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Article Index
Online Auctions
What are online auctions?
What are the benefits of online auctions?
Deciding to use an online auction
Participating in an online auction
What next?
Useful links

Online Auctions

What are the benefits of online auctions?

An online auction is a dynamic pricing environment. There are advantages for purchasers and suppliers:

  • The process is open and builds mutual trust.
  • As it is a transparent process, under/over pricing is less likely.
  • Buyers and sellers have access to global markets, irrespective of their location.
  • Participants have to specify their requirements very precisely.

Forward auctions

  • offer effective mechanisms for offloading excess stock or capacity. Bidders in these auctions can source non-critical goods cheaply.

Reverse auctions

  • generally result in quicker and cheaper procurement. Well-managed auctions significantly reduce the time between the issuing and awarding of contracts.

Forward auctions

1. For the auction holders

Many types of business supply goods through online auctions. Retailers, distributors, manufacturers and liquidators all benefit in different ways.

Forward auctions can help them to:

  • acquire new customers and extend geographic reach
  • test new products and establish price points
  • dispose of excess inventory quickly
  • price according to demand and stock levels
  • reduce sales costs by minimising marketing spend.

2. For bidders:

Buying through forward auctions reduces procurement costs.

Businesses can use them to:

  • source non-critical supplies, like stationery and office furniture
  • acquire specialist, second-hand equipment inexpensively
  • reduce the time spent on procurement by setting up automated searches and bid alerts.

Reverse auctions

Reverse auctions are increasing in importance.

1. For the auction holder

The mechanism favours buying power - the bigger the business, the better the saving.

  • The auction mechanism replaces time-intensive negotiations with suppliers.
  • Procurement departments save time sourcing and negotiating with suppliers.
  • Materials can be sourced from a larger pool of suppliers.
  • Cost reductions can be significant: 10%+ cost savings are frequently reported.

2. For suppliers

Reverse auctions aren't just a popular cost-cutting option for large businesses.

  • They are popular with major customers who have large budgets.
  • Competing on price isn't the only way to win business - factors like service, quality and reliability can count in your favour.
  • You gain access to customers who are ready to buy quickly, without having to launch a sales campaign.
  • Bidding aggressively can be a quick way to offload stock or build market share.
  • Even unsuccessful bidders gain valuable market information.
Online Auctions business advice article Crown Copyright © 2003-2013