In a ‘forward auction’, buyers bid
for an item, they
compete to obtain it [or a service] by offering
increasingly higher prices. This is the traditional way of holding auctions to
sell goods which are considered of premium quality. The seller seeks the
highest bidder – the buyer who most values the
asset’.

In contrast, in
a ‘
reverse auction’, the
traditional roles of buyer and seller are reversed. One buyer declares a search
for an item and many potential sellers compete to obtain business from the
buyer by undercutting each other on price.
If,
after back-and-forth bargaining, the seller agrees to the buyer’s price, the
conditions are met, and the sale is concluded.

What
advantages reverse auction?

·       
Sellers benefit from access to a marketplace and make gains
on inventory that may not otherwise have been sold.

·       
Profit made from cutting procurement costs add to the
sellers’ bottom-line.

·       
Price-sensitive buyers perceive they are getting a good
bargain.

·       
It is a win-win marketplace for B2C players.

Though
with
clear
advantages
, this model of doing business is
yet to be widely applied. Perhaps this is because sellers must wait on a need
to arise and miss the advantage of coaxing demand created by ‘
in-the-face’ marketing
of their wares! It is therefore advised that this mode be applied as a
supplement to more infallible methods of marketing and selling goods and
services.

Reverse
auction can be hugely successful when supported by a well-defined e-sourcing
process which relies on an easy-to-use online sourcing software that allows for
quick setup of the auction, is targeted at organizations of all sizes in
capturing every facet of this unique negotiation method, and must require
minimal supplier
[i.e. bidder]
training. The software must be completely web-based and supported by all popular
web browsers – including iPhone and Android phones.

The
systems put in place must be secure, flexible, scalable, and user-friendly such
that the auctions go smoothly. It must have the capability to stage multi-round
negotiations and incorporate:

·       
Pre-bid, Live event, and
Post-event bid features.

·       
Real-time supplier
messaging and online chat.

·       
Post-event reports for
comprehensive bid analysis.

·       
Comprehensive audit
trails for all event activities.

·       
Archive and search
tools for completed events.

It
would also be of great advantage for the reverse auction platform to be multi-Lingual,
multi-Currency, and have Global Time Zone support.

Perhaps a proliferation
of simple to use, easy to implement and affordable Reverse Auction Software would
attract more businesses to this model. Examples of businesses operating with
this model are:

·  Priceline, where travellers give up
convenience for cheap airline tickets, rentals, and other travel accommodation
deals.

· MyHammer
– an online marketplace and directory which enables homeowners to
find tradesmen, and builders/ service experts to find leads on jobs.

 

#entrepreneurship

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