In its second-largest acquisition, Amazon buys the company for $970 million.
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Besides simply getting the bidding started, it’s important for an item to have an opening price low enough to attract bids for another reason: Bids attract other bids. Research earlier this year showed that online auction bidders were more likely to place bids on items that already had bids than they were on items that did not have bids.
Paul Dholakia, assistant professor of marketing in the University at Buffalo School of Management, analyzed bids placed for thousands of items in different product categories on eBay over a three-week period. He found that consumers gravitated toward items that have one or more existing bids, while ignoring comparable or even superior unbid-for items.
Dholakia says that bidders often succumb to a form of online peer pressure when choosing items to bid on. The behavior occurs, Dholakia explains, because online bidders are unable to thoroughly evaluate an item as they would at an off-line auction or retail environment; nor are they able to assess the trustworthiness of a seller face-to-face. So, lacking key informational cues about an item, online bidders are more prone to be influenced by the behavior of other bidders: They perceive existing bids to be evidence of an item’s quality, making it worthy of their own bid, Dholakia contends.
Dholakia believes that the cluttered design of online auction sites also contributes to the herd behavior. “Most online auctions overwhelm bidders with hundreds of choices in a relatively unorganized setting,” he says, “so consumers use existing bids as a criterion for screening items and navigating an auction site.”
Research by Laurie Sabol
|Company||Founded||Key clients||Auction services||Pricing|
Mountain View, CA
|1999||Global Golf Exchange, MJR Sales, Ice.com||Integrated suite of sales automation for merchants selling across multiple online markets. Provides single console for merchandising items, managing inventory, tracking sales, analyzing finances, and managing customer relationships.||Priced by feature: Image hosting from 40 cents to $1.75 per megabyte; Andale-hosted storefront-$5.95/mo.; Shopping cart 2.3% of each transaction; and reporting feature, $19.95/mo.|
Agoura Hills, Calif.
|Inventory management, cross promotion, image hosting, customized auction reporting, keeps bidder records, auto e-mail response and other post-auction management.||Averages 1.5% per sold item with minimum fee of 15 cents and maximum fee of 70 cents with no other fees|
San Bruno, Calif.
|1999||Techsmart||Distribution, sales and merchandising for surplus goods on emarketplaces; resides on desktop and imports data directly from inventory; fixed price auctions, reporting, buyer notification, customer feedback, shipping and payment processing, integrates to ERP systems||Listing fee of 5 cents plus 1% final value fee or $200 annual subscription; Support and integration services fees negotiated.|
|Web-based management platform with account activation, customized auction templates, branded storefronts and branded descriptor pages. Also, complete toolset for marketplace management including real-time sales monitoring, secure payment, automatic winner notification, and inventory management.||2% commission on all completed sales. For outsourced fulfillment, listing services, and pre-sales customer inquiries, commission is up to 15%.|
Research Triangle Park, N.C.
|Creates branded marketplace for overstocked, returned, or unsold inventory; integrates with existing inventory databases, payment and fulfillment systems. Services include brand management, marketplace management, auction strategy development, and cross-auction marketing promotions.||Setup $10,000 to $50,000; transaction fee varies from 5 to 15% depending on volume. No listing fee.|
|Fixed price plus other auction formats; includes AutoMarkdown to sell out item, RFQ feature, customizable categories, payment processing, reporting, data mining, fulfillment and marketing services.||Hosting fee $5,000-$20,000/mo.; transaction fees from 1 to 3%; setup fee from $5,000-$20,000|