Going once. Going twice. Sold to the young lady in the pink pajamas seated behind the IBM.
There’s a new form of auction that has millions of consumers hooked and it doesn’t rely on fast-talking, gavel-wielding auctioneers. Hundreds of online auctions have popped up in the last few years that are giving people a chance to buy and sell everything from matchbooks to vintage automobiles from their home.
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Ranging from the industry giant eBay, Inc., where more than 1.4 million items can be found, to a computer-savvy teenage looking to unload Michael Jordan’s rookie cards, the Internet has opened up an outlet for people to sell goods to a world-wide audience.
It’s an industry analysts expect will reach more than $3.2 billion in sales annually by 2002.
“This is an area that has been growing dramatically in the past few years and there is no reason to think the growth will end,” said Fiona Swerdlow, an analyst for Jupiter Communications, a New York-based new media research firm.
Swerdlow said two types of online auctions exist today: person-to-person auctions and business-to-consumer.
“On one hand there is the auction that acts like a matchmaker to a buyer and a seller, but the transaction itself is very much between the buyer and seller,” she said.
eBay, the San Jose-based auction service, posts products for sale by an individual and provides the technology for people to place bids on the items. Once a deal is struck, the buyer and seller work out payment and delivery arrangements. eBay receives a percentage of the sale for its service
The other option is a company that auctions off an item itself, handling all the financial logistics.
Jupiter’s estimate of $3.2 billion in sales by 2002 was based on just the business-to-consumer market. Also in that market, Jupiter reported that there were 1.2 million purchasers of online auction goods in 1998. The firm expects that number to grow to 6.5 million in 2002, which will represent 11 percent of online shopping.
Swerdlow said it’s obvious that the reluctance consumers initially expressed about buying items online is disappearing, which is evidenced by people buying from people.
“Yes, in this form you are dealing with an individual you don’t know and have not met. It’s not like buying from a company that you might be familiar with or has a reputation,” she said.
Lisa Kohring, spokesperson for Utrade, a person-to-person auction site based in Dallas, said she is often surprised what is bought and sold via the computer.
“People are buying cars online, which I find astonishing. I know when I go for a big purchase item I want to kick the tires and slam the doors. But, it appears this alternative route has people quite satisfied,” she said.
The satisfaction might come in the fact that people are paying the price they deem reasonable and also they are buying hard-to-find items.
Kohring said it has been well worth getting into the market in November. She said after several weeks online the site was among the top 20 on the Internet in terms of usage.
Utrade’s success might be linked to its parent company’s past experience as another form of matchmaker. The auction site is owned by The One and Only Network, an online classified site for the dating arena.
Kohring said they have been successful in both ventures by getting its customers exposure. With Utrade the company created a network of auction sites that can be used to sell its customers products.
”We are trying to create an open auction architecture through a network of online auction sites. Venues are getting better exposure for products and it also makes it easier for buyers to find the products,” she said.
She said the hot items sought by buyers are hi tech products, computer hardware and software. Collectibles of all sorts are always popular as well.
”Then there are hot products, like for Christmas it was Furbies,” Kohring added.
The average price of items sold on Utrade is from $55-$60, but the range is from a dollar baseball card to a 1947 Harley Davidson sold for $12,000.
Utrade makes its money by collecting two fees. The first is a listing fee between 25 cents to two dollars, which is only collected if an item is sold, as well as a closing fee around five percent for items less than $1,000 and 1.2 percent for items over $1,000.
Kohring said most of the costs for hosting an auction site is technology related. The business only has seven staff members, but Kohring added that that number will be growing.
At Amy’s Auctions, a site dedicated to sports cards, there is just Amy Galitzer, an investor and her computer.
Galitzer, who has a Ph.D in math, said her site – a collaboration with Triple Threat Sports Card (owned by a friend) – was the first interactive sports card auction. She said the business is not as easy as it might sound.
”For anyone who is considering doing this I strongly suggest not doing it,” she explained. “I had to write all my own programs, which is a lot of work.”
Her latest project is creating a virtual card show and providing a system to search other auctions for cards they don’t have.
Galitzer said there are many advantages to dealing with a business rather than an individual. The first, and most important, is getting the product as advertised.
”We have all the cards here. We know exactly what they look like and what kind of condition they are in. Unlike a person, this is a business and we know how important it is to develop a relationship with our customers,” she added.
Swerdlow of Jupiter said there are several tactics that can be used to avoid getting ripped off.
She said when buying an expensive item it might be worth paying an escrow service to hold your money until you get the product to ensure it was in fact what you ordered.
Also, many auction web sites allow buyers to rate the people from whom they made purchases. “That can sometimes tell the story. Sellers are quite proud of their scores and try to do as much as possible to keep them favorable,” Swerdlow said.
Her last piece of advice is the wisest.
“Let the buyer beware,” she said. “Make sure you do your homework on the item. Understand the true market value at the time before you over bid or over pay.”
