are more buyers than items, the earliest successful bids get the goods. Also, higher bidders are more likely to get the quantities they’ve requested. However, bidders can refuse partial quantities. For example, if you place a bid for ten items and only seven are available after the auction, you don’t have to complete the purchase. Here are some examples of how Dutch Auctions work:

A seller has ten new Seagate hard drives for auction at $10 each. Ten people bid $10 for one hard drive each. In this case, all ten bidders will win a hard drive for $10. But, if five people bid $12 for one hard driven each and seven others bid $10, the minimum bid for the hard drives is still $12, but because the five $12 bidders bid higher than the $10 bidders, they are guaranteed a hard drive. The other five hard drives will go to the earliest $10 bidders. Thus, with Dutch auctions, the final price for each an item may be lower than the highest bid placed, since all winning bidders pay the same price — which is the lowest successful bid.

Dutch Auctions might sound complicated, but the majority are simple because most users win the items they bid on at the minimum asking price. Still, there are some special instances you might want to know about:

If you are the lowest bidder in a Dutch Auction and you specify a multiple quantity, you may not get to purchase all that you specify. Why? Because there may be little left over after the high bidders get their share.

In other words, if the lowest bidder requests a quantity of four hard drives, he or she may only get one since the first nine drives have already been allotted to the higher bidders. The only way to avoid this problem is to make sure you are not the lowest bidder.

In Dutch Auctions (multiple item auctions), successful high bids are usually displayed via a “High bidders” link. And the complete bidding history (including any unsuccessful bids) is typically displayed via a “Bid history” link.

Restricted Access Auction — This auction category is normally used for “adult” material such as erotica. By using the Restricted Access Auction, customers can easily find — or avoid — “mature audience” merchandise. This allows customers to avoid inadvertently viewing explicit materials.

Note, however, that sellers of mature-audience-items may be subject to various legal statutes that regulate the sale and distribution of mature-audience-related materials. And if you plan to allow your website to offer “adult” items for auction, you should place a notice to bidders and buyers of adult items that informs then that there are various legal statutes that regulate the sale and distribution of those materials.

This type of auction site usually requires that sellers register, obtain a “user account name” or “screen name”, and meet other criteria, before they can place items for bid. Sellers also must agree to pay a fee every time they conduct an auction. Most sellers set a time limit on bidding and, in some cases, a “reserve price” (the lowest price they will accept for an item). When the bidding closes, the highest bidder “wins.” If no one bids at or above the reserve price, the auction closes without a “winner.”

At the end of a successful person-to-person auction, the buyer and seller communicate — usually by email — to arrange for payment and delivery. Yahoo! Auctions, eBay, and Ubid are the most popular person-to-person auction sites. But also see the “Auction” section of Chapter 1 for examples of smaller, niche websites that represent this model.

Requirements

In order to set up an online auction site, whether as an adjunct to an existing e-commerce site or as a standalone business, you typically need:

  • A web server that supports Perl 5 or above and CGI scripts.
  • Auction software and specialized script.
  • Some hard disk space on the web server for the script to write auction data. Usually one MB of space will do when starting out, but more may be necessary if your auction becomes popular.
  • Time and patience. A typical installation of auction software only takes a few minutes. But those of you who want your auction site to look original or who are attaching an auction module to an existing e-commerce site, you might want more. For instance, you may need to tweak the script a bit to give your auction pages an original look and feel, or in order to match the auction pages to rest of your website.

Software

Here is a list, not inclusive, of auction software to consider using to setup your auction site.

Auction Bid Software (www.biddotcom.com). This is one of the more popular auction software products, probably because no special skills are required to get it up and running. And updating your site is as simple as typing an email message; putting those changes online just requires a click of your mouse. Cost — $299.

Auction Software for Online Auction (www.mewsoft.com/Products/). This auction software is driven by a SQL database and provides a variety of features including unlimited nested categories; multi-lingual capabilities; proxy bidding system; featured category, home page and gallery auctions; and Dutch, reserve, and private auctions auction types are supported. It also has a user accounts manager and advanced search tools. Cost — Free.

AuctionWeaver Lite (www.siteinteractive.com). This is a CGI program written in Perl that enables a website to create and host auctions. Its key features include unlimited categories and items; item preview before posting; outbid emails automatically sent (which means you also need access to an SMTP mail server); integrated search engine; and one script file for easy configuration and use. Cost — Free.

BidFlux Auction Software (www.bidflux.com). This fully functional online auction software is 100% self-contained. It is designed to be user and customer friendly, as such it has many similarities with the auction program used by eBay. BidFlux also allows for flexibility and growth as your auction business expands. Cost — $300.

E-Z Auction 1.8 (www.e-zauctionsoftware.com). This affordable auction software is very popular with the e-commerce crowd. That is because E-Z Auction 1.8 allows you either to create a standalone auction website or add auctions and classified ads to an existing e-commerce site. Some of its main features include: required registration, email verification, password protection, automated email notification, automated closing, integrated search engine, bidding history, browse closed auctions, change registration info, seller sets starting bid, seller sets reserve price, automated user statistics, unlimited subcategories, customized email, buy-it button, shipping and payment options, feedback, lost password, forgot alias, view sellers other auctions, and much more (e.g. ability to view all new, hot, and closing auctions). The program is also fully customizable and comes with complete resell rights. Cost — $10.

Emaze Auction (www.emaze.com/auction.cfm). Although a bit pricey, Emaze Auction 2.5, written in Allaire Cold Fusion, is easy to install, to manage, and to modify for any website’s design needs. This auction software easily integrates into almost any existing e-commerce site or it can be used as the starting point for a new auction site. It is completely web-based, incredibly powerful, easily expandable, and fully customizable. A few other salient features include simple and fast installation, procure/classified/seller add-ons, user friendly administrative screens, ability to uses MS Access or MS SQL databases, CyberCash and AuthorizeNet ready, and its source code is readily available. E-businesses worldwide use Emaze Auction 2.5 and it has been translated into German, French, Swedish, and Spanish. The software is utilized to auction anything from personal products to autographs to estate jewelry to optical equipment to oil field pipe. Cost — $995.

Ultimate Auction (www.ultimate-auction.net). This auction software is written in perl and it utilizes the mySQL database (a binary database that can hold virtually unlimited amount of information without a change in speed). Ultimate Action is written so the average e-commerce operator can handle extensive online traffic and business needs easily. The product is also perfect for the small business that wants to start a small Dutch auction on their website. A few of its many features include the ability to create cookies, blacklists, and watchlists. It also offers good account management features, web-based administration, proxy bidding, a nice clean layout that loads quickly under most conditions, and encrypted passwords. Cost — $300 without installation ($400 with installation).

As some readers may have ascertained, much of the auction software discussed in this section is little more than what an experienced programmer could create with a web design package such as Macromedia’s Dreamweaver MX. Though, of course, it would help if the programmer has experience in developing online auctions so that he or she could understand how to design the workflow for any number of pages dealing with the intricacies of buying and selling online. Nonetheless, using an auction package is probably the better choice since most e-commerce start-ups are not programmers and are on a tight budget. Even if you have an ample budget you may find one of the more costly auction programs to be a better choice than letting an experienced programmer have a go at designing your auction pages — building a bespoke system can run into a wad of money. Still, if you want an auction site that offers all the “bells and whistles,” you may need a programmer.

Tips

Know Your Legal Obligations. Under federal law, you’re required to advertise your product or service and terms of sale honestly and accurately. You can’t place “shill” bids on an item to boost the price or offer false testimonials about yourself in the comment section of Internet auction sites. You’re also prohibited from auctioning illegal goods. If running a person-to-person auction site, put in place a system whereby you can monitor the merchandise offered for auction to ensure that illegal items are not offered — the responsibility for ensuring that a sale is legal rests with the auction site owner, the seller, and the buyer. Consider posting a list of prohibited items as a guide for both buyers and sellers.

If operating an auction to market your own merchandise know that you must follow the following rules:

Delivery of Purchased Goods. You are required to ship merchandise within the time frame specified during the auction, or, if a time frame is not specified, within 30 days. If you can’t meet the shipping commitment, you must give the buyer an opportunity to cancel the order for a full refund or to agree to a new shipping date. To learn more about your responsibilities when shipping products, see “A Business Guide to the Federal Trade Commission’s Mail or Telephone Order Merchandise Rule,” which can be found at www.ftc.gov/bcp/conline/pubs/buspubs/mailorder.htm.

Advertising Products. When describing an item and its condition, you must state whether it’s new, used, or reconditioned. Specify the minimum bid at the lowest fair price you’re willing to accept and who is to pay for shipping (also whether or not you are willing to ship internationally). State your return policy, including who’s responsible for paying for shipping costs or restocking fees if the item is returned. Try to anticipate questions buyers might have and to address them in the description of your item or service. If possible, include a photo of the item. Don’t forget to advise prospective bidders whether you provide follow-up service — or tell them where they can get it.

Dealing with Bidders. Respond as quickly as possible to bidders’ questions about your item or your sales terms. When the auction closes, print all information about the transaction, including the buyer’s identification; a description of the item; and the date, time and price of the bid. Save a copy of every email you send and receive from the auction site and/or the successful bidder. Contact the “winning” bidder as soon after the auction closes as possible; confirm the final cost, including shipping charges, and tell the buyer where to send payment.

Arranging for Payment. If you accept direct credit card payments from the buyer, bill the credit card account as close to the ship date as possible. If a buyer insists on using a particular escrow or online payment service that you’ve never heard of, check it out — visit the service’s website, call the customer service line. If there isn’t one, or if you call and can’t reach someone, don’t use the service. Also, before agreeing to use an online payment or escrow service, read the terms of agreement:

  • If it’s an online payment service, find out who pays for credit card charge backs or transaction reversal requests if the buyer seeks them.
  • Examine the service’s privacy policy and security measures. Never disclose financial or personal information unless you know why it’s being collected, how it will be used, and how it will be safeguarded.
  • Be suspicious of an online escrow service that cannot process its own transactions and requires you to set up accounts with online payment services. Legitimate escrow services never do this.
  • Check with the Better Business Bureau, state attorney general and/or consumer protection agency, both where you live and where the online payment or escrow service is based, to see whether there are any unresolved complaints against the service. Be mindful that a lack of complaints doesn’t necessarily mean that the service has no problems.


The Complete E-Commerce Book. Design, Build & Maintain a Successful Web-based Business
The Complete E-Commerce Book, Second Edition: Design, Build & Maintain a Successful Web-based Business
ISBN: B001KVZJWC
EAN: N/A
Year: 2004
Pages: 159

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