By now everyone knows how eBay works. You list an item you're
trying to sell, and buyers place bids on it. After a
predetermined length of time (commonly seven days), the highest
bidder "wins" and gets to pay that much money for the item.
That's great for sellers, but what about buyers? Wouldn't it be
better if sellers competed for a buyer's business, instead of
the other way around? That's where
reverse online auctions come in.
Reverse online auctions work in the opposite way from
eBay-style auctions. A buyer lists the item he's looking
for, and sellers compete for his business by offering their
lowest possible prices. In effect, the buyer is playing
hard-to-get. Rather than running to eBay and flinging himself at
the seller -- "Please sell it to me! Look how much I'll pay for
it!" -- the buyer plays it cool, letting the sellers come to
him.
As a result, buyers in reverse online auctions usually pay less
than people participating in regular auctions. A DVD that's only
worth $12 might have its price driven up to $20 or more on eBay,
due to buyers competing with each other for the right to buy it.
With a reverse Internet auction, that price will stay low,
because buyers aren't getting in each other's way, artificially
driving up the price. Instead,
the sellers are driving DOWN
the price, because they want your business.
There are two ways of running an auction online: open and
closed. In an open
online
auction, all the bidders know where they stand in the
bidding, i.e., whether they've been outbid. In a closed auction,
each bidder only knows his own bid. Therefore, he must put forth
his very best offer at once, since he won't be able to make a
better one in response to someone else's bid.
Sellers know that e-procurement -- where items are bought, paid
for and sold over the Internet -- is more lucrative than
traditional brick-and-mortar stores simply because there are
fewer overhead costs. So it's in their best interest to attract
new online customers, and they know one way to do that is to
participate in reverse auctions on the Internet.
About the author:
Richard Verker has been writing business articles for 15 years.
After studies in general economy and e-commerce, his work on
online auctions make his articles top-rated by magazines and
thousands of readers.
