From the December 1998 issue of Entrepreneur

More trustworthy than classified ads and cheaper than a retail outlet, online auctions are rapidly becoming the most cost-effective way for small businesses to buy or sell goods on the Internet. Since Web sites such as Onsale Inc. (http://www.onsale.com) began appearing in 1995, the popularity (and revenues) of online auctions has soared, generating nearly $3 billion in business-to-business sales in 1997, according to Forrester Research Inc. in Cambridge, Massachusetts.

There is no direct state or federal government oversight of online auctions, so fraud is still a real concern for participants. Those who run the auction sites, however, have come up with some ingenious ways of addressing these fears, says e-commerce analyst Erica Rugullies of Cambridge, Massachusetts-based Giga Information Group. On some sites, says Rugullies, "Buyers are given an opportunity to post opinions about sellers and their equipment, so word of a bad apple gets around real fast."

For one business, Eclipse Integration Inc., a value-added reseller of IT equipment in Wareham, Massachusetts, online auctions have become a viable alternative to purchasing from local and national distributors at fixed, nonnegotiable prices. Eclipse's founder and CEO, John White, began visiting the online auction site http://www.fairmarket.com earlier this year. "I can usually get a lower price on off-brand equipment [at FairMarket] because the auction allows me to haggle directly with vendors," says White.

Still, to really benefit from online auctions, you have to be pretty shrewd, says White. "You need to know the market price of what you want and not bid any higher."

Like many online auction sites, FairMarket Inc. charges a nominal fee for each transaction and, in return, protects the anonymity of buyers and sellers and guarantees satisfaction.

Match Game

EPA gets into the small-business act.

A new program sponsored by the U.S. Environmental Protection Agency (EPA) is giving women- and minority-owned small businesses the opportunity to make money and help the environment at the same time.

The Environmental Technology Commercialization Center in North Olmstead, Ohio, opened last December to make EPA technology, expertise and facilities available to small businesses nationwide. "The center performs market opportunity analyses on [EPA] patents to give people an idea of what's out there and what they can use the patents for," says Larry Fradkin, the EPA'S director of technology transfer.

The center has worked with more than 100 businesses so far, primarily through licensing agreements and cooperative research and development. "We also play traffic cop and matchmaker," says Fradkin, "which helps [businesses] cut through the bureaucratic maze and find the exact person they need to work with to develop their idea."

For more information, contact the center at (440) 734-2746 or http://www.battelle.org/etc2

Place Your Bids

To learn how online auctions work, check out these Web sites:

http://www.classifieds2000.com : Recently acquired by Excite Inc., this site offers classified ads as well as online auctions for computer equipment and general merchandise. The Cool Notice feature alerts you via e-mail when an item you're looking for is put up for sale.

http://www.webauction.com : Associated with computer retailer Micro Warehouse, this site lets you track bids on computer hardware and consumer electronics as they're entered.

http://www.dealdeal.com : This site specializes in computer hardware and also contains search tools and personal bid tracking.

http://www.firstauction.com : Associated with the Home Shopping Network, this site offers 30 minute "flash" auctions as well as auctions that last several days.

http://www.auctionaddict.com : This auction takes a one percent commission on all items sold rather than charging a listing fee. Transactions are handled privately between buyer and seller via e-mail, and users can post comments on the site about other buyers or sellers.

Contact Sources

Eclipse Integration Inc., (508) 295-6100, fax: (508) 295-4051

Giga Information Group, 1 Kendall Sq., Bldg. 1400W, Cambridge, MA 02139, (617) 577-4779

Society of Financial Service Professionals, (888) 243-2258, http://www.financialpro.org