Case Study – Auctionwire

Introduction

Auctionwire conducts online auctions on behalf of some of the world’s largest corporations, foundations and non-profit organisations. The company aims to create successful auctions to raise money, brand awareness and publicity for its clients. Common transactions for Auctionwire include selling off excess inventory and stock for large businesses and running fundraisers online for charitable organisations. The online auctions are performed on eBay tapping into the famous online auction sites 233 million users. Auctionwire manages the complete auction process for their clients, from listing the item to collecting payment, charging them a commission ranging from 5 to 20 percent on successful auctions. [1]

Auctionwire’s Business Plan

The basis for Auctionwire’s business model was to maximise the sale of each item by leveraging three core strengths: the reach of eBay, Auctionwire’s efficient auction management process and Auctionwire’s experience in conducting successful online auctions. I think this is profitable idea, if the team at Auctionwire could learn to conduct efficient auctions by listing their goods effectively and spotting trends in the eBay user base they could maximise the price for each item. This maximising of the sale price would increase the amount of commission Auctionwire received upon successful auction. In addition, becoming a power seller would encourage companies to approach them realising they could make more profit if Auctionwire handled the bidding process. This would increase the number of items Auctionwire would be selling as well as the commission received on each item. [2]

I think the potential market for Auctionwire is huge as companies are now beginning to see the benefits of selling unwanted inventory on eBay (e.g. IBM is one of the biggest eBay sellers in the world). The company’s main focus was on corporate businesses that had excess inventory items and out of date equipment and online charity auctions in the fundraising sector. Companies that had excess stock would in a lot of cases just have to scrap or hold the extra stock resulting in additional costs. I feel companies would be more than happy to pay for Auctionwire to perform their online auctions on behalf of themselves, as it would involve little input from them but would generate extra profit that they would in most cases never see. In my opinion charities would benefit from using the services of Auctionwire as they may not have the expertise or level of staff to perform large scale auctions. Additionally they would want to use the experience of Auctionwire to maximise the amount of money they would raise in the auction. Auctionwire at present has no direct competition, which should allow them to hold a strong position in the market.

Auctionwire’s Software Requirements

For Auctionwire to conduct efficient profit maximising auctions they must choose the right software to perform their auctions. This software package must have certain requirements for it to run effectively.

I felt the most important requirement for Auctionwire’s software was that it could manage multiple listing for different clients. As the company looked to represent multiple companies simultaneously it was essential the software could cope with this. When listing the sale items the software should be able to maximise the number of views each item gets by staggering identical items over time and researching eBay user trends. The software should also be able to help when trying to set the price of new sale listings. Software that could do both these processes would capitalize on the eBay market generating the most profit for Auctionwire.

I think the software chosen should be user friendly and help reduce costs and employee hours. It is important the system installed should automate a lot of the auction processes. Payment and shipping for example are common processes that if automated would significantly reduce operating costs. It would also be useful if the software could help improve customer service. The people at Auctionwire predicted receiving large amounts of emails from clients regarding their items. Many of these queries will be similar so software that could provide standard responses would be beneficial. If the right software is installed many aspects of the business would run itself and operating costs would greatly be reduced.

Which software package to choose?

To achieve the best results I feel Auctionwire should buy an already developed software package. Building their own package would increase the suitability of the system as it would be customised to Auctionwire’s individual needs but the effort and money needed to do this successfully would be too high. eBay is constantly changing so the software designed by Auctionwire would also need to evolve, this would mean a constant expense resulting from paying software designers to modify the system. In addition there is no guarantee that the newly designed software would be successfully and in the end an “off the shelf “ product would need to be purchased anyway. The risk and expense would therefore be too great so I think the best option would be to buy already available software.

All of the online auction software on the market had their individual flaws and problems but most would allow Auctionwire to operate somewhat effectively. I think the best option for Auctionwire would be to choose Canauction Inc. Unlike the competition Canauction already has in place all the requirements that Auctionwire needs. Canauction allows multiple client listings, is operable cross borders and has very little downtime due to the online and offline systems. The other companies have still to develop some of these essential requirements or modification of the existing system would be needed. Hence it is unclear if companies like SuperAuction could handle these essential requirements. Therefore for a small start up fee of $5000 Auctionwire could be up and running with all their software needs. The operating cost of the Canauction is also low at just $250 per month.

As the Canauction software is newly designed the software is still having some early problems that need ironed out but the Canauction designers are a team of former power sellers so they understand what their clients are looking for. Once these teething problems are fixed I believe Canauction will be by far the best system on offer to the market.

Conclusion

I believe Auctionwire has an opportunity to really make an impact on the online auction market. A lot of companies now realise the benefits resulting from selling unwanted stock online but just don’t have the resources available to do it theirself. The potential market is therefore huge for Auctionwire to break into. Picking Canauction Inc as its software supplier will satisfy all Auctionwire’s software needs. I think using Canauction would allow for effective selling online and for Auctionwire to make a substantial profit.

References

[1] http://auctionwire.com/

[2] Ivey: Creating Auctionwire (2006) by Ken Mark and Michael B. Comisarow