Over the years, a lot has changed in the way people transact businesses. A few years ago, whenever a seller listed something for sale, the whole process of actually negotiating with the buyer was too tedious. First they had to post an ad, wait for the customers to respond to the offer, sit with them and then complete the transaction. Usually in such cases, the amount sellers get from the buyers is much less than what they had wanted due to several rounds of negotiations.
Auctions are always convenient
A far more practical option back then was to arrange an auction whereby buyers competed with each other to buy the goods or services which the seller is offering. In this case, prices usually went up, and the highest bidder could acquire the things on sale. In traditional auctions like this, buyers ended up paying over the odds while sellers enjoyed enormous profits.
But as technology has advanced, it has brought a lot of changes and one of them has been the introduction of reverse auctions. These auctions, unlike the traditional ones, are entirely different. For instance, here it is the buyer who initiates the auction. Usually, the process comprises of:-
Unlike traditional auctions, prices are driven down by competing sellers. Here vendors are competing to obtain business from the buyers. But it's not always the price which is the primary factor when buyers are deciding which bid to accept from a seller and which to reject. It depends on a lot of other factors. The buyer might accept a higher bid from a seller if they feel that their proposal is much better.
There are several advantages of reverse auctions like:-