Tuesday, May 3, 2011

Business model - Auction

Pricing has always been an important activity for all companies to ensure their final product gets sold. You get everything right but get the pricing wrong, there is no respite from your losses. The beauty of economics lies in its assumptions, and the "Market" definition too indicates that the market price can be defined only by the interaction between buyers and sellers. A price tag though covers the cost, might not really indicate the best deal for both the buyer and seller - a market place would. Auctioning is one such mechanism for the market system for its beauty. Auctions themselves have a lot of variants; we would deal about them elsewhere.

A simple brick and mortar model of the business auction would come with its limitations, but the online model is better in terms of its reach. A numerous advantages gather for the online auction - breaking down the geographical borders, reducing the inventory storage costs, and dis-intermediation. But it comes with its own draw backs of the buyer purchasing a product without really feeling the product.

Dedicated companies in the online e-commerce space like the e-bay, Amazon etc have devised their own ways to make the "market" function well and have been operating pretty well. This model is being attempted in a lot of the developing countries and they have had success to varying degrees. We would learn more about these at a later stage.

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