LESSON 8: AUCTIONS

A. Read this text and fill in the blank with suitable words.

Welcome to sellthingsyoudontneed.now!
specific price specification bids information
item description money e-mail package
basket condition purchase account

I’m Mark and I’ll guide you through all the processes. As you selected the seller account, I will
tell you everything about selling on our platform.

Let’s say you want to sell your old camera. First, you need to fill in the (1) item description. It
should contain all important information including technical (2 specification, color and item
condition _, i.e. whether the product is new or used. Don’t forget to describe returns, so your
clients know what to do if there is something wrong with the camera.

If you have a (4) ___ specific price _______ in mind, there is a “buy it now” option, so anyone
willing to pay this amount of money can buy the item straight away. Buyers have an
opportunity to add your product to (5) ___ basket _______ (if they are in England) or to cart (if
they are in the USA). Later, they can purchase all the items in their cart at once.

If you do not, however, auction would be your best choice – buyers would place (6) bids, or, in
other words, declare the amount of (7)___ money _______they want to pay. Bidders are
informed about current bids by (8) ___ e-mail ______ and on our website. As a seller, you can
also be notified whenever buyers bid, just click the ‘Notify’ icon.

After buyers (9) ___ purchase ______ the camera, they need to make a payment. All you need
to do now is pack your product, pay for postage and expect money from us on your bank (10)
__ account _______ when the buyer confirms the arrival of the package from you.

B. Reading Comprehension
SELLING VIA E-AUCTIONS
Auctions are gaining popularity both as B2B buying and as sales channels. Some major B2B
auction issues are discussed in this section.

The Benefits of Auctions on the Sell Side

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 Many companies use forward auctions to liquidate their surplus products or capital assets. In
such a situation, items are usually displayed on an auction site (private or public) for quick
clearance. Forward auctions offer the following benefits to B2B sellers:

• Revenue generation. Forward auctions support and expand online and overall sales. Forward
auctions also offer businesses a new venue to quickly and easily dispose of excess, obsolete,
and returned products (e.g. liquidation.com).

• Cost savings. In addition to generating new revenue, conducting e-auctions reduces the costs
of selling the auctioned items, which helps increase the seller’s profits.

• Increased “stickiness.” Forward auctions give websites increased “stickiness,” namely,

potential buyers stay there longer. Stickiness is a characteristic that measures customer loyalty
to a site that eventually results in higher revenue.

• Member acquisition and retention. Registered members of auctions can invite their business
contacts. In addition, auction software aids enable sellers to search and report on virtually
every relevant auction activity. Such information can be analyzed and used for business
strategy.

Forward auctions can be conducted in two ways. A company can conduct its forward auctions
from its own website or it can sell from an intermediary auction site, such as liquidation.com
or ebay.com. Let us examine these options.

Auctioning from the Company’s Own Site

For large and well-known companies that frequently conduct auctions it makes sense to build
an auction mechanism on the company’s own website. Why should a company pay a
commission to an intermediary if the intermediary cannot provide the company with added
value? Of course, if a company decides to auction from its own site, it will have to pay for
infrastructure, and operate and maintain the auction site. Note that, if the company already has
an electronic marketplace for selling from e-catalogs, the additional cost for conducting
auctions might not be too high.

Using Intermediaries in Auctions

Several intermediaries offer B2B auction sites (asset-auctions.assetnation.com and

liquidation.com). Some companies specialize in government auctions while others focus on
surplus stock auctions (govliquidation.com).

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An intermediary can conduct private auctions either from the intermediary’s or the seller’s
sites. Alternatively, a company can conduct auctions in a public marketplace, using an
intermediary (eBay, which has a special “business exchange” for small companies).

Using an intermediary to conduct auctions has many benefits. The first is that no additional
resources (e.g., hardware, bandwidth, engineering resources, or IT personnel) are required.
There are no hiring costs for using corporate resources. B2B auction intermediary sites also
offer fast time-to- market as they are capable of running the auction immediately. Without the
intermediary, it can take weeks for a company to prepare an auction site in-house.

Another benefit of using intermediaries relates to payments, which are handled by the
intermediary.

REVIEW QUESTIONS

1. List the benefits of using B2B auctions for selling.

Forward auctions offer the following benefits to B2B sellers:

• Revenue generation. Forward auctions support and expand online and overall sales.
Forward auctions also offer businesses a new venue to quickly and easily dispose of excess,
obsolete, and returned products (e.g. liquidation.com).

• Cost savings. In addition to generating new revenue, conducting e-auctions reduces the
costs of selling the auctioned items, which helps increase the seller’s profits.

• Increased “stickiness.” Forward auctions give websites increased “stickiness,” namely,

potential buyers stay there longer. Stickiness is a characteristic that measures customer
loyalty to a site that eventually results in higher revenue.

• Member acquisition and retention. Registered members of auctions can invite their
business contacts. In addition, auction software aids enable sellers to search and report on
virtually every relevant auction activity. Such information can be analyzed and used for
business strategy.

2. List the benefits of using auction intermediaries.

Benefits of intermediaries: The first is that no additional resources (e.g., hardware,

bandwidth, engineering resources, or IT personnel) are required. There are no hiring costs
for using corporate resources. B2B auction intermediary sites also offer fast time-to-
market as they are capable of running the auction immediately. Without the intermediary,
it can take weeks for a company to prepare an auction site in-house

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 3. What are the major purposes of forward auctions, and how are they conducted?

Many companies use forward auctions to liquidate their surplus products or capital assets. In such a
situation, items are usually displayed on an auction site (private or public) for quick clearance. Forward
auctions can be conducted in two ways. A company can conduct its forward auctions from its own
website or it can sell from an intermediary auction site, such as liquidation.com or ebay.com.

 - Auctioning from the Company’s Own Site: companies build auction mechanisms on their own
websites. The company does not have to pay commissions for any intermediaries. however they will
have to pay for the infrastructure, operation and maintenance of the auction site. And if the company
already has the electronics market for sale from e-catalogs, the additional cost to make the auction may
not be too high

. - Using Intermediaries in Auctions: The company cooperates with a number of intermediaries to

provide B2B auction sites. An intermediary can conduct private auctions either from the intermediary’s
or the seller’s sites. Alternatively, a company can conduct auctions in a public marketplace, using an
intermediary (eBay, which has a special “business exchange” for small companies).

C. Group Discussion
CASE STUDY: EC APPLICATION: HOW THE COMMONWEALTH OF PENNSYLVANIA SELLS
SURPLUS EQUIPMENT

For many years, the Pennsylvania Department of Transportation (DOT) (dot.state.pa.us) used a
traditional offline auction process. Beginning in October 2003, the state held online auctions to
sell its surplus heavy equipment. At his fifth monthly radio address, Pennsylvania then-
Governor Ed Rendell stated, “The old, live-in-person auction system generated about $5 million
a year. Using the Internet, we’re on pace for a 20% revenue increase.”

The initial online sale of surplus DOT items consisted of 77 items (including 37 dump trucks).
On-site inspection was available twice during the 2-week bidding period. The online sale
allowed the Commonwealth of Pennsylvania to obtain an average price increase of 20%, while
reducing labor costs related to holding a traditional on-site sale. On high-value specialty items
(i.e., a bridge inspection crane and a satellite van), results exceeded the estimated sale prices
by over 200%.

The auction was conducted by AssetAuctions ( asset-auctions.assetnation.com ). The results

of the auction were as follow:

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• Total sales: $635,416.03.

• Half of the bidding activity occurred in the final 2 days.

• Every lot received multiple bids.

• Overtime bidding occurred in 39 lots.

• 174 bidders from 19 states and Mexico made about 1,500 bids in 5 days.

• 47 different buyers participated.

The Commonwealth of Pennsylvania now sells surplus equipment and properties using both
AssetAuctionsOnline and eBay. Many other states and city governments use auctions to sell
their surplus equipment.

Sources: Based onasset-auctions.assetna-tion.com (accessed November 2012), the

Commonwealth of Pennsylvania (2006), and PR Newswire (2003).

Questions

1.   Why is heavy equipment amenable to such auctions?

Heavy equipment amenable to such auctions because:

Heavy equipment is high value.

For potential buyers who are far away or they are unable to participate in the
auction at a specific time, they will participate in an online auction that twice during
the 2-week period.

Many bidders from different places make thousands of bids in 5 days, and the
online auction reducing labor costs related to holding a traditional on-site sale

Buying used heavy equipment lowers the purchase price and limits depreciation. New
equipment depreciates significantly before it is even used on the first job site.
Purchasing used equipment at auction, on the other hand, avoids the initial
depreciation while still allowing for many years of reliable service.

Stretch Your Equipment Budget:

Heavy equipment is an essential and valuable asset for construction businesses, but it
is also expensive. 

Buying equipment used at auction allows contractors to stretch equipment budgets

by providing a great value on purchases. Auctions give buyers a chance to get

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 quality machinery at less than retail value, meaning that often businesses can land
a discount on the equipment they need.

Better Price:

Price is almost always the main concern when buying heavy equipment.
Machinery such as dozers, forklifts, and cranes are certainly not cheap, and if
you’re buying new, not only are you paying the maximum price, you’ll also have to
accept the depreciation that occurs the moment you use the equipment for the first
time.

Buying used offers the opportunity to obtain quality machinery for bargain prices,
while simultaneously avoiding depreciation. Company owners and contractors can
use these auctions as an economical way to fill their equipment inventory, saving
thousands of dollars in the process.

Deal with Professionals

Dealing with professional auction staff can make the entire buying process more
pleasant and predictable. There is no need to deal with unknown sellers. Plus, with
an auction, there’s no haggling and no hard sales push – bid on only the items that
you and your business needs.

Take of Choices

Buying used heavy equipment at auction allows buyers to take advantage of more
choices. In addition to equipment from different manufacturers, auctions may have
equipment of varied age and value. 

         Preview a Variety of Equipment

Heavy equipment auctions provide an opportunity for buyers to see a wide variety
of equipment that may not be available at local equipment dealers. This diversity of
selection provides an opportunity to look at equipment that you may not otherwise
consider and compare the prices and features side by side all at once.

Transparency:

The vast majority of sellers at heavy equipment auctions provide the proper
documentation of service history with their machinery, giving potential buyers the
same insight they’d get when buying from a used dealer or reputable private seller.
In fact, auctions offer a level of reliability that private sellers can’t, including
protection from fraudulent transactions, defective equipment that’s been passed off
as functional, and more.

There’s also no need to haggle or argue on price, or deal with a sales push —
auctions let you bid the exact amount you’re willing to pay.

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2.   Why did the Commonwealth generate 20% more in revenue with the
online auction? 

As can be seen, in the results of the auction was conducted by AssetAuctions

(asset-auctions.assetnation.com), half of the bidding activity occurred in the final 2
days. There were 174 bidders from 19 states and Mexico made about 1,500 bids
in 5 days along with 47 different buyers.  Each lot received multiple bids and
overtime bidding occurred in 39 lots. Finally, it brings total revenue of 635.416,03
USD per auction.

It shows the reason why the Commonwealth generates 20% more revenue with
online auctions, that is they are approaching a larger potential market through the
auction site. Using e-auctions helps The Commonwealth negotiate with more
customers using a structured process that removes the need for time-consuming
one-on-one discussions. They are much more efficient than traditional negotiations
and provide process transparency as well as  increase buyers participation.

The Commonwealth opens an online auction, so the number of auction

participants is not limited, no constraints on time and geographical space, buyers
can access anywhere as long as there is an internet connection. Because the
higher the number of participants, the prices of items also become more diverse
and increase. This is one of the reasons why results go up in the Commonwealth's
revenue.

Besides that, online auctions also help the Commonwealth reduce the labor costs,
event space rental costs associated with organizing traditional on-site sales.