how to start auction business

The E-Commerce & Online Auctions industry has experienced exceptionally rapid growth since the beginning of the decade, outperforming most retail sectors. As internet use becomes more commonplace, consumers are more likely to purchase goods from online retailers. Growth in this industry is also due to consumers becoming more comfortable purchasing items online. In particular, internet payment systems like PayPal have made buying online easier and more secure, helping retailers sway security-minded consumers and attract repeat buyers. The Online Auction another rising Industry in Ecommerce especially for the past 10 years because people like to buy staff with bargain. Often items sold on auctions are cheaper than buying directly from online or in-store retailer. Hungry for bargains the consumer is looking for local and online auctions to make the next purchase especially on the most expensive items like cars, homes, electronics.

There are many Services which offer an auctioneer the possibility to run an auction on a third party platform and make them pay fee for selling the items or a monthly flat cost per service or per auction. These services are often standard, you end up having the same looking auction like anyone else’s, also often to bid on the auction your customer has to be redirected to the third party auction platform. This fact gives the consumer the impression that you don’t owe the auction. You can’t customize this type of auction based on your needs. Or if the provider is willing to make anything custom for you the bill for this customization can cost as much as tens of thousands of dollars. The benefit of having your own auction website is because you own it for life, you do not depend on anyone else’s servers or issues they may experience. You don’t have to wait on the call to get support for each and every time you experience an issue, you can customize your own website as you wish and may change the design any time. You may add new features and impress your customers with something new all the time. You have full 100% control over all procedures starting from adding the items on auction ending with blocking the bidders and customizing the home page.

English Auction: This is an open, ascending auction where each winner pays his/her bid. When people speak of auctions, they usually mean this one. At most Internet auction sites, if there is no indication otherwise, this is the method used. The method works with both Single Unit and Multiple Unit auctions.

Single Unit Auction: Only one item is offered for sale. If a case of coffee mugs is being auctioned, and bidders have to bid on the whole case, then this would be a single unit auction. If bidders can buy individual coffee mugs, then this is a Multiple Unit auction.

Multiple Unit Auction: More than one of an item is offered for sale. If a case of coffee mugs is being auctioned, and bidders have to buy the whole case, then this would be a Single Unit auction. If bidders can buy individual coffee mugs, then this is a multiple unit auction. In multiple unit auctions, most sites will let bidders bid on more than one item ("I'd like to buy four coffee mugs.") However, in the auction theory literature, most papers are written with the assumption that each bidder can only bid on one item. If the items being auctioned are all identical, then it is a homogenous multiple unit auction. If the items are basically the same, but have slight differences (scratches, perhaps), then the auction is heterogeneous.

Reserve Price: The minimum price that the seller will accept. An auction is not required to have a reserve price, and theoretically, any auction can have a reserve price. If the bidders know the reserve price, it is a posted reserve price; otherwise it is a secret reserve price.

Minimum Bid: The lowest bid allowed. The chart below shows the relationship between Reserve Price and minimum bid.

Reserve Price Auction: A term used by many Internet auction sites to refer to an English Auction with a Reserve Price.

Proxy English Auction: On the Internet many auction sites have an English auction with a "robot" or other bidding agent that automatically increases a bidder's bid up to the bidder's predetermined maximum.

Sealed Bid Auction: This is a closed version of the English auction. All bidders submit their sealed (secret) bids. When the bidding period is over, all the bids are opened. The high bidder wins and pays what he/she bid. The strategy for a sealed bid auction is different from the strategy in an English. In Multiple Unit sealed bid auctions, the bids are ranked from high to low, the highest bidders win and each pays what he/she bid.

Yankee Auction: This is what the British sometimes call a Sealed Bid auction.

Classic Dutch Auction: This is an open, descending auction. The name is derived from the old Dutch practice of auctioning flower bulbs (tulips). The auctioneer starts at a very high price and at specific time intervals drops the price by a fixed amount. The process continues until a bidder indicates a buy signal, at which time that bidder wins the lot. In Multiple Unit classic Dutch auctions, the price quoted by the auctioneer is the unit price. When a bidder gives a buy signal, he/she can take some or all of the lot at the current price. If not all units are taken, the auctioneer continues dropping the price on the un-purchased portion of the lot. The auction is described as descending because the bids decrease over time.

Dutch Auction: This refers to many different auction types. To the financial community and to many Internet auction sites, this refers to a Vickrey auction. To the auction theorist, this is a Classic Dutch auction. Some sites use this term to refer to any descending price auction, including Reverse Auctions.

Vickrey Auction: In a Multiple Unit auction, the highest bidders all win, but they each pay the lowest winning price. The Vickrey is sometimes called a uniform auction, because each winner pays the same as every other winner. This contrasts with the English Multiple Unit and Sealed Bid Multiple Unit auctions that are called discriminatory because each winner could pay a different price.

A Japanese auction is a special form of English auction where once bidding starts, no new bidders are allowed to participate and when the price rises each bidder must either drop out or indicate that they are continuing to bid.
Japanese auctions are usually seen in auction theory. Although poker is not a true Japanese auction, it functions similarly: once everybody antes, no new players may jump in; when somebody raises, everybody must either fold (drop out) or match the raise.
The term Chinese auction is used to describe three different types of transactions.

Investment bankers use the term to describe a "shotgun" style force-out.

A second style of Chinese auction is commonly used at fund raising events. The bidders buy (or win) tickets - I remember playing casino games at one fundraiser and my chips were exchanged for tickets. During the "auction" phase all items being auctioned are put on display with a basket (or jar or whatever) in front of each item. Bidders take their tickets and place them in any combination of baskets that they choose. After all tickets are deposited, a winning ticket is randomly drawn from each basket. The more tickets you put in to a single basket, the more likely you are to win that particular item.

The third style of Chinese auction is most commonly used at gift exchanging parties. In this "auction" the first person picks a gift from a pile an opens (unwraps) it. The second person can either take the first person's gift or can pick a gift from the pile. The third person can take the first or second person's gift or pick one from the pile, and so on. There are numerous variations of rules concerning how many times a person can have a gift taken away, how many times a gift can be taken, etc.

Winner's Curse: In a Single Unit auction, it is the difference between the amount the winner paid and the next lower bid. In Multiple Unit auctions, it can be the difference between a winning bid and the lowest winning bid or a winning bid and the highest losing bid. The meaning is usually clear from the context.

Pay-Your-Bid Auctions: An auction where the winning bidders pay the amount they bid. The English, Sealed Bid and Classic Dutch are all pay-your-bid auctions. The Vickrey is not.

Reverse Auction: This term is used inconsistently. In most cases and in auction theory, this refers to a one-buyer, many-seller auction (as opposed to the traditional one-seller, many-buyer auction). Some sites use this term to refer to any descending price auction, including the Classic Dutch.

Aggregate Demand Auction: This is not a true auction, but does fit in the overall category of dynamic pricing. (This is the Mercata model.)

The seller posts an item for sale and a price.
Buyers indicate their willingness to buy at that price.
When enough items are sold (as defined by the seller beforehand) at the initial posted price, the price drops a specified amount.
Buyers willing to purchase at this new, lower price now do so.
When enough items are sold, the price drops again.
This process continues until the buying period is over.

Negotiated Price Auction: This is not a true auction, but appears in dynamic commerce situations. (This is the Priceline model.)

A seller posts an item for sale
A prospective buyer makes an offer
If the seller accepts, then a trade is done
If the seller chooses not to accept, he/she can make a counter-offer or not
This process goes back and forth until a trade is consummated or one party chooses not to counter-offer.