Auctionwire

Josh Gold and David Romeo wanted to ‘go live’ with their online auction business, Auctionwire, in May 2004. This business aimed to become a ‘new channel’ that corporations in Canada could sell excess inventory and capital goods as well as a means for charities to sell online. They planned to charge their clients commission on successful auctions for managing the whole auction process from listing items to shipping auctioned items to buyers and collecting payment. They would also absorb the listing fees and manage customer service for the corporations and the charities.

In terms of the business plan that Gold and Romeo plan to follow, I feel that there are positive and negative aspects. Firstly, the online auction market is young and no competitor has yet built a business focused on corporate and charity customers. This is an opportunity to access a new market in the ever profitable reach of eBay which had 94.9 million users and a total payment volume of $12,226,000,000 in 2003 (Case Study). Also, they have a good backing in experience of commerce and finance with the degrees that they hold and further, Gold has experience of building a web portal for health insurance. However, they have little experience of the online auction business which could prove a problem with the claims that they have made in relation to the efficient auction management process they aim to provide.

Also, they plan only to charge commission on successful sales through their auctions. This may be successful for corporations who have new, unsold goods to sell however, in terms of the charities, there could be a problem in selling goods that are left unwanted in their shops. If these charities provide a large amount of second hand goods for auction that are all different and need to be entered into the database separately, it could provide extremely time consuming with no financial reward if these goods are left unsold in the auction.

Further, as Auctionwire plan not to charge their clients anything until a successful auction has been achieved, they may become swamped with items from both corporations and charities that they will be unable to sell and they will need to pay the listing fee on the auction site(s) for these goods. This cost may not be recoverable.
A final point of criticism of their plan relates to not only auctioning on eBay but, on other auction sites. The use of other auction sites may not be as effective as eBay as it is the leading global brand for online auctions with its name being a generic term associated with auctions (http://www.marketingteacher.com/SWOT/eBay_swot.htm). It may be an extra cost to put items on further sites that will not provide as many hits and sales as eBay.
Gold and Romeo also have yet chosen their software with the choice of five different options to choose from:
Super Auction
Canauction
Clear Bid
Blackthorne
Design own software
With the cost of designing their own software being high, predicted at an initial 300 hours for a developer to create the program and a cost of $5,000 to acquire the right to use the code to make the software I would rule this option out. Not solely on this reason but also for the reason that Gold and Romeo have limited time and the program created will be untested which could cause problems.
Therefore, this leaves the four established options all being used by an online auction company at present. As all the software packages are around the same initial cost: $5000, it is hard to differentiate on this basis therefore the decision will be largely based on the functions on offer and how they meet the business plan of Auctionwire.
Firstly, I feel that the weakest bidder should be eliminated – Clear Bid. This is the weakest bidder for three main reasons: it has no Canadian shipping calendar – which Auctionwire need; the company’s customer service suffered from complaints – not ideal if Auctionwire want to set up clients and establish a good working relationship with them and, there would be a $10,000 developer fee to have a multiple client module added. I feel that this cost is far too high and for the total cost of this program, a more tailored one could have been designed solely for Auctionwire’s needs.
Further, I also feel that Super Auction should be eliminated due to one fact – in 2004 eBay halted its access to Checkout Redirect as Super Auction repeatedly failed to live up to the terms it had agreed with eBay (Case Study). Although this software program has the majority of features that Auctionwire require, this bad publicity and failure is not ideal for a business start up that will need to be extremely careful in the preliminary stage of business so as not to loose customers.
This leaves two software packages – Canauction and Blackthorne. I feel that Blackthorne should not be used as it is still in the testing stage and is not yet set up for Canadian business. This could be a major downfall in the start of a business if the software crashes – potential customers could be lost and business lost. Further, it does not support the use of auctioning on other sites as it is directed at eBay which could be a problem if Gold and Romeo do decide to pursue the use of other sites. Therefore, this leaves Canauction. I believe that this software package fulfills all of Auctionwire’s needs in what it aims to offer and the fact that it is a Canadian team who has developed it makes it perfectly aligned for Auctionwire’s strategy. It has also been developed by previous power sellers who will have extensive knowledge of the market. However, there is one downfall to this system – there are bugs that have still to be ironed out and functions that are not yet working. This is a major problem however, I propose that Gold and Romeo invest some of the $15,000 that they planned to spend on software to help solve these problems and also to speed up the process of doing so to meet their deadline of May 2004. However, if this is the best software for them that will maximize their business they may want to review their business strategy to incorporate it if the software is not ready in time. However, this delay should be minimal as on-line commerce moves at an extremely fast pace.



REFERENCES

Comisarow, M. and Mark, C., Creating Auctionwire, The University of Western Ontario, 2006

http://www.marketingteacher.com/SWOT/eBay_swot.htm