E-Auction : Types, Benefits, Fraud and Prevention
An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder. In economic theory, an auction may refer to any mechanism or set of trading rules for exchange. It is characterized by the competitive and dynamic nature by which the final price is reached. Electronic auctions (E-auctions) are auctions conducted online. There are many types of Auctions like English auction, Dutch auction, Sealed first-price auction, Vickrey auction, forward auction, reverse auction, silent auction, top-up auction and so on.
Forward auction or regular auctions are electronic auctions, which can be used by sellers to sell their items to many potential buyers. Sellers and buyers can be individuals, organizations etc. Items are commonly placed at a special site for auction (e.g. eBay.com). Buyers can continuously bid for the items they are interested in. Eventually the highest bidder wins the item. Two types of forward auctions are common. The first is a liquidate auction. Here buyers seek to obtain the lowest price for an item they are interested in. The second type is a marketing efficiency auction. Buyers wish to obtain a unique item.
In a regular auction, purchasers are allowed to place a bid on an item, which is the amount they are willing to pay in order to buy the item. The person who places the highest bid usually ends up with the item. With a reverse auction, however, the opposite is true. More specifically, the buyer advertises a need for an item or service. Then a pool of suppliers or sellers is selected. A Request for Quote (RFQ) is sent out to the suppliers. Suppliers then place bids for the amount they expect to be paid in order to perform such a service or provide such an item. Generally, the supplier who places the lowest bid will win the job or sell the item.
E-Auction replaces the conventional methods of requesting sealed paper tenders, however, it must be emphasized that success depends on at least the same market knowledge and sourcing skills as the paper-based process it replaces.
Benefits of E-auctions
Benefits to sellers
1) Increased revenues
Sellers can reach the most interested buyers and sell the things at price which equal to buyer valuation by broadening the customer base and shortening the disposal cycle time. they can eliminate the need to predict demand.
2) Better customer relationships
Buyers and sellers have more time and chances to interact with each other. Seller can gather information about customer interest and delivery more personalized content.
Sellers can reach the most interested buyers and sell the things at price which equal to buyer valuation by broadening the customer base and shortening the disposal cycle time. they can eliminate the need to predict demand.
2) Better customer relationships
Buyers and sellers have more time and chances to interact with each other. Seller can gather information about customer interest and delivery more personalized content.
3) Lower transaction and administrative costs
Compared to manual auctions and liquidation, E-auctions offers lower transaction cost. Cost of selling will be lower too.
Benefits to buyers
Compared to manual auctions and liquidation, E-auctions offers lower transaction cost. Cost of selling will be lower too.
Benefits to buyers
1) Market Transparency
An electronic reverse auction with multiple, qualified bidders can be used to flush out the true market price of the auctioned items. Furthermore, this information can be used as the basis for real-time benchmarks for future sourcing projects. Auctions spark healthy competition, which can help all participants understand the true market value and identify areas where they need improvement. A buyer benefits by knowing true – often lower – costs. Suppliers benefit by knowing the market rate so they can review their own business or pricing model.
An electronic reverse auction with multiple, qualified bidders can be used to flush out the true market price of the auctioned items. Furthermore, this information can be used as the basis for real-time benchmarks for future sourcing projects. Auctions spark healthy competition, which can help all participants understand the true market value and identify areas where they need improvement. A buyer benefits by knowing true – often lower – costs. Suppliers benefit by knowing the market rate so they can review their own business or pricing model.
2) Opportunities to find unique items and collectibles. Items that are hard to find are auctioned regularly on the internet.
3) Anonymity. Nobody knows who are the buyer, only can see that the price is increasing.
Fraud & Prevention
3) Anonymity. Nobody knows who are the buyer, only can see that the price is increasing.
Fraud & Prevention
There are many types of e-auction fraud. For example:
Shilling: It is a place where placing fake bid on auction items. The main purpose is to rise up the bidding price.
Bid shielding: there is some phantom bidders bid at a very high price at the start of an auction and pull out at the last minute and this will cause a bidder of a much lower price to win.
Fake photos and misleading descriptions: some seller will distort what they can truly sell. They tried to falsified facts by convey false impression of the item.
Selling reproductions: sellers sell something that claims are original but actually it is a reproduction.
Loss and damage claim: buyers claim that they did not receive an item or they received it in a damage condition and thus ask for refund. They might be trying to get a freebie.
Other fraud: sale of stolen goods, use of false identities, providing false contact information, selling the same item to several buyers and so on.
From the above statements, it is important for everyone to prevent e-auction fraud. There are some ways to be taken to prevent fraud:
1)Become familiar with the auction website. Look into the websites protection policies. Never assume you are protected from auction fraud.
2)Before placing a bid, learn as much as you can about the seller. If you can’t find anything out about the seller, than avoid doing business with them. Never fall for promises of better deals by moving away from the original auction website.
3)Never ever give out your social security number, drivers license number, credit card number, or bank account information until you have thoroughly checked out the seller and the escrow service.
4)Always save 100% of the transaction information. You’ll be glad you did in the event your case makes it to court.
5)If after the sale you feel the item/payment should have been delivered already, try to work it out with the seller/buyer. If at that point you feel that fraud is involved, immediately contact your state attorney general’s office and the FTC at http://www.ftc.gov/
Related links:
1)http://en.wikipedia.org/wiki/Auction
2)http://en.wikipedia.org/wiki/Forward_auction
3)http://www.wisegeek.com/what-is-a-reverse-auction.htm
4)http://www.finance.gov.tt/documents/172.pdf
5)http://www.esourcingwiki.com/index.php/E-Auctions_in_Sourcing#Benefits_of_online_auctions_.E2.80.93_Suppliers
6)http://www.crimcheck.com/background-check-news/whats-internet-auction-fraud-and-how-do-i-prevent-it
Related links:
1)http://en.wikipedia.org/wiki/Auction
2)http://en.wikipedia.org/wiki/Forward_auction
3)http://www.wisegeek.com/what-is-a-reverse-auction.htm
4)http://www.finance.gov.tt/documents/172.pdf
5)http://www.esourcingwiki.com/index.php/E-Auctions_in_Sourcing#Benefits_of_online_auctions_.E2.80.93_Suppliers
6)http://www.crimcheck.com/background-check-news/whats-internet-auction-fraud-and-how-do-i-prevent-it
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7 comments:
Thanks a lot for sharing such interesting and valuable topic of e-auction.
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