In early 2004, the online auctions industry was young but was enjoying a period of enormous growth. Josh Gold and David Romeo, both in their mid late 20s and coming from entrepreneurial families spotted a gap in the market – no online auction business focused on dealing with corporate and charity customers. They decided to take advantage of this opportunity and formed Auctionwire – a business which aimed to be a new sales channel, allowing corporations in Canada to sell excess goods and capital goods through online auctions and also providing a fundraising tool for charities as they would be able to sell donated items online. Their main source of revenue would come from charging clients a commission but this would only be from successful auctions. In exchange for this fee, they would manage the complete auction process and absorb all listing fees. Auctionwire’s plan was to maximise the gains of the client through using eBay’s massive customer base, their own auction management process and their own experience in making successful auctions.
Although they are operating in a potentially lucrative market, there are a number of flaws to their business model. Gold and Romeo may both have some business and online background but they both have little experience in the online auction industry. Only charging commission on successful sales is risky, particularly for charities selling donated items. If goods do not sell then they have to pay the listing fee and this cost will not be recovered. Timing is also crucial for setting up a business and May 2004 is possibly too early as the market is so young and a decent software package for online auctions is not currently available.
Central to Auctionwire’s success will be their decision concerning their choice of software. Firstly, they required the software to be compatible with eBay, but other crucial factors included reliability and ease of use. They also planned to have a multiple client module, Canadian market functionality and preferably have good customer support. They also wanted to limit spending to $15,000. They have 4 choices of software which they can buy in: SuperAuction, Canauction, Clear-Bid, Blackthorne Pro. A further option is to make the software themselves from scratch. Each of these options fitted their needs differently and all of them are far from perfect.
In my opinion the first option that should be ruled out is the option of designing their own software. Although this option could possibly allow for a perfectly tailored system, it has too many drawbacks. They require the software as soon as possible if they are to meet the projected launch date and this option would require a great deal of time from both the developers and also Gold and Romeo themselves. The software would also be completely untested presenting too great a risk for them.
Out of the 4 buy-in choices, I feel that 2 of them should not be given much consideration. Clear-Bid is perhaps the worst option. At a cost of $5,000 to set up, $1,000 per month in ongoing costs and $10,000 for the multiple client module, this would exceed the budget that was set. At such a great cost, it is also not a perfect fit to their needs as it lacks a Canadian shipping calculator, has downtime issues and a customer service which does not offer immediate assistance. The cheapest option would be Blackthorne Pro. It would cost $5000 to set up with running costs of only $24 per month. However cost cannot be the deciding factor as this software is still in a beta testing phase making it far too high risk. It is also designed exclusively for the US and it could take too long for their planned expansion to Canada to actually happen.
I believe that the other 2 options, SuperAuction and Canauction are the best of a bad bunch. SuperAuction, on paper is a very strong package. It boasts both an online and offline solution meaning that downtime would not be an issue provided that the offline solution is continuously updated by the users. They have targeted the US customer but with some additional investment from Gold and Romeo, I think they could adapt their service for Canada also. It would cost $5,000 to set up and $300 per month in ongoing costs. However the reason why SuperAuction cannot be selected is because of their past record. In January 2004, eBay halted access to its Checkout Redirect feature through the SuperAuction platform. They have repeatedly failed to live up to the expectations that they agreed in the Service Level Agreement and many sellers are upset with their services and eBay have also stated that the outages have been a major problem. Launching Auctionwire with this kind of bad publicity would be detrimental to their success.
This leaves only Canauction – a brand new online auction software based in Toronto, which means the Canadian shipping calculator will definitely be there. It is run by a very small team of software developers and also offers both an online and offline solution. They have not yet secured many clients but at least they start from a clean-slate. They have a software solution that is believed to be well-suited to managing multiple clients but having said all this there are also considerable risks associated with this package. There are still bugs that need fixing, and many features are not fully working yet. Customer service is weak and inflexible but the software cost is reasonable at $5,000 plus $250 per month. Minor software modifications may be pricy but Auctionwire’s budget is probably large enough to cope with any necessary modifications. I believe that Auctionwire should select Canauction as their software package but they should definitely invest some extra finance into the software to ensure that nearly all of the bugs are ironed out and that all of the features are working properly in time for their May launch date.
Although they are operating in a potentially lucrative market, there are a number of flaws to their business model. Gold and Romeo may both have some business and online background but they both have little experience in the online auction industry. Only charging commission on successful sales is risky, particularly for charities selling donated items. If goods do not sell then they have to pay the listing fee and this cost will not be recovered. Timing is also crucial for setting up a business and May 2004 is possibly too early as the market is so young and a decent software package for online auctions is not currently available.
Central to Auctionwire’s success will be their decision concerning their choice of software. Firstly, they required the software to be compatible with eBay, but other crucial factors included reliability and ease of use. They also planned to have a multiple client module, Canadian market functionality and preferably have good customer support. They also wanted to limit spending to $15,000. They have 4 choices of software which they can buy in: SuperAuction, Canauction, Clear-Bid, Blackthorne Pro. A further option is to make the software themselves from scratch. Each of these options fitted their needs differently and all of them are far from perfect.
In my opinion the first option that should be ruled out is the option of designing their own software. Although this option could possibly allow for a perfectly tailored system, it has too many drawbacks. They require the software as soon as possible if they are to meet the projected launch date and this option would require a great deal of time from both the developers and also Gold and Romeo themselves. The software would also be completely untested presenting too great a risk for them.
Out of the 4 buy-in choices, I feel that 2 of them should not be given much consideration. Clear-Bid is perhaps the worst option. At a cost of $5,000 to set up, $1,000 per month in ongoing costs and $10,000 for the multiple client module, this would exceed the budget that was set. At such a great cost, it is also not a perfect fit to their needs as it lacks a Canadian shipping calculator, has downtime issues and a customer service which does not offer immediate assistance. The cheapest option would be Blackthorne Pro. It would cost $5000 to set up with running costs of only $24 per month. However cost cannot be the deciding factor as this software is still in a beta testing phase making it far too high risk. It is also designed exclusively for the US and it could take too long for their planned expansion to Canada to actually happen.
I believe that the other 2 options, SuperAuction and Canauction are the best of a bad bunch. SuperAuction, on paper is a very strong package. It boasts both an online and offline solution meaning that downtime would not be an issue provided that the offline solution is continuously updated by the users. They have targeted the US customer but with some additional investment from Gold and Romeo, I think they could adapt their service for Canada also. It would cost $5,000 to set up and $300 per month in ongoing costs. However the reason why SuperAuction cannot be selected is because of their past record. In January 2004, eBay halted access to its Checkout Redirect feature through the SuperAuction platform. They have repeatedly failed to live up to the expectations that they agreed in the Service Level Agreement and many sellers are upset with their services and eBay have also stated that the outages have been a major problem. Launching Auctionwire with this kind of bad publicity would be detrimental to their success.
This leaves only Canauction – a brand new online auction software based in Toronto, which means the Canadian shipping calculator will definitely be there. It is run by a very small team of software developers and also offers both an online and offline solution. They have not yet secured many clients but at least they start from a clean-slate. They have a software solution that is believed to be well-suited to managing multiple clients but having said all this there are also considerable risks associated with this package. There are still bugs that need fixing, and many features are not fully working yet. Customer service is weak and inflexible but the software cost is reasonable at $5,000 plus $250 per month. Minor software modifications may be pricy but Auctionwire’s budget is probably large enough to cope with any necessary modifications. I believe that Auctionwire should select Canauction as their software package but they should definitely invest some extra finance into the software to ensure that nearly all of the bugs are ironed out and that all of the features are working properly in time for their May launch date.
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