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Merits and Demerits of Selling By Auction

Selling by auction is a leading marketing strategy that is adopted by most of the online shop owners. The concept of auctioning goods is not new, as it has a historical presence in the real estate industry. The rapid increase in online shopping has compelled merchants to make available products and services for sale at auction.

The consumer behavior has changed drastically from conventional shopping to online shopping and more specifically bidding for their favorite products. Among the online users, about 26% are likely to buy products at auctions, as they are given freedom to bid a rate they prefer. Therefore, more and more merchants are preparing to be the part of the game by installing plugins and extensions that support the entire bidding process e.g. Magento Auction extension for stores built on Magento platform.

The concept of selling by auction has merits and demerits some of which we have listed below.

Merits of Selling By Auction

 

1.  Eliminate Negotiation

Negotiation is a favorite game consumers often play with the merchants to lower down the prices. To avoid the process, most of the marketers label products with fixed prices, which results in a decline in sales. The consumers are always searching for flexibility in prices, which is given through an auction. This eliminates the time of negotiations and simply allows users to bid either a higher or a lower price for the product displayed in the store.

2.  Buyers Fight for Products

Merchants enjoy peace of mind, while buyers are passionate to get the product. A store, which has to wait for a customer to visit and place order, will create a competition between buyers. Everyone will bid higher to grab the product and become a winner. The whole process is entertaining for the admin, who have to manage auctions and monitor each bid. The owner can set preferences for declaring a winner rather than replying each customer about negotiable terms and further details.

3.  Price Protection

A general perception about auction includes starting bidding without setting a price. The online auction sales ensure price protection by initiating with a base price. The bidders are invited to bid above the basic figure and float between an upper limit. This gives protection to a merchant in getting the fair value of the product and reasonable profit. The price range is set to ensure the minimum profit and let the buyers decide your extra profit.

4.  Increased Sales

An auction sale gives birth to a sense of urgency. The time limit creates a hassle to bid first and get the product, else the auction will close. This gives a sudden boost to sales of an online store, because this marketing strategy brings customers in a bunch rather than individuals. This strategy works fine for merchants who are fed up of a decline in sales. A simple Magento Auction Extension by FME empowers them to manage sales by opening auction for products and defining opening and closing dates for it.

Demerits of Selling By Auction

1.  Cost of Auction

If we talk about the offline auctioning, the cost includes hiring an auctioneer and paying a percentage from sale proceeds. In terms of online shopping, the merchants only have to buy and install a extension, and that’s it. The extension comes with an admin panel, from where the owners can easily manage auctions, set price and time period. For an online auction store, the merchants will never have to pay a professional auctioneer, but the installation of an additional extension will may cost a bit.

2.  A unique Community May Seem Interested

With the growing trend of auction sales, the people who don’t like to purchase through shall never be ignored. Selling products through bidding will attract a unique community and may result in disappointment between end consumers. A great number of visitors, who lack interest in bidding, may turn to other stores, from where they can simply place an order and get the item. So, both aspects shall be kept in mind.

3.  Customers May Dislike Waiting

An auction has a starting and ending date. If the product is left open to bidding for a longer duration, the customers may turn down the interest and will switch to shops, where they are ensured same day delivery without any wait. The marketers and merchants can strategically manage an auction for better prospects and keep the bidders and watchers engaged.

4.  Auctioning Does Not Apply to All Products

An industry has a set of rules, trends and norms. Back in the days, auctioning was mostly suited for selling property or household items, but it has gone beyond the imagination of a common man. The online stores are putting everything on the auction, which may not be based on thorough research of that specific product line. Online stores, which are blindly following the same strategy for all products will suffer from the results.

5.  An Auction Needs To Be Advertised

Without advertising, the product will be unable to grab customer’s attention. Just like a single product is promoted through various channels, a specific budget shall be allocated to ensure the visibility of an auction. The sales stop when an auction is closed, so that it needs to be highlighted on various platforms.

Conclusion

Selling products by auction is a growing trend, where most of the store owners are trying their luck in combination of the effective marketing strategies. The merits and demerits may simply guide a merchant in selecting products that will work best with bidding. The online industry has grown to highest revenue generating with an annual turnover of more than $186 billion in American only. The internet has empowered entrepreneurs around the world to come up with a brilliant idea of showcasing their products and services to a wide range of audience.

The merchants and managers are facilitated to implement any marketing or conversion strategy without bothering the functionality issues, because the entire auction process is powered with a simple extension. The Auction Extension for Magento has bridged the web development gap through easy installation and configuration to a great extent. Easier management of auctions has stopped the merchants from worrying about the demerits of auctions.

 

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