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Internet Auctions Attract Bargain Shoppers

Online Auctions Match Buyers and Sellers Worldwide

One of the most curious aspects of e-commerce, and the Internet explosion in general, is the startling success of online auctions.

Auctions on the Internet may be the purest form of capitalism practiced today, with buyers and sellers coming together in a central worldwide marketplace, unencumbered by intermediaries and, to a large extent, outside regulation. It encompasses individuals selling to individuals, business selling to individuals, and businesses selling to other businesses.

The most popular Internet auction site is eBay, one of the most trafficked of all Internet sites, according to Neilsen/NetRatings. Qualitatively, it’s the single best Internet site out there, according to the editors of PC World magazine, who recently evaluated factors such as usefulness, content, ease of use, and the "gee-whiz" quotient.

The strategizing, ticking clock, and winning and losing impart a game quality to online auctions. But they’re serious business too. eBay moves $12 million of merchandise per day, while its competitors, the auction areas of Yahoo.com and Amazon.com move $500,000 and $200,000 per day respectively.

Business-to-Business Auction Market Brings "Dynamic Pricing"

The business-to-business auction market, exemplified by sites such as FreeMarkets and FairMarket is doing even better. Businesses using "dynamic pricing" in selling to other businesses are expected to generate $29 billion in sales this year and $60 billion next year, according to the market research group Forrester Research.

Most e-commerce software developers have added auction capabilities to their programs. Some companies have moved their entire sales operation to the online auction model.

The most popular items for sale at online auctions in the past were collectibles, but lately non-collectible items such as computers, office supplies, and even heavy machinery have become dominant. Of course, you can also bid for the wacky, from taxidermied bats to debris from shipwrecked luxury liners.

You can usually pay for auctioned items with a personal check, cashier’s check, or money order, though many sellers ship only after a personal check has cleared. Most individuals and many businesses auctioning online don’t accept direct credit-card payments because of the transaction fees or the difficulty in obtaining merchant status.

Protection From Online Auction Fraud

Fraud protection is increasingly necessary in the Wild West of online auctions. The Internet Crime Complaint Center, a new service run by the National White Collar Crime Center and the FBI, receives more complaints about online auction fraud than anything else.

One common problem is inaccurate product descriptions. When I recently won an auction for a 1799 silver dollar at eBay, I discovered after receiving it that it had a plug in it, a result of someone in the past drilling a hole to make jewelry and someone later filling that hole with a silver plug. The plug also wasn’t mentioned in the description of the coin by the seller. The seller agreed to refund my money-only after I spelled out these facts.

Two good Web sites where you can arm yourself against online auction fraud are the FTC’s "Internet Auctions: A Guide for Buyers and Sellers" at FTC.gov and AuctionWatch.com.

The latter site is a terrific resource about online auctions in general. It provides tips on successful auction strategies, an auction search engine, and auction software, news about the online auction world and discussion groups.

Among the issues explored by AuctionWatch.com is auction addiction. "Addiction" might seem an improbable word here, but only if you haven’t experienced the curious phenomenon of online auctions.

Source: YOUNG MONEY staff reports

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