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Online Auction Sites In Taiwan

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    Online Auction Sites In Taiwan Online Auction Sites In Taiwan Document Transcript

    • International Journal of Information Management 22 (2002) 127–142 A study of online auction sites in Taiwan: product, auction rule, and trading type Kai Wang*, Eric T.G. Wang, Chi-Feng Tai Department of Information Management, National Central University, Chung-Li 320, Taiwan, ROC Abstract As the Internet grows rapidly, traditional transaction mechanisms like auctions have been imported to the online world. This study focuses on online auction sites in Taiwan, investigating products, auction rules, and trading types adopted by these sites. Based on the three layers of value creation in the Rayport–Sviokla model, results from the 25 sites show that brand-new products are offered more than used ones, and easily describable products are more popular. For auction types, English is the most common one. On the other hand, consumer-to-consumer (C-to-C) trading types are more popular than business-to-consumer (B-to-C) counterparts. Also, most auction site owner’s act as intermediaries only. With respect to product delivery, participants usually have to manage the delivery process themselves. The cross-analyses between trading types and product types and between roles of site owners and number of product categories provided are also conducted. Managerial implications and future research directions are discussed. r 2002 Published by Elsevier Science Ltd. Keywords: Internet; Online auction; Trading type; Rayport–Sviokla model 1. Introduction An auction market is a place that simultaneously provides centralized procedures to all market participants for purchase and sales orders (Lee, 1996). In auction markets, trading participants’ interactions and transactions are governed by specified procedures and rules (Klein, 1997). Auction markets differ from market maker markets in that in the latter, bids and offers submitted depend on the role of brokers, making direct order matching impossible (Picot, Bortenlaenger, & Roehrl, 1995; Lee, 1996). However, in auction markets, the need for intermediaries or brokers to locate compatible orders may be eliminated, meaning that two orders may directly meet in the market (Picot et al., 1995). *Corresponding author. Tel.: +886-3-4267265; fax: +886-3-4254604. E-mail addresses: kwang@im.mgt.ncu.edu.tw (K. Wang), ewang@im.mgt.ncu.edu.tw (E.T.G. Wang), jeffery@im.mgt.ncu.edu.tw (C.-F. Tai). 0268-4012/02/$ - see front matter r 2002 Published by Elsevier Science Ltd. PII: S 0 2 6 8 - 4 0 1 2 ( 0 1 ) 0 0 0 5 0 - 0
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 128 The emergence of the Internet allows direct contact between buyers and sellers (Benjamin & Wigand, 1995; Wigand & Benjamin, 1995; Choi, Stahl, & Whinston, 1997), and makes itself a suitable and popular place for conducting auctions, which are usually called online auctions. The popularity of online auctions is evidenced by the lists provided in directories such as Internet Auction List (http://www.internetauctionlist.com/) and AuctionGuide.com (http://www.auctionguide.com/), and according to Nielsen NetRatings (2001), auction sites grossed record revenues of 556 millions in May 2001. Unlike traditional auction markets that only deal with limited (or specific) categories of objects, online auction markets provide the opportunity of buying and selling almost all kinds of products. Consequently, online auction has also become a topic receiving much research attention, e.g. Rachlevsky-Reich, Ben- Shaul, Chan, Lo, and Poggio (1999), Teich, Wallenius, and Wallenius (1999), and Budish and Takeyama (2001). Take the famous Internet auction site, eBay (http://www.ebay.com/), for example. eBay ranks No. 1 in Time magazine’s choice of best cyber-technology in 1999 (Anonymous, 1999) and provides items for sale in more than 4500 categories, with over 600,000 new items everyday.1 Consequently, eBay has even been described as an economic phenomenon second to the stock market (Anonymous, 1999). There are many online auction sites other than eBay on the Internet, and they sell products in various categories, like antiques, books, computers, real estates, etc. With this number of choices, online auctions have not only changed the parameters of traditional auctions, but also provided the sellers with more degrees of freedom (Beam, Segev, & Shanthikumar, 1996). (In fact, what Beam et al. (1996) neglected is that not only the sellers but also the buyers are provided with more choices and flexibility in an online auction site.) Compared with the rapid and prosperous growth of online auctions in US, what is the situation in Taiwan? As the Net population exceeds three millions at the end of 1999 (NII Steering Committee, 1999), and as more people gradually get used to conducting business on the Internet, online auctions as a form of online transactions other than pure online shopping also grow rapidly. This study investigates the characteristics of online auction sites currently operating in Taiwan, reporting what they trade and how they trade. Due to research limitations, this study focuses on the site owners’ perspectives only. Consumer auction behavior is not the aim of this study. If possible, however, consumer behavior in the online auction environment might also be an interesting topic for further research, since in such an environment traders do not meet each others face to face, making interpersonal interaction like observing others’ reactions impossible (e.g. Kambil & Van Heck, 1998). This study analyzes online auctions from the perspective of the Rayport–Sviokla model (Rayport & Sviokla, 1994), which describes how customer value can be created in the marketspace at three layers: content, context, and infrastructure. These three layers form the basis for analyzing the operation of online auction sites in the study. The remainder of the article is as follows. In Section 2, auction types and online auctions are introduced. Section 3 introduces the Rayport–Sviokla model, which forms the analytical basis of the study. Section 4 describes the sampling and coding procedures of the web sites surveyed, and Section 5 analyzes the data collected. Findings and results are discussed in Sections 6 and 7 provides the conclusion. 1 http://pages.ebay.com/community/aboutebay/overview/benchmarks.html, accessed July 9, 2001.
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 129 2. Online auctions Auctions have a long history in human society. An auction is ‘‘a market institution with an explicit set of rules determining resource allocation and prices on the basis of bids from the market participants’’ (McAfee & McMillan, 1987, p. 701). Such mechanism sets out rules for bidding and allocates the goods to a certain bidder based on the predefined rule set (Klein, 1997; Segev & Beam, 1998). Since the primary variable negotiated during the auction process is often price alone, it thus can also be viewed as a resource allocation mechanism for buyers and sellers to compete on price for specific products (Bierman & Fernandez, 1993). Auctions proceed differently with different rules. In general, they can be divided into sealed-bid auctions and open auctions. The difference between these two types of auctions is that in sealed auctions, competitive bidders do not know each other’s bids while in open auctions the bidders do. Beam and Segev (1998) and Bichler and Segev (1998) summarize the auction types in each category: 2.1. Sealed-bid auctions First price sealed bid: Bidders submit their sealed bid for the item. The bids will be opened simultaneously later, and the bidder who offers the highest price is declared as the winner. The winner pays at the bid price. Sealed double auction: Buyers and sellers simultaneously submit bids. The auctioneer determines a market-clearing price and matches the buyers and sellers. Vickrey: Bidders submit their sealed bid in advance. The bidder who offers the highest price will be declared as the winner, but he/she pays at the second-highest price. (Vickrey is similar to first price sealed bid except the price paid.) 2.2. Open auctions English: Bidders continuously raise their bids during the auction process until only one bidder with the highest price remains. During the process, bidders can see others’ bids and update theirs accordingly. The one who offers the highest price wins and pays at the bid price. Dutch: The auctioneer calls out descending prices, and the bidders have to decide whether they want to buy at current price or wait until it drops to a lower level. The winner is the first bidder to call out and pays at the current price. It is noted that in the study, the term ‘‘online auctions’’ refers specifically to the auctions conducted on the Internet, although other forms of electronic or online auctions are possible, e.g., the pig auction market in Taiwan and Singapore (see Neo, 1992), the Dutch flower auction market (see Heezen & Baets, 1996; Van Heck & Ribbers, 1996, 1997; Kambil & Van Heck, 1998), and the AUCNET in Japan (see Lee, 1997, 1998). Although most online auctions conducted on the Internet adopt traditional auction types, due to the limitations of the network environment, slight modifications are common (Beam & Segev, 1998). For example, in the traditional English auctions, bidders gather together for bidding. In that context, bidders may observe their competitors’ gestures or demeanors and then call out their bids accordingly (and strategically, if necessary). However, with the introduction of information
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 130 technology such as the video (e.g. Heezen & Baets, 1996; Kambil & Van Heck, 1998) and the Internet, the situation is quite different. Kambil and Van Heck (1998) argue that due to the incapability of capturing the nonprice information, the introduction of Vidifleur by Flower Auction Holland was unsuccessful. To compensate for similar shortcomings, some online auction sites allow or even encourage bidders to postmessages or comments regarding the bidding objects or to their trading partners. In addition to interpersonal interactions, the bidding process of online auctions may also be slightly different from the traditional ones. Take English online auctions for example, the closing of auctions is usually based on time (Turban, 1997; Beam & Segev, 1998). That is, the bidding continues, say, for a week. During the one-week period, bidders are free to call out and adjust their bid prices. At the end of the predetermined period, the bidding will be closed regardless of whether any bidders are still interested in calling out further bids. With the interesting and multiplicity shown in online auction sites, this study investigates what and how online auctions trade with a focus on the sites hosted in Taiwan. The following section first introduces the Rayport–Sviokla model, which forms the analytical basis of the study. 3. Rayport–Sviokla model Rayport and Sviokla (1994) emphasize the importance of information in the marketspace relative to the traditional marketplace. Due to the separation of information about the products or services from the physical product or service, information in the marketspace sometimes is as critical for a company’s profits as the physical products or services. Taking the Japanese AUCNET as an example, Rayport and Sviokla argue that the difference between the marketspace and the marketplace is the separation of the three layers, content, context, and infrastructure, in consumer value creation. The model proposed is depicted in Fig. 1. Customers Customers Exchange Exchange Content Content Brand Brand Context Context Infrastructure Infrastructure Marketplace Marketspace Fig. 1. Value creation in the marketspace. Source: Rayport and Sviokla (1994).
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 131 These three layers represent the basic elements of customer value creation in the marketspace. According to Rayport and Sviokla (1994, p. 142), ‘‘in a information-defined transaction space, customers learn about products differently, buy them differently, and have them delivered differently’’. Thus, Rayport and Sviokla disaggregate customer value creation in the marketspace into content, context, and infrastructure. With the aids of information technology, marketers may bring values to their customers from these three layers separately, while in a traditional marketplace, customer value comes from the aggregation of these three layers. Newspaper is an example in the traditional marketplace, which customers cannot access the contents without interacting with the context (e.g. format, political position, etc.) and the infrastructure (delivered by the newsboy or bought from the newsstand). AOL, however, is an example of value creation in the marketspace. It provides contents from numerous newspaper publishers with customizable viewing context and numerous ways of online access (e.g. dial-up lines, LANs, etc). Mapping the model into online auctions, the top two layers, content and context, become interesting and important. Content relates to the products that are bid, whereas context relates to the circumstances of bidding, i.e., the processes in which online auctions proceed. With respect to infrastructure, two issues are of concern: Internet connection and product delivery. Since the ways of connecting to the Internet are not limited and are usually not under the control of auction site owners, they are not analyzed in the study. As for product delivery, this study will investigate the ways the auction site owners manage the product delivery process, because it usually is an issue that customers care about. During the coding process, we will focus on the content (products) and the context (process) aspects of the online auction sites in Taiwan. With respect to the infrastructure, as mentioned above, only product delivery is coded, according to whether the delivery is managed by the auction site owners or by the auction participants. Fig. 2 depicts the issues analyzed according to the Rayport–Sviokla model. In Fig. 2, the values created by auction site owners can be seen as synthesized from the three layers. In each individual layer, the analysis will focus on product types offered (content), trading Value Creation Content of Auction Product types and categories Site Owner Context Auction and trading types and roles of site owners Infrastructure Product delivery Fig. 2. Value creation in an auction site.
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 132 types adopted (context), and product delivery mechanisms offered (infrastructure). Online auction participants interact with the auction sites and variety in values created differ as each site owner holds different policies in each layer. Differences in these policies will thus be analyzed in the following sections of this paper. In the content layer, product types such as brand-new or used ones as well as product categories offered will be investigated. In the context layer, the focus will be on auction mechanisms relevant to participant interactions, including auction types, trading types, and roles of auction site owners. In the third layer, the infrastructure, attentions will be paid to how products are delivered to auction winners. The three layers and the issues investigated are seen as forming the basis for value creation of an auction site. Under that presumption, a content analysis of auction sites in Taiwan was conducted. The sampling and coding procedures of the study are discussed in Section 4. 4. Sampling and coding procedures To obtain a list of online auction web sites as complete as possible, this study searched with the keyword ‘‘auction’’ (in Chinese) using the following search engines: Yam (http:// www.yam.com.tw/), Kimo (http://www.kimo.com.tw/), and Yahoo! (http://tw.yahoo.com/). These search engines were used because they are well known and thus hopefully could provide a more complete list of auction sites. Data collection was conducted on January 21, 2000, and 82 URLs were found. However, to get a valid list of URLs, the following conditions need to be considered: (1) It is common for identical web site URLs to be registered in more than one search engine directories. (2) Some entries in search results are actually hosted in Hong Kong or Mainland China. (The latter cases usually present GB-encoded web pages.) (3) Some URLs may be out-of-date, and hence the sites may no longer exist. With these conditions in mind, special checks were made to identify duplicate entries. HK- and Mainland China-hosted sites and unavailable sites are discarded. Among the URL list, 35 are duplicated, five unavailable (host may be down or nonexistent), and five host in HK or Mainland China. An entry recognized from its description as a British site was also dropped. Later during the process of this study, another 11 sites were also dropped from the list: nine because of not in a bidding-style, one under construction, and one not providing online bidding. Excluding these invalid sites, 25 valid entries remained. For each auction site, information regarding both the products it offers and the process it runs the auction were recorded. For products, each site was investigated for whether it provides used or brand-new products; the availability of single or multiple product categories; and the list of product categories. For processes, auction types used were recorded. Other recorded data include trading types (C-to-C, B-to-C, or B-to-B), role of the site owners (intermediary/market maker or producer), delivery methods, and evaluation policy.2 The coding form used for recording the above information is available from the authors. 2 The coding form used for recording the above information is available from the authors.
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 133 5. Data analysis 5.1. The products Of the 25 sites investigated, ten of them (40%) offer brand-new products for auction, nine (36%) offer used products, and six (24%) offer both. The used products typically are provided by the registered members of a site instead of its owner, i.e., the members provide their used goods for sale via online auctions. As for the brand-new products, the site owner either is the producer or simply acts as a market maker who provide a place for running auctions. Table 1 shows the summary of product types offered on those auction sites. With respect to product categories, seven sites offer only one product category, while the other 18 provide multiple ones. For those sites offering only one product category, the typical products offered include electronics and communication products, computer hardware, music CD’s, etc. Table 2 summarizes the product categories offered by the 25 sites investigated in the study. As shown in Table 2, Computer hardware/software, Electronics and communication products, and Family appliances are the top three product categories offered on the auction web sites in Table 1 Offered products Frequency Percentage (%) Brand-new 10 40 Used 9 36 Both 6 24 Table 2 Product categories Frequency Brand-new Used a 1 Computer hardware/software 18 10 14 Electronics and communication productsa 2 18 10 14 3 Family appliances 18 9 15 Booksa 4 15 7 13 AV mediaa 5 14 9 11 6 Vehicles 14 6 13 Othersa 7 14 6 13 Collectibles and artsa 8 12 6 11 9 Travel and recreation 12 7 9 10 Jewelry and life accessories 12 7 9 11 Sports 11 7 9 12 Beauty and health care 8 6 7 13 Home and office furniture 7 3 6 14 Toys 7 4 6 15 Camera and equipment 6 2 6 16 Real estate 5 2 5 a Categories offered by one-category-only sites.
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 134 Taiwan. Examining the product categories in Table 2 in rank order (excluding the row indicating ‘‘others’’), an interesting observation can be made that, roughly, the higher the rank, the easier to describe the product specifications. That is, the quality of the products ranked higher in the list tends to be more standardized and less influenced by personal tastes and experiences. For example, it is easier to describe the ‘‘specification’’ of a computer or a mobile phone than a travel plan. Thus, it is clear that online auctions are more viable for selling products that are relatively standardized or easier to specify. This observation will be discussed further in Section 6. A cross-analysis of the types and the categories of the product shows that for both brand-new and used products, those more commonly traded via online auctions roughly conform to the rank order described above. On the other hand, Table 2 also shows that for all product categories, the frequency of used products traded is higher than that of brand-new ones. In fact, since traditional channels for trading used products are limited, compared to those of the brand-new ones, it should not be surprising to observe that online auctions have become a major channel for trading used products. 5.2. The auction process As indicated by other studies (e.g. Beam & Segev, 1998), English auction is by far the most common auction type on the Internet. This fact is also revealed in Table 3, which shows the auction types adopted by the 25 sites surveyed. The other less commonly adopted type is the Dutch auction, offered by only one site in our sample. The reason why English auction is so widely adopted is probably due to its simple rules, making bidders easier to comprehend and participate in the auctions, especially for the novice participants.3 Also, since the possibility of fraud is one of the major limitations of online auctions (Turban, 1997, National Fraud Information Center, 2000), English auction may have another advantage of building trust toward online auctions for its openness in price information. Of the 25 sites surveyed, only one of them offers real-time online auctions. For this case, the price shown in the web page varies by seconds, and buyers have to decide whether to buy a product at the price currently shown. Another interesting point is that 8 out of the 25 sites offer bidding prices starting from NT$1 (about US$ 3 cents). The $1 bidding price seems to be a popular strategy for online auction sites to attract more participants, even though the final closing price is often close to the market price. For trading types, the sites are separated into C-to-C only, B-to-C only, and both (no sites investigated in this study trade in B-to-B style). The difference between C-to-C and B-to-C depends on the provider of the products. If it is individuals who provide the products, then the site operates a C-to-C trading; if it is the auction site owner or other companies who provide the products, then the site operates a B-to-C trading. Among the sites investigated, eleven provide C- to-C trading, 10 provide B-to-C trading, and four provide both types (see Table 4). In a C-to-C trading, individuals offer the products to be traded, and the products usually are used ones. In a B-to-C trading, the products typically are brand-new, but not necessarily produced by the site owner. Also, 23 sites act as intermediaries only and the other two are operated by the producers 3 A site in our sample also indicates this point in their FAQ pages.
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 135 Table 3 Auction types Frequency Percentage (%) Sealed-bid auctions First price sealed bid 0 0 Sealed double auction 0 0 Vickrey 0 0 Open auctions English 25 100 Dutch 1 4 Table 4 Trading types and roles of site owners Frequency Percentage (%) Trading types C-to-C 11 44 B-to-C 10 40 Both 4 16 Roles of site owners Intermediary/market maker 23 92 Producer 2 8 Table 5 Evaluation policy Frequency Percentage (%) Evaluation by sellers 9 36 Evaluation by buyers 9 36 Online comments 6 24 themselves. That is, the 23 intermediary sites exist simply to offer a place to ‘‘facilitate’’ the trading of the products, whether in C-to-C or in B-to-C styles, while the other two build online storefronts to sell their own products. With regard to the evaluation policy of the auction sites, some auction sites provide evaluation systems. With an evaluation system, auction participants may post personal evaluations to their trading partners, according to past trading experiences with them. Evaluations may be from either the buyer-side or the seller-side, as shown in Table 5. Thus, both buyers and sellers may get an email requesting for evaluation after each auction has been successfully closed. In some sites, participants may also give their evaluations at their own will on the auction web pages. There are still some sites that even let the bidders postonline comments regarding a particular item, such as their opinions or their begging for letting him/her win the auction.
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 136 5.3. Delivery of products The delivery of products is important when the deal is made. If the auction site ‘‘guarantees’’ the delivery of products, either by express delivery or by the producer of the products, then it is coded as delivery by site owner. Otherwise, auction participants have to arrange the delivery themselves. Of the 25 sites, only four manage/guarantee the delivery of products, including the two producers sites. The results are summarized in Table 6. 5.4. Cross-analysis To gain additional insights into the data collected, the cross-analyses between the trading types and the product types, and between the roles of site owners and the number of product categories provided are conducted, which are shown in Tables 7 and 8, respectively. Comparing the products traded in C-to-C markets with those traded in B-to-C markets, C-to-C markets provide more used products, while B-to-C markets provide more brand-new ones. As mentioned above, the difference between C-to-C and B-to-C transactions lies in the role of the product providers. Since items provided by individuals are usually used, it is understandable that most products traded in C-to-C markets are used ones. On the other hand, in B-to-C markets, the higher number of brand-new products comes from the fact that those products are provided by manufacturers directly, or indirectly with site owners as intermediaries. Table 8 shows that most site owners who act as an intermediary provide more than one product category. For those providing only a single category, five are intermediaries, and two are product producers. In fact, the two product producers are also the only two producers who run their auction site as an alternative distribution channel. For intermediaries, however, the selection of the number of product categories diverges. Some choose only one, but some choose as many as 15. In fact, the number may be even higher if we dig into the ‘‘others’’ category. Of course, no matter how many product categories are provided, the Table 6 Delivery of products Frequency Percentage (%) Delivery by site owner 4 16 Participant-managed 17 68 Unknown 4 16 Table 7 Cross-analysis between trading types and brand-new/used products Brand-new Used Trading types C-to-C 6 15 B-to-C 14 4
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 137 Table 8 Cross-analysis between roles of site owners and number of product categories provided Number of product categories provided 1 5 6 8 9 10 11 13 14 15 Roles of site owners Intermediary/market maker 5 1 1 1 5 3 3 1 1 2 Producer 2 most important thing for the site owners is to attract as many online surfers as possible to participate in auctions and to build and enhance their trust and loyalty, so that the likelihood of repeated visits can be increased. 6. Discussion Based on the findings described in Section 5, some interesting points emerge and are discussed below. The discussion is separated into four sections: product, auction rule, trading type, and automated auction process. 6.1. Product What are the popular or typical products offered in the online auction markets? As described by Malone, Yates, and Benjamin (1987), products with simple product description will have a better fit with the market mechanism. Inspecting Table 2, we can also find similar facts. Since online bidders are unable to view, inspect, or feel the products personally, what make them decide whether or not to bid the product at a specific price usually are some standardized and hence easy- to-recognize attributes, such as CPU clock speeds, hard disk drive capacities, mobile phone brands and specifications, etc. These attributes form the primary cues that guide their decisions in the auction process. Thus, products with easily described or standard specifications should be more popular in online auctions. It is particularly true for used products. Consequently, it is natural to see that products such as computers hardware/software, electronic products, and family appliances are among the most frequently traded products in online auctions. Beam and Segev (1998) indicate the features shared by popular products offered by Internet- based auction sites: (1) easy to describe and understand over the Internet; (2) easy to deliver; (3) medium-valued, more than a pencil, less than a house. Do services fit in online auctions? According to the data collected in this study, no site provides such a category. The study of Chui and Zwick (1999) also shows that auctions for services are not as popular as other products. Such fact may be due to the difficulty of quality assurance and the required timeliness of services. Compared with online shopping, online auction participants should have higher product involvement (which enables them to determine the product quality and the appropriate price level), hence how to make the products easily appraised and valued becomes important. With higher product involvement, the participants care more about the central cues of the products
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 138 (Petty & Cacioppo, 1984), meaning that the purchasing decisions are primarily based on deliberate reasoning and thinking. Clear, concrete, and precise product descriptions may help in that aspect. Another issue is the number of product categories provided in a site. As discussed in Section 5.1, seven sites offer only one product category. A further cross-analysis between the role of site owner and the number of product categories reveals that for the sites that offer more than one category, all of them act as intermediaries. However, of the seven sites that offer only one category, two are product producers. This means that, in our sample, if the auction site is run by the producer itself, the only products available are of their own brand. Chui and Zwick (1999) explain the selection of such focused strategy as caused by ‘‘the difficulty of sourcing too many types of merchandise’’ and ‘‘the importance of establishing the brand name among cyber-stores’’ (p. 9). In fact, it is observed that the main reason should be those product producers see online auction simply as another channel for product distribution, an extension from the traditional retailers. On the other hand, they also run the risk of competition if other brands are also available in their sites. Since differentiation as well as branding are important issues facing online auctions (Ellington, Ficeli, Jaturaputpaibul, & Kellam, 1998), establishing a strong brand to differentiate from competitors while at the same time enhancing consumer trust becomes important. This might be the reason why those producers offer only their own products instead of carrying a broad range of product categories. Nevertheless, for other site owners who act as intermediaries, this should also be a point that they cannot ignore. The difference, however, is that, for the site owners, the branding issue involved should be establishing the brand of their sites rather than that of the products. 6.2. Auction rule English and Dutch auctions are the only two auction types found in the sites surveyed. However, in online auctions, Dutch auction has been applied with a slight modification. The price variation loops in a certain range instead of continuously dropping down. As mentioned earlier, the reason English auction has been widely adopted may be due to its ease of understanding. However, the potential of Dutch auction should not be neglected. Since most online bidders are only familiar with English auction, if with creative designs, Dutch auction may be another marketing strategy to attract more auction participants. As the bid price drops continuously, at what price should the bidder call out, not only to bid at the best acceptable price but also to be the first bidder to win the game? This type of auctions may be much more exciting and thus brings more funs into the auction process because a bidder does not know who his/her competitors are, nor does he/she know what these competitors are thinking because of the networking environment. Thus, auction site owners may offer a product everyday as a ‘‘special offer’’ using Dutch auction, and see how the market responds so as to evaluate whether to adopt Dutch auction as one of the site’s normal auction strategies. With respect to the roles played by the auction site owners, it is obvious that most of them only act as an intermediary or a market maker. They provide a ‘‘transaction space’’, acting as brokers between buyers and sellers, and usually are not involved in the physical delivery of products. That is, the owners conduct their businesses primarily in the content and context layers. Rayport and
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 139 Sviokla (1994) have pointed out the possibility of mixing and matching content and context as a content tie-in strategy to connect with consumers and raise their loyalty to a particular context. Once the loyalty has been built, ‘‘the potential for related transactions may be limited only by the imagination of the strategic members involved’’ (p. 149). For example, auction site owners may cooperate with producers to offer special product for auction each day or each week coupled with creatively designed bidding methods such as the Dutch auction. Or, winners of each auction may win coupons with face value determined according to the price differential earned during the auction process, which can be used in future auctions or in buying other products from the product producer. These strategies, in the hope of making a tie-in effect, may create opportunities for site owners to build a community-like environment, attracting more participants and strengthening their loyalty. 6.3. Trading type The B-to-B trading type does not exist in the 25 sites investigated. Businesses usually have a formal policy and procedure for procurement, and hence auction may not be a viable source for procurement because of the risks involved. Another reason might relate to the source from which we obtain the list of auction sites. Since most entries registered in search engines are usually consumer-related, B-to-B auction sites are thus less commonly seen (Beam & Segev, 1998). Although B-to-B auction sites do not exist in our list, this however is not the case for sites studied by Beam and Segev (1998) and Chui and Zwick (1999). Other than the two reasons described above, are there any possibilities that cause the difference? In fact, the industrial structure and the relationships between businesses in US are quite different from those in Taiwan where trust and habit play a larger part in transactions. On the other hand, the real values that can be gained from the Internet are unclear with the Internet applications still under development in Taiwan. Hence, it should be natural to rarely see B-to-B auction sites operating at this stage of Internet development in Taiwan. For example, due to currently unsolved cash and material flow problems in Taiwan, businesses would rather make a direct phone call or fax to get immediate services than spend their time and efforts in the online world. It is not only true with the direct goods that are critical to manufacturing but also true with those indirect goods (MRO; maintenance, repair and operation) such as stationery. However, as the E-Marketplace concept being promoted globally, the situation may change soon. In Taiwan, companies like Com2B (http://www.com2b.com.tw/), invested by Commerce One, Compaq and some local companies, will be in operation in the third quarter of 2000, aiming at building a global trading web (GTW4) in this area. Such B-to-B platform will be connected with other GTWs globally, providing an online marketplace platform for trading. Other than Com2B, ecom Software (http:// www.ecomsoft.com.tw/) and BeXcom Greater China (http://www.gc.bexcom.com/) are also aiming at building such centralized transaction platforms for businesses. In fact, once such platforms are widely accepted in the industry, the B-to-B auction may gain rapid popularity as a major procurement mechanism for businesses. 4 The GTW is a strategic vision and structure proposed by Commerce One, and is designed to be a global trading community, creating access to worldwide markets and allowing B-to-B transactions to occur at any time and any place in the world. Related information is available from http://www.globaltradingweb.net/.
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 140 6.4. Automated auction process Lastly, a special mechanism provided by several auction sites is noteworthy. Five of the auction sites investigated in this study allow bidders to activate automatic bidding. Automatic bidding is a mechanism in which bids are automatically placed with lowest increments. Participants set their highest acceptable price first, and then the ‘‘bidding agent’’ or ‘‘bidding wizard’’ will automatically place bids with minimum increments if any other participant had placed a bid higher than the agent’s previous bid. The agent continues to work until it wins the auction or the highest acceptable price has been reached. With automatic bidding, participants have a greater opportunity of winning an auction at the lowest possible price, while no longer having to care about the current status of bidding once the bidding agent is configured properly. This eases the workload and the cost of participation in bidding, and should be more popular in the future. 7. Conclusions The popularity of Internet continues to grow, forming an arena called electronic marketspace. The Internet has become a new battlefield in which new forms of transactions are conducted. Among them, auctions are an example. Auctions have existed for a long time in human history, and in the Internet world, they can also play an important role in online business. This study focuses on online auctions in Taiwan, investigating how online auctions have been applied in this area and providing implications of online auctions based on the Rayport–Sviokla Model (Rayport & Sviokla, 1994). It should be noted that due to the rapid growth of the Internet applications, the list obtained in this study would never be complete at any time. Nevertheless they do provide a view or a trend that enables us to gain insights into how auction mechanisms have been utilized in the cyberspace. With such limitation in mind, managerial implications and future research suggestions are provided below. 7.1. Managerial implications Analyzing from the content, context, and infrastructure layers, this study investigates how online auction web sites are operated. The result of the analysis not only helps to understand the status quo, but should also be able to provide some implications for practitioners. First, with respect to the products, auction site owners should pay attention to what products to be offered on their site. The rifle strategy, accommodating as many categories as possible, may on the one hand widen consumer choices, but may on the other ruin the site’s reputation once entanglements are aroused due to product description indeterminacy. Second, although English auction is the most widely adopted auction mechanism, Dutch auction, another type of open auctions, may also be implemented as a marketing strategy to make participants feel different. With more variety in auction mechanisms, Net surfers may be more motivated to participate in online auctions. Third, auction site owners may try mixing the content and the context to formulate competitive strategies or to gain competitive advantages. Returning back or discount coupons as mentioned previously may be a choice. Combining the content and the context creates a tie-in effect,
    • K. Wang et al. / International Journal of Information Management 22 (2002) 127–142 141 attracting more people to continuously participate in the auctions for whatever they may need. Hence, owners should first conduct an in-depth analysis of their own sites to discern the delineation and opportunities between the two layers, and then carefully design and implement the most suitable auction strategy. 7.2. Future research This study focuses on auction site owners’ perspectives. Future research may investigate how consumers act differently in the online auction environment. The analysis of consumer behavior in online auctions should also be of interest to researchers because of the differences between online and traditional auction circumstances. For example, online action, ranked No. 1 of Internet frauds in 1999 and 2000 (National Fraud Information Center, 2000), may be an important issue to study in the online environment. Plenty other issues, such as the setting of buy prices, are worthy of investigation (see Budish & Takeyama, 2001). Obviously, related research will not be replete if only one side is emphasized or paid attention to. With gradual accumulation of research results, a more thorough understanding of online auctions should result. Another possible future research direction is to perform comparative studies across different areas. In this study, we focus on online auction sites in Taiwan only. Researchers and practitioners may be interested in investigating the differences in content, context, and infrastructure adopted by auction sites in different areas or countries, taking into account the differences in cultures, industrial structures, interorganizational relationships, etc. Such an approach should be able to provide a more complete picture of online auctions on a global scale. References Anonymous (1999). The best cybertech of 1999. Time, 154(25), 113–114. Beam, C., & Segev, A. (1998). Auctions on the Internet: A field study. Working Paper 98-WP-1032, November /http:// haas.berkeley.edu/cmit/wp-1032.pdfS (Accessed June 5, 1999). Beam, C., Segev, A., & Shanthikumar, J. G. (1996). Electronic negotiation through Internet-based auctions. CITM Working Paper 96-WP-1019, December /http://haas.berkeley.edu/Bcitm/WP-1019.PDFS (Accessed January 19, 2000). Benjamin, R., & Wigand, R. (1995). Electronic markets and virtual value chains on the information superhighway. Sloan Management Review, 36(2), 62–72. Bichler, M., & Segev, A. (1998). A brokerage framework for Internet commerce. CMIT Working Paper 98-WP-1031 /http://haas.berkeley.edu/cmit/wp-1031.pdfS (Accessed June 5, 1999). Bierman, H. S., & Fernandez, L. F. (1993). Game theory with economic applications. Reading. MA: Addison-Wesley. Budish, E. B., & Takeyama, L. N. (2001). Buy prices in online auctions: Irrationality on the internet? Economic Letters, 72, 325–333. Choi, S. Y., Stahl, D. O., & Whinston, A. B. (1997). The economics of electronic commerce. Indianapolis: Macmillan. Chui, K., & Zwick, R. (1999). Auction on the InternetFa preliminary study /http://home.ust.hk/Bmkzwick/papers/ auction.pdfS (Accessed June 5, 1999). Ellington, D., Ficeli, D., Jaturaputpaibul, P., & Kellam, K. (1998). Issues facing consumer-oriented online auctions. eLab Student Projects & Papers /http://www2000.ogsm.vanderbilt.edu/Student.Projects/consumer.online.auctions/ start.htmlS (Accessed June 4, 1999). Heezen, J., & Baets, W. (1996). The impact of electronic markets: The case of the Dutch flower auctions. Journal of Strategic Information Systems, 5, 317–333.
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