8-Reasons Why e-Auctions Are Gaining Popularity in B2B Negotiations
E-Auctions have seen extensive acceptance in business-to-consumer (B2C), consumer-to-consumer (C2C), and business-to-business (B2B) environments. Many researchers are studying B2B auctions that involve much larger portions of the economy than B2C and C2C and have direct implications on firms’ performance. When to auction and when to strategically negotiate is an art which gets perfected with continuous experimentation. Manual negotiations are useful typically where collaboration between buyers and sellers is required. Not all transactions need collaboration between the buyer and the seller. In many cases, an auction is a better approach than a manual negotiation. But let’s first understand the basics.
What is e-auction?
E-auction is one of the processes of conducting a real time negotiation to buy or sell assets, natural resources, or other goods through online competitive bidding. A large variety of products and services are possible to buy through an auction, however, the best way is when there are multiple suppliers who can deliver the product or service with almost similar specifications. Always remember that e-auctions are a way of working, not just an IT tool.
What are the benefits of an e-auction?
- A highly effective tool to facilitate the negotiation process
- Based on 200+ years successful philosophy of Auctions - fast way to save money
- Transparency over the process and outcome
- Option to select different auction types based on requirement
- Awarding based on cost only
- First-time auctions leading to market shakeups
- Extremely Low transaction costs
8- reasons why e-auctions are gaining popularity
In the initial stage of the COVID-19 pandemic, many organizations shifted to e-auction because of the limitations on large gatherings. But, it was perhaps the catalyst in a required shift to best serve all the buyers and sellers. Be it live or e-auctions, both have their own benefits. So, here is a quick look at the 10-reasons why e-auctions are gaining popularity in B2B negotiations.
- More buyers: Because of limited conflicts, no distance limitations and option to target specific items, there is a much larger audience who are interested in participating in an online auction.
- Larger reach: With online auctions, you can reach buyers from around the world. For those who sell products related to different genres, online auctions help in finding the right buyers for each and every item.
- Convenience: Buyers can bid when and where they want and also on multiple auctions on the same day.
- Exposure: Through an e-Auction platform, it becomes much easier for a business to connect with a buyer and for a buyer to connect with a business.
- Instant engagement: Bidders can go from an email to bidding in less than 10 mins, so they work on to bid the best options.
- Longer bidding notice: Online bidding notifications can be given 2-3 days in advance. Longer bidding notice means more chances for bidders to find what they want and engross. Furthermore, this allows the buyers to do their homework and make informed decisions, which they love to do.
- No moving: Requirements can be precisely defined - giving exact specifications, picture and any other required details, with exact place of required delivery. That’s more money in the pocket that you would have spent on moving the item from one location to another.
- More throughputs: Yes, with an online auction, suppliers get the chance to decide how many items to close in any amount of time. It is easy to close 10 items in a minute or two.
Key success factors for any e-auction
- It is important to test and ensure the competition level is good enough.
- Preparation is very important.
- RFI and RFQ information is explicit and remains unchanged during the setup process.
- It is required to inform the parties well on time to reserve slots for live auction and training.
- Flexibility is significant for e-auction.
- Get supplier confirmation on start prices.
- Remember when a supplier wins in the auction, the business wins.
The most essential types of e-auction
English reverse e-auction Features:
- Classic bidding system.
- Suppliers bid against each other.
- The lowest bidder wins.
When is English reverse e-auction beneficial?
- Bids suppliers are closer.
- Competition is on the edge.
Dutch reverse e-auction
- No active bidding.
- Price augments in steps from starting price.
- The bidder who accepts the prize first wins the bid.
When is Dutch e-auction beneficial?
- When bid suppliers have a huge difference.
- Extra burden on the current supplier as there is no counter offer or second chance.
- There is no active bidding, rather all suppliers see the same value enhance over time.
- The start price is quite low.
- There is a fixed time for the auction, no extension is possible.
- Reserve prices and factored bids can be set in order to benefit certain or all participants.
Japanese reverse e-auction
- Price goes down in steps from high.
- Supplier allows every step until its limit is reached.
- Whoever leaves the auction last, wins.
When is Japanese reverse e-auction beneficial?
- Huge difference between bids supplier.
- No competitive information is shared between the suppliers.
The Bottom Line
Although the implementation of e-auction events is not new, current interest in understanding the main concerns involved in its implementation exist, especially in the business-to-business (B2B) environment. A clear will can help in classifying and systematizing the different variables directly or indirectly affecting e-auction suitability and final performance determination is palpable also from the previous conceptual literature contributions.