Creating Auctionwire Case Study

Auctionwire believe they provide a service which enables customers to obtain a greater income from auctioning items online than they would have been able to achieve by themselves. Primarily this service is their expertise which will lead to higher bids. Like any new company, an innovative and effective business plan is obviously desirable and would increase their chances of success. In general, I believe that the company’s business has been the latter, without being particularly innovative. The business plan, put simply, appears to be a larger version of eBay drop-off shops, where items are bought then sold on at a higher price. Failures such as iSoldit in America is an indication that such a business model is not necessarily set for success (franchisepick.com). However the fact that Auctionwire can now boast high-profile customers such as BMW, MasterCard, Virgin and MTV tends to suggest their business model was in fact effective (canadian business.com).

To entice custom Auctionwire only charged commission on successful auctions. This is an appealing offer to customers who pay a basic fee for listing an item on eBay for example, whether the items sells or not. Similar selling points have been successful in other industries (e.g. “no win, no fee” law firms) and in my opinion there is no reason why it would not be successful in this one.

Auctionwire appear to have found a market niche in the form of corporate and charity customers. They would liquidate excess equipment for corporate clients and out-of-season stock for retailers. For smaller companies I think this would be particularly appealing. Firstly, some might not have thought of the idea, and for those who have, handing responsibility to Auctionwire may be more profitable. However larger companies may be able to set up a team in house, making Auctionwire’s business plan susceptible to imitation. The fact that IBM are currently the highest sellers on eBay highlights this fact (Wilson, A 2007).

Items which are handed into charity shops are very often of nominal value. This conflicts with what Auctionwire sees as an “ideal customer” whose items would be desirable. Also I know volunteers who auction items for charity online and do not charge commission. As a result of this I am sceptical as to whether this area of the business plan would prove fruitful.

The Commission which Auctionwire intend to charge is significantly higher (5% - 20%) than if customers were to use an online auction themselves. EBay for example charge 5% – 5.25% plus the basic listing fee. In essence Auctionwire’s business plan makes the company appealing to those customers who will make a greater net profit from sales despite the higher commission charge.

The software requirements which are outlined in the case study are, in my opinion, fairly comprehensive. However there is no mention of the software meeting any security needs, although perhaps it could be assumed that this would be included. It seems that a new case of fraud is appearing on the news every night and so security should be a primary concern to Auctionwire, particularly as the software will be online.

From the case study it appears that no software which is currently available off the shelf perfectly meets the needs of Auctionwire. Because of this is it possible that developing their own software from scratch would be the most suitable idea. Providing that such software could be designed to meet every need of Auctionwire and the cost was not prohibitive, this would be my recommendation. However the case study is particularly vague regarding the particular details involved in taking on such a project (e.g. costs involved, availability of good developers). Therefore I will recommend the best software solution out of the options provided in the case study.

It should also be noted that there are downsides to such a decision. If software is developed, Auctionwire would be the first company to use it. As a result, all teething problems and unforeseen bugs would have to be rectified and paid for by them. Similarly, it is unlikely that the software would be suitable for other companies as it would be custom made for Auctionwire, meaning they could not even make money from selling the new software. Also, very few repairers would have knowledge of the system and so Auctionwire could possibly become tied to certain repairers who would be able to charge over the odds.

The first two software solutions I ruled out were those of Canauction and Blackthorne Pro. Auctionwire specifically outline that the overall stability of the company and good customer support are of particular concern to them. Canauction falls down on both these fronts. Firstly, it is a brand new software provider with no reputable customers and by entering into an agreement with them Auctionwire would be taking a substantial risk which is not necessary. Secondly the customer service is not up to scratch and certain bugs have to be ironed out. I discounted Blackthorne Pro for a similar reason: a lack of experience. While I feel the software has potential, it is still at the testing stage and it is offline software. As a result I would imagine much of the data would have to be manually fed into the system, thus increasing the number of “touch points” In addition, it is not even compatible with the Canadian eBay, which I imagine would be the main market Auctionwire would be dealing in.

Clear-bid have substantial financial backing, thus providing Auctionwire with the stability they require. However I feel there are too many weaknesses of the software which would cost the company dearly. For example, down time was an issue of concern, as was poor customer service. While Clear-bid did offer the option to add multiple client module (at a cost), even with this I did not think the software was as suitable as SuperAuction.

SuperAuction meets most of Auctionwire’s needs, and the software could be adapted to rectify the majority of any shortcomings. The 24/7 customer support which is offered would be particularly appealing to Auctionwire as they admit to having had little experience in the area. In addition the company can offer a certain degree of experience in the field to Auctionwire. Therefore, if Auctionwire were to decide against developing their own software, this would be my recommendation.

Sources

Mark, K & Comisarow, M.B “Creating Auctionwire” 2007. Richard Ivey School of Business, The University of Western Ontario

Wilson, A “Accounting Information Systems” 2007. Class lecture, Strathclyde University

www.canadianbusiness.com/rankings/hot50/list.jsp?pageID=profile&profile=7&year=2007&type=profile&listType=HOT50

http://www.franchisepick.com/owner-of-failed-isold-it-ebay-drop-off-franchise-leaves-apology