Reverse Auctions Fail To Deliver On Their Promise - InformationWeek

InformationWeek is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them.Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Business & Finance

Reverse Auctions Fail To Deliver On Their Promise

Online reverse auctions promise faster sourcing, lower prices, and quick ROI. But research by two critics of the practice points to the opposite result.

"The data doesn't support the market hype," says Bob Emiliani, president of the Center for Lean Business Management at Rensselaer Polytechnic Institute. "If you critically analyze and meticulously pick apart details, you'll find mostly unsubstantiated claims. The typical outcome is poor for both buyers and sellers."

Emiliani, along with David Stec, looked at reverse auctions in the aerospace and wood-pallet industries, two diverse markets that resulted in "very consistent outcomes," Stec says. Among the findings: Savings from online auctions are difficult to measure and generally don't yield quick ROI or reduce sourcing time. Perhaps more important, reverse auctions are inconsistent with ethical business practices and trigger opportunistic behavior, the researchers found.

Buyers are "abusing this process to test the market and see just how low the price will go to drive down their current supplier, with no real intention of switching to another supplier," Emiliani says. Suppliers retaliate by increasing prices on goods and services, he says. "They're certainly not going to do anything extra for that customer."

We welcome your comments on this topic on our social media channels, or [contact us directly] with questions about the site.
Comment  | 
Print  | 
More Insights
The State of Cloud Computing - Fall 2020
The State of Cloud Computing - Fall 2020
Download this report to compare how cloud usage and spending patterns have changed in 2020, and how respondents think they'll evolve over the next two years.
Top 10 Data and Analytics Trends for 2021
Jessica Davis, Senior Editor, Enterprise Apps,  11/13/2020
Where Cloud Spending Might Grow in 2021 and Post-Pandemic
Joao-Pierre S. Ruth, Senior Writer,  11/19/2020
The Ever-Expanding List of C-Level Technology Positions
Cynthia Harvey, Freelance Journalist, InformationWeek,  11/10/2020
Register for InformationWeek Newsletters
Current Issue
Why Chatbots Are So Popular Right Now
In this IT Trend Report, you will learn more about why chatbots are gaining traction within businesses, particularly while a pandemic is impacting the world.
White Papers
Twitter Feed
Sponsored Live Streaming Video
Everything You've Been Told About Mobility Is Wrong
Attend this video symposium with Sean Wisdom, Global Director of Mobility Solutions, and learn about how you can harness powerful new products to mobilize your business potential.
Sponsored Video
Flash Poll