Ottawa eyes eBay-style auction site to boost bids and revenue

Looking for a hot deal on a set of eight office chairs, a military generator and a pair of sandal foot, nylon thigh highs? The federal government’s online auction Web site, GCSurplus, has you covered.

Ottawa is about to make it easier to outbid fellow Canadians online and walk away, thigh highs in hand, as Public Works and Government Services Canada begins an auction site redesign.

The updated site will allow shoppers to monitor competing bids.

GCSurplus was launched Jan. 5 this year to boost the sale of used, seized or surplus items collected from 90 government departments.

More than $40 million worth of goods are sold to direct buyers and contract service providers through online and live auctions, according to Céline Tremblay, communications advisor, media relations at Public Works.  

Shoppers also have the option of visiting one of four Canada Assets Distribution (CAD) warehouses to inspect items and use on-site kiosks to place electronic bids.

CAD purchases about $20 million worth of goods and services on behalf of government departments each year, such as staplers, vehicles and uniforms. They are able to earn back approximately $14 million each year through resale.

The current system allows users to submit bids for seized or surplus items ranging from household appliances and business supplies, to scrap metal, shipping material, and military goods.

Shoppers search through a list of items online, and submit bids electronically. But currently they have no way of knowing whether their bid is likely to win until the bidding period closes – as competing bids are hidden.

But that will soon change.

The power of open bidding

Following a business review of the Jan. 5 model, CAD hopes to evolve its current site into a more “open bidding system,” Tremblay said.

The new site will mirror eBay‘s open-bidding style and allow users to view competing bids. This, it is hoped, will spark more than a few bidding wars and drive up revenue for the government.

“CAD is now reviewing the functionality of its new system to ensure it meets government expectations and the needs of Canadians,” the Public Works official said. “Our goal is to maximize access for Canadians and return on investment for departments disposing of surplus material.”

The government site’s changes are being made in response to an internal study conducted in March 2007 and presented to Public Works in May 2008. It found an open, bidding style brings many benefits, such as higher sale prices and more revenue for departmental clients.

The effectiveness of “open bidding” is also exemplified by British Columbia’s auction site, BCAuction, which works in a similar manner – taking a commission for selling its government’s goods.

Launched by the Ministry of Labour and Citizen’s Services, BCAuction uses “proxy bidding”, an automatic bidding system which is the standard for online auctions, such as eBay, to improve convenience for buyers.

The online auction reduces infrastructure costs, the cost of analyzing bids, and processing payments – all of which are done electronically, noted Arthur Fee, director of asset management and product supply for the ministry.   

Shoppers enter a bid amount, which is kept hidden until their maximum bid has been exceeded by another bidder’s, or until they win.

The site automatically uses increments to boost your bid to the max amount, to prevent you from overpaying for the item.  

The BC site has 22,500 registered bidders and offers around 200 items, on average, at any given time, collected from 20 public sector bodies. BC has been able to sell 16,000 surplus assets online and earn $10 million in revenue.

The province still uses traditional live auctions in addition to the Web site, but Fee says the open-bidding system has also generated more revenue than expected.

The U.S. government has also seen similar success with their Federal Assets Initiative.

Its open-bidding online auction, GovSales.gov receives 250,000 hits per quarter, according to the 2009 Report to Congress on E-Gov initiatives.

Net revenues have increased 20 per cent over the past year, with site visitors increasing 14 per cent.

Sparking bidder competition

Auction sites should be open to appeal to people’s competitive side, said Jim Cockrum, Internet marketing expert and author of The Silent Sales Machine Hiding on eBay.

“An auction is 1,000 times more likely to receive a second and third bid if there is a first bid,” he said.

“I always encourage people to do what they can to get in a first bid for as soon as you do that, the psychology of bidder competition kicks in and you’re more likely to get further bids and make greater profit on the item.”

The benefits of putting most surplus goods online are huge, he said. Governments will reach a larger audience, be able to display video and pictures, and write detailed descriptions. And users will be able to take their time and investigate intended purchases.

That’s one of the main reasons B.C. began putting some of its items online – live auctions only appeal to a certain geographical space – online auctions have a much larger reach.

However, Cockrum is curious about why the governments aren’t simply using eBay – a Web site that’s already well-designed and reaches millions of buyers.

“It would be hard for me to justify building an entire system to duplicate eBay.” He said the government auction site wouldn’t draw
the same audience as eBay does. “Revenues earned [on eBay] would offset the fees.”

eBay was the most popular online auction site in Canada in February 2009, according to comScore Canada’s Media Matrix, receiving 96 per cent of online auction site seekers, or 13,257 unique visitors.

The second most popular auction site was Bidz.com, which had 468 unique visitors by comparison.

While eBay could clearly reach more buyers, under the Surplus Crown Assets Act, CAD is responsible for the disposal of assets, Tremblay said.

“Consequently, CAD has decided to develop its own online auction system to better meet the needs of Canadians … in areas of bilingualism and accessibility.”

The Federal Accountability Act also does not permit use of PayPal for financial transactions, she said. As an alternative, CAD is now working to include the Receiver General’s official payment in GCSurplus.

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