webinarseauctions-chapter-7-part-5-guidelines-for-types-of-auctions Ron Halversen, Vice-President of Sales and Marketing at Clarity Ventures, gives examples of Japanese reverse eAuctions and how they can be a valuable type of auction on your platform. Part 5 of an 8-part series (Return to Part 4) JAPANESE AUCTION RON: Next is a Japanese eAuction. The Japanese eAuction is similar to the Dutch auction. However, it only allows the suppliers who are lowering the bid to see the price and the countdown timer. So whoever's selling the item can see where the price is. And as the price goes down, the suppliers can opt out. RON: If I've got my car and I put it on a custom auction website, I want to get 30 grand. It starts at 50, and it drops below 30 and nobody still bid, and I'm not willing to really take anything less than that. I can actually opt out. So it really tests their tolerance and their patience because they can opt it out if they can't take that price anymore. So it gets down until potentially the last supplier is there and the last person that's willing to sell that item. So there might be multiple items for sale by multiple suppliers. So that one's a Japanese eAuction. REVERSE AUCTION The reverse auction can be helpful for the buyers who want to get bids from different sellers. So in this way, the process is reversed because the buyer puts in a request for a quote and says, “I'm interested.” And it's like I'm interested in somebody coming to paint my house. My house is this big and vendors provide bids and come back and provide feedback. And then whoever gets the lowest bid for the buyer's request, they win the contract. So, I'll do it for $1,000. Another guy comes in and does $900, another $800, another $700. And I look at the floor of their keyword bidding and go, great. Now, if the verification process of those suppliers is controlled through the governance and I know that all four painters that bid have been through a vetting process and they're quality, well then why wouldn't I go with a $700 bid on reverse auction software? RON: A lot of times people are like, “Well, you get what you pay for, so maybe I shouldn't go with the lowest bid.” Well, in this case the governance should control that, because if everybody's been vetted on the seller's side of the auction platform, and we know that, if it's a new item and it's a warranty item, we know it's not refurbished, it's not a salvaged car, it's a car that hasn't been through salvage, it's a car that comes with the Carfax. It's you know, those kinds of things. If the governance controls that, then I should be able to go through. And if four bidders came back in the eAuction software contact methods and said, “All four of us have ‘69 Camaros with my requirement of 75,000 original miles or less with the big block 396 engine model,” if I put that out there and all four come back, then I should be able to rely on the lowest one. But in the position where they're cars, they're all going to be very, very different, right? What about rust? What about everything else? But if I was buying a brand-new MacBook Pro with the specs and four different bidders came to me and said, “We all have those exact laptops,” why wouldn't you take the cheapest? So that's really where the reverse auction websites work. You put it out to bid, you put it out to contract, and allow the suppliers to come in and do that. I know I buy a lot of electronics equipment from a company out in New York, because it's brand new and it's in the box. It's still under warranty. They're not knockoffs. It's not the black market. They’re a very reputable place. So I always buy my photography equipment from them, right? And I get a great deal from them. RON: The reverse eAuction or traditional auction suppliers can actually see their position when they're bidding so suppliers can come in and go, “I'll do it for a thousand. And they could see the other guy come in at 900 and then 800 and then 700,” and they can decide how much profit margin they have built into the thing. Custom auction website development delivers ability to come down and be competitive. It allows the suppliers or the sellers to compete and drop down. You know, I can name that tune in five. No, I can name it four. It allows each to see where they're at, where the other one, they have no idea what the other would bid at. They just went in and input. What's your best bid? The reverse eAuction actually allows them to see their standing. They can turn around and adjust. They can even interact with the purchaser via the online auction software. I might be willing to paint your house for 600 if you can wait six weeks because they have another house in your neighborhood, my crew's going to be right there and it's going to cost very little for us to move the scaffolding three houses down. Okay, well, that changes everything for me. I might be able to do it for 600 because now I don't have to pay for a lot of travel, a lot of time, and I can save a lot of money. So that might be changes. I can literally interact with the purchaser on the eAuction platform and say, “Hey, are you willing to wait six weeks for me to paint? I'm painting your neighbor's house in six weeks.” RON: That's what a reverse B2B auction allows. It allows a much more interactive process which can help reduce the price, because now there's some negotiation in there. It could be, "By the way, not only do I have this house, I have a cabin. So, tell you what, if you do it for 600, I'll hire you to do my cabin as well this summer.” That would be a negotiation that you could do that might affect that price. Reverse auction can also work on a marketplace auction site. Continue to Part 6 to learn about sealed bid auctions.
Ron Halversen, Vice-President of Sales and Marketing at Clarity Ventures, gives examples of Japanese reverse eAuctions and how they can be a valuable type of auction on your platform. Part 5 of an 8-part series (Return to Part 4)