Online Auctions and Your Business

Over the past few years, online auctions have taken the Internet by storm. Auction sites such as eBay draw millions of buyers and sellers each month, creating a virtual flea market with items ranging from the mundane to the bizarre.

Although consumer-to-consumer auction sites get most of the attention, online auctions for businesses of all sizes can be a powerful tool. Auctions help companies clear out excess inventory and get rid of discontinued or irregular items — often for a much better price than they would get from a liquidator. Not all auction sites draw millions of visitors, but most attract large, diverse audiences that help businesses move their products quickly and efficiently.

Is the Site Right for Your Business?

Some companies create their own auction sites, but this might not be practical for yours; we suggest working with an existing site, and you'll have plenty to choose from. Large sites such as eBay and Yahoo Auctions draw both consumer and business customers. Other smaller sites focus on business-to-business auctions and cover a wide variety of categories. There's no easy way to decide which auction site will work for your business. Try a few sites and see which ones deliver the best results. When evaluating them, keep the following questions in mind:

Does the auction site protect its buyers and sellers? Many sites offer fraud insurance with either a built-in deductible or a monthly premium. They might also provide escrow services that hold the buyer's money until the goods are received.

What types of payment does the site accept? Some sites use a third-party company to assist sellers with credit card orders. Other sites, particularly ones working in the business-to-business arena, offer financing. And a growing number of auction sites use payment systems that deduct money from the buyer's checking or credit card account and deposit it into the seller's account.

Does the auction site provide other helpful services? Most auction sites provide optional services to help sellers manage their auctions and promote their merchandise. A few will include customer- and inventory-management tools and online support.

Does the auction site maintain high standards? Many sites allow buyers and sellers to rate each other, and members who get too many negative reviews can be removed from the site. Make sure your auction site has a clear grievance and conflict-resolution policy for its members.

Finding a Fair Price

Then there's the big question: How much should you pay for an online auction?

Some sites, such as Yahoo Auctions, let you set up auctions for free. But there will probably be a charge to advertise your auctions, set up a merchant account or purchase optional services. Most sites, however, will charge a seller fee for each auction. The fees typically fall into two categories:

• Insertion fees. These are flat per-item fees, usually based on the initial listing price. They can range from a few cents for small items to $50 or more for cars, real estate and other big-ticket items.
• Final-value fees. These fees are based on a percentage of each item's final sale price. They typically range from 1 percent to 5 percent, but in some cases the fee will be higher.

Getting Started

Once you're ready to start selling, you'll need to register with an auction site. Sites often ask new members to confirm their identity by entering a valid credit card number, even if they don't buy anything. And new members will be required to accept the site's terms of service. Keep in mind some business-to-business sites accept only qualified sellers; a number of them will contact the seller directly, run a credit check or gather other information before accepting the application.