29 July 2002
Mouse hits the hammer
by Peeyush Agnihotri
Auctions on the Internet are a powerful way to transact business. Sellers are able to convert their products into cash and buyers are able to find goods at desirable prices.
IT'S an open neelaam ghar with a keyboard cord attached. For the uninitiated, these are online auctions. Net surfers are in for unheard of deals. The mouse has replaced the hammer and for the Net surfers there is a whole array of products to choose from. Auctions on the Internet are a powerful way for sellers and buyers from geographically distant locations to transact. Sellers are able to convert their products into cash and buyers are able to find goods at desirable prices.
Take the case of Mohit Malhotra. He "downloaded" a Nikon camera last month from one of the auction portals for an unimaginable price. "In the market, this SLR click thing would have cost me a fortune. I got it cheap that way," he says. It can’t get better than this. Branded products like a Dlink digital camera (MRP 9,500) sells for 5400, Sansui TV (MRP 15,000) can be had for 7,500. The list is long, though not endless.
Register, select and bid. That’s all that is needed to own a product. Usually bidding starts with a difference of nearly Rs 2,500 as compared to the market price. The bidder is automatically informed over e-mail if someone else outbids him.
Online auctions allow bids from all over the country and it’s pure saving for the seller as advertising costs are nil. Airlines and the hotel industry are also making use of online auctions to draw volumes during off-seasons. Ramachandra Murthy Konakanchi from Mumbai narrates his experience: "One day while causally bidding at the baazee.com site I won a three night-four day stay at Brightland resorts, Goa, for just Rs 1,050."
E-auctions are a rage worldwide in case of surplus inventory, export rejects, used machinery and second-hand goods. Businesses are increasingly using online auctions innovatively to extend their reach to customers bypassing middlemen in the supply chain, mostly for consumer durables. The auctions are highly cost, effort and time effective. Such auctions are used as a buyer-seller matchmaking-cum-negotiation platform and can even be extended into a transaction involving online payment.
Online auctions can be broadly classified by their very nature as forward auction, reverse auction, B2B, B2C, C2C (B for business, C for consumer) auctions and used products auctions. In the recent trend of reverse auction sellers bid against each other bringing the price down to benefit the purchaser.
In the case of a forward auction, the seller displays the products online along with its specifications (brand, model, place, date of manufacture and weight), the minimum bid at which the auction begins and minimum price he is willing to accept. Then there is bid increment—the minimum value by which the next bid should be higher than the previous bid. The auction period is the time specified for the deal.. Classification may vary from one site to another. Like at baazee.com, trading is divided into paisa auctions (a B2C auction model), local trading (through city-wise product listing), smart search and general auctions (B2C and C2C auction model).
How it works
Prospective buyers are invited to participate by way of e-mails to the registered members. Once an auction begins, prospective buyers bid and outbid each other. The highest bidder at the end of the auction period wins the deal, provided his bid is higher than the reserve price.
Sometimes interesting deals take place, tells Dinesh Aggarwal, CEO, Indiamart. "The winner in an auction, or the highest bidder in almost all auctions, is decided only after the expiry of the auction period. However, in one of the auctions, a few days after the auction began at $2 per unit for a lot of 5,000 shirts, one of the bidders posted a request that he was a trader already in a deal where he had committed to supply shirts of similar specifications within a month’s time. He, therefore, wanted the deal to be finalised within 30 days. Since there were three other bidders involved, we had to communicate this to them seeking their permission to close the auction before the slated period. All other bidders agreed and the deal was finalised at $ 6 apiece."
But have online auctions come of age? "In the B2B segment, our chief target market, volume and value of transactions are usually high and therefore factors like sampling, verification, mediator and mode of payment play a vital role. Auction of products from well-known brands is easier than that of unknown suppliers and brands. B2B online auctions have yet to gain popularity since the above stated factors are still in a nascent stage to offer a completely secure virtual auction. Even for corporate deals that were shown being finalised through online auctions, most of the times a lot of offline homework was done to invite companies to participate. Before even educating or counselling target businesses on the above factors, these support systems have to be made robust with support from networked inter-bank inter-national online money transfer," Aggarwal says.
Regarding the mode of payment credit cards are useful in case of B2C or C2C auctions where the value of transaction is low. However, for B2B transactions of high monetary value, escrow accounts play an important role.
If someone backtracks then what happens. "There are hardly any laws that apply if a buyer or a seller back-tracks. Even if there are some, these are hard to follow or prove. We, however, operate on good faith and run on a policy of blacklisting buyers or a suppliers if they do not deal in a professional manner or back out of a deal," says Amit Gundh from one of the bidding portals...