Trust in Online Auctions - Case Study Example

Contents 1 Introduction 0 2 Traditional auctions Vs Online auctions 2 3 Facts about eBay 4 4 Trust in online auctions 5 4.1 Feedback Systems 7 4.2 Insurance or Guarantee 7 4.3 Escrow Services 8 5 Conclusion 8 6 Bibliography 10 1 Introduction An E auction is a real time affair that takes place on “World Wide Web”, permitting numerous sellers in diverse geographical areas to leave and amend their bids on an item concurrently. It is possible for buyers to modify e-auctions to their tailor needs, though a classic auction would let each dealer to inspect their bids spot and the rate of the lowest bid with the ID of the dealer being out of action. E Auctions are not inevitably foundational on price merely; a variety of factors steady with the standard of “Most Economically Advantageous Tender” can be integrated into the assessment. (Mehdi Khosrow-Pour, 2006) As the fig 1.0 demonstrates, an e-auction is a module of sourcing, choosing a trader and approving a contract. It consequently erects on high-quality procurement practice and is not an alternate for it. Figure 1.0 During this modern era, the accessibility of the internet has augmented at a express speed and approximately each person in the western humanity has contact with the internet. In harmony with the mounting convenience of the internet, the exercise of electronic marketplaces, particularly of E auction podiums has turn out to be extra lucrative and famous. Predominantly, SME’s and clients have started to connect more effectively in online marts biased on platforms similar to “e-Bay and On Sale.” (Holden, 2007)An annual internal update of E-Bay reveals that as of current situation the company is having over 240 million record registered users in all over the world, which is a market share of hefty 86 % and amid those users there are thousands of non- professional vendors earning with retailing on e-Bay. (Holden, 2007) The issues arising from this novel method of carrying out commerce is about the efficiency. Fundamentally, public sales are utilized for three causes: To boost retailing (Holden, 2007), To publicize information regarding to the buyers' valuations of an item, (Holden, 2007) To avert fraudulent selling among the merchants agent and the consumer (Holden, 2007) This paper will give an answer to this question taking e-Bay as a representative for the whole Internet auction industry. First it will define about the differences between traditional auctions and the online auctions. Subsequently a brief description of how E Bay auctions work, what the typical auction rules are and how auctions fix prices will be given. Afterwards what impact trust has for the consumers and if trust between consumers can be established will be discussed. E Bay is an early leader of a specific class of e-commerce i.e. web auctions. The company was established in the year 1990 and altered to a public limited company in the year 1998, eBay offered buy and sell podium in WWW and acted as launch pad given that pre sales and post sales VAS for 3 crucial categories of e auctions. (Holden, 2007) B2B auctions: trades which deal with other businesses in array to vend stock surplus, second-hand apparatus or high-tech production. (Holden, 2007) Business 2 end user auctions: companies selling merchandise and services unswervingly to their patrons by way of Internet. (Holden, 2007) Person 2 person auctions - that congregate petite sellers and purchaser in a virtual face to face bazaar. (Holden, 2007) 2 Traditional auctions Vs Online auctions The traditional auction procedure entails a series of rising bids by the budding buyers till the uppermost bid is acknowledged by the auctioneer. (Curtis P. Haugtvedt, 2005) Traditional auctions propose additional services as compared to the Internet auctions like “evaluation services and well-appointed viewing areas,” but there is a noticeable disparity in the fees charged of both auctions for instance “Sotheby's,” a traditional auction house during late 90’s charged a consumer’s premium of 15% on the ending proposed price in addition with a regular vendor’s fee of 20% on the ending bid. (Xiaotie Deng, 2005) Whereas the traditional auctioneers use to charge more than 30% of the vendor’s income, the online auction houses continued to charge a minimum of 6-8 % of the ending bid charge. (Xiaotie Deng, 2005)Traditional auctions charge their commission from both sides i.e. the vendor and client, as they offer much more services on the other hand the online auctions charge their commission with only seller’s in ease to promote their business and attract more clients. While at E-Bay in the year 1999, there is no shopper’s charge levied, E-bay charge all commission charges from the vendor, which is very nominal in context with the traditional auctions. (Dr Neil J Salkind, 1999) There are two mechanisms applicable to the trader fees. Initially it is an introduction charge for the mart listing, usually varying from “$0.25 to $2.00,” which depends on the volume of the bare minimum bid or reserve price. Subsequent is a proportion of the sum of the closing bid price, with the trivial rate declining as of 5% to 1.25% as the extent of the transaction boosts. (Dr Neil J Salkind, 1999) The latent shopping threats for a customer who procures at Traditional houses like “Sotheby’s and online auctions like EBay” could be contingent from these key variations as discovered in the subsequent table: (Table 1.0) (Dr Neil J Salkind, 1999) Table 1.0 Primarily, prior to the closing of acquisition, customers are entitled to get more precise knowledge vis-à-vis the item when dealing with traditional auctions than online auctions as the earlier one at all times performs an appraisal course concerning the explicit products for sale in deference of its superiority and robustness for auction. (Mehdi Khosrow-Pour, 2006) Post closing of a procurement, if a dispute arises concerning the goods, the customers dealing with traditional auction companies can be unrestricted to a more broad lawful remedies in comparison to the OAWs, as pertinent auction law has by now laid a concrete establishment for clients who obtain merchandise via mart sale in the offline world. Both the online auctions and traditional auctions own their pros and cons which are well accepted by the users of both trends. 3 Facts about eBay “EBay Incorporation limited” is an American Internet trade house that through its subsidized business “www.eBay.com” runs an online mart and shopping website to facilitate consumers and Business houses trade their merchandise and services internationally. Additionally to its unique main website, in array to its global expansion plan the company has expanded its network of websites in thirty extra countries. EBay Inc. also runs supportive businesses “PayPal, Skype, StubHub, Kijiji etc.” (Holden, 2007) The E-bay was formerly originated in California on Sept 3, 1995 by an Iranian computer programmer “Pierre Omidyar” under the title “AuctionWeb.” (Holden, 2007) Figure 1.1 The very initial thing sold on E-Bay was a wrecked laser pointer for “$14.83” however; in 2008 the selling of military equipments was barred on website. Overwhelmed, “Omidyar” made contact with the winning bidder to inquire about his awareness regarding the wrecked laser pointer. The customer, in his reply enlightened: “I'm a collector of broken laser pointers.” (Holden, 2007) This 1 reply led the company towards the market of second hand goods. The first employee recruited by the firm was “Chris Agarpao.” In Nov 1996, eBay entered into its foremost third party licensing deal, with a trade house, “Electronic Travel Auction” to adopt “SmartMarket Technology” to retail aviations tickets and additional tailor made travel products. (Mehdi Khosrow-Pour, 2006) In the year 1997, the business title of the company was amended to E-Bay. An online business “PayPal” was procured on “Oct 14, 2002”. 4 Trust in online auctions As a category of e-bazaar, online auctions are renovating the collectibles trade to a latent billion-dollar international market. (Rino Falcone, 2003)Nourishing on public fascination with the initiative of a “friction-free economy,” online auctions are measured as rapid and well-organized platforms to wipe away geological limitations as well as for ascertaining precise prices foundational solely on supply and demand. The appliance of online auction sites sorts from individuals performing online “garage sales” to corporations settling their surplus stocks. (Curtis P. Haugtvedt, 2005) Nevertheless, like any other market the deception in the online market is on the boost. As per the “Internet Fraud Watch” controlled by the “National Consumers League” online mart sales continued to the top source of e-fraud for the initial ten months of fiscal year 2000-01. (Bidgoli, 2006) Averages of 64% of the fraudulent transactions reported to the IFW are online auction deceptions. (Xiaotie Deng, 2005)The approximate monetary loss/person had roused from $310 to $427 in a year alone i.e. 1998-99 to 1999-00 and even continued to rise touching the mark of $478 in the first ten months of 2000-01. (T. Kautonen, 2008) Maintaining consumer “Trust” has been acknowledged as an extremely significant aspect to smooth the progress of online transactions. “Information asymmetry,” a condition where two trading parties do not hold the identical information, is identified as one of the key tribulations in electronic marketplaces. In the middle of several facets of “asymmetric information,” (Curtis P. Haugtvedt, 2005) The two conditions are identified to be in close relation to online deceptions: 1. The unverified identities of online trading parties, and (Bidgoli, 2006) 2. The unsure quality of the merchandise. (Bidgoli, 2006) Nearly all of the auction sites categorize their merchants or bidders via “email addresses,” which can be without difficulty obtained devoid of financial transactions from manifold sources. Distinguishing the complexity of verifying client identity, e-Bay defenses itself from the accountability in its “User Agreement”: (Holden, 2007) ‘‘Because user authentication on the Internet is difficult, eBay cannot and does not confirm each user’s purported identity.’’ (Holden, 2007) This launches prospects for sale accomplices to be bad devoid of paying reputation penalties. The lack of interpersonal communications in online markets is an extra resource of fraudulency. In a conventional face-to-face trade environment, “eye contact, a handshake, and chatting” assist grow indispensable trust among retailers and clientele. Patrons get to be familiar with the eminence of products by evaluating. Though, such interpersonal contacts do not exist in e- markets. “Asymmetric information” in this milieu means that the concluding parties may not contain the similar product knowledge. When bidders’ analysis merchandise scheduled at an auction site, the factual superiority of the product is indefinite. Auction site operatives regularly assert that they “have no control over the quality, safety or legality of the items advertised, the truth or accuracy of the listings,” therefore, divulging auction bidders to added deceitful listings and dealings. In array to protect the consumer trust the online auction sites have commenced to present an assortment of services that are intended to persuade trustworthiness and diminish deceitful transactions in the online auction market. (Rino Falcone, 2003) 4.1 Feedback Systems Auction accomplices are authorized to utilize feedback systems to openly rate their contentment towards their vending associates. In particular, the feedback system is a gauge of a user’s ranking in an auction society. The auctioneers support all users to ensure their trading partners’ ranking prior to dealings and leave comments about their satisfaction level post transactions. In quintessence, the arrangement tries to utilize one’s standing as a restraint for unethical behaviors. Explicitly, if a trader build ups a awful standing, further site users are warned against the unethical behaviors of trader and decide whether to deal with him or not. (Holden, 2007) 4.2 Insurance or Guarantee Auctioneers proffer complimentary or low-cost cover to guard buyers if confirmed to be sufferers of deception. A listed item is covered by the insurance while the consumer make payment to the retailer but do not be given the purchased item or the thing received is considerably unlike from the article portrayed in the auction listing. Furthermore, the “insurance and guarantee program” merely tenders an imperfect cover. For instance, the procurements are covered by assurance program only for up to “$200 at eBay and $250 at Amazon.com.” (Curtis P. Haugtvedt, 2005) 4.3 Escrow Services An “escrow service such as escrow.com” performs as a trusted third party (TTP) in a deal, delivering secure system to transmit stuff and payments to both parties. Primarily the escrow accumulates payment for the products from the customer. Post payment clearance, the retailer is informed via an email conforming to ship the item. Subsequently, the consumer confirms the TTP about the adequate acceptance of products. Afterward, the escrow releases the sum to the supplier. (Bidgoli, 2006) 5 Conclusion It is an undeniable fact that the transaction costs for both the customers and sellers had decreased post introduction of online markets, the quantity of participants has augmented and extraordinary bidding behaviors akin to “last-minute-bidding” are now possible. The online auctions continue for quite a lot of days, while traditional auctions were confined to definite locations and intervals. As a outcome internet auctions, in meticulous eBay, proved to be very triumphant. (Holden, 2007) Via introducing a TPP that not only issues “digital certificate” but also take actions against amoral actions, representatives are capable of attaining information concerning a trading partner’s precedent history. This can be prepared by authenticating whether the collaborator has a “valid digital certificate.” If a “digital certificate” is issued all the way through sturdy authentication, a market contributor will not be capable to effortlessly modify his identity post commending deception at any online auction site. The reputation result will pursue the certificate possessor despite of his location. Particularly eBay established a leading position as it was alone of the preliminary websites offering online auctions and may perhaps consequently be in advantageous position of the “bandwagon effect” and the system externalities. (Mehdi Khosrow-Pour, 2006) This led to eBay’s place as a “virtual” dominating company. Their achievement might be astonishing due to the fact that trust cannot be established in the similar way online as compared to the traditional way. The customer looses the possibility of gaining trust through personal contact but online auction websites have created reputation systems in order to compensate for the loss of personal contact. EBay did so by creating their Feedback Forum which apparently led to great success. Concluding, online auctions have established their selves in a market which existed for over thousand years and which mainly built up on trust. (Rino Falcone, 2003) 6 Bibliography Bidgoli, H. (2006). Handbook of Information Security: Threats, Vulnerabilities, Prevention, Detection, and Management. John Wiley and Sons. Curtis P. Haugtvedt, K. A. (2005). Online Consumer Psychology: Understanding and Influencing Consumer Behavior in the Virtual World. Routledge. Dr Neil J Salkind, B. F. (1999). Ebay Online Auctions. Muska & Lipman Pub. Holden, G. (2007). EBay PowerUser's Bible. John Wiley and Sons. Mehdi Khosrow-Pour, M. K. (2006). Emerging Trends and Challenges in Information Technology Management. Idea Group Inc (IGI). Rino Falcone, S. B. (2003). Trust, Reputation, and Security: Theories and Practice : AAMAS 2002 International Workshop. Springer. T. Kautonen, K. T. (2008). Trust and New Technologies: Marketing and Management on the Internet and Mobile Media. Edward Elgar Publishing. Xiaotie Deng, Y. Y. (2005). Internet and Network Economics. Birkhäuser. Read More