AJPark

Modern technologies enable auctions to be held on the Internet and make them open to people around the world. The auctions held on the Internet are called “online auctions”. We recognise them by the names of TradeMe and eBay.

Online auction sites give buyers a “virtual” flea market with new and used goods from anywhere in the world. They give sellers a global storefront from which to market their goods.

Online auctions quicken deal completion by increasing competition among buyers. They overcome some of the inefficiencies of trading in traditional markets. Traditional markets focus on only a small group of people, normally local people, and the high market price may attract fewer buyers. In online auctions, more competitors and participants can result in a better and improved trading process and cheaper prices.

Online auction sites have become so popular that more and more online auction traders are entering this market. The online auction site community is not just ‘ma and pa’ looking to offload unused or unwanted goods; retailers are also using online auction sites as another trading channel.

Buyers and sellers on online auction sites need to fully acquaint themselves with some rules to avoid problems.

What does a seller need to do?
Sellers are required to advertise their product or service and the terms of the sale honestly and accurately. You can’t place “shill” bids on your item to boost the price or offer false testimonials about yourself in the comment section of online auction sites.

You are banned from auctioning illegal goods; some auction sites have further prohibitions on sales of other items. While many auction sites check to ensure that illegal items are not being offered for sale, the responsibility for ensuring that a sale is legal rests with the seller and buyer.  Some auction sites like TradeMe post a list of banned items.

When describing your item and its condition, state whether it is new, used, or reconditioned.

Expect questions buyers might have and address them in the description of your product or service.

Include a photograph of your product. There is truth in the saying “a picture is worth a thousand words”.

State your return policy, including who is responsible for paying shipping costs or restocking fees if the item is returned.

Specify the minimum bid you are willing to accept, and who will pay for shipping and whether you will ship internationally.

To have a successful online auction website, online traders should put their efforts into meeting consumers’ needs.  Traders should check whether their current website images and branding, and customer service meet their consumer needs.

What does a buyer need to do?
Buyers should become familiar with the online auction site before starting the bidding process. Don’t assume the same rules apply between online auction sites.  Often they don’t.

Find out what protection the auction site offers buyers.  Do they offer free insurance or guarantees for items that are not delivered, or not what the seller claims?

Work out what the relative value of the item is before you bid. Check out brick and mortar store prices for a price comparison check.

Check out the seller. Check to verify you are dealing with the person you think you are dealing with. Avoid doing business with sellers you can’t identify. Don’t trust emails alone.

Beware of the dark side of online auctions
Buying and selling through online auction sites can be a pleasant way to spend the odd hour or two. But there is a dark side to online auctions.

Online auction sites provide another platform for counterfeiters to offload their fakes. While counterfeiting has always existed, the Internet has intensified sales of cyberfakes.  Counterfeiters are no longer dependent on selling their goods on local streets. Thanks to online auctions and websites, they can now reach consumers worldwide and for the most part, remain anonymous.

The problem of counterfeiting has become so rife that online auction sites have had to address it. You only need to enter a well-known brand like LOUIS VUITTON into the ebay.co.uk site to return hundreds and thousands of hits for products being sold at less than US$100. Clearly at that price, they are not legitimate goods!

Facing increasing complaints from online customers about the trade of counterfeit goods on its website, eBay set up its VeRO Programme (Verified Rights Owner Programme). This programme is designed to help protect the intellectual property rights of owners. The VeRO programme enables owners of patent, copyright, design and trade mark rights to report listings that infringe their rights. Also, anyone who holds rights which may be infringed by a listing or items sold on eBay is encouraged to join in the VeRO Programme.

The VeRO Programme now counts among its participants over 10,000 companies and individuals representing every type of intellectual property - from major software companies to video game developers to rock bands to luxury good manufacturers.

Retailers need to keep a watch on online auction sites, especially if you have entered arrangements to be the exclusive supplier or distributor of certain branded products. You do not want your investment eroded.  Make periodic checks to see who is selling your products, what they are writing about the products, and if they are giving misleading information that reflects poorly on those products. It is the brand name that buyers remember, not the third-party website they bought it from. 

The real issue is the dilution of the value of the brands that are sold. Goodwill in the brand is often diminished because counterfeit goods are usually substandard and of poor quality.

Online auctions remain a fun, efficient, and safe way to sell and buy – if you act prudently.

An edited version of this article was published in NZ Retail, June 2008

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  Corinne Blumsky

  Partner