Online Auctions

Participating in an online auction

You will need a high speed Internet connection to take part in online auctions. The average cost of broadband offering is currently around GBP 60 per month.

A variety of software platforms are available for running your own online auctions, including:

Forward auctions

• Application service providers (ASPs), like auction4biz.net, offer platforms that allow you to run your own auctions, either as supported or stand alone services.
• Sector-specific electronic marketplace, which usually include online auction functionality. Covisint (automobiles) and Exostar (aerospace) are two examples.

Reverse auctions

• Many e-procurement modules from the major e-Commerce application vendors, like CommerceOne, Oracle and mySAP, allow users to run reverse auctions.
• Specialist e-sourcing providers (Goodex, Freemarkets etc) offer software and service solutions for running reverse auctions.

Registration requirements, fees and services vary considerably, but there is usually a transaction fee of at least 2% charged to sellers.

Whether you buy, sell or simply observe, the information gained from monitoring shifts in supply and demand can be extremely useful.

For more detail on forward auctions look at:
Selling through forward auctions
Buying via forward auctions

For more detail on reverse auctions look at:
Using reverse auctions in procurement
Suppliers and reverse auctions

Selling through forward auctions

Once you decide to use forward auctions as a sales channel, ensure that you make the most of the opportunity.

• Positive feedback is vital for repeat business. Ensure high standards of customer care are in place and that you have a global delivery system.
• Maximise distribution, perhaps by using multiple auction sites. Consider promotional devices to increase the chance of selling your items e.g. banner, home page buttons, category buttons, shop-in-shops.
• What is your target market? Should you use sector-specific or mass-market auction sites?
• Calculate net sales prices. You'll need to pay commission on any sales and there may also be a small posting fee.
• Use a reserve price to avoid selling at too low a price.

Buying via forward auctions

Forward auctions are particularly appropriate for procurement of non-critical items.

A few simple steps can help:

• Compare costs, both online - look at co-buying sites like shopsmart.com, retailers' websites - and 'bricks & mortar' prices.
• Check out the items. Suppliers often provide digital images, descriptions and e-mail addresses.
• Monitor feedback from previous bidders - is the supplier reliable?
• Don't bid too early. Set yourself a maximum bid and stick to it. Set up a system of e-mail alerts so you know when bid status changes. Consider using auction-tracking software like Auction Manager in Internet Explorer 5 to monitor multiple auction sites.
• Beware of fast rising bids. Keep a check on how much you're prepared to spend.
• Check the terms, such as who pays for shipping, insurance etc.
• Be aware of security. Although it is estimated that only 0.04% of listings are fraudulent, buyers should carry out sensible checks or use sites with closed billing which protects transactions.

Using reverse auctions in procurement

These guidelines will help you run a fair and efficient reverse auction.

1. Decide on the kind of service you want.

• Do you have the infrastructure to administer the auction yourself?
• Do you want to source and qualify suppliers?
• Look at the fee structure for outsourced solutions.
• Compare the cost of developing your own secure, extranet-based system.

2. Assess the technology.

• Is the technology quick and simple to use?
• How reliable is the software platform during peak activity periods?
• Does it allow you to automatically request quotations (referred to as RFQ - Request for Quotation)?
• Does the operator have expertise in your market?

3. Prepare the event.

• Invite suppliers and set out qualification requirements.
• Specify your requirements.
• Publish the auction rules and stick to them.
• Ensure that there is enough competition.
• Agree evaluation criteria for contract submissions.
• Train suppliers to use your system.
• Agree the timing/format of the event.
• Set the rules/opening price.

4. During the event.

• Monitor supplier bidding and tactics.
• Monitor how the technology performs.
• Extend the live auction period if there is a late flurry of bids (this should be considered in advance).

5. After the event.

• Always award the contract according to the auction result or you will loose the respect of the bidders and they won't take part in your future auctions.
• Provide proper feedback to all the bidders.
• Keep everyone informed - including unsuccessful bidders - as it will help them improve their bids in the future.

Suppliers and reverse auctions

If you are invited to participate in a reverse auction, think about whether you have the required expertise and consider the impact on your other sales channels.

If you decide to participate:

• Respond promptly.
• If there are tender documents prepare your responses carefully, ensuring you understand how the tenders will be assessed.
• Research the competition.
• Be clear on the auction rules and accept any training on offer.
• For the actual event, assemble a bid team and decide your opening and worst-case prices in advance. Think about timing and tactics.
• If the contract is complex, devise a spreadsheet so you can adjust your bid and assess the competition.
• Analyse the results afterwards. It will help you improve your strategy.