UKNM: Online Auctions Response

[Sam Michel]

Tim Jackson of Quixell asked me to forward this to the list in response to Steve Bowbrick's recent posting about online auctions (and Steve's auction habit, but we hear he's drying out now):


Steve


I really loved the thread about online auctions in general and Quixell in

particular. It was great to see that even the hardened pros who subscribe

to the list admit to finding online auctions fun.


We feel that we've found the Holy Grail of e-commerce -- giving customers a

reason to buy, rather than kick the tyres (because the product may not be

available tomorrow), and giving them a sense of who the other customers are

out there in the market (because they can see times and amounts of other

bids in the auction).


But there's one point I'd like to set straight in the discussion. One of

the list members said that auctions make money on the basis that most

winning bids will be higher than the 'fair' price.


In our case, that's definitely not the business model. I was quoted in the

story on us in yesterday's Daily Mirror (we're a quality operation,

remember?) as saying that we take 'razor-thin margins', and that's

absolutely true. If you knew the size of our losses to date, you'd realize

that our strategy is all about building a very big business where the

markups on each transaction are far smaller than most retailers. We're

currently trying to raise ten million dollars to grow the business, and a

key part of the pitch is convincing investors who don't understand the

Internet that low margins can help deliver fast growth.


So how come the final winning prices in our auctions aren't always below

the lowest mail-order or discounter's price? Well, there are two answers.

The less important one is that some bidders occasionally get carried away.

But this pretty rare, since we offer a money-back guarantee, which gives

people an opportunity to repent of their mistakes. 


The more important reason why we can't always be the cheapest is that we're

up against giants in the market whose turnover is a hundred or a thousand

times our paltry three million quid a year. Once in a while, they run loss

leaders that are cheaper than manufacturers' prices to us.


So the message I'd like to send to members of the list is: please be

patient! We can't hope to be the cheapest in town on every single product

-- just on most of them. In the long run, delivering real bargains and

achieving positive word of mouth is much more important to us than making a

quick buck today. To get that positive word of mouth, we have to deliver

real value to our buyers.



But to be economically viable, we also have to deliver value to sellers as

well.


Here's one example. In our newly launched travel channel, we're starting

off by helping people who own holiday homes around Europe and rent them out

a few weeks a year to help cover the bills. Until we came along, they found

customers by signing up with agencies, who charged them 20-25% and put

their houses in a colour brochure at a fixed price, say a thousand quid a

week. Now they can put spare weeks up for auction on our site. 



We explain to home owners that they can't expect the same high price as

they asked in the brochure.  But if they're willing to take, say, half the

normal price, then both sides will benefit. The seller gets some income

that helps to pay the bills. The buyer? Well, the buyer gets to spend a

week in a French chateau or a beachside cottage in Florida at a bargain price.


As we see it, this is what e-commerce ought to be all about: bringing

benefits to people on both sides of the transaction.


- Tim Jackson

Managing Director, Quixell Ltd

timquixell [dot] com

Toodle Pip


Sam

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