eCommerce Aug 30, 2021

Picking a Type of Auction and Key Features for Your Online Auction Website

Kseniia Hrechyshkyna

Copywriter

Author

Julia Tsymbal

Business analyst

Expert

Time to read: 15 minutes

Content

  1. English Auction
  2. Reverse Auction
  3. Dutch Auction
  4. All-pay auction
  5. Penny auction
  6. First-price auction
  7. Second-price auction
  8. Unique bid auction
  9. Silent auction
  10. Comparative Table of Auction Types
  11. Needs and Key Features of Antique Auction Websites
  12. Needs and Key Features of Real Estate/Car Auction Websites
  13. Needs and Key Features of Charity Auction Sites
  14. How Much Does It Cost to Develop an Auction Marketplace?
  15. Summary
Content

The idea of auctions is as old as the hills. Its history dates back to 500 B.C., and the earliest auction house in the world was established in the 17th century. Thinking about that period, you may imagine spacious galleries, decorated in an aristocratic manner, honored guests holding fans, and a coveted object for sale in the spotlight.

In the modern day, the sale process by auction is still highly valued due to the incredible excitement, allure of authenticity, and opportunity to purchase rare items at a bargain price.

However, the shift to digital systems provoked a major change in this industry. Nowadays, auction participants can make a deal from the comfort of their own homes, while the candle that once measured the duration of the auction has been replaced by auction software—a bidding countdown clock.

Although the word “auction” emerges from the Latin verb “augere”, which means “to increase”, there are broad variations of auction types in terms of bidding strategy. Modern auctioneers pick one or another auction type according to their business niche, type of organization (commercial or non-profit), and the specifics of their target audience.

You might be interested in: “How to Build an Auction Website Like eBay in 2021. Complete Guide

Keep on reading if you want to learn more about the different types of auctions, their key particularities, fields of use, and core functionalities and determine which type is the most suitable for your e-commerce enterprise.

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English Auction

An English auction is the most common form of both online and offline auctions. It follows the open-cry ascending price protocol. An English auction starts with the lowest price (stated by an auctioneer), which gradually increases as each participant places a bid.

The last highest bid within the auction time limit decides the auction winner, who then purchases the lot for a price equal to their bid.

English Auction

Main peculiarities

Here are some of the distinctive features of an English auction:

A Japanese auction, which is a variation of an English auction, is based on the following conditions:

Such an auction format is relevant for bidders who know exactly how much they are willing to pay for the lot, so they don’t need to depend on the decisions of other bidding participants.

Fields of use

As the most widespread auction type, an English auction has a wide field of use. Although it can be used for all kinds of goods, the following industries predominantly prefer an English auction:

Christie’s is a good example of a long-established auction house that got a second wind and became an industry leader in digital innovations. Founded in 1766, Christie’s is currently a big corporation, which covers up to 80 art and luxury categories with a price range from $200 to $100 million. Christie’s provides up-to-date viewing and bidding experiences, enhanced by augmented reality, global live streaming, and other trendy e-commerce technologies.

Read more: “Benefits of Creating Online Antique Auction Sites

Reverse Auction

A reverse auction is also known as a buyer-determined auction. In contrast to an English auction, this type of auction can be described as an open-cry descending with one buyer and multiple potential sellers.

In simple words, a buyer puts up a request for a particular product or service. Sellers compete for the opportunity to make a sale, continuously decreasing the price and underbidding each other. As a rule, the auction winner is the seller who offers the lowest price for their products or services.

Yet, a buyer is not obliged to choose the lowest price offer. Additional factors, such as the seller’s reputation, estimated shipping date, etc., can be considered as well.

Reverse auction

Main peculiarities

To better understand the market relevance of a reverse auction, let’s look at its main characteristics:

Fields of use

It’s necessary to highlight that a reverse auction, due to its specifics, is ideal for simple, mass-market products. On top of that, to ensure the competitiveness of the auction process, there should be enough sellers who offer similar goods and/or services.

Thus, this auction type is frequently used for the following purposes:

Smarttender.biz is a good example of a commercial and government e-procurement platform that hosts reverse auctions and assists bidders in distributing their products/services and customers in selecting the best prices among multiple suppliers.

Dutch Auction

A Dutch auction is similar to a reverse auction. Both follow the open-cry descending protocol, which means that the bidding process starts with the highest price. The difference between the two is that in a Dutch auction, there are multiple buyers and one seller who gradually lowers the lot price until one of the bidders accepts it.

Dutch auction

Main peculiarities

Here are some ins and outs of Dutch auctions:

Fields of use

A Dutch auction is considered a wholesale auction, where a seller can quickly sell multiple items simultaneously. Therefore, it’s frequently used on wholesale B2B auction marketplaces. This type of auction is also suitable for selling real estate.

You might be interested in: “How to Build Online Real Estate Auctions

The Aalsmeer Flower Auction follows the Dutch auction system. Held in the Netherlands and considered the largest flower auction in the world, it sells approximately 20 million flowers daily from distant places, such as Ethiopia, Colombia, Ecuador, Kenya, Israel, etc. The Dutch bidding system generates considerable excitement among attendees: those who buy too fast risk overpay and those who wait too long risk missing the chance to win the lot.

All-pay auction

An all-pay auction is an auction where all participants have to pay their bid amount regardless of whether their bid is winning or not. This auction type can be either open or closed.

The idea behind all-pay auctions is the following: the more effort you exert, the higher the probability of the desired outcome. A similar idea lies behind the lottery: people who purchase a lottery ticket pay for their chance to win.

All-pay auction

Main peculiarities

Let’s discover what benefits the all-pay auction bidding system can bring:

Penny auction

A penny auction is also called a bidding fee auction. This is a type of all-pay auction where bidders must pay an entry fee. During the auction, bidders are allowed to increase a bid by an amount predetermined by the seller. This amount can even be several pennies, which is where the name of this type of auction was derived from.

With each new bid placed, the duration of the auction is extended. The winner is the participant whose bid was the last when the timer hit zero. The auction with such a bidding system is mostly held online rather than personally.

Main peculiarities

Let’s find out how all participants, including the seller and buyers, can benefit from this type of auction.

Fields of use

Penny auctions are widely used for selling and buying everyday goods: household goods, electronics, bijouterie, etc.

Dealdash.com is an auction website that sells goods through, as the company mentions, a fair alternative to bidding fee auctions. DealDash slightly modernized the penny auction bidding system by offering losing bidders the option to deposit the money spent bidding unsuccessfully on other items at a fixed retail price.

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First-price auction

A first-price auction relates to closed-format auctions. It is the second most common auction type after an English auction. During first-price auctions, participants submit one-time bids simultaneously and privately, so that any other bidder knows the sum of the bids made by their opponents. The participant who placed the highest bid becomes the winner.

First-price auction

Main peculiarities

Here are the main specificities of first-price auctions you should know:

Fields of use

Due to its closed format, a first-price auction is appropriate for selling the following:

Realtyhive.com is a global real-estate marketplace that combines intelligent digital marketing and strategic time-limited events to help its clients sell and buy properties online. The marketplace users can accomplish this via either the traditional selling process or an auction. The platform was created in a way that allows agents and lenders to expose their objects for sale to the right audience. To place a bid, buyers should create an account at least 48 hours before the start of an auction. The bidder who wins the lot is notified by email after the auction ends.

Second-price auction

A second-price auction or a Vickrey auction is slightly different from a first-price auction. It also relates to closed-format auctions. A participant wins the lot if they offer the highest price for it; however, they need to pay the amount of the second highest bid.

Main peculiarities

Given the characteristics of this auction type, second-price auctions have the following specifics:

Watch the detailed explanation of how a second-price auction works.

Fields of use

Second-price auctions are frequently picked for the real estate industry and the market of pre-owned goods.

Bidx1.com is an international property trading platform that harnesses the power of technology to provide a seamless experience of buying and selling properties online. Bidx1 is a pioneer in running digital property auctions. Its mission is to make the process of property purchasing easy, transparent, and effective.

The legal documentation for every object for sale, available on their website, lets the customers of Bidx1 make more informed decisions. Besides, the company provides online bidding demos and comprehensive content on how to invest in property through online auctions.

Unique bid auction

A unique bid auction is quite a contrast to traditional forms of online auctions. While in common types of auctions, the winner is an individual who made the highest bid, in a unique bid auction, it is not the amount but the bid uniqueness that defines the winner. Depending on the script, the winner is the highest or the lowest unique bid. Additionally, to be able to participate in a unique bid auction, buyers must pay a fee.

Unique bid auction

Main peculiarities

Let’s overview the key specifications of a unique bid auction:

Silent auction

A silent auction is similar to a classic English auction, although bidders often participate anonymously (other bidders can still observe the number of attendees who placed a bid, but they can’t see their names). This is because the primary goal of silent auctions is charity.

Fields of use

Silent auctions are good for non-profit organizations since it’s a proper way to engage donors and entertainingly hold charitable events.

Dukar-art.com is an online auction house. Dukat regularly organizes silent auctions, predominantly selling art from the first half of the XX century, national unofficial art of the 1950s–1990s, and contemporary art.

Comparative Table of Auction Types

Let’s summarize the above characteristics in this table.

Auction Type

Characteristics

Main Fields of Use

English auction

  • Open ascending;

  • One seller, multiple buyers.

Antique, real estate, cars, pre-owned goods.

Reverse auction

  • Open descending;

  • One buyer, multiple sellers.

Wholesale trading, services/freelance (B2B, B2C), government procurement.

Dutch auction

  • Open descending;

  • One seller, multiple buyers.

Wholesale, real estate.

All-pay auction

  • Can be either open- or closed-ascending;

  • Each bid must be paid regardless of the auction outcome;

  • The seller receives small amounts from multiple bidders.

Everyday goods, pre-owned goods.

Penny auction

  • Ascending;

  • Bidders pay an entry fee;

  • Each bid extends the auction duration;

  • The winner is the bidder who made the last bid.

Household goods, electronics, bijouterie.

First-price auction

  • Closed ascending;

  • Simultaneous bidding;

  • The winner is the participant with the highest bid.

Government contracts, government securities (in England), service contracts, real estate, cars.

Second-price auction

  • Closed ascending;

  • The winner pays the amount of the second highest bid.

Real estate, pre-owned goods.

Unique bid auction

  • The bid uniqueness defines the winner;

  • Buyers must pay an entry fee.

Everyday goods, pre-owned goods.

Silent auction

  • Open ascending;

  • Anonymous participation.

Non-profit organizations.

Needs and Key Features of Antique Auction Websites

Now that we’ve got acquainted with the ultimate types of auctions, let’s refer to the basic e-commerce industries that make use of the auction business model the most. In this part of the article, we will discuss auction solution implementation more specifically and examine the core needs of each industry along with the corresponding online auction features.

The antique industry takes the lead in online auction development. The antiquities market draws more and more attention from e-commerce entrepreneurs due to the ultra-rare, and therefore high-value, lots sold on auctions. However, the large sums of money to be made are not the only reason for the popularity of antique auctions. Real experts are ready for anything to get their hands on an exclusive piece of art, so it’s also about passion.

The first step in fine-tuning the selling process on an online antique auction is to examine its needs:

The main features to consider when developing an online antique auction are:

  1. Holding an auction:

  1. Buyer registration:

  1. Seller account:

  1. Buyer account:

  1. Moderation:

  1. Arbitration:

  1. Ads catalog:

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Needs and Key Features of Real Estate/Car Auction Websites

Real estate and car auctions are an innovative and quite fashionable way of selling and buying used vehicles, relic cars, and property. But what is the interest of the participants in such auctions? It’s very simple.

Before you develop a top-notch platform for car and/or real estate auctions, it’s important to account for their needs:

The key functionalities of car/real estate auctions involve:

  1. Holding an auction:

  1. Buyer registration:

  1. Seller account:

  1. Buyer account:

  1. Moderation:

  1. Arbitration:

  1. Ads catalog:

Needs and Key Features of Charity Auction Sites

Charity auction websites are an integral part of any modern charity event. With the help of a website, donators are able to obtain more information about the auction’s mission. In contrast with other auction industries, self-profit is not the point of a charity auction. Nevertheless, the auction website should still have a professional look. Let’s see what else is required to justify its main purpose, goodwill:

Hence, a charity auction website should come with the following features:

  1. Holding an auction:

  1. Buyer account:

  1. Ads catalog:

How Much Does It Cost to Develop an Auction Marketplace?

The examples of the leading online auction marketplaces, such as eBay, Bonanza, Christie’s, etc., prove that this business niche is quite lucrative and inspires many investors to move forward in this direction. Indeed, this market has vast prospects as it evolves along with the global trends of digitization.

Before you begin conquering the online auction industry and choosing a professional development team to assist you, you should understand the approximate cost for the auction marketplace development. Multiple factors influence this cost, such as the development approach, the auction marketplace architecture, the main features, third-party integrations, post-launch expenses, and so on.

Apart from the development process itself, other measures must be considered on the way to a fully-fledged online auction solution. For example, during business analysis, we collect the main business prerequisites, identify business growth points, and define the project scope.

Quality assurance is also important. Before you launch your website, you will need to ascertain its smooth performance and make sure there won’t be any issues with your auction platform in the future.

You can find more information on how we work by reading this article.

Dinarys, which is a proficient auction marketplace development team, will gladly provide you with a rough budget estimation for online auction website development.

Service

Cost

Business analysis

$3500–$5000

Project management

$5000–$7000

Development

$300–$1000 for the template solution

$40,000–$60,000 for custom development

UI/UX design

$5000–$6000

Quality assurance

$6000–$8000

Clean-up and acceptance

$6000–$8000

Moreover, keep in mind any possible post-launch expenses, such as SEO, PPC advertising, email marketing, and of course website maintenance, which will require additional investments on a regular basis.

Summary

Auctions have an old and rich history and a plethora of bidding mechanisms. The famous Aalsmeer flower auction is held using the Dutch bidding system, artworks are mainly sold via English auctions, while real estate auction sites can follow both the English and Dutch, first- and second-price auction bidding mechanisms.

Creating a qualitative and profitable online auction marketplace will take some time and funds. To justify your efforts, pick the right auction bidding system for your business, and ensure all necessary functionality is in place, we recommend the assistance of professional e-commerce developers, such as Dinarys.

We are always open to new projects. Each auction website calls for an individual feature set in alignment with the particular needs of our clients, and our team is delighted to address them by establishing an exclusive solution for you. Contact us, and we will provide you with more details on the auction marketplace development pricing, time frames, and functionality structure and help you plan your future business.

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