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Online Auctions, Virtual Communities, And Web Portals

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  • 1. Chapter 6: Online Auctions, Virtual Communities, and Web Portals Electronic Commerce, Sixth 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 Electronic Commerce, Sixth Edition 2
  • 3. 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 Electronic Commerce, Sixth Edition 3
  • 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 Electronic Commerce, Sixth Edition 4
  • 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 Electronic Commerce, Sixth Edition 5
  • 6. 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 Electronic Commerce, Sixth Edition 6
  • 7. Coldwater Creek Dutch Auction of Closeout Merchandise Electronic Commerce, Sixth Edition 7
  • 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 Electronic Commerce, Sixth Edition 8
  • 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 Electronic Commerce, Sixth Edition 9
  • 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 Electronic Commerce, Sixth Edition 10
  • 11. 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 Electronic Commerce, Sixth Edition 11
  • 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 – Gain an advantage by identifying a strong market segment with readily identifiable products Electronic Commerce, Sixth Edition 12
  • 13. 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 Electronic Commerce, Sixth Edition 13
  • 14. 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 Electronic Commerce, Sixth Edition 14
  • 15. 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 Electronic Commerce, Sixth Edition 15
  • 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 Electronic Commerce, Sixth Edition 16
  • 17. CompUSA Auctions Home Page Electronic Commerce, Sixth Edition 17
  • 18. 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 Electronic Commerce, Sixth Edition 18
  • 19. Supply Chain Characteristics and Reverse Auctions Electronic Commerce, Sixth Edition 19
  • 20. 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 Electronic Commerce, Sixth Edition 20
  • 21. 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 Electronic Commerce, Sixth Edition 21
  • 22. Auction-Related Services (continued) • Auction consignment services – Create online auction for an item – Handle the transaction – Remit the balance of the proceeds Electronic Commerce, Sixth Edition 22
  • 23. 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 Electronic Commerce, Sixth Edition 23
  • 24. Web Page Displayed on a PDA Electronic Commerce, Sixth Edition 24
  • 25. 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 Electronic Commerce, Sixth Edition 25
  • 26. AvantGo Home Page Electronic Commerce, Sixth Edition 26
  • 27. 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 Electronic Commerce, Sixth Edition 27
  • 28. 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 Electronic Commerce, Sixth Edition 28
  • 29. 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 Electronic Commerce, Sixth Edition 29
  • 30. Google Answers Page Electronic Commerce, Sixth Edition 30
  • 31. 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 Electronic Commerce, Sixth Edition 31
  • 32. 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 Electronic Commerce, Sixth Edition 32
  • 33. 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 Electronic Commerce, Sixth Edition 33
  • 34. 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 Electronic Commerce, Sixth Edition 34
  • 35. Stickiness of Popular Web Sites Electronic Commerce, Sixth Edition 35
  • 36. 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 Electronic Commerce, Sixth Edition 36
  • 37. 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 Electronic Commerce, Sixth Edition 37
  • 38. 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 Electronic Commerce, Sixth Edition 38
  • 39. 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 Electronic Commerce, Sixth Edition 39

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