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A Reverse Online Auction is a web-based portal for marketing goods and
services from pre-qualified Sellers through bidding on requests from pre-
qualified Buyers during a given time period. Unlike a traditional auction in
which prices are bid higher, the winner of a reverse auction is typically the
company or individual that submits the lowest bid. Its not only the lowest
bid, but also the service the buyer provides and also the feedback rating.
Similar terms:
e-auctions
e-sourcing
procurement auction
sourcing event
Reverse auctions popularity gained with the emergence of Internet-based online
auction tools.

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Advantages of Reverse Auction
Is a specialized auction that allows the organization to procure goods from the
sources by featuring decreasing incremental bidding.
 It is transparent process.
 It saves time as it is very fast as the auction is live.
 It gives additional vendor base as in the case of open
reverse auction.
 It is best suited for the standard off shelf items.
 With its continuous competitive bidding process, the
possibility of getting better price is always there.

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Who uses Reverse Online Auctions
Reverse Online Auctions are used to purchase a variety of products, not
just commodities.
Some examples include:
 Made-to-order printed circuit boards for an electronics
manufacturer.
 Construction materials for a cell-phone transmission
tower by a construction engineering company.
 Government department may notify several traffic light
distributors that they wish to buy a large number of
traffic lights.

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Key Components
Proxy Bidding : Bidders can set price points and allow the system
to bid for them to those levels.
Dynamic Close : System monitors event within moments of the
close and if a bid is placed, the event is automatically extended to
allow for a responding bid.
Variables/Factors : Introduces other variables into the bid value
determination to better reflect true value, for example –
warranty, incumbency, service rates.

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Types of Auctions Spacing
Open auctions as well as sealed-bid auctions there are four major one-sided
auction formats:
English Auctions : Seller announces reserve price or some low opening
bid. Bidding increases progressively until demand falls. Highest bidder
earns right to purchase item.
Vickrey Auctions: Bids submitted in written form with no knowledge of
the bids of others. Winner pays the second-highest amount bid.
Dutch Auctions : Seller announces very high opening bid. Bid is
lowered progressively until demand rises to match supply.
First-Price Sealed Bid Auctions : Bids submitted in written
form with no knowledge of bids of others. Winner is
determined in the resolution phase when the bids are opened.

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Reverse Auction Categories
Reverse Auctions are not appropriate for all types of business, because they met
the three basic criteria’s
Competition Exists: At least two competing
suppliers.
Of relative value to the suppliers: The business must
be of value to the supplier.
The product or service can be defined: Defining a
material or a service is a key component of the Auction
Strategy.

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Some of the Most Common Categories are
Travel Services
Requirement Services
Numerous Direct Materials
Consultancy Support
Printing Materials
PC’s and Laptops
Telecoms
Car Hire

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Benefits for Buyers by Using Reverse Auctions
 Maximize competition on price
 Minimize negotiation time (skips what could end up in several
negotiation rounds)
 Greater transparency in the selection of a supplier
 Minimize the influence of personal relations selection of
supplier
 Low cost of supplier selection
 Shorten time for negotiation
Benefits for Suppliers by Participating in Reverse Auctions
 Easier access to potential customers
 Equal treatment of all participants

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Providing Information During The Reverse Auction
The reverse auction website should display:
• The number or name that identifies the procurement
• The starting price for the reverse auction
• The number of bidders
• The current bid
• The time remaining for the reverse auction

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