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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
  • 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
  • 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
  • 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
  • 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
  • 7. Coldwater Creek Dutch Auction of Closeout Merchandise
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 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
  • 17. CompUSA Auctions Home Page
  • 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
  • 19. Supply Chain Characteristics and Reverse Auctions
  • 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
  • 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
  • 22. Auction-Related Services (continued)
    • Auction consignment services
      • Create online auction for an item
      • Handle the transaction
      • Remit the balance of the proceeds
  • 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
  • 24. Web Page Displayed on a PDA
  • 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
  • 26. AvantGo Home Page
  • 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
  • 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
  • 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
  • 30. Google Answers Page
  • 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
  • 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
  • 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
  • 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
  • 35. Stickiness of Popular Web Sites
  • 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
  • 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
  • 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
  • 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