Which online channel is right? Online auction channel choice for personal computers in the presence of demand decay

  • Authors:
  • Terence T. Ow;Charles A. Wood

  • Affiliations:
  • Department of Management, Marquette University, Milwaukee, WI 53201, USA;Department of Management, University of Notre Dame, Notre Dame, IN 46556, USA

  • Venue:
  • Electronic Commerce Research and Applications
  • Year:
  • 2011

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Abstract

Electronic commerce has become a viable marketing channel for many companies as they take advantage of the ease of electronic markets to move merchandise quickly and inexpensively. Researchers have investigated the use of an e-commerce channel in conjunction with traditional channels, but less research has been dedicated to choosing which e-commerce channel to use. In this study, we examine the choices made by Dell, a computer manufacturer, about whether to utilize their own proprietary auction site to sell computers or to use eBay, a popular and well-established third-party auction site, to move excess merchandise. We find that Dell receives a price premium over other vendors of Dell computers, and that DellAuction.com receives a price premium over eBay.com auctions. This price premium is drastically reduced as technology ages and is made obsolete by newer technology-based products. We further find that there is little to no price premium for extremely new technology, which is consistent with a contention that the online auction demand is so high for new technology that Dell cannot realize much of a price premium making a more popular third-party channel a more viable option.