What Types of Online Auctions Are There?

I have never really given much thought to the subject of online auctions. Recently, I had the opportunity to research this subject and was rewarded with some very interesting information.

Online auctions are, quite simply, a platform or process or method that has been developed to provide bidders for products and various services a way to purchase from sellers over the internet. This type of business transaction is accomplished through various types of auction software.

Types of Online Auctions

The three main types of internet auctions are limited to these categories:

  • Person-to-person auctions – these offer the most significant diversity in the goods available for sale and value. For the most part, you would be dealing with individuals in these transactions. But, beware of the companies who dump their wares, whole inventories, into an auction and set the reserve price for very near the retail price.
  • Commercial auctions – as the name suggests, this method involves companies who are openly selling their products in this format. Surplus materials and products, equipment that has been reconditioned and discontinued items are being marketed.
  • Real-time web casts – these are live auctions that are being broadcast over the internet. Bidders can place their bids either from the auction location or via the internet. Pre-registration is almost always required to participate.

Reserve Price

A note should be added here about the term “reserve price:” This term applies in all the above methods of auctions. There are two types of auctions: Reserve auctions and absolute or non-reserve auctions.

Reserve auctions: a minimum bid (or reserve bid) is established. If the bidding does not reach the minimum, there is no sale. The reserve prices can be kept secret if desired but, if no bids are above the reserved price, there will be no sale even though bids have been placed.

Absolute or non-reserve auctions: these auctions have no reserve prices. The sale is guaranteed as long as there is a single bid placed.

Advantages to Online auctions versus traditional auction houses

Online auctions business platforms have a number of advantages over the traditional auction houses.

  • Auctions and sales can take place 24 hours a day, seven days a week
  • There are no geographical limitations
  • Large number of buyers who have diverse interests
  • Transaction costs can be lower because the item does not have to be moved until it is sold. Moving the item only once can save significant money depending on the size of the item.

Online auction business model is an interesting concept born of technological prowess to market goods and services. Where else could you buy a big screen TV for $50 located in Germany from the comfort of your living room in the United Sates? We’ve come a such long way!