Web auctions revolutionise procurement process

One of the most extraordinary successes in the e-commerce world has been that of online trading company ebay.com, which employs...

One of the most extraordinary successes in the e-commerce world has been that of online trading company ebay.com, which employs an online auction format for selling. But for many people in business, it has also been one of the most baffling.

Why on earth are nearly eight million Internet users using something so apparently old-fashioned as auctions, and often with a passion that borders on addiction?

This is not merely of academic interest - as a result of that passion, eBay not only receives more visitors than the former e-commerce bellwether,Amazon.com, but is worth more as a company. EBay is also notable for the fact that, unlike practically every other dot-com, it is profitable.

Many companies selling online would doubtless like to channel this incredible enthusiasm that people seem to have for online auctions. But finding a way of jumping on this bandwagon has not been easy. Few companies are ready - or willing - to adopt auctions alongside traditional fixed-price selling methods. And, although tendering has long been a standard practice, it is hard to generalise this into auction-based business-to-business procurement.

One way of solving the conundrum of how auctions might be applied to any business can be found on the Cokeauction site. The idea is simple: by purchasing promotional Cokeauction 330ml and 500ml packs of Coca-Cola, consumers acquire what are called Coke Credits. These can then be used to bid in auctions held on the Cokeauctions site. In effect, Coca-Cola has created a digital currency that is valid only for its auctions.

This is extremely clever, for a number of reasons. First, it taps into the craze for online auctions without forgoing fixed pricing for Coca-Cola's products. Secondly, it sends a subliminal message that buying Coca-Cola products is tantamount to currency conversion. And perhaps even more subtly, it makes the entire process - product purchase, conversion into the Coke Credit currency, and bidding on the CokeAuctions site - into one huge branding exercise.

Everything is permeated with the Coke brand, which thereby becomes impregnated with some of that online auction fever that eBay discovered and has mined so profitably. And the beauty of the CokeAuction idea is that it can be applied to almost any type of goods. Even the Internet address of www.cokeauctions.co.uk/ can be generalised to other companies. Time to buy a cyber-gavel, perhaps.

Read more on E-commerce technology