Usually it’s the buyer going to where the merchandise is being sold, but in a reverse auction, the sellers go to the buyer to sell what they have. With a fixed rate, the sellers come up with equivalent services so a buyer can choose from several packages without changing his price offering,or lowering it if there are a lot of takers. A similarity of a reverse auction with a regular one is the presence of a middle man. One more similarity is the factor off volume; reverse auctions and regular auctions are necessary for businesses to procure massive quantities of goods or services.

B2B Markets

Sellers go to reverse auctions instead of the buyers. A reverse auction may also be considered a sourcing event. In freelancing sites, the concepts of reverse auction are applied. A buyer waits for bids to come before awarding the business with an individual or a group that offers the best value. In wholesale procurement, a reverse auction is much more effective as a business tool than an ordinary auction.

The Middle Man in a Reverse Auction

The middle man in a reverse auction is the organizer himself. The middle man can choose to take a percentage from every sale or can enter into an agreement with the sellers, buyers or both. A middle man should provide security for the buyer and the seller. An escrow service is a good example of the market tools that a market organizer provides. The market organizer can oversee the changing of hands and deal with disputes, if needed.

A buyer’s responsibility in a reverse auction is disclosing the amount he is willing to pay out. The higher the price offering, the more sellers he attracts in his auction. The buyer should also disclose his expectations and terms before the bidding starts. All parties involved in the auction should abide by rules and industry codes of conduct for the use of reverse auctions. Another thing that’s important is the disclosure of payment mode, which the buyer must do before the auction starts

For a seller to obtain a contract, here are some recommendations. One way to succeed is to prepare by researching the competition, estimating the value of your competitor’s bids and knowing your own costs. A good way to win contracts is to invest on a competent bidder for your organization should you choose to participate in a reverse auction as a seller.

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