From the Archive: Auctions
‘From the Archive’ is the regular column that revisits some of the more interesting retail stories covered over the past 30 years by Glynn Davis for a variety of publications.
This period covers many seismic structural changes in the industry including the emergence of the internet. Alongside the actual stories Glynn will be adding commentary around each of the pieces that will seek to put the articles into context with today’s landscape.
Subscribe to TRBFrom Sunday Business (12 August 2001)
In 2001 the online auction site eBay had been trading for around five years and in doing so created the marketplace model connecting buyers and sellers online and taking a commission for hosting the transaction.
Its pioneering model went on to have a seismic impact on retail and beyond as it effectively proved the concept for peer-to-peer interactions online, which has underpinned many thousands of businesses since. It showed that people who did not know each other could safely transact with each other without it being the Wild West.
What has not taken hold though is the concept of online auctions. When this piece was published in August 2001 the vast majority of transactions on eBay were undertaken as auctions because the ability to buy goods at a fixed price only came into play in November 2000 when the company launched its ‘Buy It Now’ alternative that sat alongside the core auction proposition on the website.
Over time the fixed price mechanic became the main choice for buying and selling on eBay and today such transactions account for 90% of revenues on the website. But back in 2001 the prospect of auctions playing a serious role in the retail world was very real. Rather than solely relying on fixed prices retailers could follow the eBay lead and introduce auctions on certain products.
A survey at the time found that up to 20% of the UK population would be willing to buy goods at auction from the likes of electricals goods retailer Comet that was an early experimenter in this area. It had recognised that online auctions were a potential route to selling distressed stock, over-ordered goods, and discontinued lines. It had previously sold these items in its physical clearance stores but it thought the option of running auctions online would expose the goods to a greater audience who could determine the sale price between themselves.
There was evidence auctions could reap greater prices than setting a fixed price. Lastminute.com auctioned 4,000 flight tickets and found it achieved 30% higher prices than it would have realised through using fixed pricing methods. There was also similar experiences in the US where PC seller CompUSA raised 80 cents on the dollar for refurbished goods compared with 25% when it had set fixed prices.
The fact that higher prices were paid via these auctions might well have led to what is known as ‘buyers’ remorse’ from some of the successful bidders who got carried away with the excitement of the auction and ultimately felt they had overpaid. With auctions there is also the disappointment felt by the under-bidders. These two scenarios can potentially create a negative perception of the retailer.
My 2001 article aligned auctions with the nascent area of dynamic pricing and quoted Simon Danciger, MD of the auction business at Freeserve, who predicted that in three to four years’ time so-called dynamic pricing would become part of the retail mix both online and on the high street. The likes of Burger King, Yo! Sushi and others were all suggesting the benefits of introducing discounted burgers at quieter times and charging more for sushi at peak times in certain outlets.
None of these have come to fruition in any meaningful way because dynamic pricing has been demonised. But there is still time for this type of ‘intelligent’ pricing to come good as data will play a greater part in pricing in the future. Alas this might not be the case for online auctions. They had their chance back in the late-1990s and have been long superseded by fixed price transactions where consumers ultimately feel more comfortable with the certainty it delivers.
