Niche Auction Websites Gaining Momentum on The Net
Posted: Sunday, February 19, 2006
by Web Times
The online auction site, eBay, has made its mark on the internet by turning mom and pop operations into millionaires. Over the years, sellers have made big bucks auctioning off goods to buyers all over the world. IBM, Disney, Motorola, Xerox and Dell, are just a few of the major corporations that now use eBay as an additional sales and lead generation channel. Who can blame them with the numbers eBay brings to the table. 1.5 billion page views puts this website in sixth place on Alexa.com traffic rankings - ahead of Amazon, AOL and CNN. eBay members make 79 million targeted searches for items each day. eBay has 125 million registered users, and 40,000 new members join each day.
The numbers may be staggering to some, but others are asking how big is too big? Lost in the listings of over 35,000 different categories, one cannot help but to notice the views of individual auctions decreasing because of the overpopulation of similar items. Sellers are having to pay more to stand out among the crowds just to receive the same response they generated in the past. Many sellers are feeling the effects of these higher costs and have begun looking for other venues to sell their items. If that is not concerning enough, the listing fees and the Pay Pal fees associated with listing items all roll up to eBay at the end of the day.
While sellers have benefited tremendously overall from the online auction format, they have begun to ask the question, “What if I don’t have a product to sell? Can I still take advantage of the auction format to generate sales and leads on the internet?" While eBay has begun to answer this question by introducing eBay Real Estate – a division of eBay which allows real estate agents to list their properties for sale in hopes of generating leads, the costs associated with these listings has discouraged many agents from participating. The real answer is waiting at niche auction sites. For example, a boat painting service company that wants to generate sales and leads to increase their bottom line can list this service for auction on a niche auction site. A small restaurant owner that wants to fill empty chairs on Monday thru Thursday, or the owner of a hotel that has plenty of rooms available during the week can drive traffic to their businesses by utilizing niche auction sites. Niche auction sites provide owners with a targeted audience looking for their services.
So why list in an auction format channel? The answer is quiet simple - businesses cannot afford not to. In today’s market environment, most business owners have already spent time and money developing a website to help promote their business. Well, the most common thought is “even if a website does not sell a product, it is a cost of doing business these days". However, the truth is that a company’s website’s main purpose is to generate another method to reach consumers for the end goal of increasing their sales. Websites are an electronic portal to a business owner’s door. The simple question is: how does a business owner drive the people in? With over 600,000 million websites worldwide, this question may not seem to have an easy answer, but it does. Auctions! Online auction sites act as portals for all business types that attract ready, willing, and able consumers directly to a business’ door step. The only real purpose for a business to have a presence on the internet is to Sell,Sell,Sell! No matter what a business is offering- it can be auctioned off. This is an open market environment that is moving at the speed of light.
All businesses have some fixed cost electricity, phone, supplies and labor are all costs of doing business. There are also costs associated with obtaining a new customer. Every business spends money to gain a new customer, but the most successful businesses are the ones that spend the least amount of money to bring the most amount of new customers into their locations. Many factors go into determining the cost associated with obtaining a new customer. The most obvious is the cost of the advertising campaign that is used to gain the consumers attention, but there are other factors. An advertising campaign for a restaurant may bring in 100 new customers that use a discounted coupon. The restaurant’s cost to obtain these new customers is not only the cost of the advertising campaign, but also the increased food cost due to the discount and the increased labor necessary to take care of the new customers. The campaign may seem successful due to the increased traffic, but if the new customers do not become regulars that recommend their friends and family, the campaign may have been a waste of money.
Looking at all of the factors associated with the costs of obtaining a new customer, online auction sites provide a very cost effective method to obtain new consumers. For example, a restaurant auctions off a gift certificate for $50.00. The auction has 150 people who have viewed the restaurant’s auction but only one won the $50.00 certificate for a total of $25.00. The restaurant has a new guest and friends visit the restaurant with the certificate they won. The new guests sit down to have dinner and all have a great time and meal. They use the certificate won to pay the bill.
Let’s break down the numbers. First the certificate auctioned off cost $50.00 worth of food and beverage. An average food cost for a restaurant is 30% which means the $50.00 certificate actually costs the restaurant $15.00. The new customer paid $25.00 to win the certificate. The restaurant has already made $15.00 minus listing fees approximately $3.00, making the profit $12.00. Some would say that’s a lot of work to make a few bucks. They are not necessarily wrong, but it’s not about making the money on the certificate that makes this channel of advertising so intriguing to so many. First, the cost to obtain this new customer and their friends and family, is virtually zero dollars which is unlike any other advertising medium. Also, the new customers were more likely to have a positive experience at the establishment due to the nature under which they visited the business – as winners. This positive attitude from the beginning allows these customers to be more likely to have a great experience – meaning they are more likely not only to return themselves, but also to tell their friends and family about their experience. Then there is the 150 people that looked at the auction, visited the restaurant’s web site, checked out the menu, and got in the mood to visit the restaurant. Even if only 1% visited the restaurant after finding it on the web, that is 1.5 new guests to the restaurant using no additional advertising costs to obtain them. If the restaurant sold one $50.00 auction a week with this example, they would obtain 208 new customers that redeemed the certificate (estimating 4 customers per certificate), and 78 new customers paying full price. Selling the certificates made the restaurant $624.00. If the ticket average for this restaurant is $10.00, the 78 new customers generated $780.00 of new revenue to the company. That is a total of $1404.00 of new revenue over the course of the year. Now figuring that the 208 customers that came to the business through the winning certificate return only one time in the course of the same year, these 208 customers generate an additional $2080.00. Of course, the better experience the customer enjoys, the more likely they are to return, giving this advertising medium’s return the opportunity to grow exponentially. The most part of this example is what the cost of this exposure was. Remember the restaurant made $10.00 selling the certificate in the auction format. So the restaurant was able to generate all of this with no actual advertising cost or food cost, and the auctions paid for advertising to the others. When, one compares this to a listing in some food magazine with a coupon costing real marketing dollars, the auction format makes perfect sense to the business owner looking for the most cost effective method of driving traffic in the door.
Niche auction websites are the key that open this flood gate of visitors and traffic, however, there are still only a few websites that provide this advertising medium to business owners. There is www.ebay.com which is very well known, but very costly to a business looking to list their services. Since eBay does not specialize in services from businesses, the business owner will not be able to maximize their returns on this site. Businesses do better to find a smaller niche sites that focus business to consumer auctions such as www.iBidUSA.com. This site specializes in services like restaurants, hotels, golf courses, day spas, and attractions. While primarily focused in
Every auction site should be examined to determine which one will benefit the business the most and which one is most cost effective. A business owner must approach online auctions as a method of driving new business and examining the cost in that light. While the cost of online auctions will generally pay for themselves, some websites may show better results for a particular region or type of business than others. A business owner should also examine and weigh the traffic ranking of a website with the crowdedness of a particular category to maximize their exposure. No matter which auction site a business uses, all businesses can benefit from this new and exciting advertising medium to generate sales and increase their bottom line.
There are still ways of making money on the web!
