Examine the use of auctions by businesses. Go to any auction site of your choosi

Question

Examine the use of auctions by businesses. Go to any auction site of your choosing and look for outlet auctions or auctions of items directly from merchants. Research at least three products up for sale. What stage in the product life cycle do these products fall into? Are there quantity purchasing requirements? What was the opening bid price? What are the bid increments? What is the auction duration? Analyze why these firms have used the auction channel to sell these goods and prepare a short report on your findings.

Explanation / Answer

Online auctions are sales transactions that result from a competitive bidding process conducted over the Internet. Whether the sales take place between individuals, between consumers and merchants, or between businesses, online auctions have enjoyed rapid growth with the spread of Internet access. The value of goods and services traded through online auctions is not tracked but is estimated to have grown rapidly in the last five years, from under $10 billion in 2000 to well over three times that figure in 2005. According to anEntrepreneur magazine article about online auction marketplace leader eBay, sales through that company's online auction space alone accounted for more than $32 billion in 2004.

The consumer online auction process has been described as being similar to a garage sale, with commonly offered items including collectibles, antiques, toys, clothing, art, cars, tickets, electronics, and even real estate. Online auctions appeal to individuals who enjoy the competitive bidding process and like to feel as if they are getting a bargain. Most Web sites that host auctions allow buyers and sellers to negotiate payment methods and shipping details. Auction-related costs are usually limited to a small percentage of the final sales price.

Auctions have been a means of economic transaction for centuries. By moving onto the Internet, auctions have become accessible to a much larger number of participants, increasing the size of the marketplace dramatically. Although transactions between individuals are an important driver of the online auction market, the business-to-consumer and business-to-business portions of the market are growing rapidly. Online auctions offer potential benefits to all types of businesses. For example, since 2000 the firm SalvageSales has been helping insurance companies and their clients sell damaged shipments of commercial and industrial goods. In the past these salvage sale operations would have been handled locally, but the online auction option offered by SalvageSales has increased the size of the marketplace that can be easily reached in salvage sales. The same increase in market size is being seen across the board for both used and new products. Another example of an online auction-based business is Cashco 1000, Inc., a business started by a stay-at-home mother who wanted to try something she could manage from home while raising her children. Founder and owner, Angle Cash expected her business to sell $500,000 worth of home-decorations on eBay in 2005.

"Many companies wonder when and why they should use online auctions as part of their business trading strategy," Lori Mitchell wrote in InfoWorld. "The short answer is, if you sell goods and services or if you purchase items to run your business, online auctions can work for you'

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