The Role of Online Auctions in e commerce

May 24, 2017 Facebook Twitter LinkedIn Google+ Uncategorized


The Role of Online Auctions in e commerce

Experience has shown that online auctions play a very important role in e commerce. Online auctions (internet based activity used to negotiate prices) provide quick rewards on investments.  E-Auctions are invaluable marketing strategy designed to reduce the cost of goods and services.  E-Auctions take advantage of internet technology to help companies arrive at true market prices for products and services. Online auctions offer advantages to both buyers and sellers and can facilitate better commercial relationship between both parties.

The internet as a medium of exchange has come to stay. When it first made its way into the horizon, little did anyone know that it was going to change the method of buying and selling in a worldwide environment.  No one could think of the internet as a market place. Now with the internet being saturated with market, e commerce is taking a new dimension.  Companies on daily basis think of new ways to sell their products quickly to worldwide consumers. Consumers seek a way of purchasing products at the lowest price possible.

Hence, online auction fills this need. Businesses have seen the potential impact of online auction and have seen the need to adapt their entire strategy to take advantage of this potential. Internet markets are adjusting to the auction format for conducting transaction. Why have many businesses adopted web auctions for transaction? It is because online auctions have been found to be one of the most successful types of electronic markets.

A typical example of a successful online auction is eBay . The success of e auctions has given buyers access to larger product diversity with potentially lower prices. Online auctions have a remarkable impact on trading in B2B (business to business) , B2C (business to customer) and C2C (customer to customer)

There are basically two types of web auction a business may use. These are the English auction and the Dutch auction.


The English Auction

The English auction is considered the standard format. It takes the ascending order hence it is also known as the ascending price auction. The participants are the seller and the buyer. The seller sets a starting price known as the reserve price. The buyers bid higher and higher and the one with the highest bid wins the item and thus purchases it. Several businesses prefer this type of auction format as it is will help them reach a large market.

The Dutch Auction

A second auction option is the Dutch auction type. In the Dutch auction the buyer holds the auction while the seller bids. It is just a reverse of the English auction. It proceeds from a very high to low price instead of low to high.

The role of online auction in e commerce cannot be overemphasized.

  • It is a tool used by companies to sell excess inventory and overstocked items. Thus, excess inventory are turned into profit, made possible by online auction sites.
  • The market is open to global buyers and suppliers which lead to higher revenue.
  • Reduces transaction cost
  • Helps save costs
  • Provides market for second hand products
  • More efficient pricing is achieved
  • Less inventory
  • Offers buyers favorable purchasing condition
  • Online auctions are good for selling old stuffs