What Are Online Auctions? A Complete Buyer's Guide

what are online auctionsOnline auctions are a portal to a global marketplace filled with every type of product you can imagine — from home goods to auto parts to collectibles and novelty items.

In the lucrative world of e-commerce, the CAGR (Compound Annual Growth Rate) for online auctions accelerates at 7 per cent.

In other words, the industry only continues to grow more every year, and it doesn't show signs of stopping.

The auction marketplace has evolved since eBay first launched in 1995. The first variations highlighted novel, unique corners of consumerism. For example, collectibles and motor parts were among the top-selling categories for bidding.

Over time, the global auction marketplace expanded with additions like OnlineAuction and Webstore. Now, you can buy anything your heart desires, including clothing, accessories, food, digital devices, and even jet planes.

What are online auctions?

The online auction model works by connecting buyers with sellers. Despite their prevalence in consumerism, there's confusion as to the what, why, and how of online auctions. That's where we step in! Keep reading as we outline the purpose of online auctions, how they work, and why it's time to start bidding.

What Are Online Auctions?

Online auctions provide buyers and sellers access to a global trading marketplace. Sellers fill their virtual shops with products and goods, and buyers bid on them. Auctions are the platform where the buyers and sellers connect.

Think of it this way:

  • The auction is a shopping center

  • Sellers are the stores inside the center

  • And the buyers are the shoppers

The same type of activity takes place at bricks-and-mortars. The difference is that the auction platform creates an opportunity for buyers to find goods and bid on them to keep the market value fair.

Auctions connect both parties, enforce the terms of service, regulate transactions, and ensure the atmosphere is fair and equitable.

Why would consumers rather buy from online auctions than say, from a single online store or a local market? Let's look at the benefits of bidding online.

Advantages Of Online Auctions

The auction marketplace can be highly competitive, but it can also be highly rewarding for buyers and sellers. Despite some occurrences of fraud and scams, auctions remain a safe place to bid on and purchase goods.

In large part, this is because the advantages of online auctions outweigh the disadvantages. Let's have a look at why this is a successful business model:

  • Buyers get access to a global marketplace filled with every kind of product

  • Bidding on items levels the playing field, so that they don't exceed market demand

  • There are flexible time ranges for bidding on items

  • Buyers can shop from a global marketplace of goods

  • Sellers gain a wider demographic that's not geographically confined

  • They are incredibly convenient, meaning you can bid on items in the middle of the night

  • Auctions cut out the middle man, and sellers have little overhead, which keeps the prices affordable

  • Auctions put the power in the hands of the buyers, who dictate the worth of an item through bidding

online auctions

How Do Online Auctions Work?

So, we know that online auctions are beneficial for buyers and sellers, but how do they work? Have you ever been to a charity auction, silent auction, or local auction? Well, online auctions work in the same way—those who make the highest bid win (purchase) the item listed. However, there is an essential distinction between online auctions and physical auctions: data.

Artificial intelligence and the incorporation of data collection and processing streamlines the bidding process. Let's have a look at how online auctions work.


There are many online auctions, but they all share a similar format. The first step is to register before you're able to participate in selling, buying, and bidding. Once you sign up with your email account, you can start bidding on items, and all of your activity is stored in a database to keep you up to date on your bids.


Depending on the time range, you're able to bid on certain items before the auction closes. If you have the highest bid, you win the auction and are required to pay for it. In many cases, there is a reserve price.

A reserve is a minimum bid required for the auction to be active. However, some auctions don't require a set value on the item, like our No Reserve Auctions.

In this case, the bidding starts at $1, and the highest bid wins the item.


Let's say you bid the highest on an item, and the auction is now closed. Congrats! You won the auction, and now it's time for you to pay. At this point, the seller communicates with the buyer to collect payment and delivery. Most payments through online auctions are very strict to avoid scams. Generally, you'll pay with a credit card, debit card, PayPal, or Direct Deposit through a secure payment page.

Pretty straightforward, right? That's why online auctions are so popular because, in a very simplified process, you can bid on and purchase goods.

Now that you know how the process works let's explore the different types of online auctions you can join.

What Are The Types Of Auctions?

There are hundreds of online auctions, but they all have a similar structure in how they work. The two types of online auctions are:

  1. Businesses selling to people: Store owners own the products and merchandise, list them, and accept payment. These can be product lines or a general collection of items in their store.

  2. People selling to people: People list an assortment of goods sold by an individual seller or small business. Once the highest bid wins, the seller and buyer coordinate the logistics of payment, shipping, and delivery.

There is a myriad of auction websites, each specializing in a specific market. For example, here at Treasures Auctions, we are an Australian owned auction dealing exclusively with Australian buyers and sellers. Our mission is to encourage Aussies to buy Australian and keep money in our economy.

There are auctions for books, antiques, automobiles, furniture, clothing, homes, rare art, collectibles, coins, and more. That's the beauty of online auctions; you can find anything you want and start bidding in your pyjamas. Buying online has never been easier!


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