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Online auctions have their own logic

Having spent a bit of my life timidly bidding at real-life auctions, I've been struck by the counterintuitive nature of all the Internet-based electronic auction services that have sprung up. Described by some as the ultimate Nintendo game with real money, they're more like the markdowns at a bargain basement.

In real life, placing a "winning" bid for an "antique" rocker inevitably means I'm willing to pay the most among the bidders. This realization usually fills me with a mild case of buyer's remorse and some deft rationalization about how my junk treasure might appreciate in value instead of just fall apart.

But on the Internet, the winner gets the lowest possible price.

The reality, of course, is that even an old stick of furniture is relatively rare, while plane tickets, cars and computer hardware are abundant. Thus, Internet auctions follow more closely the market rules of a commodity exchange. That's why, although I wish there was an online art auction called www.masterworksatcost.com, there is instead a real-world site called www.haggle.com, where electronic gear is auctioned off at the click of a mouse.

Indeed, there are some 150 Web sites running some kind of auction, according to the New York Times. The biggest are Onsale, which sells surplus computer and electronic gadgetry to 10,000 daily bidders, and Ebay, which accepts electronic ads to auction off YOUR old stuff.

In all of this, I can't help but be amazed how this is empowering the consumer, who is becoming his own auctioneer. For example, a colleague recently went to www.edmunds.com to look up the price of a used sports car. He then entertained competitive bids from a number of local dealers from Microsoft's CarPoint. His ultimate aim: to get the least-expensive red convertible to use here in New England's short summer. Other services he could have used include www.autobytel.com, which sells thousands of cars monthly; www.autoweb.com, which includes 2,100 dealers; or even Detroit manufacturers, themselves, at www.chrysler.com and www.gmbuypower.com.

Likewise, when a reader asked me if I could help evaluate the fair market price of some old silver coins, I told him about www.numismatists.com, which appraises and auctions coins.

Meanwhile, if you want the ultimate in cheap airfares to a given point on a given day, there's the new Priceline service, which auctions off unsold plane tickets to bargain hunters willing to live by all its restrictions.

For traditional businesses, this low-cost auctioning strategy seems bizarre, if not suicidal. Providing the lowest cost and the most convenience, at least in the old days, seemed a recipe for disaster. Low bids were for contractors and government vendors. But with ever-more fickle and demanding customers, what choice do many companies have?

Listen to what Jerry Kaplan, CEO of Onsale, recently said: "We are moving to an age where businesses will quote a different price to every customer for every product every day."

Although there are auction services that start with price floors, called Yankee or silent auctions, the biggest growth has been in free-for-all variety. Estimates already put the revenue generated from online auctions at $500-million for 1997, with the likelihood that will double in 1998.

Of course, unlike live auctions or regulated exchanges, where you can finger the merchandise or be backstopped by a government agency, electronic auctions put a heavy emphasis on "buyer beware." At my first barn auction, I could hear everyone chuckle when the auctioneer smirkingly held up a piece of crockery and called it a Ming vase. You can't hear people laughing on the Net. And this may curb online auction growth.

Yet, by the same token, convenient and reputable Internet auction services will inevitably grow to the prestige of a Sotheby's or Christie's auction house, and that will be a good thing.

_ James Champy is an author and syndicated columnist. E-mail him at JimChampyps.net.

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