Paper info

Online Auctions: Are Relationships Doomed?

David T. Wilson and Hui-Ying Chen

The paper was published at the 16th IMP-conference in Bath, U.K in 2000.

Is the era of seller pricing setting coming to an end? Will auctions be the primary mode ofsetting price? Where will relationships and the IMP model fit into an auction driven pricingsetting mechanism? The performance of online auctions has excited purchasing managerswho are looking to reduce their costs. The leading web auction sites such as eBay(www.ebay.com, Priceline (www.priceline.com) and Freemarkets (www.freemarkets.com)have shown the business how to use the Internet to shape the price paid for goods andservices. Since eBay launched its pioneer person-to-person auction site in September 1995,online auctions actually have become an important type of web-based business and seem tobe becoming more popular. According to a Jupiter Communication's (www.jup.com) [1]prediction, the number of online auction purchasers in the United States will grow from 1.2million in 1998 to 6.5 million in 2002, representing about 11% of the total online shoppingpopulation. Forrester Research (www.forrester.com) [2] provides a more optimisticprediction as they predict that the number of online auction buyers will grow from 3 millionin 1998 to at least 14 million by 2003. In addition to the growing number of users, theestimated number of auction sites has increased dramatically as now more than 1,660 auctionsites [3] are listed on the online auction portal web site Internetauctionlist(www.internetauctionlist.com). The number of auctions is expected to continue to increase.We review the existing auction business models and then investigate the dynamics betweencompetitors and how auctions may impact alliances and buyer-seller relationships. Weconclude the paper with some thoughts on how relationships and theIMP will evolve.