Online Auctions, Virtual Communities, And Web Portals

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Online Auctions, Virtual Communities, And Web Portals

  1. 1. Chapter 6: Online Auctions, Virtual Communities, and Web Portals Electronic Commerce, Sixth Edition
  2. 2. Objectives <ul><li>In this chapter, you will learn about: </li></ul><ul><li>Origins and key characteristics of the seven major auction types </li></ul><ul><li>Strategies for Web auction sites and auction-related businesses </li></ul><ul><li>Virtual communities and Web portals </li></ul>
  3. 3. Auction Overview <ul><li>In an auction, a seller offers an item for sale, but does not establish a price </li></ul><ul><li>Bidders </li></ul><ul><ul><li>Potential buyers </li></ul></ul><ul><li>Bids </li></ul><ul><ul><li>Prices bidders are willing to pay for an item </li></ul></ul><ul><li>Shill bidders </li></ul><ul><ul><li>Can artificially inflate the price of an item </li></ul></ul>
  4. 4. English Auctions <ul><li>Bidders publicly announce their successive higher bids until no higher bid is forthcoming </li></ul><ul><li>Open auction </li></ul><ul><ul><li>Bids are publicly announced </li></ul></ul><ul><li>Minimum bid </li></ul><ul><ul><li>The price at which an auction begins </li></ul></ul><ul><li>Reserve price </li></ul><ul><ul><li>Minimum acceptable price </li></ul></ul>
  5. 5. English Auctions (continued) <ul><li>Yankee auctions </li></ul><ul><ul><li>English auctions that offer multiple units of an item for sale </li></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><li>Winning bidders tend not to bid their full private valuations </li></ul></ul><ul><ul><li>Bidders risk becoming caught up in the excitement of competitive bidding </li></ul></ul>
  6. 6. Dutch Auctions <ul><li>Also called descending-price auctions </li></ul><ul><li>Form of open auction in which bidding starts at a high price and drops until a bidder accepts the price </li></ul><ul><li>Often better for the seller </li></ul><ul><li>Good for moving large numbers of commodity items quickly </li></ul>
  7. 7. Coldwater Creek Dutch Auction of Closeout Merchandise
  8. 8. Other Types of Auctions <ul><li>Sealed-bid auctions </li></ul><ul><ul><li>Bidders submit their bids independently </li></ul></ul><ul><li>Second-price sealed-bid auction </li></ul><ul><ul><li>Highest bidder is awarded the item at the price bid by the second -highest bidder </li></ul></ul><ul><li>Open-outcry double auctions </li></ul><ul><ul><li>Buy and sell offers are shouted by traders standing in a small area on the exchange floor </li></ul></ul>
  9. 9. Other Types of Auctions (continued) <ul><li>Double auction </li></ul><ul><ul><li>Buyers and sellers each submit combined price-quantity bids to an auctioneer </li></ul></ul><ul><li>Reverse (seller-bid) auctions </li></ul><ul><ul><li>Multiple sellers submit price bids to an auctioneer who represents a single buyer </li></ul></ul><ul><ul><li>Bids are for a given amount of a specific item that the buyer wants to purchase </li></ul></ul>
  10. 10. Online Auctions and Related Businesses <ul><li>Three categories of auction Web sites </li></ul><ul><ul><li>General consumer auctions </li></ul></ul><ul><ul><li>Specialty consumer auctions </li></ul></ul><ul><ul><li>Business-to-business auctions </li></ul></ul><ul><li>Largest number of transactions occurs on general consumer auction sites </li></ul>
  11. 11. General Consumer Auctions <ul><li>Most common format used on eBay </li></ul><ul><ul><li>Computerized version of the English auction </li></ul></ul><ul><li>eBay English auction </li></ul><ul><ul><li>Allows a seller to set a reserve price </li></ul></ul><ul><ul><li>Bidders are listed </li></ul></ul><ul><ul><li>Bid amounts are not disclosed until after the auction </li></ul></ul><ul><ul><li>Allows sellers to specify that an auction be made private </li></ul></ul>
  12. 12. Specialty Consumer Auctions <ul><li>Specialized Web auction sites </li></ul><ul><ul><li>Meet the need of special interest market segments </li></ul></ul><ul><li>Specialty consumer auction sites </li></ul><ul><ul><li>Golf Club Exchange, Cigarbid.com, and Winebid </li></ul></ul><ul><ul><li>Gain an advantage by identifying a strong market segment with readily identifiable products </li></ul></ul>
  13. 13. Consumer Reverse Auctions and Group Purchasing Sites <ul><li>Reverse bid </li></ul><ul><ul><li>Buyer can accept the lowest offer or the offer that best matches the buyer’s criteria </li></ul></ul><ul><li>Priceline.com </li></ul><ul><ul><li>Completes many of its transactions from an inventory </li></ul></ul><ul><ul><li>Operates more as a liquidation broker </li></ul></ul>
  14. 14. Consumer Reverse Auctions and Group Purchasing Sites (continued) <ul><li>Group purchasing site </li></ul><ul><ul><li>Seller posts an item with a price </li></ul></ul><ul><ul><li>As individual buyers enter bids, the site can negotiate a better price with the item’s provider </li></ul></ul><ul><ul><li>Posted price ultimately decreases as the number of bids increases </li></ul></ul>
  15. 15. Business-to-Business Auctions <ul><li>Liquidation brokers </li></ul><ul><ul><li>Firms that find buyers for unusable inventory items </li></ul></ul><ul><li>Online auctions </li></ul><ul><ul><li>Logical extension of inventory liquidation activities to a new and more efficient channel, the Internet </li></ul></ul>
  16. 16. Business-to-Business Auctions (continued) <ul><li>Ingram Micro </li></ul><ul><ul><li>Major distributor of computers and related equipment to value-added resellers </li></ul></ul><ul><ul><li>Often finds itself with outdated items turned over to liquidation brokers </li></ul></ul><ul><ul><li>Now auctions those items to its established customers </li></ul></ul><ul><ul><li>Auction prices received average about 60 percent of the items’ costs </li></ul></ul>
  17. 17. CompUSA Auctions Home Page
  18. 18. Business-to-Business Reverse Auctions <ul><li>U.S. Navy and the federal government’s General Services Administration are experimenting with reverse auctions </li></ul><ul><li>The need for trust and long-term strategic relationships with suppliers makes reverse auctions less attractive in some industries </li></ul><ul><li>The use of reverse auctions replaces trusting relationships with a bidding activity that pits suppliers against each other </li></ul>
  19. 19. Supply Chain Characteristics and Reverse Auctions
  20. 20. Auction-Related Services <ul><li>Auction escrow services </li></ul><ul><ul><li>An independent party that holds a buyer’s payment until the buyer receives the purchased item and is satisfied with it </li></ul></ul><ul><li>Auction directory and information services </li></ul><ul><ul><li>Offer guidance for new auction participants </li></ul></ul><ul><ul><li>Offer helpful hints and tips for more experienced buyers and sellers along with directories of online auction sites </li></ul></ul>
  21. 21. Auction-Related Services (continued) <ul><li>Auction software </li></ul><ul><ul><li>For sellers </li></ul></ul><ul><ul><ul><li>Software offers services that can help with or automate tasks such as image hosting </li></ul></ul></ul><ul><ul><li>For buyers </li></ul></ul><ul><ul><ul><li>Software observes auction progress and places a bid high enough to win the auction </li></ul></ul></ul>
  22. 22. Auction-Related Services (continued) <ul><li>Auction consignment services </li></ul><ul><ul><li>Create online auction for an item </li></ul></ul><ul><ul><li>Handle the transaction </li></ul></ul><ul><ul><li>Remit the balance of the proceeds </li></ul></ul>
  23. 23. Virtual Communities and Web Portals <ul><li>Cellular-satellite communications technology </li></ul><ul><ul><li>Can be packaged with </li></ul></ul><ul><ul><ul><li>Notebook computers </li></ul></ul></ul><ul><ul><ul><li>Personal digital assistants (PDAs) </li></ul></ul></ul><ul><ul><ul><li>Mobile phones </li></ul></ul></ul><ul><li>Wireless Application Protocol (WAP) </li></ul><ul><ul><li>Allows Web pages formatted in HTML to be displayed on devices with small screens </li></ul></ul>
  24. 24. Web Page Displayed on a PDA
  25. 25. Electronic Marketplaces <ul><li>Marketplaces </li></ul><ul><ul><li>Can serve people who want to buy and sell a wide range of products and services </li></ul></ul><ul><li>AvantGo </li></ul><ul><ul><li>Provides PDAs with downloads of Web site contents, news, restaurant reviews, and maps </li></ul></ul>
  26. 26. AvantGo Home Page
  27. 27. Intelligent Software Agents <ul><li>Programs that search the Web and find items for sale that meet a buyer’s specifications </li></ul><ul><li>Some software agents focus on a particular category of product </li></ul><ul><li>Simon </li></ul><ul><ul><li>One of the best shopping agents currently available </li></ul></ul>
  28. 28. Virtual Communities <ul><li>Gathering place for people and businesses that does not have a physical existence </li></ul><ul><li>Exist on the Internet in various forms </li></ul><ul><ul><li>Usenet newsgroups </li></ul></ul><ul><ul><li>Chat rooms </li></ul></ul><ul><ul><li>Web sites </li></ul></ul><ul><li>Offer people a way to connect with each other and discuss common issues and interests </li></ul>
  29. 29. Virtual Communities (continued) <ul><li>Virtual learning community </li></ul><ul><ul><li>One form of a virtual community </li></ul></ul><ul><li>Can help companies, their customers, and their suppliers plan, collaborate, and transact business </li></ul><ul><li>Google Answers </li></ul><ul><ul><li>Gives people a place to ask questions that are answered by an expert for a fee </li></ul></ul>
  30. 30. Google Answers Page
  31. 31. Early Web Communities <ul><li>The WELL ( “whole earth ’lectronic link”) </li></ul><ul><ul><li>One of the first Web communities </li></ul></ul><ul><ul><li>Predates the Web </li></ul></ul><ul><li>Tripod </li></ul><ul><ul><li>Founded in 1995 in Massachusetts </li></ul></ul><ul><ul><li>Offered its participants free Web page space, chat rooms, news and weather updates, and health information pages </li></ul></ul>
  32. 32. Web Community Consolidation <ul><li>Virtual communities for consumers </li></ul><ul><ul><li>Can succeed as money-making propositions if they offer something sufficiently valuable to justify a charge for membership </li></ul></ul>
  33. 33. Web Portal Revenue Models <ul><li>Web portals are so named because the goal is to be every Web surfer’s doorway to the Web </li></ul><ul><li>One rough measure of stickiness is how long each user spends at the site </li></ul><ul><li>Nielsen//NetRatings determine site popularity by measuring the number of unique visitors </li></ul>
  34. 34. Web Portal Revenue Models (continued) <ul><li>Web portals </li></ul><ul><ul><li>High visitor counts can yield high advertising rates </li></ul></ul><ul><ul><li>Companies that run Web portals add sticky features such as chat rooms, e-mail, and calendar functions </li></ul></ul>
  35. 35. Stickiness of Popular Web Sites
  36. 36. Mixed Revenue Portals <ul><li>Time Warner’s AOL unit </li></ul><ul><ul><li>One of the most successful Web portals </li></ul></ul><ul><ul><li>Charges a fee to users and has always run advertising on its site </li></ul></ul><ul><li>Yahoo! </li></ul><ul><ul><li>Now charges for the Internet phone service originally offered at no cost </li></ul></ul>
  37. 37. Internal Web Portals <ul><li>Run on intranets </li></ul><ul><li>Can save significant amounts of money by replacing the printing and distribution of paper memos, newsletters, and other correspondence </li></ul><ul><li>Can become a good way of creating a virtual community among employees </li></ul>
  38. 38. Summary <ul><li>Companies are now using the Web to operate auction sites, create virtual communities, and serve as Web portals </li></ul><ul><li>Consumer online auction business is dominated by eBay </li></ul><ul><li>B2B auctions </li></ul><ul><ul><li>Give companies a new and efficient way to dispose of excess inventory </li></ul></ul><ul><li>B2B reverse auctions </li></ul><ul><ul><li>Provide an effective procurement tool </li></ul></ul>
  39. 39. Summary (continued) <ul><li>New companies have formed that capitalize on the Web’s ability to bring together geographically dispersed people and organizations </li></ul><ul><li>Organizations are using mobile commerce to sell goods and services to users of handheld devices </li></ul><ul><li>Companies are using internal Web portals to communicate with employees </li></ul>

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