e-Business

Auctions in EC October 8, 2001 Jae Kyu Lee (jklee@kgsm.kaist.ac.kr) Graduate School of Management Korea Advanced Institute of Science and Technology Composition of eAuction WWW/IT Supplier (Seller) Competing Auctions and Trade Forms Auctioneer Items Auctioned Trading Rules Execution Process Auction Customer (Buyer) Effects Source : Modified from Klein (1997) Jae Kyu Lee Auction -2- The Process of eAuction Register Seller Listing Featuring Scheduling Pricing Auction Types Auction Posted Bidders Register Search Bid Watch Biddings Max bid/ Jump Bid Proxy Bidding Multiple Biddings Bid Increment Canceling Bid Real-time credit card payment to seller Bidding Notification Bidder Report Invoicing Shipping Bids completed Buyer Feedback Seller Notification Auction Administrator Seller Feedback Fees Payment Jae Kyu Lee Auction -3- Motivations of eAuctions Coordination mechanism Buyer Role Price Discovery Allocation mechanism Distribution mechanism Short-term acquisition Often experts/ Bargain hunting, Bargain hunting, of resources, e.g., gambling Professional Gambling for demand peaks, motive collectors trying motive, auction as a to acquire rare Possible side mechanism to items at a motive: charity achieve an reasonable equilibrium price Supplier Role Short-term allocation Exposing items for Clearance of Attention, direct of resources, load sale channel, inventory sale to a charity, balance public relations; sufficient breadth possible side of demand, hope motive: charity for a high price Auctioneer/ Often electronic Achieve high breadth Achieve high breadth Limited role because of Intermediary auction without and depth of the and depth of the supplier-buy Role auctioneer auctions, high auctions, high relation;possible trading volume trading volume results in high returns, results in high returns, function as competitive advantage competitive advantage service provider for the over other auctions over other auctions supplier side Jae Kyu Lee Source : Modified from Klein (1997) Auction -4- Impact of Web-based Auction Parameter Auctioneer Access Rules Item auctioned Impact of the Web Lower entry barriers; opportunity for direct sales. Customizable; Theoretically millions of potential customers can be reached. Focused product segments can be auctioned off; the technology extend the complexity of the product description. The trading rules reflect the lack of a guaranteed service. For digital products the entire trading cycle can be handled on the Web; For physical products the trading process and the physical logistics of the trade objects can be separated, leading to a reduction of costs. Source : Modified from Klein (1997) Auction Trading Rules Execution process Jae Kyu Lee -5- Web based Auctions     Negotiations using EDI: B2B EDI Web-based (Sales) Forward Auctions : eBay, Auction.co.kr Web-based (Procurement) Reverse Auctions : Priceline.com Web-based Double Auctions : Stock Exchanges (Arizona Stock Exchange closed www.azx.com) Buyer One One Negotiations using EDI Seller Many Forword (Sales) Auctions Double Auctions Many Reverse (Procurement) Auctions Source : Eric Van Heck, and Peter Vervest, Communications of the ACM july 1998/Vol. 41, No. 7 Jae Kyu Lee Auction -6- Contrast of Traditional and Internet Auction Traditional Auction High antiques, agricultural Types of products, special items; items Limited number of items Value Subjective Efficiency Limited by time and space Fee High Privacy Exposed Information Objective information Collection collection difficult Visual Inspection on site Inspection is possible Internet Auction Low necessities, surplus stocks, used items; Variety of items Objective Free from time and space Low Less exposed Objective information collection easy Trust by brand necessary Jae Kyu Lee Auction -7- Types of Auctions  Auction  English Auction : Ascending Auction  Yankee Auction  Dutch Auction : Descending Auction  Free Fall Auction  Sealed Bid Auction   First Price Sealed Bid Auction Second Price Sealed Bid Auction (Vickrey Auction)  Double Auction (vs. Single Auction)  Continuous Double Auction  Many sellers and buyers bid continuosly Many sellers and buyers bid simultaneouslly Auction  Sealed Double Auction  Jae Kyu Lee -8- Computerized Auction Clock for Dutch Flower Auction Jae Kyu Lee Auction -9- Items in Auctions 1 2 3 4 5 6 7 % of sites Internet % of sites selling items selling items Others 54% Computer 61% Collectibles 33% Information 61% Arts Crafts and 25% Others 61% Computer 17% Consumer Products 44% Consumer Products 17% Collectibles 39% Aut omotives 13% Automotives 33% Sports equipments/13% Recreation/ Travel33% Memorabilia Antiques Real Estate 28% 22% Traditional 8 Food and Beverages 4% 4% 9 Information 10 Antiques 4% Money 17% Source : Carrie Beam, and Arie Segev, Fisher CMIT Working Paper, Nov. 1998 Jae Kyu Lee Auction - 10 - Use Level by Auction Types Type of Auctions English First Price Sealed Bid Dutch Vickrey Continuous Auction Double % 85 7 4 1 1 1 Sites eBay, egghead, Auction.co.kr, eSellpia and most auction sites The Chicago Wine Company; Timeshare Resale International Klik-Klok Department Store; Bookbid Antebellum Covers (www.antebellumcovers.com) Auction Depot (www.auctiondepot.com) Fastparts (www.fastparts.com) Sealed Double Auction Source : Carrie Beam, and Arie Segev, Fisher CMIT Working Paper, Nov. 1998 Jae Kyu Lee Auction - 11 - Business Models of eAuctions  Pure-play Internet companies   Mainly for Customer-to-Customer Multitude of item; low price items   Auction Ltd., (www.auction.co.kr), eSellpia (www.esellpia.co.kr) eBay (www.ebay.com), egghead and ONSALE (www.onsale.com) [closed]  Vertical Auction (or Auction Vortal)     Click and Mortar of traditional auctioneer Mainly Business-to-Customer Speialized items; high price items Build Community     Sotheby (www.sothebys.com) : paints Butterfiled & Butterfield (www.firstauction.com) : jewelry, paints, furnitures Christie (www.christies.com) : paints, automobiles TechSmart: Specialized in used or outdated PCs in a B2B auction.  Reverse Auction : Priceline.com, FastParts.com Jae Kyu Lee Auction - 12 - Use Level by Business Models  Items Any Items: 74% Specicalty: 13% Use Agents: 7% English Primary Business Business model 78%; Any items 29% C2C 53% B2C  Business Model C2C (52%) : e.g.) eBay, Auction Ltd. B2C (25%) : e.g.) Zauction, Auction Ltd. B2B (6%) : e.g.) Industrialbid, B2C & B2B (16%) First Price Seal Bid 29%; Any items 15% C2C 71% B2C Inventory Model Doing it Right 22% Very Virtual 55% Mixed 22% Traditional 9% Very High 16% High 14% Low 0% Virtual 72% Mixed 29% Very Traditional 0% Very High 14% High 43% Low Jae Kyu Lee Source : Carrie Beam, and Arie Segev, Fisher CMIT Working Paper, Nov. 1998 Auction - 13 - eAuction Sites Company eBay www.ebay.com Onsale/Egghead Auction Ltd www.onsale.com www.auction.co.kr Wa!Auction ---- Sellpia www.sellpia.co.kr 1995.5 End of 1995 1998.4 37.6 M 4.3 M Members Merged (Nov, 2001) (Nov, 2001) # Items 2000 K 1290 K 100 K Opens Types Fee Payments 1999.9 closed 20 K 1999.10.15 260M (Nov, 2001) 20 K Portal Sale : 1.25-5% Register : $0.2-2 Vertal Sale: 1.25-5% Register : $0.2-2 Portal Sales (Free, Fee for Value Add) Reverse Auction Auction Hub Sales Sale: 3% Online Credit Closed Auction (Free, Fee for Value Add) Online Credit Online Credit Seller Pays Merged to eqghead $99/32 (March 2000) Online Credit Seller Pays 15,500 Won Online Credit Seller Pays Delivery Cost Seller Pays Stock Price 57$ Jae Kyu Lee - 14 - B2B Auctions  Independent Auctions :   Company use a third-party auctioneer to create the site and sell the goods e.g. www.fairmarket.com [became a solution provider] www.imxexchange.com  Commodity Auctions :    Buyers and Sellers come together to a third-party Web site. Access Energy, Utilities, and Telecommunications or Dutch flower market e.g. www.band-x.com, www.metalsite.net, www.fastparts.com  Private Auctions : Open the Auction Market privately  e.g.Ingram(www.auctionblock.com) [is coming soon] -Source : Forrest Research, Fickel (1999) Jae Kyu Lee Auction - 15 - Fraud Problems in Auctions  87% of Internet fraud accounts for eAuction. (Internet Fraud Watch fraud.org/internet/intinfo.htm)  9 out of 10 Internet-related complaints registered are concerned with auction fraud. (National Consumer League’s National Fraud Information Center)   Average auction loss is US$248 per complaint. US$1.1 million was lost due to the fraudulant activities. Jae Kyu Lee Auction - 16 - Types of eAuction Fraud  Bid Shielding  Use of some phantom bidders to bid at very high price when the auction begins. Then at the last hour, the phantom bidders pull out, and one bidder with a very low price will win. Sellers arrange to have fake bids places on their item to artificially jack up high bids on their item.  Shilling         Fake Photos and Misleading Descriptions Improper Grading Techniques Selling Reproduction High Shipping Costs and Handling Fees Failure to Ship Mechandise Loss and Damage Claims Switch and Return Jae Kyu Lee Auction - 17 - Protecting Against eAuction Fraud  eBay’s measures  Only 27 out of every 1,000,000 transactions at eBay were fraudulent in 2000. eBay uses the services of Equifax to verify user identity for a $5 fee. Determine whether an item is genuine and described appropriately. Authenticator service for a fee. Determine the physical condition of an item. Allows registered buyers and sellers to comment on their experiences with other individuals. Individuals build up their online trading reputation. Jae Kyu Lee Auction  User Identity Verification   Authentication Service    Grading Service   Feedback Forum   - 18 - Protecting Against eAuction Fraud(ii)  Insurance Policy   eBay offers insurance underwritten by Lloyd’s of London. Users are covered up to $200, with a $25 deductible, without fee. Procedure  Buyer mails the payment to the escrow service.  Alert the seller the payment.  Seller ships the good to the buyer.  Buyer inspect the goods, and notify the acceptance.  Escrow service pays the seller. eBay recommends recommends escrow service for a fee. I-Escrow (www.escrow.ca): on-line escrow service provider  Escrow Service    Jae Kyu Lee Auction - 19 - Protecting Against eAuction Fraud (iii)  Non-payment Punishment  eBay Policy     1st violation: friendly warning 2nd violation: sterner warning 3rd violation: 30-day suspension 4th violation: Indefinite suspension  Appraisal Service   Estimate the value of an item Hard to implement. Some collectors have their item ‘DNA tagged’ for identification purposes.  Verification  Jae Kyu Lee Auction - 20 - Auction Comparison Model  Auction comparison process 1. Find it 2. Track it 3. Win it  eBay’s lonely crusade against the shopbots,  (Businessweek Online, 02/11/2000)  Bid Search Engine  Biddersedge [www.bidxs.com/be]  Auctionwatch.com   Shifted to the Solution Provider Auction Solutions  Auctionbroker.com : EasyScreen Layout view multiple auction sites  Problem - Winner’s Curse Jae Kyu Lee Auction - 21 - eAuction for Procurement  Status  Many Companies and Government agencies are reengineering their bidding processes and procedures  NASA  Canada :  Governmental Procurement above $25,000  Required to use the system MERX  Boeing Inc.(1997): Found on the Internet vendors that charge 10-30% less than what Boeing used to pay, and also got the job done faster  GE TPN [GXS]  Market Size Prospect  Total amount of public purchase requests now advertised on the Internet exceeds $400 billion annually. (www.bidengine.com) Jae Kyu Lee Auction - 22 - Online Auction Sites Country USA Auction Sites BIDCAST BIDLINE BIDNET CBDNet COS Federal Marketplace GOVCON GPO Canada MERX BIDS Japan Europe JETRO EGCC TED(ECHO) EPIN Hong Kong Australia New Zealand GSD GEMS GETS URL http://www.bidcast.com http://www.bidline.com http://www.bidnet.com http://cbdnet.access.gpo.gov http://cos.gdb.org http://www.fedmarket.com http://www.govcon.com http://www.access.gpo.gov http://www.merx.cebra.com http://www.bidservices.com http://www.jetro.go.jp http://members.ao1.com/eurocom http://www2.echo.lu http://epin1.epin.ie http://www.info.gov.hk/gsd http://www.gems.gov.au http://www.gems.gov.au/nzgets Fee (2000) Charge Charge Charge Charge Charge Charge Charge Free Charge Charge Free Charge Charge Charge Free Free Free evel Jae Kyu Lee Auction - 23 - Terms in Bidding  Reserve Price Auction   Lowest price a seller is willing to sell an item for If no bid meets the reserve price, the auction is cancelled. Cancellation of a bid Usually a bid is considered as a binding contract The act of entering a bid during the very last seconds of an auction and outbidding the highest bidder Auction Express offers a tool to snip items automatically Auctiontool.com [domain onsale] A software system that operate as a proxy to place bids on behalf of the buyers Buyer determines the maximum bid, and then place the first bid manually. Proxy execute the bids trying to keep the bids as low as possible Jae Kyu Lee Auction  Bid Retraction    Auto-snipping     Proxy bidding    - 24 - Post Auction Follow-ups  Notification     Bidding notification to buyers: notify the status whether they are being outbid or winning in auction End-of-Auction Notices Seller Notices about auction number, item name, price, payment preference, mailing address Postcards and Thank-you Notes   Feedback and Rating Invoice and Billing Jae Kyu Lee Auction - 25 - Payment Methods  EFT  PayByWeb.com, PayPal.com[acquired by eBay] BidPay.com[money order] The third pary holds a bidder’s payment in trust until the buyer receives and accepts the auction item from the seller. I-Escrow (escrow.ca), Auction.co.kr Person-to-person credit card transaction Billpoint.com offers escrows, shipment tracking, and fraud protection.[will phase out in 2003] CCNow.com [became a solution provider] Jae Kyu Lee Auction  Escrow Service    Credit Card Payment    - 26 - Shipping and Postage  Internet Shipping  AuctionShip.com  Internet Postage  Stamp.com: Download the postage, print stampled envelopes and labels, and arrange shipment via the US Postal Service. Jae Kyu Lee Auction - 27 - Auctions in Private Networks    Pigs in Singapore and Taiwan Cars in Japan: Aucnet Livestock in Australia Jae Kyu Lee Auction - 28 - Mobile Auction  Benefits    Conveniece and ubiquity Privacy Simpler and faster Visual quality Memery capacity  Limitation   Jae Kyu Lee Auction - 29 - Trend of Internet Auction    Auctions at Portal Secure Buyer Protection Global Reach  eBay + Auction.co.kr Pricemix.com: Comparison Shopping Agent  Agent-based auction: Research  Jae Kyu Lee Auction - 30 - Agent 인터넷 경매 기술  Tete-a-Tete (ecommerce.media.mit.edu/tete-a-tete)   MIT 미디어연구실에서 개발한 협상에이전트 시스템 소비자가 원하는 상품의 질이나 색상, 가격 등의 정보를 가지고 판매 에이전트들과 협상 을 통해 거래를 성사 시킴 미시간대학 인공지능 연구실에서 개발된 다목적 인터넷 경매 서버(Multipurpose Internet Auction Server) 구매자가 참여를 원하는 경매의 정보와 조건을 제시하면 그에 맞는 경매 사이트를 찾아줌 구매자 에이전트가 다수의 판매자 사이트를 방문하고 정보를 모아온다. 구매자가 입찰의 상한선을 결정해 주면 그 한계 내에서 Agent 스스로 입찰에 참여한다. 구매자를 돕는 에이전트로서 구매자가 상품 구입의 최대 한도를 에이전트에게 알려 준다. 에이전트는 가능한 최소가격부터 최대가격을 넘지 않는 한에서 경매에 응한다.  AuctionBot (auction.eecs.umich.edu)    e-Mediator (ecommerce.cs.wustl.edu/emediator/ )    BidWatcher   Unik-Agent  EC 경매 및 입찰에서 일어나 계약의 유형, 규칙 및 Agent Message를 정의  Bazaar(MIT), Negotiation in Electronic Commerce(CITM, UC Berkeley) 등 Jae Kyu Lee Auction - 31 - References                   Albert Pang, “ Internet Commerce Procurement Application Market Review, Forecast, and User Trends, 19982003, IDC#19662, August1999 Arie Segev and Judith Gebauer, Carrie Beam, “Procurement in the Internet Age-Current Practices and Emerging Trends (Results from field Study), Fisher CMIT Working Paper WP-98-1033, Aug. 1998 Carrie Beam and Arie Segev, “Auctions on the Internet: A Field Study,” Working Paper 98-WP-1032, Nov.1998. Efraim Turban, Jae K. Lee, David King and H. Michael Chung, “Electronic Commerce : a managerial perspective”, 1999 Efraim Turban, “Auctions and Bidding on the Internet : An Assessment”, Electronic Markets, Vol.7, No.4, 1997 Eric Van Heck and Peter Vervest, “How Should CIOs Deal with Web-Based Auctions?,” Communications of the ACM, July 1998/Vol 41. No7 Jill L. Frankle, “Online Auctions:The New E-Commerce Enabler”, IDC#18872, April 1999 John-Carol Brigham, “Indirect Procurement Over the Internet”, IDC#19143, May 1999 L. Fickel, “Online Auctions: Bid Business” CIO Web Business Magazine, June, 1999 Michael N. Huhns, Jose M. Vidal, “Online Auctions,” IEEE Internet Computing, May.June 1999. Robert H. Guttman and Pattie Maes, “Agent-mediated Integrative Negotiation for Retail Electronic Commerce,” White Paper . S. Klein, “Introduction to Electronic Auctions”, Electronic Markets 7, #4, 1997 이승현, 서의호, 윤영수, “A Web-based Auction Mechanism for Multi-Agent Environment”, 1999 이재규, 이웅규, “지능형 에이전트에 기반한 입찰,” 컴퓨터월드, 1997.7.1 이재규, 이웅규, “전자상거래와 경매시스템,” 컴퓨터월드, 1997.7.15 이재규외, “전자상거래원론”, 2002, 법영사 이준한, 문태수, “정부 조달 EDI의 확산방안에 관한 연구, 1999 전호일, 한유경,이재범, “인터넷 경매” 사례연구, 1999 Jae Kyu Lee Auction - 32 - References            Amazon : www.news.com/News/Item/0,4,0-35623,00.html Arizona Stock Exchange: www.azx.com Butterfiled & Butterfield: www.firstauction.com Christie: www.christies.com Dell: www.dell.com eBay: www.news.com/News/Item/0,4,0-35623,00.html eBay : www.ebay.com/aw eCo: www.commerce.net/projects/currentprojects/eco/ eMediator: ecommerce.cs.wustl.edu/emediator/ Sellpia : www.sellpia.co.kr Auction Ltd. : www.auction.co.kr Jae Kyu Lee Auction - 33 -