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Slide 1: Chapter 10 E-Auctions
Slide 2: Learning Objectives 1. 2. 3. 4. Define the various types of e-auctions and list their characteristics. Describe the processes involved in conducting forward and reverse e-auctions. Describe the benefits and limitations of e-auctions. Describe some unique e-auction models. Electronic Commerce Prentice Hall © 2006 2
Slide 3: Learning Objectives 1. 2. 3. 4. 5. Describe the various services that support e-auctions. Describe the hazards of e-auction fraud and discuss possible countermeasures. Describe bartering and negotiating. Describe e-auction deployment and implementation issues. Analyze future directions of mobile e-auctions. Electronic Commerce Prentice Hall © 2006 3
Slide 4: Fundamentals of Dynamic Pricing and E-Auctions auction Market mechanism by which buyers make bids and sellers place offers; characterized by the competitive and dynamic nature by which the final price is reached electronic auctions (e-auctions) Auctions conducted online dynamic pricing Prices that are determined based on supply and demand relationships at any given time Electronic Commerce Prentice Hall © 2006 4
Slide 5: Exhibit 10.1 Types of Dynamic Pricing Electronic Commerce Prentice Hall © 2006 5
Slide 6: Fundamentals of Dynamic Pricing and E-Auctions • One Buyer, One Seller • – – Popular in B2B Each party can use negotiation, bargaining, or bartering The resulting price will be determined by: • • • Bargaining power Supply and demand in the item’s market Business-environment factors Electronic Commerce Prentice Hall © 2006 6
Slide 7: Fundamentals of Dynamic Pricing and E-Auctions One Seller, Many Potential Buyers forward auction An auction in which a seller offers a product to many potential buyers sealed-bid auction Auction in which each bidder bids only once; a silent auction, in which bidders do not know who is placing bids or what the prices are Vickrey auction An auction in which the highest bidder wins 7 Electronic Commerce pays only the second-highest bid Prentice Hall © 2006 but •
Slide 8: Exhibit 10.2 Types of Forward Auctions Electronic Commerce Prentice Hall © 2006 8
Slide 9: Fundamentals of Dynamic Pricing and E-Auctions • One Buyer, Many Potential Sellers reverse auction Auction in which the buyer places an item for bid (tender) on a request for quote (RFQ) system, potential suppliers bid on the job, with the price reducing sequentially, and the lowest bid wins; used mainly in B2B and G2B ecommerce Electronic Commerce Prentice Hall © 2006 9
Slide 10: Fundamentals of Dynamic Pricing and E-Auctions • One Buyer, Many Potential Sellers – – – B2B Reverse Auctions C2C Reverse Auctions “Name-Your-Own-Price” Model “name-your-own-price” model Auction model in which would-be buyers specify the price (and other terms) they are willing to pay to any willing seller; a C2B model, pioneeredHall © 2006 by Priceline.com 10 Electronic Commerce Prentice
Slide 11: Fundamentals of Dynamic Pricing and E-Auctions • Many Sellers, Many Buyers – Buyers and their bidding prices are matched with sellers and their asking prices based on the quantities on both sides and the dynamic interaction between the buyers and sellers Electronic Commerce Prentice Hall © 2006 11
Slide 12: Benefits, Limitations, and Strategic Uses of E-Auctions • Benefits of E-Auctions – Benefits to Sellers • Increased revenues • Optimal price setting • Removal of expensive intermediaries • Better customer relationships • Liquidation • Lower transaction costs • Lower administrative costs Prentice Hall © 2006 12 Electronic Commerce
Slide 13: Benefits, Limitations, and Strategic Uses of E-Auctions • Benefits of E-Auctions – Benefits of E-Auctions to Buyers • Opportunities to find unique items and collectibles • Lower prices • Entertainment • Anonymity • Convenience Electronic Commerce Prentice Hall © 2006 13
Slide 14: Benefits, Limitations, and Strategic Uses of E-Auctions • Benefits of E-Auctions – Benefits to E-Auctioneers • Higher repeat purchases • A stickier Web site • Expansion of the auction business Electronic Commerce Prentice Hall © 2006 14
Slide 15: Benefits, Limitations, and Strategic Uses of E-Auctions • Limitations of E-Auctions – – – – – – – – Possibility of fraud Limited participation Security Auction software Long cycle time Monitoring time Equipment for buyers Order fulfillment costs Electronic Commerce Prentice Hall © 2006 15
Slide 16: Benefits, Limitations, and Strategic Uses of E-Auctions • Strategic Uses of Auctions and Pricing Mechanisms – Through dynamic pricing, buyers and sellers are able to adjust pricing strategies and optimize product inventory levels very quickly • • Suppliers can quickly flush excess inventory and liquidate idle assets Buyers may gather the power to procure goods and services at the prices they desire Electronic Commerce Prentice Hall © 2006 16
Slide 17: The “Name-Your-Own-Price” C2B Model • Enables consumers to achieve significant savings by naming their own price for goods and services Same concept as C2B reverse auction, in which vendors bid on a job by submitting offers and the lowest priced vendor or the one that meets the buyer’s requirements gets the job • Electronic Commerce Prentice Hall © 2006 17
Slide 18: Exhibit 10.4 The E-Auction Process Electronic Commerce Prentice Hall © 2006 18
Slide 19: The E-Auctions Process and Software Support • Phase 1: Searching and Comparing – – Finding When and Where an Item Will Be Auctioned Auction Aggregators and Notification auction aggregators Companies that use software agents to visit Web auction sites, find information, and deliver it to users – – Browsing Site Categories Basic and Advanced Searching Prentice Hall © 2006 19 Electronic Commerce
Slide 20: The E-Auctions Process and Software Support • Phase 2: Getting Started at an Auction – – – Registration and Participants’ Profiles Listing and Promoting Pricing Bid Watching and Multiple Bids • Phase 3: Bidding – sniping Entering a bid during the very last seconds of an auction and outbidding the highest bidder (in the case of selling items) Electronic Commerce – Proxy Bids Prentice Hall © 2006 20
Slide 21: The E-Auctions Process and Software Support • Phase 4: Post-auction Follow-Up – Post-auction activities • • • • Bidding notifications End-of-auction notices Seller notices Postcards and thank-you notes Chat groups Mailing lists Message boards Prentice Hall © 2006 21 – User communication • • • Electronic Commerce
Slide 22: The E-Auctions Process and Software Support • Phase 4: Post-auction Follow-Up – – – Feedback and ratings Invoicing and billing Payment methods • • • P2P transfer service Escrow service Credit card payment – Shipping and postage Electronic Commerce Prentice Hall © 2006 22
Slide 23: The E-Auctions Process and Software Support • Additional Terms and Rules vertical auction Auction that takes place between sellers and buyers in one industry or for one commodity auction vortals Another name for a vertical auction portal Electronic Commerce Prentice Hall © 2006 23
Slide 24: Double Auctions, Bundle Trading, and Pricing Issues single auction Auction in which at least one side of the market consists of a single entity (a single buyer or a single seller) double auction Auction in which multiple buyers and sellers may be making bids and offers simultaneously; buyers and their bidding prices and sellers and©their asking prices are Electronic Commerce Prentice Hall 2006 matched, considering the quantities on both 24
Slide 25: Double Auctions, Bundle Trading, and Pricing Issues bundle trading The selling of several related products and/or services together Prices in Auctions: Higher or Lower? – Pricing Strategies in Online Auctions • Sellers have the option to use different auction mechanisms, such as English, Dutch, sealed-bid first price, and sealed-bid second price Buyers should develop a strategy regarding how much to increase a bid and when to stop bidding Prentice Hall © 2006 25 • • Electronic Commerce
Slide 26: E-Auction Fraud and Its Prevention • Types of E-Auction Fraud bid shielding Having phantom bidders bid at a very high price when an auction begins; they pull out at the last minute, and the bidder who bid a much lower price wins shilling Placing fake bids on auction items to artificially jack up the bidding price Electronic Commerce Prentice Hall © 2006 26
Slide 27: E-Auction Fraud and Its Prevention • Types of E-Auction Fraud – – – – – – Fake photos and misleading descriptions Improper grading techniques Bid siphoning Selling reproductions as originals Failure to pay Failure to pay the auction house Electronic Commerce Prentice Hall © 2006 27
Slide 28: E-Auction Fraud and Its Prevention • Types of E-Auction Fraud – – – – – – High shipping costs and handling fees Failure to ship merchandise Loss and damage claims Fake escrow services Switch and return Other frauds Electronic Commerce Prentice Hall © 2006 28
Slide 29: E-Auction Fraud and Its Prevention • Protecting Against E-Auction Fraud – – – – – – User identity verification Authentication service Grading services Feedback forum Insurance policy Escrow services Electronic Commerce Prentice Hall © 2006 29
Slide 30: E-Auction Fraud and Its Prevention • Protecting Against E-Auction Fraud – – – – – Nonpayment punishment Appraisal services Physical inspection Item verification Other security services Electronic Commerce Prentice Hall © 2006 30
Slide 31: Bartering and Negotiating Online • Bartering Online bartering The exchange of goods and services electronic bartering (e-bartering) Bartering conducted online, usually by a bartering exchange Electronic Commerce Prentice Hall © 2006 31
Slide 32: Bartering and Negotiating Online • Negotiation and Bargaining online negotiation A back-and-forth electronic process of bargaining until the buyer and seller reach a mutually agreeable price; usually done by software (intelligent) agents Electronic Commerce Prentice Hall © 2006 32
Slide 33: Bartering and Negotiating Online • Negotiation and Bargaining – Technologies for Electronic Bargaining 1. Search 2. Selection 3. Negotiation 4. Continuing selection and negotiation 5. Transaction completion Electronic Commerce Prentice Hall © 2006 33
Slide 34: Issues in E-Auction Implementation • Using Intermediaries – The following are some of the popular third-party auction sites: • General sites • Specialized sites • B2B-oriented sites • • Using Trading Assistants Auction Rules Prentice Hall © 2006 34 Electronic Commerce
Slide 35: Issues in E-Auction Implementation • • • • Strategic Issues Auctions in Exchanges Infrastructure for E-Auctions – – – Building Auction Sites Pigs in Singapore and Taiwan Livestock in Australia Auctions on Private Networks Electronic Commerce Prentice Hall © 2006 35
Slide 36: Exhibit 10.6 Integrated Auction Business Model Electronic Commerce Prentice Hall © 2006 36
Slide 37: Exhibit 10.7 Auctioning Pigs in Singapore Electronic Commerce Prentice Hall © 2006 37
Slide 38: Mobile E-Auctions and the Future of Auctions • Benefits and Limitations of Mobile Auctions – Benefits • Convenience and ubiquity • Privacy • Simpler and faster – Limitations • Visual quality • Memory capacity • Security Electronic Commerce Prentice Hall © 2006 38
Slide 39: Mobile E-Auctions and the Future of Auctions • The Future of E-Auctions – – – Global Auctions Selling Art Online in Real-Time Auctions Strategic Alliances Electronic Commerce Prentice Hall © 2006 39
Slide 40: Managerial Issues 1. Should we have our own auction site or use a third party site? 2. What are the costs and benefits of auctions? 3. What auction strategies would we use? 4. What about support services? Electronic Commerce Prentice Hall © 2006 40
Slide 41: Managerial Issues 1. 2. 3. 4. What would we auction? What is the best bartering strategy? How can we promote our auction? Should we combine auctions with other models? Electronic Commerce Prentice Hall © 2006 41
Slide 42: Summary 1. The various types of auctions and their characteristics. 2. The processes of forward and reverse auctions. 3. Benefits and limitations of auctions. 4. Unique auction models. Electronic Commerce Prentice Hall © 2006 42
Slide 43: Summary 1. Services that support auctions. 2. Hazards of e-auction fraud and countermeasures. 3. Bartering and negotiating. 4. Auction deployment and implementation. 5. Future directions and the role of mobile auctions. Electronic Commerce Prentice Hall © 2006 43