Online Shopping

The online auction business model is one in which participants bid for products and services over the Internet. The functionality of buying and selling in an auction format is made possible through auction software which regulates the various processes involved.

eBay, the world's largest online auction site, is one of the better known examples. Like most auction companies, eBay does not actually sell goods that it owns itself. It merely facilitates the process of listing and displaying goods, bidding on items, and paying for them. It acts as a marketplace for individuals and businesses who use the site to auction off goods and services.

Several types of online auctions are possible. In an English auction the initial price starts low and is bid up by successive bidders. In a Dutch auction, multiple identical items are offered in one auction, with all winning bidders paying the same price -- the highest price at which all items will be sold (treasury bills, for example, are auctioned this way). Almost all online auctions use the English auction method.

Globalisation and the reach of the internet have allowed the auction business model to extend beyond its traditional realm of the trade in goods into the area of service provision. Outsourcing companies exist, such as guru.com and getafreelancer.com that now provide services such as programming and web design as the result of a competitive bidding auction process. Others, such as earn.co.uk have taken the auction model to the provision of local services.

The earliest collectibles were included as incentives with other products, such as cigarette cards in packs of cigarettes. Popular items developed a secondary market and sometimes became the subject of "collectible crazes". Eventually many collectible items came to be sold separately, instead of being used as marketing tools to increase the appeal of other products. To encourage collecting, manufacturers often create an entire series of a given collectible, with each item differentiated in some fashion. Examples include sports cards depicting individual players, or different designs of Beanie Baby. Enthusiasts will often try to assemble a complete set of the available variations. The early versions of a product, manufactured in smaller quantities before its popularity as a collectible developed, sometimes command exorbitant premiums on the secondary market. In a mature market, collectibles rarely prove to be a spectacular investment.