Page 319 - Electronic Commerce

Chapter 6

Online Auctions and Related Businesses
Millions of people buy and sell all types of goods on consumer auction sites each year.
Although the online auction business is changing rapidly as it grows, three broad
categories of auction Web sites have emerged: general consumer auctions, specialty
consumer auctions, and business-to-business auctions. Some industry analysts consider
the two types of consumer auctions to be business-to-consumer electronic commerce, but
others call it consumer-to-consumer or even consumer-to-business (because the bidders
at a general consumer auction might be businesses). This argument is based on the idea
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that many sellers in general consumer auctions are ordinary people (not businesses) who
use these auctions to sell personal items. Whether you prefer to think of online auctions
as business-to-consumer, consumer-to-consumer, or consumer-to-business, the largest
number of auction transactions occurs on general consumer auction sites.

General Consumer Auctions
The most successful consumer auction Web site today is eBay. Sellers and buyers must
register with eBay and agree to the site’s basic terms of doing business. Sellers pay eBay a
listing fee and a sliding percentage of the final selling price. Buyers pay nothing to eBay.
In addition to paying the basic fees, sellers can choose from a variety of enhanced and
extra-cost services, including having their auctions listed in boldface type and featured in
lists of preferred auctions.
In an attempt to address buyer concerns about seller reliability, eBay instituted a
rating system. Buyers can submit ratings of sellers after doing business with them. These
ratings are converted into graphics that appear with the seller’s nickname in each auction
in which the seller participates. Although this system is not perfect, many eBay bidders
feel that it affords them some protection from unscrupulous sellers. eBay also uses buyer
ratings of sellers to place restrictions on sellers (such as withholding funds for three
weeks) or, if the ratings are low enough, prohibit them from selling on eBay at all. The
converse is true also; sellers rate buyers, which provides sellers some protection from
unscrupulous buyers.
Although eBay does not release any statistics about buyer and seller frauds, most
industry observers agree that sellers face larger potential losses than buyers. Sellers’
greatest risks are from buyers who use stolen credit card numbers or who place the
winning bid but never contact the seller to conclude the transaction. Buyers’ risks include
sellers who never deliver or who misrepresent their merchandise. You will learn about
ways that sellers and buyers can protect themselves later in this chapter.
The most common format used on eBay is a computerized version of the English
auction. The eBay English auction allows the seller to set a reserve price. In eBay
English auctions, the bidders are listed, but the bid amounts are not disclosed until after
the auction is over. This is a slight variation on the in-person English auction, but because
eBay always shows a continually updated high bid amount, a bidder who monitors the
auction can see the bidding pattern as it occurs. The main difference between eBay and a
live English auction is that bidders do not see the details of the bidding history (which
bidders placed which bids when) until the auction is over. The eBay English auction also

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