Discover 6 Myths Surrounding Online Auctions

(PRWEB) January 19, 2006

Online Auctions are unmistakably among the hottest eSourcing technologies on the Internet business today. But what exactly is an online auction anyway and what are its benefits? According to The Pocket Oxford Dictionary, fourth edition (1942), an auction is a “public sale in which articles are sold to the highest bidder.” And if done on Internet it is online auction.

Online auctions are a great way to find a bargain on almost everything and it is an excellent way of getting the best price for selling something of your own. The seller sells the product to the person who offers the highest price. Online auctions open up new sales channels for new products and offer buyers favorable purchasing conditions.

Today, business-to-business (B2B) and business to consumers (B2C) auctions are surging in popularity and you can auction almost anything that doesnt have fixed price associated with it.

There is wide range of products, which are auctioned like cars, houses, jewelry, seized electronics, real estates, automobiles, and many other things. The benefits of online auctions are that we can buy and sell any products at very economical prices sitting at home. This saves time and money.

Online auctions create a competitive advantage because they make it relatively simple for Procurement managers to negotiate on all corporate purchases and create better deals.

Lets see some common myths surrounding Internet based online auctions:

MYTH #1: Only very familiar, particular or consistent items can be auctioned:

The myth came into being because no one understood how to measure criteria other than price. Total cost auctions take price and non-price factors, such as delivery time or customer service, into account, and they allow a customer to weight each factor accordingly. This is only a myth because when someone with sourcing expertise takes a creative approach to defining or breaking down the item in question, that item or its components can generally be auctioned.

MYTH # 2: Auctions are only effective when there is a level playing field:

This is false since a level playing field simply doesn’t exist. And, not all suppliers are alike. Face-to-face negotiations have long proven this fact. Procurement managers can now normalize for differences (e.g., customer service, warranty terms, delivery cost, etc.) using Web-based technology. In effect, these technologies measure total cost allow customers to compare apples-to-oranges.

MYTH #3: Only Internet-savvy suppliers can participate in an Online auction:

Today, the majority of legitimate suppliers have access to computers. The myth that only internet-savvy suppliers can participate in an online auction is wrong. In order to participate in an Internet based online auction, the suppliers merely need to be able to log on to the Internet, log in to a web site, and log their bids. It’s just very simple. Suppliers don’t have to know how to navigate the World Wide Web or use any sophisticated search engines to participate.

MYTH #4: Maximum benefits could be derived only if large number of suppliers participate:

For any online auction, competition is a must and you must create a competitive environment, no matter if the suppliers is 4 or 400. Internet auctions put the business “up for bid.” Incumbents are wise to take notice. Once existing suppliers believe that the buyer really will change where he takes his business, a competitive environment is created. Thus concrete results for online auctions occur irrelevant to number of suppliers.

MYTH #5: Only products are auctionable?

Not true – in fact, services are highly auctionable. Services such as Telemarketing services, Cellular phone services, Security services, and temporary labor services are all good examples. For example, a particular auction site held an auction for telemarketing services that resulted in an 18% cost reduction. The auction involved over 60 suppliers and more than 700 bids. The study shows that apart from products, services are also auctionable.

MYTH # 6:Auctions are carried out only once in a year:

Event online auctions are generally used for categories of goods and services that require a long-term contract (say one year). These will achieve better results if auctioned once per annum (or less). For example, a buyer may auction off the purchase of 10,000 PCs over a two-year period.

Recurring auctions are more like short-term contracts. Many goods and services (such as service repair agreements) can and should be auctioned on a recurring basis throughout the year for good results. For example, a buyer might auction off the purchase of circuit boards needed for current production

Online auctions are also ideal for “hassle-factor” items like gas connections or heat exchange repairs that people must buy on an ongoing basis. This web-enabled technology allows potential buyers to conduct smaller, hassle-free recurring auctions for these items, rather than soliciting new bids and handling repetitive administrative tasks every other month.

The bottom line is that just about anything can be auctioned. However, there are a few exceptions.

Not all things can be auctioned.

There are still a few instances where auctions may not be appropriate. For example, personal preference cannot be easily incorporated into an auction. Suppose you would like to purchase a large sculpture for the lobby of your company’s headquarters. The sculpture should symbolize the mission and spirit of the firm. Since your decision will most likely be based on personal preference and fit with the firm’s culture, an auction may not be relevant. Other product categories not well suited to auctions are those involving joint process improvements with suppliers, and those that come from highly strategic suppliers offering truly specialized items like disease-specific medical instrumentation.

Perhaps it can be summarized best with this thought. It is important for companies to expand their concept of what is auctionable, as long as the value of each item is ‘elastic’ enough to preclude fixed pricing. Once they’ve done that, the possibilities are almost endless.

By: Pradeep Aggarwal

Note from the Author: Learn all the tips and tricks and ideas on how to make money online. Find free articles, newsletters and products at http://www.auctionspectrum.com.

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