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Banking and Finance  » If You Want to Save Money, Reverse Online Auctions Are The Way

If You Want to Save Money, Reverse Online Auctions Are The Way

Article:

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,

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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.