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What is a Reverse Auction?

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  • Written By: Shannon Kietzman
  • Edited By: Niki Foster
  • Last Modified Date: 06 October 2014
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Reverse auction is a term that is generally associated with Internet auction and e-purchasing. This event is also known by many other names, including procurement auction, sourcing event, e-sourcing, and e-auction. The first such auction took place in the 1990s, when the Internet was introduced as an auction tool.

In a regular auction, purchasers are allowed to place a bid on an item, which is the amount they are willing to pay in order to buy the item. The person who places the highest bid usually ends up with the item.

With a reverse auction, however, the opposite is true. More specifically, the buyer advertises a need for an item or service. Sellers then place bids for the amount they expect to be paid in order to perform such a service or provide such an item. Generally, the seller who places the lowest bid will win the job or sell the item.

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For a reverse auction on the Internet to take place, a great deal of planning is required. It begins with a meeting that takes place between the buyer and the seller, who is also known as the market maker. During this meeting, the buyer and the seller discuss the requested service or good. Special considerations, such as necessary materials to complete the job, the time frame to complete the job, and even the budget for the job, are discussed at this meeting. If the buyer is interested in purchasing an item, considerations such as the age of the item and quality of the item may be discussed beforehand.

The bidding of an online reverse auction is generally captured as it takes place. This “real time” bidding feature makes the bidding more competitive, as sellers attempt to outbid each other in order to win a job or to sell an item. At the end of the day, the objective of a this type of auction is to lower purchase prices for the buyer.

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anon339235
Post 20

I would like to sell my unit through a reverse auction. Could anybody tell me how I would go about this or who to contact?

Monika
Post 18

I think a reverse auction actually sounds kind of exciting. Of course, it must be suspenseful for the people who participate in them. Especially those that are trying to get work.

Although, I'm assuming people in certain industries are probably used to the reverse auction process. They probably do it frequently, and it's not the end of the world if they don't win the contract.

Still, I'm a bit high strung and I think the reverse b2b reverse auction process would definitely get me over-excited!

starrynight
Post 17

@JessicaLynn - I see what you're saying. I do think those sites that specialize in reverse auction procurement serve a purpose though. And really, you never have to bid any lower than you want. I mean, you might not get as much work, but you're not obligated to try to undercut your competition.

And really, you can't blame employers for wanting to hire the cheapest labor. Most people these days aren't exactly rolling in money. So if you can find someone who is good, and willing to work for cheap, why not?

JessicaLynn
Post 16

I work as a freelance writer, and I absolutely hate the idea of the electronic reverse auction. I see this type of thing on website that allow bidding for jobs all the time. It seems like it always ends as qualified people undercutting each other to win the job.

I really think this fosters the wrong kind of attitude about skilled work like, writing or graphic design. Why are employers looking for the cheapest bid? Shouldn't they be looking for the most qualified person?

Also, it really puts all the power in the hands of the employer, instead of the contractor. I usually steer clear of these sites myself, and prefer to advertise my services on my own. That way I can find clients who are willing to pay a fair wage.

myharley
Post 15

You would be surprised by what you find on internet reverse auction sites. Sometimes the competition is very tight and you have several bids, all from qualified people.

I have seen other times when there is very little competition and people are desperate for any type of work, or want to get their foot in the door.

This doesn't necessarily mean they do low quality work because they have a low bid for their services. It may simply mean they really need a job and are willing to start out working for less to get noticed.

honeybees
Post 14

There are several online websites that use a reverse auction system. Depending on the type of work that you want done, these can be quite effective.

Many of the ones I am familiar with involve some type of writing skills. The internet is a great place to have a reverse auction like this.

Not only do you receive bids, but you can also see what kind of skills the person has from samples of work they submit.

There would be many job situations where using email or an online service would not be as effective, but for something like this, it works great.

shell4life
Post 13

@StarJo – My husband is in construction, and his boss frequently gets the crew work through reverse auctions. The companies seeking construction crews rarely hire them without meeting them and having them give a presentation, though.

When it comes to constructing buildings, people want someone who can prove they know what they are doing and can make a solid, sturdy, yet attractive structure. They want evidence of past work and references, and they want to see the work ethic of the crew. These are all things that are hard to judge through an email.

StarJo
Post 12

This sounds like a really convenient, cool way to find work. Of course, you might have to accept lower payment for your services than you would usually charge.

Since everybody is trying to bid low while not shorting themselves, it must be difficult to charge enough to justify your work. I would struggle with how much to charge someone, because I would be tempted to pay myself as much as possible.

What are some types of work available on reverse auction sites that do involve having to meet someone in person? I think it would be easier to convince someone to hire me if I could talk to them directly rather than just through writing.

OeKc05
Post 11

@Perdido – It is true that certain types of workers benefit greatly by getting jobs from far away employers. Anyone who can do their work on a computer and email it over to the employer could find so much work this way without ever having to leave home.

I make my living as an editor, and I have taken advantage of reverse auction sites. I send a copy of both before and after versions of work I have edited to potential employers seeking bids and samples, and my price is usually low enough that I get their attention.

I have a family, so traveling out of state for work is not an option for me. Reverse auction sites have allowed me to get all kinds of jobs and make income that I would otherwise have been without.

Perdido
Post 10

The reverse auction process has advantages and disadvantages. I get most of my freelance work this way, and though it has resulted in several jobs I would not have had otherwise, it also has made the job market a little tougher.

I do graphic design, and I visit sites that take bids for jobs. If a job sounds like something I can handle, I place a bid, along with samples of my work and a resume.

I have found work in other states that I never would have been able to get otherwise, but I have had many failed attempts at receiving jobs, too. There are so many qualified designers on these sites looking for work, so the competition is fierce.

anon110715
Post 8

Great description. The term reverse auction is being somewhat blurred by new sites that offer reverse auctions as a way for people to purchase consumer items, such as these "Lowest Unique Bid" sites, which is a far cry from the description given above that I would class as a true reverse auction, such as Market Dojo, among others.

anon86390
Post 6

Thanks, your explanation and example are clearer than others I've found.

anon77288
Post 4

It's really helpful.

anon52978
Post 3

good one.

anon37019
Post 2

thanks a lot!!

anon36540
Post 1

thanks..it was so helpful to understand..

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