e-commerce: the second wave fifth annual edition
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E-Commerce: The Second WaveFifth Annual Edition
Chapter 6:Online Auctions, Virtual
Communities, and Web Portals
E-Commerce: The Second Wave, Fifth Annual Edition 2
Objectives
In this chapter, you will learn about:
• Origins and key characteristics of the seven major auction types
• Strategies for Web auction sites and auction-related businesses
• Virtual communities and Web portals
E-Commerce: The Second Wave, Fifth Annual Edition 3
Origins of Auctions
• In an auction– Seller offers an item for sale, but does not
establish price• Bidders
– Potential buyers• Bids
– Prices bidders are willing to pay for an item• Shill bidders
– Can artificially inflate the price of an item
E-Commerce: The Second Wave, Fifth Annual Edition 4
English Auctions• Bidders publicly announce their successive
higher bids until no higher bid is forthcoming
• Open auction– Bids are publicly announced
• Minimum bid – The price at which an auction begins
• Reserve price– Minimum acceptable price
E-Commerce: The Second Wave, Fifth Annual Edition 5
English Auctions (Continued)
• Yankee auctions
– English auctions that offer multiple units of an item for sale
• Disadvantages
– Winning bidders tend not to bid their full private valuations
– Bidders risk becoming caught up in the excitement of competitive bidding
E-Commerce: The Second Wave, Fifth Annual Edition 6
Dutch Auctions
• http://esurplusauction.com/IANAuction?ianac=cat&catid=12
• Also called descending-price auctions
• Form of open auction in which bidding starts at a high price and drops until bidder accepts price
• Often better for the seller
• Good for moving large numbers of commodity items quickly
E-Commerce: The Second Wave, Fifth Annual Edition 7
Coldwater Creek Dutch Auction of Closeout Merchandise
E-Commerce: The Second Wave, Fifth Annual Edition 8
Other Types of Auctions
• Sealed-bid auctions– Bidders submit their bids independently
• Second-price sealed-bid auction – Highest bidder is awarded the item at the price
bid by the second-highest bidder
• Open-outcry double auctions– Buy and sell offers are shouted by traders
standing in a small area on the exchange floor
E-Commerce: The Second Wave, Fifth Annual Edition 9
Other Types of Auctions (Continued)
• Double auction
– Buyers and sellers each submit combined price-quantity bids to an auctioneer
• Reverse (Seller-Bid) Auctions
– Multiple sellers submit price bids to an auctioneer who represents a single buyer
– Bids are for a given amount of a specific item that the buyer wants to purchase
E-Commerce: The Second Wave, Fifth Annual Edition 10
Online Auctions and Related Businesses
• Three categories of auction Web sites
– General consumer auctions
– Specialty consumer auctions
– Business-to-business auctions
• Largest number of transactions
– Occurs on general consumer auction sites
E-Commerce: The Second Wave, Fifth Annual Edition 11
General Consumer Auctions
• Most common format used on eBay – Computerized version of the English auction
• eBay English auction– Allows seller to set a reserve price– Bidders are listed– Bid amounts are not disclosed until after
auction – Allows sellers to specify that an auction be
made private
E-Commerce: The Second Wave, Fifth Annual Edition 12
Specialty Consumer Auctions
• Specialized Web auction sites– Meet the need of special interest market
segments• Specialty consumer auction sites
– Golf Club Exchange, Cigarbid.com, and Winebid, Diamond
– Gain an advantage by identifying a strong market segment with readily identifiable products
E-Commerce: The Second Wave, Fifth Annual Edition 13
Consumer Reverse Auctions and Group Purchasing Sites
• Reverse bid
– Buyer can accept lowest offer or the offer that best matches buyer’s criteria
• Priceline.com
– Completes many of its transactions from an inventory
– Operates more as a liquidation broker
E-Commerce: The Second Wave, Fifth Annual Edition 14
Consumer Reverse Auctions and Group Purchasing Sites (Continued)
• Group purchasing site - LetsBuyIt
– Seller posts an item with a price
– As individual buyers enter bids, site can negotiate better price with the item’s provider
– Posted price ultimately decreases as number of bids increases
E-Commerce: The Second Wave, Fifth Annual Edition 15
Business-to-Business Auctions
• Liquidation brokers
– Firms that find buyers for unusable inventory items - http://www.liquidation.com/ http://www.murphyauction.com/
• Online auctions
– Logical extension of inventory liquidation activities to a new and more efficient channel, the Internet
E-Commerce: The Second Wave, Fifth Annual Edition 16
Business-to-Business Auctions (Continued)
• Ingram Micro – Major distributor of computers and related
equipment to value-added resellers– Often finds itself with outdated items turned
over to liquidation brokers– Now auctions those items to its established
customers– Auction prices received average about 60
percent of the items’ costs
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CompUSA Auctions Home Page
E-Commerce: The Second Wave, Fifth Annual Edition 18
Business-to-Business Reverse Auctions• U.S. Navy and the federal government’s
General Services Administration – Experimenting with reverse auctions
• Need for trust and long-term strategic relationships with suppliers– Makes reverse auctions less attractive in some
industries• Use of reverse auctions
– Replaces trusting relationships with a bidding activity that pits suppliers against each other
E-Commerce: The Second Wave, Fifth Annual Edition 19
Supply Chain Characteristics and Reverse Auctions
E-Commerce: The Second Wave, Fifth Annual Edition 20
Auction-Related Services
• Auction escrow services - Escrow.com– An independent party that
• Holds buyer’s payment until buyer receives purchased item and is satisfied with it
• Auction directory and information services– Offer guidance for new auction participants – Offer helpful hints and tips for more
experienced buyers and sellers along with directories of online auction sites – Auctionguide.com
E-Commerce: The Second Wave, Fifth Annual Edition 21
Auction-Related Services (Continued)
• Auction software
– For sellers Vendio
• Software offer services that can help with or automate tasks such as image hosting
– For buyers
• Software observes auction progress and places a bid high enough to win the auction - Sniping
E-Commerce: The Second Wave, Fifth Annual Edition 22
Auction-Related Services (Continued)
• Auction consignment services
– Create online auction for an item
– Handle the transaction
– Remit balance of proceeds
– Picture it SOLD
E-Commerce: The Second Wave, Fifth Annual Edition 23
Portion of Andale Products Page
E-Commerce: The Second Wave, Fifth Annual Edition 24
Virtual Communities and Web Portals
• Cellular-satellite communications technology
– Can be packaged with
• Notebook computers
• Personal digital assistants (PDAs)
• Mobile phones
• Wireless Application Protocol (WAP)
– Allows Web pages formatted in HTML to be displayed on devices with small screens
E-Commerce: The Second Wave, Fifth Annual Edition 25
Web Page Displayed on a PDA
E-Commerce: The Second Wave, Fifth Annual Edition 26
Electronic Marketplaces
• Marketplaces
– Can serve people who want to buy and sell a wide range of products and services
• AvantGo
– Provide PDAs with downloads of Web site contents, news, restaurant reviews, and maps
E-Commerce: The Second Wave, Fifth Annual Edition 27
AvantGo Channels Subscription Page
E-Commerce: The Second Wave, Fifth Annual Edition 28
Intelligent Software Agents
• Programs that search the Web and find items for sale that meet a buyer’s specifications
• Some software agents
– Focused on a particular category of product
• Simon
– One of the best shopping agents currently available
E-Commerce: The Second Wave, Fifth Annual Edition 29
Virtual Communities
• Gathering place for people and businesses that does not have physical existence
• Exist on the Internet in various forms– Usenet newsgroups
– Chat rooms
– Web sites
• Offer people a way to connect with each other and discuss common issues and interests
E-Commerce: The Second Wave, Fifth Annual Edition 30
Virtual Communities (Continued)
• Virtual learning community– One form of virtual community
• Can help companies, their customers, and their suppliers plan, collaborate, and transact business
• Google Answers – Gives people a place to ask questions then
answered by an expert for a fee
E-Commerce: The Second Wave, Fifth Annual Edition 31
JA-SIG uPortal Home Page
E-Commerce: The Second Wave, Fifth Annual Edition 32
Google Answers Page
E-Commerce: The Second Wave, Fifth Annual Edition 33
Early Web Communities
• The WELL ( “whole earth ’lectronic link”)– One of the first Web communities
– Predates the Web
• Tripod – Founded in 1995 in Massachusetts
– Offered its participants free Web page space, chat rooms, news and weather updates, and health information pages
E-Commerce: The Second Wave, Fifth Annual Edition 34
Web Community Consolidation
• Virtual communities for consumers
– Can succeed as money-making propositions if
• They offer something sufficiently valuable to justify a charge for membership
• Web portal revenue models
– Strategies that build on a combination of virtual communities and other activities
E-Commerce: The Second Wave, Fifth Annual Edition 35
Web Portal Revenue Models
• Advertising supported web portals
– One rough measure of stickiness
• How long each user spends at the site
– Nielsen//NetRatings
• Determines site popularity by measuring the number of unique visitors
E-Commerce: The Second Wave, Fifth Annual Edition 36
Web Portal Revenue Models (Continued)
• Web portals
– High visitor counts can yield high advertising rates
– Companies that run Web portals
• Believe in the power of portals
• Add sticky features such as chat rooms, e-mail, and calendar functions
E-Commerce: The Second Wave, Fifth Annual Edition 37
Stickiness of Popular Web Sites
E-Commerce: The Second Wave, Fifth Annual Edition 38
Mixed Revenue Portals
• Time Warner’s AOL unit
– One of the most successful Web portals
– Charged a fee to users and has always run advertising on its site
• Yahoo!
– Now charges for the Internet phone service originally offered at no cost
E-Commerce: The Second Wave, Fifth Annual Edition 39
Internal Web Portals
• Run on intranets
• Can save significant amounts of money by
– Replacing the printing and distribution of paper memos, newsletters, and other correspondence
• Can become a good way of creating virtual community among employees
E-Commerce: The Second Wave, Fifth Annual Edition 40
Summary• Companies are now using Web to
– Operate auction sites, create virtual communities, and serve as Web portals
• Consumer online auction business – Dominated by eBay
• B2B auctions– Give companies a new and efficient way to
dispose of excess inventory • B2B reverse auctions
– Provide an effective procurement tool
E-Commerce: The Second Wave, Fifth Annual Edition 41
Summary
• New companies have formed that – Capitalize on Web’s ability to bring together
geographically dispersed people and organizations
• Organizations are using mobile commerce to – Sell goods and services to users of handheld
devices• Companies are using internal Web portals to
– Communicate with employees
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