Chapter 1: Project Initiation 1.

1 Business Case The proposed On-line procurement and bidding system was developed to users for easy and fun transaction in purchasing an item. On-line procurements has huge market potential; it will become the main development direction of e-commerce. On-line bidding system combines bidding procurement with price competing. Buyers can get the most favorable price thus decrease purchasing cost greatly through suppliers online competition by lowing price. Online bidding system provides an optimized net procurement platform for enterprises. On-line Bidding will release bidding items according to buyers information. After the releasing of bidding items, many suppliers will make quotations through online bidding system and proceed with reversed bidding during a fixed period of time. This new bidding mode will undoubtedly reduce the falsity of each suppliers quotation, changing the original one-to-one negotiation between buyer and supplier into positive competition among suppliers. Moreover, On-line bidding system will reduce all the unnecessary intermediate links and rise purchasing efficiency tremendously. At the same time, on-line bidding system can ensure just and transparent bidding process during which supplier has no idea of his contestants. This just and transparent bidding process gives no room at all to string biding behavior. When the bidding is over, buyer will choose qualified suppliers after he evaluates each supplier comprehensively. On- line Bidding is committed to the establishment of business partnerships between supplier and buyer, to the mutual win of supplier and buyer. On-line bidding is making efforts to achieve the goal of supply chain e-commerce integration. 1.1.1 Project Origin When one thinks of online auctions today, the name eBay certainly comes to mind first. This website was the first in what is now a history of the online auction, which began in 1995, when Pierre Omidyar sold his first item. The item was a broken laser pointer, which sold for $14.83 to a man who collected such objects. The history of the online auction was born with that sale, and has continued to grow by exponential amounts since the first day. Omidyar quickly found that his hobby of creating an online garage sale needed to become a part-time business, which grew to a full-time endeavor within a very short period of time. In many ways, it's thanks to eBay that other online auction sites exist. Amazon.com became a fierce competitor throughout the late 1990's, as did Yahoo! Auctions, who actually still have majority market share in some countries. Other auction sites, while not as big, managed to leave their mark. ePier, started by a couple of poor students, has been one of the few auction sites to withstand all storms and continues on today. Today, there is a definite move away from auctions to

more traditional methods of selling. Craig's List and other online classifieds are gaining popularity, and Amazon.com's open retail market has also gained quite a bit of market share with individuals peddling goods from their garage. However, much of their success is owed to the early pioneers of online auctions. Undoubtedly, there will be new technologies and new companies that take the market in a different direction, leaving online auctions to be enjoyed by a niche group, just as it was in the beginning. 1.1.2 Problems and Issues Many complaints about auctions involve late shipments, no shipments, or shipments of products that aren't the same quality as advertised. Misleading terms are Terms like "bonus bids" might suggest that bids are free. In a auction, you pay for every bid. Hidden costs, Read each auction site's Terms of Use before you sign in or register. Sites may charge fees (for membership, ongoing subscriptions, or shipping), follow different rules, or have a variety of refund policies or other terms and conditions. If the terms and condition arent clearly disclosed on the website, take your business someplace else. Customers that are insecure paying, Consider how you'll pay, dont send cash or use a money transfer service. Instead, consider using a credit card. That way, if something goes wrong, you don't get your merchandise or it's not what you expected you can dispute the charge with your credit card issuer. 1.1.2.1 Current Technical Situation

Online Customer Bidding item Seller

Figure 1: Data flow Diagram level 0

1.1.2.1 Proposed Technical Situation

Bidding room
Register Add Product

Trader Send Message

PRODUCT

Bidding
Start Auction Close Auction Accept Message

BUYER

SELLER

Is a

SENT BY

Terms Of Sale

RULES
Bid Available Bid Evaluate Bid Update

TRADE
Deal Specification Winners/Losers

Message
Message Type

PARTICIPA NT

Sent to

Notification

Update
Sent to

Figure 2: Data flow Diagram Level 1

1.2

Purpose and Objectives The purpose of the system is to help the consumers to easily purchase an item via internet, Consumers can purchase over brand new and luxury items such as gadgets, television sets, game consoles, designer brand items, beauty and fitness products, vacation packages and more through the system, Followers can also put their selected item in the bidding process if they want to sell it. But first they need to confront us and let us do the remaining process of joining their item into the bidding. It will be less work to them to sell their item.

1.2.1 General Objective To design a System that will provide easy access for On-line buyers to bid for their desired products. 1.2.2 Specific Objectives Every project has its objectives to achieve at the end of the study. This project aims to fulfill the following objectives: 1. To reduce paperwork, postage, and photocopying 2. To reduce time for bidders to achieve their desired product 3. To provide secure bidding environment 4. The costumer have chance to pay less on the product 1.3 Benefits and Impact 1.3.1 Operational Benefits On-line bidding will benefit our day to day living, it will help consumer to use less time in purchasing their desired products. And it will lower the cost of every transaction and help us to higher our savings. 1.3.2 Technical and Technological Benefits On-line bidding business will expand the popularity of online market and will further more introduces to the world that purchasing a product from the web is more convenient. It will benefit every other developer who is starting to make a name in on-line business. 1.3.3 Economic and Financial Benefits It will benefit seller to Increase their revenues and will give Better customer relationships. It will help to lower every transaction costs that will definitely help our economy.

1.3.4 Cost and Benefits Analysis

1.3

Scope and Limitations The scope of the project includes the registration of the client and handling of the product from the supplier, it will be posted by the admin on the website. Winning bidders will pay the said amount before they receive the product via shipment from the website owner. The website owner will send the agreed price to the supplier after shipping the product. The website or the admin is not responsible for any technical errors in any devices that the bidders are using while bidding is in progress.

1.4

Operational Definition of Terms 1. Procurement - The act of obtaining or buying goods and services. The process includes preparation and processing of a demand as well as the end receipt and approval of payment. 2. Bidding the process of making bids for things, for example ( an event where things are sold to the person who offers the most money). 3. E commerce commerce conducted electronically. ( as on the internet) 4. Network administrator - The IT network administrator focuses on maintaining an organization's data management network 5. Bids - An offer of a price, esp. at an auction.

1.6 Review of Related Studies Christies much-publicized premier online auction came to a triumphant finish in August, bringing in an impressive $819,715. The Signature Cellars auction of fine wine was the first exclusively online auction held by Christies, and after its success it looks as if the firm is planning more. E-commerce is a key part of our growth strategy as a company, and we look forward to expanding this exciting new model even further this fall, as we add more collecting categories to our online-only auction calendar, says CEO Steven P. Murphy. According to Christies, 25% of registered buyers in the auction had never bought with the firm before, with many of these new participants being overseas bidders. It has long been accepted as an industry truth that people will never buy high-value items online. Yet Christies (and many other auctions) have proved this false one case of Chateau Lafite-

Rothschild alone sold for $42,000 to a collector in Asia. This auction seems to be a harbinger for a new era in the realm of high-end auctioning, but to what extent will Internet-exclusive auctions catch on? Online auctions were taking place even before the release of the first web browser for personal computers, NCSA Mosaic. Instead of users selling items through the Web they were instead trading through text-based newsgroups and email discussion lists. However, the first Web-based commercial activity regarding online auctions that made significant sales began in May 1995 with the company on sale. In September that same year eBay also began trading. Both of these companies used ascending bid, English auctions and were the first of their kind to take advantage of the new technological opportunities. The Web offered new advantages such as the use of automated bids via electronic forms, a search engine to be able to quickly find items and the ability to allow users to view items by categories. Online auctions have greatly increased the variety of goods and services that can be bought and sold using auction mechanisms along with expanding the possibilities for the ways auctions can be conducted and in general created new uses for auctions. In the current web environment there are hundreds, if not thousands, of websites dedicated to online auction practices. Auction started long ago. Different definitions have been proposed. Auction was considered as a mechanism for price competition between buyers and sellers. Auction was defined as a market for the participants to determine resource distribution and price under specific rules. Auction was also regarded as a resource distribution of scare resource and pricing mechanism under uncertain situations. However, the purpose of an auction can be categorized into four aspects: a co-ordination mechanism, a social mechanism to determine a price, an efficient allocation mechanism, and a highly visible distribution mechanism. Two most popular auctions are English auction and Dutch auction. The former bids up the price gradually and the highest bidder wins the auction; and the latter, on the other hand, bids down gradually and the lowest bidder wins the auction. Online auction is considered as to match buyers and sellers and the auction web site is to provide a virtual space for transaction. Reck considered online auction as using web to transmit information about products and services and sells the products and services via a bidding process. According to Focus on Internet News & Data (FIND) in Taiwan, the household connection to the Internet increases from 57% in 2003 to 61% in 2005. The participants in online auction increase from 9% in 2003 to 14.8%. Indeed, the Internet provides a good channel for auctions. Most goods and services are sold at xed prices. Yet auctions are used as the allocation mechanism in a wide variety of contexts, including procurement and the granting of oil drilling and spectrum rights. Online auction platforms, in particular, have grown substantially in recent years. In retail eBay alone has revenues of $36 billion from

its auctions business in 2007, while Google realized $21 billion in revenue from its online advertising platform in 2008. More specialized auction sites such as Dove Bid and Iron Planet have sold billions of dollars of used aviation and construction equipment respectively. Given their importance in the modern economy, one would like to be able to estimate demand in these platform markets. This would allow us to answer questions of broad economic interest, such as how much welfare has been generated by these platforms; as well as narrower strategic questions, such as how a rm with a xed inventory should set reserves and time sales to dynamically maximize its revenue. Demand estimation is often also a necessary rst step for the evaluation of anti-trust issues, such as the potential impact on the search-keyword advertising market of a merger between Microsoft and Yahoo. At rst glance, auctions data is an extremely rich of information about demand. In auctions we actually observe a continuous bid which directly reects willingness to pay, relative to the discrete choice we typically see in xed price markets. Moreover, for any buyer we generally observe all the auctions that they bid in, which provides valuable information about which items they view as close substitutes. This is informative for demand, much in the same way that second-choice data is useful in Berry, Levinsohn, and Pakes (2004). As the choice sets available to buyers vary we may observe deferring participation, which is helpful for identifying substitution patterns. Yet the strengths of auction market data also pose some diculties. As Hendricks and Porter (2007) note in their survey article, participants in auction markets are playing a complex dynamic game, where they must continuously adapt to the changing set of available auctions, and learn about rivals valuations. Most of the existing tools of structural auction econometrics are focused on independent auctions of homogenous objects, which limit their direct applicability to auction demand estimation, where bidders repeatedly interact across auctions, and substitution across products is important. The concept was first introduced in 1971 by Martin Shubik, the Seymour Professor of Mathematical Institutional Economics at Yale University, under the name of dollar auction. The game is an illustration of a paradox in which the participants are constrained to make, in the end, an irrational decision based on a sequence of rational decisions; an irrational escalation of commitment. Rules: Bidding starts at $0.01 and goes up in $0.01 increments. The winner then pays the auctioneer whatever the highest bid is to get the item. Typically, the auction will start with a few bidders hoping to make a profit and then ending up in a bidding war of attrition. In most cases the bid will reach $1 and then a problem will become evident for the $0.99 bidder, He can no longer make profit but right now the only rational option is to bid $1.01 which will result in a $0.01 loss compared to $0.99. Martins auction game was transformed into a penny auction site in 2005 by Telebid and its lead developer Josh MacDonald who practically invented todays penny auction business model which later became swoopo.com. It was very controversial in the beginning and also heavily criticized. This led to a business change model adopted by all reputable penny auction sites. They allowed bidders, who lost the auction, to get back all

their bids that were used and put them towards purchasing the item. This change made it impossible of the bidder to lose money with penny auctions.