 Online Auctions
First Published: July 1999
Last Update: April 2002
Author: Computer Partners
Of all the ecommerce that goes on over the Internet, some of
the most lucrative businesses are those that specialize in online auctions. In
the June 15 issue of Upside Today, Paul Keegan talks about the amazing
transformation of the auction site eBay.com.
Keegan reported that eBay's fiscal 1998 net income was $2.4
million on revenue of $47.4 Million. In March eBay had an estimated market value
of $20.5 billion and surpassed amazon.com as
the most valuable Internet retailer. It was also identified as the 20th
most-visited site on the Internet.
In June Bloomberg News reported that eBay had purchased
Alando, Germany's largest online trading company. The purchase added more than
50,000 customers to eBays more than 3.8 million registered shoppers.
Amazon.com responded to eBay's success in late March by
creating it's own auction site.
Murray Taylor of Kitchener, Ontario, who participates
regularly in online auctions, favours eBay over other auction sites because of
the number of items listed. He said the site sells something like 2 million
items a week.
Participants have the opportunity to buy and sell items in
more than 1,000 categories under such headings as collectibles, antiques, sports
memorabilia, computers, toys, beanies, dolls, figures, coins, just to mention a
few.
From a buyer's perspective it makes it more interesting and
from a seller's perspective more profitable, he said. The more people who want
your product and decide to bid on it, the more money you make from the sale.
Viewing, bidding, and buying items on eBay is free but
listing and selling items costs a fee. When you list your item for sale on eBay,
you are charged an Insertion Fee. Insertion Fees are non-refundable.
The Insertion Fee is based upon the opening value or minimum
bid of the item you list for sale. This can range anywhere from 25 cents to
$2.00. Cars including classics, trucks and RVs have a fixed insertion fee of
$25.00 and real estate is fixed at $50.00.
If the item is sold, the seller pays a commission starting at
5 percent of any sale less than $25, 2.5% from $25.01 to $1,000 and then 1.25%
for a sale of $1,000 or more.
Taylor has tried other sites but he said his products just
don't get the same exposure as they do on eBay. Members of his family have also
participated in buying products in online auctions. He said the eBay site is
straightforward and easy to use. Of the items that he has posted for sale he has
had a 10 to 20 percent success rate.
He first decided to try the auction when he was cleaning out
his basement earlier this year. Since then he has sold automotive advertisements
and magazines dating back to the 1970s and 80s.
Pierre Omidyar came up with the idea for eBay in 1995 when
his fiancée was looking for a way to trade Pez candy dispensers over the
Internet. Since then it has just snowballed.
The only thing that seems to have plagued the eBay auction
site has been complaints of online fraud. According to Keegan the Federal Trade
Commission says that auction fraud is one of the most frequent complaints they
receive.
The most common problem is buyers saying they paid for a
product that they never received. Other problems reported have been sellers
artificially bidding up the price of their own item using an alias. Buyers have
found that some of the items they purchased didn't turn out to be what they were
expecting.
When he lists an item on eBay, Taylor specifies that the
customer must pay for the shipping and that he has to receive the money first
before he will ship it. Most of the people he has been involved with have been
Americans. They send him a money order, cheque or cash.
He has been burned a few times by people who claimed to want
the item but who never sent the money. In those case he just relisted it. He has
also bought products from eBay and he has never had any trouble receiving what
he purchased.
According to Keegan eBay claims that cases of fraud accounted
for precisely .03 percent of all transactions on their site. The negative
publicity has contributed to the need for all online auction sites to prove
their credibility.
In response to the problem of fraud, eBay has created a
system where buyers and sellers can rate each other so that participants can
check out the reputation of the person they are going to be dealing with.
The site also advises shoppers to ask questions about the
product they are bidding on and to phone the buyers if necessary.
Keegan reported that eBay also set up a program where users
earn a "verified" rating by providing confidential information to the
credit agency Equifax Inc. To counter this, Amazon asks for a credit card number
from every seller and bidder. Both companies have also provided buyer insurance
for large ticket items.
eBay purchased the real auction house Butterfield &
Butterfield, of Los Angeles in April for $260 million. According to Elizabeth
Gardner in the May issue of Internet World the purchase is all about online
companies using their "wealth to gobble up a brick-and-mortar
counterpart".
In the article, CEO Meg Whitman said that eBay had been
looking for a way to help buyers and sellers authenticate big-ticket antiques
and collectibles. It was hoped that the staff of appraisers at Butterfield's
would fill the gap.
In response to eBay's move Amazon.com purchased a partnership
with the 255-year-old Sotheby's for $45 million.
Troy Wolverton of CNET News.com reported in April that the
difference between eBay and Amazon.com are the sellers they attract. He said
that the products on Amazon.com are items that you could find elsewhere
contrasting to the "flea market atmosphere of competing sites like eBay and
AuctionUniverse." He said that Amazon courted merchant auctioneers for its
site, which accounts for the difference in merchandise.
Besides eBay and Amazon there are a host of other popular
online auction sites such as ubid.com. There are also specialty
auctions sites like egghead.com
that auctions off surplus computer hardware and software. The auction site millionaire.com
auctions off luxury items that only the well-to-do can afford.
These are only a few of the better known online auction
sites. Most auction sites provide detailed information on how to go about
participating in the process. If you'd like to join the online auction mania
click on one of the above links and see what all the fuss is about.
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