|E-commerce: The end of fixed prices|
Below, we've listed a few of the more common types of pricing models, and given a few examples where you can find them online.
The most popular tweak on fixed pricing. Online auctions work in much the same way as offline ones: Sellers put up an item for sale, and bidders make offers. The highest bidder gets to buy the item. Differences: Online auctions are generally timed, so bids must come in before a pre-determined point.
A variation on this is the reserve auction, in which the seller sets a minimum price that must be met for the sale to go through. Sometimes this reserve price is public information, some times it isn't. If no bids meet the reserve price, the sale doesn't go through.
Where to find them: Auctions are so popular that just about every big online site, including ZDNet, has one. The granddaddy of online auction sites is eBay Inc. where you can find everything from antiques to Beanie Babies. Other popular general interest sites include Amazon Auctions, run by the e-tailer, and Yahoo! Auctions, run by the portal site. There are also dozens of specialty sites focusing on one or two specific categories, such as computer hardware or baseball cards.
Dutch auctions are typically used when a seller has many identical items. Multiple people can win, and winners can buy more than one item. All winners pay the lowest successful winning bid. The seller who bids the lowest amount for the most items is the winner.
Reverse auctions flip the whole process. A buyer lists the item he wants, and sellers bid down against each other to see who can win the request. Twists on the process: In many cases, the buyer will be required to buy from whoever wins the auction. In some setups, buyers can pre-set a price they're willing to pay, and if no seller wants to go that low, there's no sale.
That's the model offered by Priceline.com, one of the first reverse auction sites. The caveat there is that the buyer may have to give up some degree of selection, i.e., pre-setting what price he or she is willing to pay for a plane ticket, but giving up the option of specifying the departure time.
Another variation on reverse auctions are negotiations. At these sites, the bidding doesn't stop once an offer is made. Buyers and sellers can keep haggling until they reach a mutually agreeable price.
Where to find them: Priceline kicked off the reverse auction craze, letting consumers name their own prices for airline tickets. Since then, the company has added hotel rooms, car rentals, home mortgages and even groceries to the lists of things you can price online.
Other sites have caught on. Microsoft Corp.'s Expedia travel service will also let consumers set their own prices for hotel rooms (although on Wednesday, Priceline sued Microsoft over this feature, charging patent infringement; see: Priceline sues Microsoft over Expedia). And eCollegeBid.org will even let students set their own tuition, and see if a college is willing to match it.
Elsewhere, Imandi.com lets users get national and local quotes from merchant partners. And if you want to haggle, NexTag.com offers online negotiations for computer products, software and consumer electronics.
This method lets buyers band together to negotiate a better price through volume discounts. The basic theory is that the more items sold, the cheaper the cost of any individual item. In some cases the sites pre-negotiate prices with a merchant, based on the number of buyers who sign up. Other sites allow merchants to check out the number of buyers who want in on a deal before offering up their own price.
Where to find them: Several firms have jumped into this market, including Mercata and Accompany. Shop2gether.com is aiming its site at small businesses, selling things like office furniture and supplies. The site also allows buyers to suggest items they would like to see merchants bid on.