Because of the Internet, consumers and companies have totally changed how they sell and buy goods.  The emergence of online auctions in the marketplace can take full advantage of high-speed information technology to create more efficient markets. We are now able to bring together buyers and sellers with greater effectiveness on a massive scale.

Sellers and buyers from all over the world can now participate in trading relationships without time or space constraints. The most successful online marketplace, eBay, a popular online auction flea market, offers over 3 million items for sale at any given time for anyone, from anywhere.

The ability to bring together buyers and sellers at such a worldwide scale may be both a blessing and curse for the effectiveness of electronic marketplaces. On the one hand, it is a tremendous advantage since buyers can reap the benefits of greater product diversity with potentially lower prices and sellers are able to reach a greater pool of potential buyers.

However, one of the difficulties for buyers is that they have to put in extensive effort in searching through an enormous amount of products. In addition, sellers have to compete with a great number of sellers in order to effectively reach the potential buyers.

Despite the growing interest in and importance of such marketplaces, our understanding of how the web design of the marketplace affects its use is still quite limited.

One of the difficulties with online auction sites is the poor navigation within the site. Scanning the most popular sites it is easy to see this as a major problem for which a creative solution seems yet to be discovered.

Basically, an online marketplace is a Web application that acts as an intermediary between market sellers and buyers. Each site has to establish and clearly define the rules and procedures for trading between sellers and buyers.  What determines a good interaction on the site is how effectively buyers can browse and search for items that sellers have offered for sale.

An online auction is a special type of marketplace where resource allocation and prices are determined with an explicit set of rules based on bids from market participants.

Site navigation design is important because it affects the amount and effort of search required to find products from the part of the buyers, and to find potential buyers from the part of the sellers. This usually consists of some kind of searchable categorization.

One can easily observe at eBay, for instance, product categories with over 2,000 items for sale at any given time. Some of the more popular product categories list over 8,000 items. This translates to 40 web pages of 50 item lists for categories with 2,000 items (and over 160 pages for those with over 8,000 items). Therefore a buyers’ process of searching for items is hardly automatic or instantaneous.

It’s easy to see how the problem of information overload may greatly impact the market efficiency of online auctions.

Categories: COM566
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