The Online AUCTION BOOM.

WITH MORE AND MORE brick-and-mortar companies on the prowl for new sales channels, online auctions are finding a niche. But the trend isn't without its critics; witness the hard hit taken by the B2C market on Wall Street from investors who question the viability of such business models.

Where, then, does that leave the B2B space? The short answer is: in a market with plenty of room for growth. Forrester Research predicts that Internet B2B auctions will grow to $52.6 billion by 2002.

According to Rodrigo Sales, cofounder and CEO of Auctionwatch.com, many companies are only now discovering that the channel exists and are still unsure of just how to leverage it. The San Bruno, CA-based e-commerce application service provider focuses on enabling businesses to sell large volumes of goods through the auction channel, and has seen a significant shift in its client base from consumer sales to the potentially lucrative commercial market. In the following interview with CE, Sales reflects on the present and future role of online auctions in the burgeoning B2B space.

What kinds of companies or industries are best suited to the online auction model?

We've seen over time that the types of goods have actually shifted. Although you still have a tremendous amount of antiques, Beanie Babies, and baseball cards on eBay or on other consumer exchanges like Yahoo and Amazon auctions, there's a growing amount of new goods being put up for sale, such as DVDs, digital cameras, CD players, Palm Vs, and the like. As part of this evolution, we're seeing that not only are the types and quality of goods changing--going from used to new, for example--but the types of sellers are changing as well.

Smaller etailers began to pick up on this trend and are looking to compete with larger etailers like Amazon.com, Buy.com, or eToys.com by placing goods on these exchanges. It enables them to compete on a level playing field with the larger businesses that have the market caps to bring millions of buyers back to their own sites.

What are you hoping to add to this space?

Auctionwatch.com helps small and large businesses sell large volumes of goods through the auction channel. For example, we enable seamless integration of a seller's inventory into our systems and an automated posting of that inventory across multiple exchanges. We can then provide tools that allow the seller to manage and track how the inventory is being sold across the board on various exchanges. Once the transaction is complete, we provide further seller and buyer services by taking what has been a tremendously cumbersome process, with buyers and sellers e-mailing each other and discussing how to arrange for payment, and automating it.

What kind of growth will we see specifically in the 828 space?

The B2B space is growing by leaps and bounds. And what we've seen is that rather than there being single horizontal exchanges catering to all types of categories or products, many of the B2B exchanges have been established in particular verticals.

When businesses transact with other businesses and the dollar amounts exchanged are quite high--based on the average sales price of an item being very high, such as a bulldozer, a specialized piece of testing equipment, or a batch of chemicals--they are required to go very deep in terms of the descriptions. Often times, industry expertise is needed in order to excel in that type of market.

How significant a role could online auctions potentially play in 828 e-commerce?

I think there is an enormous opportunity, and it is not restricted to the traditional forward auction model that eBay has made so popular, for example. There are all different derivations of the traditional forward auction model that I believe are going to grow in popularity based on the types of goods that are being traded and the types of buyers and sellers. When we look at the auction, we look at it in a much broader sense, as an electronic marketplace where buyers and sellers can exchange goods. And these goods may be fixed-price goods or goods that are priced in a dynamic manner.

Are online auctions another way for companies to reach out to international customers or is there too much of a lag in online auction participation in other parts of the world?

There is definitely still a lag, but I think we have also seen that other areas of the world are expanding and auctions are increasing in popularity. They are just a few years behind so that as the auction space continues to evolve in the U. S., we anticipate that it will evolve at just as an aggressive, if not at a more aggressive pace, as international companies and buyers catch up to domestic buyers.

One thing that is particularly interesting is that many companies are finding that it can be more cost effective for them to sell internationally by placing products up for sale on international exchanges because it reduces the costs they would incur by building a brand internationally and developing this entirely new sales channel abroad.

Certainly, there are still logistical challenges that companies face as they would in shipping any product internationally or order fulfillment to international customers. That issue doesn't go away, but being able to reach the international market in a cost-effective way represents an enormous opportunity for businesses linking themselves globally.

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Cell Phone MANIA

* If cell phones seem ubiquitous, that's because they are-especially in the Asia/Pacific market. Cellular phone service soared to 170.7 million subscribers in the first quarter of 2000, which is a 47 percent increase over the same period last year, according to Dataquest, a unit of GartnerGroup. China had the most subscribers for the first time with 51.7 million and Japan fell to the No. 2 spot with 51.1 million. "In markets like Indonesia and the Philippines, growth has been driven by prepaid services. In Japan and Korea, new Internet services have been the catalyst, whereas in Singapore and China, increased competition has been the prime mover," notes Dataquest industry analyst Ann Liang.

Global Internet

MAKES THE ROUNDS

The Internet has caught on around the world in a big way based on measurements compiled by Nielsen//NetRatings. The study found that more than 295 million people across 20 countries in Europe, Asia/Pacific, and North America had Internet access from a home PC. Most households with Internet access use only one source, but there are some interesting exceptions. Using multiple sources to connect to the Internet are most common in Switzerland and in New Zealand.

B2B ADVERTISING BOOST

The B2B arena has another success story: online advertising. It is the fastest growing and most financially rewarding segment for online publishers, according to a collaborative report by Jupiter Communications and Media Metrix. Jupiter analysts estimate that based on its current rate of growth, the B2B market will reach $3 billion by 2005, which represents 18 percent of online advertising spending on mainstream online media.

E-Commerce SURGES

E-commerce is alive and kicking in the second quarter of 2000. U.S. consumers spent an estimated $8.28 billion, up from $7.04 billion in the first quarter, according to Harris Interactive and U.S. Bancorp Piper Jaffray. This growth was led by a 20 percent surge in the travel services sector and a 13 percent increase in online auctions. In terms of Internet user awareness and share of online purchasers, Amazon.com has the strongest e-commerce brand with eBay nipping at its heels.

Really WIRELESS

The promise of m-commerce could be a reality in the U.S. by 2004. Aberdeen Group predicts that 74 million, which is one-third of all U.S. wireless subscribers, will be connected to the Internet. Such a shift will be propelled by the combination of new wireless services and Internet-ready devices.