Auction sites: a growing trend

Discount Store News, Feb 7, 2000 by Cecile B. Corral

This past holiday proved that auction sites are among the most promising e-commerce operations on the Web today. Media Metrix, an e-commerce traffic measurement firm, reported that eBay saw its highest volume of unique visitors overall--4,073 million--during the peak holiday season between Nov. 22 and Dec. 26. And Amazon.com, which also has auction services, took the No. 1 spot, boasting 5,693 million visitors.

"It was our first holiday with auctions and zShops, and both those did well," Amazon spokeswoman Sharon Greenspan told DSN.

Internet research company Forrester Research foresaw the great potential in auctions. Analyst Evie Black Dykema made note of the growth possibilities for the then-new e-commerce industry in a report she compiled in March 1999.

"The consumer on-line auction market will grow to $19 billion by 2003, fueled by the growth of person-to-person and business-to-consumer players," she said. "Understanding the potential of this format will enable retailers to thrive on-line."

Making its entrance into the on-line auction arena this year, priceline.com adds its new Perfect Yard-Sale feature, a site where individuals can put their unwanted household items up for sale. Perfect Yard-Sale launched mid-January in Atlanta, and it will be a nationwide network by the yearend, according to a company report. Currently on priceline.com, consumers can bid on rates for airfare and hotel stays or on prices for cars and groceries.

Priceline.com vice-chairman and founder Jay Walker has insisted his site's new service "is not an auction at all." But, in many ways, Perfect YardSale acts like an auction: People post their wares, and customers post a price to buy them.

In fact, the only difference is that Perfect YardSale has no bidding or starting prices involved. Instead, customers post what they think an item is worth. Also, any items posted must be along the lines of garage sale-like items, "things you have in your house: an extra VCR, maybe a Christmas gift you got that you really don't want, the exercise bike that's being used to hang-up laundry (to dry)," Walker said in an interview with an MSNBC reporter.

Although auctions did contribute to Amazon's momentous holiday '99 performance, Greenspan admitted auctions are not the most efficient way for consumers to shop, nor are auctions the preferred way of shopping for many consumers.

"Auctions are time consuming, prices are never set until a bid ends and bidders run the risk of not getting the merchandise they want," she said. "Auctions don't lend themselves to a lot of shoppers out there who know what they want, know the price they want it at and want the item fast."

But they provide a shopping forum on the Web that "allows individuals to interact with each other," she added. And auctions are a perfect venue for getting loved ones unique gifts that are rare or collectible.

Allyson Leavy, account manager for the NPD Group, agrees. "The novelty and fun of bidding makes it interesting for people to go there," she told DSN. "People have become hooked, and there is a loyal base in auctions."

Aside from turning off a portion of the consumer base, auctions create a risk to some e-tailers, Leavy warned. Retailers who sell on-the-Web merchandise within the toys, apparel and consumer electronics categories could suffer cannibalization in the future if auctions grow in popularity

"Toys is at greatest risk of on-line cannibalization. There are lot of used and collectible toys people buy, so it's a category where people think they can get a better price or, more importantly, a hard-to-find item on line. Auctions are great for hard-to-find toys," Leavy explained. "And also, collectibles like Beanie Babies are typically sought after in auctions. To a lesser extent, computer hardware falls into the same problem because people update they computers and get rid of their older items in auctions. And with clothing, now you can buy brand new clothes on auction sites at discounted prices."

Faced with these dangers, one way for retailers to fight back is by emphasizing to consumers the quality and competitive prices of their merchandise.

"Traditional retailers could possibly add guarantees to the quality of their merchandise," Leavy said. "One of the pitfalls of auction sites is that people are disappointed with merchandise they buy because it was made out to be better than it was. Many times, the merchandise on auctions doesn't live up to customers' expectations."