Why do people like auctions? Is it the opportunity to buy cheaper? Or maybe it’s the sense of competition? For whatever reason, auctions have always attracted public attention.
Just imagine that every 5 seconds a smartphone is sold in the US on eBay. And this statistic is for smartphones only. Such websites as eBay are loved by sellers and buyers as they give both what they want – the opportunity to sell what one does not need to those who need it, effortlessly, even without leaving home. Imagine the massive volume of all the stuff sold through eBay. All these clothes, home decor items, electronics, used and even broken things. And many of them are sold at less than 25 cents!
The E-Commerce & Online Auctionsin the US: Market Research Report issued in April 2017 by IBISWorld notes that annual revenue of the online auction business is estimated at $394 billion and is going to grow at 13.3% annually. Impressive, right?
That’s why we created this article for entrepreneurs who are also planning to start a business in online auctions. We’ll regard such essential questions as:
What industries for auctions are popular and who are your major competitors?
Which auction type will fit your project?
What should you start with and how can technology help you make a website like eBay?
How much does it cost to create an auction website like eBay?
Read on to answer your questions!
What’s inside (feel free to jump in the most interesting part):
It is a cornerstone question that needs an answer before you start any development. Having a clear understanding of your aims and motivation will give you the necessary fuel to continue even when it seems that it is all going wrong. To form the goals, you should know your contenders inside and out to feel your way around in the competition.
1. The story of eBay and a broken laser pointer
eBay was founded by computer programmer Pierre Omidyar in 1995 as a part of his website and became the first online auction.
You have probably heard this funny story that the first thing that was sold on eBay was a broken laser pointer for $14.83. Pierre even emailed to the buyer to make sure this wasn’t a mistake. In his response, the buyer explained that he was a collector of broken laser pointers.
This is how today’s multi-billion dollar international corporation started. Of course, auctions are just a part of modern eBay platform. But still, this name is associated with auctions first of all.
According to their financial report, eBay Inc. received $9.6 billion in revenue in 2017 which is 7% more than in 2016. And now, the total number of their listings equals more than 1.1 billion with 175 million active buyers around the world.
Key Takeaway #1: Life is strange: you never know what can bring you to the top. It may even be a broken laser pointer!
2. Diamonds, rare wine or used cars: what are your going to sell?
At the time when eBay was launched, it did not have a competitor. But at the same time, it had to make its way as a pioneer and every new step was a pure experiment that could be either accepted or rejected by the users. Nowadays, there are more than 10 large (like Amazon, Craigslist, Etsy, Rakuten, eBid etc.) and dozens of smaller auctions websites.
This segment of the business is diversified by industries:
Selling of different kinds of goods like clothes, electronics, books, handcrafts, etc.
In spite of the popularity and ever-growing profits of eBay, other famous and even new eCommerce auctions can still make for serious competition.
Key Takeaway #2: Know your competitors and find your niche.
3. Big commissions, poor protection: what else do eBay sellers complain of?
Ebay is the grandfather of online auctions and, like most of old men, it is really wise. But this does not make it better. Time changes and people’s expectations change quickly. Of course, eBay tries to follow trends and technology, but it is not easy to modernize such a huge system that contains so much information. It takes time and a lot of it.
The weak points of eBay that can give you a competitive advantage:
1. Big commission. It is known that eBay earns money from the fees for sellers, which is much bigger than at other auctions for:
adding listings when there are more than 50 listings per month ($0.35 per listing) while other auctions allow adding listings for free.
a final value fee of 10-12% while others take only 2-3%. Thus, if a product costs $1000, the seller will get $900 only! Big difference.
fees to upgrade listings (like making titles bold, adding more photos, listing items in more than one category).
2. No shipping assistance. eBay provides only the means for placing lots and regulating transactions. They do not have warehouses like Amazon, and sellers need to deal with shipping companies by themselves, losing more money for goods delivery.
3. Poor protection of sellers. eBay is more focused on the protection of those who buy by working with their claims, checking sellers and refunding (and seizing sellers through PayPal) to buyers even if they are not right. But sellers also need protection from dishonest buyers who are not a rare case (like fake reviews and claims).
4. Stiff competition. As one of the most popular marketplace, eBay attracts a huge amount of sellers and creates really tough competition for similar products listings. What is the chance that buyers prefer a new seller with zero reviews over the top-seller with the same product? There’s no chance for the newcomer. Sellers are forced to decrease the price to stand out and thus earn less than they would like.
5. No access to a customer database. eBay does not provide sellers a chance to contact their clients for collecting emails and proposing special offers to build a loyal customer base.
6. No personalization. Only lazy bones would neglect the personalization of a user experience and regard it just as a fashion trend but a necessity. It is sad that there is little personalization at eBay. Understanding customers’ preferences and helping them quickly find what they want could drastically improve the UX and increase user loyalty.
Key Takeaway #3: Nobody is perfect! There is always a place for improvement.
4. Turn their minuses into your pluses
So, to build another eBay, be ready to learn from their drawbacks and think of how you can turn their weaknesses into your advantages. For example, these can be:
Fewer fees or the same fees for more value
More comfortable seller and buyers conditions (more user protection, greater account flexibility, and customization)
More assistance and useful automation services to lessen sellers’ overhaul
Pay attention to personalization
Key Takeaway #4: Learn from your competitors and steal like an artist! Turn their drawbacks into your advantages.
The Elements Of The Auction Website
Now it’s time to move on to the implementation stage and find out how to create a website like eBay.
1. English, Dutch, or maybe Double Dutch?
No, we don’t mean spoken languages, but types of auction mechanisms. Let us remind you of the most popular models! Look at the scheme below and let’s talk about what types of auctions exist and how they differ.
The English Auction (or The Direct Auction)
This is the most common type, where lots are sold for the highest bid proposed by bidders in ascending order. Often, a seller can set the lowest price at which the goods can be sold and thus s/he is not obliged to sell for a less price.
The Dutch Auction
In this type of auction, the bidding goes in descending order starting from the highest price possible and stopping when a buyer presses the button when s/he is ready to buy.
For example, Price Rocks, one of our clients, was the first online auction in Ukraine where the price didn’t increase but on the contrary dropped, allowing anyone to buy the gadgets with huge discounts! We made a Dutch auction website where people could bid in descending order until they win.
The Vickrey Auction (or The Second-Price Auction)
This auction type is named after William Vickrey, winner of the 1996 Nobel Prize in Economics.
The bids are sealed and lots are sold to the highest bidder but at the second highest price. For example, if there are three bids of $10, $9 and $7, the auction is won by the bidder who proposed $10, but he pays the previous bidder’s price of $9.
eBay uses this type of bidding with some changes. Thus, the winner should pay the second-highest price plus one bid increment amount (i.e. a predefined amount indicated in the bid price field). However, it is usually a very insignificant amount.
eBay also provides sellers to set a “Buy It Now” option – this is the price for which the buyer can end the auction and buy the lot immediately.
The Double Auction
During this type of auction, both buyers and sellers compete: the former submit their bids and the latter submit their prices to an auctioneer who then chooses one price that clears the market. All the sellers who asked less than the price are allowed to sell and all buyers who placed the bid more than the price can buy at this price.
The Japanese Auction
An initial price is displayed (usually a low price) and it may be either 0 or the seller’s reserve price. The price starts growing continuously, or by small steps (for example, one cent per a second). All buyers enter the arena and stay until they are interested in buying. Once anyone exits, he or she cannot return to the auction. The winner is the last who stayed.
The Sealed Bid Auction
As we can guess out of its name, this auction works on sealed bids and each buyer can bid only once. In the first step, the buyer sets the requirements and, in the second step, the sealed bids are opened. The highest (or the lowest bid, depending on the rules) wins.
These are the most common types that can be found in the auction platform. But depending on your purposes they can be combined, borrowing each other’s elements.
And further on you’ll learn what features to include in your requirements and what technical solution to choose.
2. The Features of an auction website
Whatever unique and exclusive online auction design and business logic you use, there are still some common specifics that characterize all auction websites. To help you complete your requirements and not forget essential elements, we made this guide on general features that should make up the skeleton of your system.
Auction website users: who are they?
Auction websites are platforms where goods are bought and sold using auction mechanisms. The aim of online auctions is to regulate relationships between buyers, sellers and platform operators (admins). Thus, the following roles should be created:
A Seller should be able to create their own account, see the auction requirements, place listings, view statistics on selling, etc.
A Buyer should be able to register, place a bid or buy at once, pay with one of the proposed payments, select among shipment methods, write a review, set a rating to a seller, view a buyer’s purchase history, etc.
A Super Admin user should be able to moderate auctions, users, bids, and content of the website.
What features should an auction website have? Let’s pick them to pieces
How to build a website like eBay? There are common features characterizing any online auction website. Usually, these features are a minimum requirement for a viable product to launch to the market.
1. Listing creation
When adding items (lots), a seller should be able to provide all information about the lot (name, description, category, images) and requirements for auctions process (format and duration of auction, currency, quantity of lots in stock, starting price, buy it now price, reserve price, payment option, shipping methods, and other details).
Then, when all required fields are filled in, the system creates a lot listing available in the search to bidders.
If a seller wants to restrict the auction time, s/he can set the timer on each auction product to displays the time left until the auction end.
Also, it is possible to set a bid increment, i.e. the minimum sum the next bidder should place (it cannot be less than the bid increment).
2. Browsing the website
When entering the website, users should be able to quickly find what they are looking for and search by categories or keywords. Filters and sorting help to return more precise results back to the user.
3. Bidding process
There are several bidding options in the online auctions:
Manual bidding – a seller sets a basic auction price for the product. The auction begins from the set basic price. Bidders enter the price (place bid) they are eager to pay for an item. The highest (or lowest, depending on the auction type) bid wins.
Buy it now (Buyout) – usually, this is an option that allows a seller to set the price at which buyers can by the lot right away without additional competition. In this case, a special button for buying it now appears on the lot page. If the bidding price exceeds the fixed price, the “Buy It Now” button should disappear and the auction continues in its ordinary way until the auction conditions are fulfilled.
Reserve price – a seller can set a minimum selling price to allow for purchasing an item. If during the bidding the reserve price is not reached the seller has a right not to sell the item at a lower price.
Proxy bidding – a bidder can use a special automatic bidding bot that will bid on the user’s behalf. If the user gets outbid, the system automatically bids again and again for him/her. This helps buyers win the auction they are interested in without constantly checking the bidding process. The bidder can set a maximum price s/he is willing to pay, and after reaching which, the software will stop bidding on his behalf.
Offer – if a seller has several items in stock s/he can offer to buy the excessive items to the second and next in order bidders after the auction is already won. For that, a seller can send a message to the users who participated in the auction to offer them these items.
Deposit – some auction websites that deal with valuable items like cars, jewelry, real estate, may provide their sellers with the guarantee that the bidder will pay when the auction is over. For that, they can either provide an insurance on auction or take a security deposit from the bidders. The deposit is not refundable in case the buyer refuses to pay.
4. User account
Users can be both buyers and sellers. At registration, a user should add personal info, an address for shipping and payment details. There can also be settings for:
notifications and messages
purchase history, recently viewed items
saved items, and sellers, watch list (where a user can follow the changes on the item)
and current bids.
To increase safety on eBay, each bidder gets a code name that is only displayed throughout the bid history for an item to hide the real user details from others.
An online auction is almost the same as an online shop, so all won lots go to the user’s cart where a user can proceed to a checkout.
5. Integrations with payment methods
As with any other eCommerce website, auction websites should support multiple payment options. This can be implemented with either of the two ways:
1) Off-site integration. A user is redirected to the payment method website. All transactions will be fulfilled directly in the payment service (like PayPal). You only need to customize your payments page.
2) API integration. All transactions are performed on your website. With the help of software integrated into your code through the API, the user does not have to leave your site for payment.
We practice both ways in our projects and provide integration with such commonly used payment gateways a PayPal, Stripe and Authorize.
6. Ratings and reviews
It can be difficult to choose between two sellers who propose the same goods for the same prices. For this, bidders may use reviews to get a more clear view of the reputation of this or that vendor. The eBay rating system collects all customer and seller feedback after each transaction to prevent fraud and help their users in the future. There are three variants of rating: “positive”, “negative” and “neutral”. You can also see the colorful stars next to each user on eBay. The color of the star indicates the feedback rating that corresponds to the number of points.
7. Resolution Center
As online auctions have many rules and conditions, people may often need help to solve some issues, check the transaction status, submit a complaint or ask for assistance.
For these and other questions, eBay has the Resolution Center that helps users with their issues.
8. Seller dashboard
It is very helpful for the vendors to provide an overview of their sales tendencies and income to strategize their business. That is why a Dashboard can give them this full picture of what their performance on the platform is.
The eBay Seller Hub feature equips their users with such knowledge as traffic, ratings, sales statistics, expenses, and some other data.
9. SuperAdmin features
As any other website usually has an Admin, online auctions also need a supervisor who will have such features as:
Auctions and bidding management
Content management system
Choosing The Right Software Tools For Auction Website Development
There are many technical tools for auction website development. Here below we will compare 4 methods that are most commonly requested by people who want to build an online auction.
1. WordPress for auction website development
WordPress is an extremely popular website building platform. Here and there you may see the articles that give instructions on how to create any kind of a website on WordPress. But, what you should know first and foremost about WP is that it is a blogging platform. So actually, you build a blog and add specific functionalities to it with the help of plugins.
Many people are attracted to the cheap price of such a development, but unlike the custom development, this method has its restrictions on flexibility. Any custom “extras” may cost a lot as good WP developers are rare and expensive. Also, not all plugins may be compatible with your custom changes.
So, it is good for personal use, nonprofits or to test an idea. But you should always mind security and WP is a sweet aim for hackers.
Laravel is an open source PHP frameworks. This is one of the youngest and nevertheless the most popular PHP framework in the world for today. It was created to speed up and simplify the development process. Laravel has a larger community compared to Symfony’s and Yii’s communities. This means that a lot of people are involved in enhancing the framework and it evolves quickly.
Due to a large number of extensions, it allows you to quickly add functionalities. Developers love it for easiness of use, inbuilt authentication system, good validation and routing, and a more elegant and structured code.
Sometimes Laravel may be slow. But coupled with Vue.js frontend framework, Laravel allows for reaching smooth user experience with the event-driven websites (like auctions where bids change in real-time) with little computer resources.
Laravel is perfect for projects that are pressed for time and require quick start and delivery to the market.
3. Yii for auction website development
Yii is the fastest PHP framework among its competitors. But it takes more time for development than with Laravel that uses its multiple extensions. Yii can also use components of Symfony, but Yii components are more dependent on each other, and the more dependent code you have the more difficult it is to make any changes in it in future.
Yii is good both for small websites and large enterprise solutions, applications that need high-performance applications and apps that need real-time data changes. For example, in online auctions for the bidding process.
It is less suitable for projects that need to be launched as quickly as possible. For such projects, it is more appropriate to choose Laravel.
4. Symfony for auction website development
Symfony has won a reputation as one of the most stable and reliable PHP frameworks.
Symfony uses reusable components that reduce development time and costs. But still, this framework is heavy and not the easiest for developers to work with.
Projects of any complexity (from small startups to enterprise solutions) can be built on Symfony, especially large-scale projects (take this into account if you anticipate quick growth of your platform).
Symfony may not be the best choice for projects that need to be delivered as quickly as possible and do not need complex logic. For such projects, you are better off choosing Laravel.
In fact, you do not need to choose the technology by yourself if you delegate development to an outsourced company. All described frameworks are good, secure, reliable and the choice depends only on the experience of the team in this or that technology.
The best technology is the one your developers are good in and have the best experience with. Also, as the project development cost depends on a development time, it means that the more coding processes are automated the quicker the development is and less money you pay. That’s why for our most recent projects we prefer to choose Laravel.
At Greenice, we’ve dealt with PHP for more than 10 years and implemented projects with each of these frameworks. Selection of the framework depends highly on the requirements that we get from you for our estimation. Often when a client comes to us with an already started project (after other developers failed to do their job, which is not a rare case), we just continue to use the same framework that the project was created with. In this case, you definitely do not need to worry about which framework will be chosen.
Site Creation Steps and Cost
Steps to develop an auction website
Everything needs a plan, especially when you start a new business. Here is a high-level plan that sums up what we have already talked about and adds some more tips:
Select your niche
Know your competitors and their strengths and weaknesses
Choose the monetization method
Set the goals
Make a design (order from a web designer)
Find a development agency and get a project estimate
Test the website
Launch to the market
Iterate again and again
How much does it cost to build an auction website?
To give you an example of the cost, consider a minimum viable product – an auction website for selling electronic gadgets (or whatever other goods). As we already mentioned, we have created a website that sold electronic gadgets (like smartphones, tablets etc.). It was the Dutch auctions type, i.e. bidding went in descending order.
Users have to complete the registration process and pay the participation price. The auction starts at a definite time. The auctioneer (the website owner) sets the start and end prices, the number of items and time frame of an auction. The price drops with every second by a pre-defined bid increment. The bidders can click “Buy” when they are satisfied with the current price.
They should be quick to make a decision as there are limited number of items and other bidders can be quicker. When the “Buy” button is clicked the user should fill in their shipment details and pay with one of the proposed ways. We integrated Liqpay payment gateways for smooth payments.
A project like this can be implemented in 1.5-2 months and the approximate cost will be $8,000-10,000. If you want a project like this, contact us now!
Reasons to choose us for your auction website development
Hopefully, this information was valuable to you and gave you some food for thought. And now here is a minute of self-advertisement about why we are so cool! Here are the reasons why you would choose us to work on your website:
We have more than 10 years of experience in IT working on both small custom websites as well as complex solutions (ERP, CRM, marketplaces, social media, dating websites, booking systems, field management service apps, etc.).
We developed 130+ successful projects for industry-leading clients like Inc. 500 companies and small startups from all over the world. And we are really proud of them!
Our team consists of frontend and backend developers, business analytics, project managers and QA engineers. All our specialists are experienced in PHP and frameworks, libraries, database, and server configuration. We are not afraid of the most ambitious projects.
We provide a full development cycle – from business analysis to launch to the market. We are oriented on long-term relationships and support our clients on all stages of the way.
We are friendly, open and reliable people and comfortable to work with (as our clients tell us!).