Auctions by Businesses
Auctions are commonly used by businesses in cases where a profitable and fair price for the product is not easy to identify. More often than not, auctions are used to sell products of art, one-of-a-kind items, items that have collector value, or items that have been used and are no longer considered new (“E-markets,” n.d.). All these products have different values, depending on the customer. Therefore, auctions are used to present the products to the maximum amount of potential buyers possible in order to determine a net price. One of the largest internet platforms used for auctioning new and used products is eBay. It is used by numerous companies in order to make a business from buying and selling various items, from clothes articles to high-tech equipment. In this part of the paper, we will examine one such business, Gazelle.com.
Gazelle.com is an auctioning platform that deals with buying and selling used smartphones, computers, and other electronic gadgets (“Gazelle store, n.d.). Its business model is simple – they buy used gadgets from users, perform rudimentary maintenance in order to give the product a better appearance and increase its marketing value, and then sell it to other users via auctioning. The company does not really concern itself with the product’s lifecycle, as the company buys not only relatively new smartphones but also sells models that are old, going as far as to iPhone 3. There are no quantity purchasing requirements. I looked at three products in the cellphone bidding lot. These products are Samsung Galaxy Note 5, Samsung Galaxy S5, and Samsung Galaxy S4. For Galaxy Note 5 and Galaxy S5 the starting bids went from circa 250 dollars, whereas for Galaxy S4 they started from 100 dollars (“iPhones,” n.d.). The reason why Galaxy S4 is so much cheaper is that it is an older model. The moment a new model comes out, all older models lose in price. As a rule of thumb, the bids start from the minimal price that Gazelle expects to sell the gadget at while still having a profit. Auctions typically start with at least 10 bidders present and continue until one of them wins. Usually, they do not take longer than ten minutes. In addition, there is an option of “buying now,” where a potential buyer can skip the auctioning by paying a price higher than the initial bid. It must be said that Gazelle does not seek to sell their merchandise via auctions specifically. Ultimately, their goal is to sell their gadgets, and they do not care if it is done via auctioning or direct sales, as in either case their prices ensure a profit. It is an oddity about them, considering they sell their products on e-bay, which is one of the biggest auction sites. One interesting feature about Gazelle is that the price they give you when you sell items to them is good for 30 days (“Gazelle store, n.d.). It means that if you make a deal with them on a smartphone in the wake of the arrival of a new model, the price they give you will remain the same, even though it is supposed to go down.
Vertical Market Makers
Vertical markets are markets characterized by producers that create products and items for a specific industry. This type of market is called vertical because it does not mean to expand outside of its industry to claim market space in other areas. In many situations, the end-users are rarely the only buyers of these products, as the producers on each level of industry purchase necessary materials and products from another level, thus forming a market between buyers or a B2B vertical market (“E-markets,” n.d.). Agroindustry is one such market, where the initial suppliers of raw materials and products, the manufacturers, and the distributors are tied together with B2B commercial ties (Shapiro, 2016). Other examples of the B2B industry involve the electronics market, the automobile market, the avionics market, and many others. It can be said that almost every industry has an extensive web of buyer-to-buyer relationships.
For this part of the paper, I chose the company called Agrelma, which is a B2B vertical market maker providing services to both buyers and sellers in the agricultural sphere.
Agrelma is owned by an Italian consortium called the New Line. It was founded in 2002, with headquarters established in Gorizia, Italy (“Agrelma,” 2017).
The products that Agrelma seeks to provide its customers are Oil, Olives, Wines and Liquors, Pasta, Preserves, Delicacies, Meat and Cured Pork, Sweets, Coffee, Fish and Seafood, Ready Meals, Frozen Products, Vinegars, Ketchups, and Drinks (“Agrelma,” 2017). In short, they cover almost every major aspect of food supplies, which makes Agrelma an attractive net market for large stores, restaurants, and similar facilities. It effectively connects producers, both large and small, with their intended customers, enabling them to stock their shops and offer a varied selection to the end-users, thus appealing to a larger horizontal market. The market provides goods on a global scale and has customers in almost every country in the world, from North America to China. The total number of registered users is over 11.500, and the site features over 16.000 suppliers (“Agrelma,” 2017). Prime suppliers of goods in partnership with Agrelma are Olive Line International, S.L, Mirazeite LTD, Nutra Andes Limitada, Aussie Wagyu LTD, Monte Video Exporters CC, and others (“Food importers,” 2017).
The provided internet market platform is aimed at both producers and customers, as it allows customers to post their orders and requirements to them, and allows producers to provide their services and to answer the orders posted by the customers. Prices are formed through open competition with one another and negotiations between the producers and customers, ensuring healthy competition between all companies present. In order to make orders or provide services on Agrelma, there is a yearly subscription fee of 400 euros. Alternatively, the user may purchase food and wine directories separately, for 250 euros each. Orders and producers are displayed publicly, but it requires an account to make any offers or operations on the Net marketplace (“Agrelma,” 2017).
The vertical marketplace provider profits from every deal conducted within its platform. They take a percentage of the transaction agreed upon by both the seller and the buyer, with both parties paying an equal amount. These percentages, along with the yearly payments from the users make up for the funding necessary for the maintenance of the virtual marketplace platform. In order to ensure the safety and transparency of financial operations between buyers and sellers, Agrelma makes avid use of e-banking, in order to guarantee payments for sellers and the quality of provided services and goods for buyers (“Agrelma,” 2017).
Agrelma. (2017). Web.
E-markets, online auctions and exchanges. (n.d.). Web.
Food importers. (2017). Web.
Gazelle store. (n.d.). Web.
iPhones. (n.d.). Web.
Shapiro, R. (2016). How technology is revolutionizing the food industry. Web.