Online auctions push e-commerce
April 29, 1999
by Christian McIntosh
(IDG) -- Auctions, those commercial anomalies where the rich and famous squabble over priceless Ming vases, are driving today's Internet economy and spearheading e-commerce initiatives, according to a recent research report.
"The traditional inefficiencies of auctions in the offline world have ultimately been resolved by the Internet," says Jill Frankle, program manager for the Internet and E-Commerce Strategies research group at International Data Corporation. The market research firm just released a report, "Online Auctions: The New E-Commerce."
Online auctions solve many limitations endemic to traditional auctions, such as confined geographic scope, minimal product variety, hefty transaction costs, and inadequate background information for bidders during the event, according to IDC's report.
Many of the factors that prohibit growth in the offline auction space are industry traits, Frankle says, "[making] the market ripe for redefinition by the Internet."
Not only are auctions ideally suited for the Internet, but companies are now realizing that auctions are good for e-commerce as well. Online auctions drive user retention and establish brand awareness, according to IDC. "[They] fit the definition of a 'sticky application,'" or one that draws traffic, Frankle adds.
As businesses broaden their e-commerce initiatives, high-tech vendors need to participate as well, to stay competitive, Frankle says. IDC also expects that interactive auctions will become critical to portals.
The online auction front-runner is currently eBay, with more than two million registered users and more than $1 billion in annual gross merchandise sales.
EBay on Monday announced its acquisition of brick-and-mortar auction house Butterfield & Butterfield for an estimated $260 million in stock. EBay also announced first-quarter earnings Monday, beating analysts' forecasts and posting a twelvefold increase in profits.
"It will be difficult for any competitor to match [eBay's] scale," Frankle says. Amazon.com may be the most likely candidate. Amazon.com recently inked deals with 117 small businesses to run auctions on its site.
On the Net, everyone can be a scalper
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