Transcript E-Commerce: The Second Wave Fifth Edition

Chapter 6:
Online Auctions, Virtual Communities,
and Web Portals
Electronic Commerce,
Sixth Edition
Objectives
In this chapter, you will learn about:
• Origins and key characteristics of the seven
major auction types
• Strategies for Web auction sites and auctionrelated businesses
• Virtual communities and Web portals
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Auction Overview
• In an auction, a seller offers an item for sale,
but does not establish a price
• Bidders
– Potential buyers
• Bids
– Prices bidders are willing to pay for an item
• Shill bidders
– Can artificially inflate the price of an item
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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
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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
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Dutch Auctions
• Also called descending-price auctions
• Form of open auction in which bidding starts
at a high price and drops until a bidder
accepts the price
• Often better for the seller
• Good for moving large numbers of commodity
items quickly
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Coldwater Creek Dutch Auction of
Closeout Merchandise
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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
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Other Types of Auctions
(continued)
• Double auction
– Buyers and sellers each submit combined pricequantity 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
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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
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General Consumer Auctions
• Most common format used on eBay
– Computerized version of the English auction
• eBay English auction
– Allows a seller to set a reserve price
– Bidders are listed
– Bid amounts are not disclosed until after the
auction
– Allows sellers to specify that an auction be made
private
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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
– Gain an advantage by identifying a strong market
segment with readily identifiable products
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Consumer Reverse Auctions and
Group Purchasing Sites
• Reverse bid
– Buyer can accept the lowest offer or the offer that
best matches the buyer’s criteria
• Priceline.com
– Completes many of its transactions from an
inventory
– Operates more as a liquidation broker
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Consumer Reverse Auctions and
Group Purchasing Sites (continued)
• Group purchasing site
– Seller posts an item with a price
– As individual buyers enter bids, the site can
negotiate a better price with the item’s provider
– Posted price ultimately decreases as the number
of bids increases
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Business-to-Business Auctions
• Liquidation brokers
– Firms that find buyers for unusable inventory items
• Online auctions
– Logical extension of inventory liquidation activities
to a new and more efficient channel, the Internet
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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
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Business-to-Business Reverse
Auctions
• U.S. Navy and the federal government’s
General Services Administration are
experimenting with reverse auctions
• The need for trust and long-term strategic
relationships with suppliers makes reverse
auctions less attractive in some industries
• The use of reverse auctions replaces trusting
relationships with a bidding activity that pits
suppliers against each other
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Supply Chain Characteristics and
Reverse Auctions
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Auction-Related Services
• Auction escrow services
– An independent party that holds a buyer’s
payment until the buyer receives the 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
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Auction-Related Services
(continued)
• Auction software
– For sellers
• Software offers 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
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Auction-Related Services
(continued)
• Auction consignment services
– Create online auction for an item
– Handle the transaction
– Remit the balance of the proceeds
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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
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Web Page Displayed on a PDA
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Electronic Marketplaces
• Marketplaces
– Can serve people who want to buy and sell a wide
range of products and services
• AvantGo
– Provides PDAs with downloads of Web site
contents, news, restaurant reviews, and maps
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AvantGo Home Page
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Intelligent Software Agents
• Programs that search the Web and find items
for sale that meet a buyer’s specifications
• Some software agents focus on a particular
category of product
• Simon
– One of the best shopping agents currently
available
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Virtual Communities
• Gathering place for people and businesses
that does not have a 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
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Virtual Communities (continued)
• Virtual learning community
– One form of a virtual community
• Can help companies, their customers, and
their suppliers plan, collaborate, and transact
business
• Google Answers
– Gives people a place to ask questions that are
answered by an expert for a fee
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Google Answers Page
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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
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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
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Web Portal Revenue Models
• Web portals are so named because the goal
is to be every Web surfer’s doorway to the
Web
• One rough measure of stickiness is how long
each user spends at the site
• Nielsen//NetRatings determine site popularity
by measuring the number of unique visitors
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Web Portal Revenue Models
(continued)
• Web portals
– High visitor counts can yield high advertising rates
– Companies that run Web portals add sticky
features such as chat rooms, e-mail, and calendar
functions
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Stickiness of Popular Web Sites
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Mixed Revenue Portals
• Time Warner’s AOL unit
– One of the most successful Web portals
– Charges 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
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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 a virtual
community among employees
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Summary
• Companies are now using the Web to operate
auction sites, create virtual communities, and
serve as Web portals
• Consumer online auction business is
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
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Summary (continued)
• New companies have formed that capitalize
on the 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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