What is an online auction

An online auction is a type of auction which is conducted using the Internet. It is performed in various styles, and each of these is typically used according to the auctioneers’ preference. In some cases, how an online auction is conducted is based on the auction’s goals. 

Compared to the conventional version, online auctions have a wider reach and scope. This is because the Internet has removed most of the limitations that have confronted the traditional method. These limitations include geography, small target audience, time, space and presence.

Type of Online Auction

The existing online formats are very similar and conducted just like the original ones. Among the most popular types of online auctions are the following.

English Auction

The English auctions are commonly used by many established online auction houses. This type is conducted by placing a single item for bid at a time. The item is presented to the bidders, along with the announcement of the starting bid. Those interested or who want to bid on the object are given a chance to make their offers. That is, the bidders are allowed to compete with one another by offering higher bids. The bidding usually stops when nobody is willing to provide a bid higher than the last bidder’s. The bidder who gave the unmatched and highest bid wins and owns the auctioned item.

The English auction is a popular method of conducting an online auction because it is easy to follow. Its unique style allows the online bidders to see the earlier bid. This setup establishes transparency which significantly encourages the other bidders to submit higher bids. 

Aside from sticking to the original bidding rules, many online English auctions now place maximum bids before every auction starts. The new rule provides other bidders with the liberty to decide if they want to top the last offer or have the auction forfeited when the top bid is reached or exceeded.

English online auctions usually last longer compared to the conventional version. Some typically last for days, whilst the others take a few weeks to conclude. This is because the online auction needs additional time to attract many bidders to the auction sites. Many websites currently offer their users’ notification options to receive alerts via text or email when bid updates become available.[1]

Dutch Auction

The Dutch online auction is a type of auction wherein the price of the item auctioned is lowered until a bid is placed on it. The first bid provided becomes the winning bid, which usually leads to a sale (considering that the price is greater than the reserve price). The setup is different from the conventional online auction markets, where the cost of every item starts low and then gradually increases as more bidders join and compete to become the successful buyer.

First-Price Sealed Bid

The first-price sealed bid is commonly referred to as the sealed bid auction. This type of auction is conducted by allowing all bidders to submit to the auctioneer their sealed bids simultaneously. Given that the bids are closed, the auctioneer does not know the auction participants’ amount on their bids. The submitted sealed bids are not revealed upon submission. Instead, these will be revealed on the stated date when all the bids are revealed. In the end, the highest bidder usually emerges as the bidding’s winner.[2]

Vickrey Auction

The Vickrey online auction is a known type of sealed-bid auction. The auction allows bidders to submit their bids without knowing what the other people in the auction have provided. At the end of the auction, the highest bidder is declared the winner. However, the winner is made to pay the price reflected in the second-highest bid. Vickrey auction is also similar to the more popular English auction.

Reverse Auction

The reverse online auction involves a set of procedures that is directly opposite of what the English online auction does. Typically, English online auctions allow multiple buyers to bid to purchase one of the seller’s items. In this case, the seller looks for a bid with the highest price. On the other hand, reverse online auctions work with multiple sellers that seek to offer their items for a single buyer to purchase. So, instead of outbidding each other by providing higher bids, the sellers compete by providing the lowest price until one of them reaches a price that entices the buyer to make a purchase.

However, due to how reverse online auctions are conducted, they are not suitable for selling antique items. Instead, this auction type is a good option for most business settings. An excellent example of this is when buying office furniture in bulk. Businesses use a reverse online auction to gather suppliers that will offer their products at better prices. In most cases, the supplier with the best purchasing and delivery offer will surely get the contract.

Bidding Fee Auction

The bidding fee auction is also referred to as the penny auction. It is an all-pay auction wherein all the participants are required to provide a non-refundable fee before placing a small incremental bid. 

Compared to the other type of auctions, the time spent on a bidding fee auction is not definite. This is because the time is extended when a new bid is placed. In general, the extension ranges from 10 to 20 seconds. When the time expires and the other participants fail to set a new bid, the last bidder is declared the winner and must pay the bid amount. 

Many experts believe that a bidding fee auction allows the auctioneer to raise more profit. These profits usually come from the fees charged to the bidders for placing bids and from the payment obtained from the winning bid.

Top Tips in Running an Online Auction

Knowing how to run an online auction is a challenging yet enriching task. This type of event requires careful and comprehensive preparation. When you plan on running an online auction, try to consider the following tips.

Stock all the items to be auctioned

Holding an online auction usually involves the selling of goods or services. Considering this setup, it is best to stock all the items to be offered to have a clear plan of which item would be auctioned first. If you plan to auction more than 100 items, you choose about 20 things that will serve as the products’ key group. Make sure to offer this for auction first and move on to the next group when the first ones are finally sold.

Stocking all the items saves you more time, allows the bidders to bid on the essential products first and makes the entire activity very systematic.

Set all the items’ starting bid

The starting bid is an essential element in an auction. It serves as the starting point that the bidders could use to compete and win the auction over a particular item. That’s why all the starting bids for all the items offered for auction must be set prior to the event.

To obtain the best results, you can set the starting bid for all items at around 35% of their proposed value. But the goal is to get about 80%-100% of each object’s market value. Also, try to limit the maximum number of bids per item to around 12-16 bids.

Create the online auction rules

Online auctions usually have a set of accepted rules that many established auction websites use. As a host of an online auction, some of the rules you should make are those on alerting the winners, the shipping arrangements and the cost they should handle to have the items delivered to them.

Go for a multi-day auction

Unlike the conventional in-person auction, an online auction can be conducted using the multi-day setup which offers many benefits. First, you can start the auction early. The extra days you earn can allow you to have more time to promote the event. You can also use the additional time to send emails to potential bidders or create promotional posts on social media.

Keep your participants motivated

If you want participants to prioritise your event over the others, keep them motivated. You can give away prices using some of the items that you are planning to auction. You can also use various qualifications in coming up with the winners.

Send email invites

Organising an online auction requires you to attract more participants and donors. One way of doing this is by sending emails or getting in touch with famous bidders currently operating online. You can also opt to send them with invites or updates every time you have an upcoming auction.

Use quality photos

This is an effective technique that makes running an online auction a success. As bidders interested in joining your event will check the items offered for auction, the images of the items for the auction should be of high quality. If they can see what’s up for bidding, participants may be encouraged to join and bid. If you don’t have the best pictures of the items you plan to auction, look for stock photos that perfectly depict the appearance of what you are selling. Images with the appropriate lighting and setting should be better used.


[1] Kenton, Will. “Sealed-Bid Auction.” Investopedia, 23 May 2021, www.investopedia.com/terms/s/sealed-bid-auction.asp.

[2] Kodner, Joshua. “The 6 Different Types of Online Auctions.” Joshua Kodner, 6 Jan. 2020, joshuakodner.com/the-6-different-types-of-online-auctions.